How to create jobs in SF

There's so much more the city can do - but cutting taxes and losing city jobs is the wrong way to turn around the economy

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EDITORIAL If Mayor Gavin Newsom is serious about stimulating the San Francisco economy, he ought to start with a basic number that the city's own economist, Ted Egan, passed along to us this week. The number is 2.11 — and Egan says that's the multiplier effect of cuts in local public spending.

In other words, every dollar Newsom cuts from the city budget has a ripple effect of taking $2.11 out of the San Francisco economy. Which means that if the mayor decides to solve the city's $520 million deficit with cuts alone, he'll be taking more than $1 billion out of the local gross domestic product.

And that, in a nutshell, is the problem with the mayor's economic stimulus package: it's entirely aimed at the private sector, with no regard for how it will hit public spending.

A dose of reality here — public-sector jobs are also jobs. People who work in the public sector pay rent and mortgages and buy clothes and food for their kids and go shopping in local stores and go to local clubs and restaurants and pay taxes — and have the same economic impacts on the economy as private-sector workers. If you lay off nurses and recreation directors, those people stop spending money in town, and you continue the vicious cycle that has made this recession so deep and painful.

And if your entire economic stimulus program is aimed at cutting private sector taxes, it's going to lead to public sector job losses. And those losses will undermine much of the impact of any gains you might get from private sector job growth.

Egan predicts that Newsom's program of eliminating the payroll tax for new hires would create 4,330 new jobs in the city. We find that something of a stretch — it's hard to imagine how any struggling small business would find eliminating a small tax enough reason to hire a new worker, and small businesses provide the vast majority of the private-sector jobs in San Francisco. But even if it's accurate, it's a fairly tiny gain. The city's lost more than 35,000 jobs since 2007, and when the economy rebounds in the next two years, Egan predicts about 20,000 new jobs in the city even without the stimulus.

Egan also acknowledged to us last year that "the consensus among economists is that most of the time government spending stimulates the economy more" [than tax cuts]."

That's particularly true in a city where the largest employers are all in the public sector (see opinion piece this page).

If the mayor and the supervisors actually want to create jobs in San Francisco, there are plenty of things they can do — starting with finding ways to close as much of the budget gap as possible without layoffs. Here are some possible approaches.

Put a major revenue measure on the November ballot that saves city jobs without costing private sector jobs. There are several ways to do this, but all of them start with the well-demonstrated concept that transferring wealth from the rich to the poor and middle-class — that is, giving money to people most likely to spend it — is good for job creation. One option: shift the payroll tax to a gross receipts tax and charge bigger companies a higher rate. Another: a commuter tax on income earned above $50,000 a year would charge wealthier people who use city services and don't pay for them.

Comments

This article seems to rely on the premise that the City's pulic workers live in San Francisco and thus spend their money here. I think that's a faulty premise. Many (most?) of them live outside the City.

Posted by Guest on Feb. 17, 2010 @ 12:18 pm

As a city employee myself-- who does live in San Francisco-- I am always surprised at how many people commute here for work. I'd say most of the people in my division live outside SF. It kind of irks me.

On one hand, there are lots of fantastic folks with very important expertise that we shouldn't exclude. On the other hand, the rank-and-file folks from out of town don't have a stake in the city, why should they be allowed to make decisions on behalf of the city?

I think there should be a 'commuter' tax.However, I also would not want people with tons of money encouraged to move to SF. Let the older folks who want to live in burbs live in burbs. I'm afraid they'd all want to move here and gentrify more neighborhoods and raise rents.

PS- it really pisses me off that I have to pay $1.75 to ride two stops, just so some punk from way the hell out in Pleasanton can come work in SF and take money out of the city.

Posted by Guest on Feb. 19, 2010 @ 9:45 am

I'm interested in this statement from your article: "San Francisco's property owners, who ultimately are on the hook for the bonds, are by and large (thanks to Prop. 13) entirely able to handle more payments."

Can you provide a basis or some analysis on how this state was derived? Is this a case where because someone owns property they are "rich"?

Posted by Guest on Feb. 17, 2010 @ 4:21 pm

Not necessarily. Older folks who've owned property in the city forever, perhaps they're retired and on a limited income, shouldn't be forced to pay the full taxes of what their property is worth. They'd likely have to move.

This was part of the reason prop 13 got popularity back in the 70s.

Of course, the same applied to wealthy corporations who've owned land forever, essentially giving them a giant PASS. This is clearly regressive policy.

Save Grandma and Grandpa: Yes. Save Office Depot: No.

Posted by Guest on Feb. 19, 2010 @ 9:49 am

As mentioned in an earlier post... Many city workers do not live in the city.

As for thd bond and this statement:
"San Francisco's property owners, who ultimately are on the hook for the bonds, are by and large (thanks to Prop. 13) entirely able to handle more payments"

I purchased a home a couple years ago and if lucky I hope I can make a minor upgrade in the next couple years to a slightly larger shoebox. Prop. 13 does nothing for me in this situations. The property taxes are high enough. Please don't suggest raising them. Don't punish potential new home buyers.

Posted by Guest on Feb. 18, 2010 @ 10:21 am

I agree for the most part, but to be honest, compared to 90% of us, if you can afford to BUY a house in San Francisco, you should be paying some extra taxes. you're rich.

Posted by Guest on Feb. 19, 2010 @ 9:46 am

If there were no private sector jobs, how many public sector jobs would there be: zero. However, it is possible to have an infinite number of private sector jobs with no public sector jobs. The point is the public sector workers pay taxes, true, but they pay less taxes than they consume.

Posted by Guest on Feb. 19, 2010 @ 10:56 am

San Francisco had and has the perfect stimulus program all lined up and ready to provide tens of thousands of jobs. But its bureaucrats dithered; its environmentalists do what they do: delay.

The Water System Improvement Program, funded by voters in 2002 (bonds), was to have spent nearly $600 million in fiscal year 2009-10, but less than half of that will actually be spent. And that has been typical; each year water bureacrats say they will be big spenders, but they dither and don't contract out the work. They prefer to stretch their work out to fit time without end.

The program makes the water system more reliable. Projects prepare pipes and tunnels for earthquake, prepare for drought, and are designed to allow proper maintenance to be done. Originally the program supplied water needs through 2030, but the enviros killed that goal.

Next year's goals are just being published, and include spending 490 million dollars, which will create, they say, more than 10,000 jobs in San Francisco. Great, huh? And so it would be...if they actually do what they plan to do. But bureaucrats have a long history of missing their goals...by miles and miles.

Posted by Guest on Feb. 19, 2010 @ 5:07 pm

"There are several ways to do this, but all of them start with the well-demonstrated concept that transferring wealth from the rich to the poor and middle-class — that is, giving money to people most likely to spend it — is good for job creation."

So the poor and middle class should get rich people's money because they are more likely to spend it?
You know I think I can do a better job of spending your money than you can so please send it all to me. I'll make sure I buy myself something nice. Hope you folks at the SFBG make a ton of bucks for me.
What I don't get is if you take away money from rich people what is their incentive to keep making more? Would you show up for work if the government was raping you of your paycheck?
"Tax the rich, feed the poor
till there are no rich no more."
Ten Years After

Posted by GlenParker on Feb. 20, 2010 @ 3:49 pm

Not everyone who owns a home in San Francisco benefits from low property taxes. If you bought youre place in the past year or two, it's probably assessed at about what it's worth. But if you've owned it longer than that, you're underassessed.

Commercial property changes hands less often, so commercial lots are typically way underassessed.

If you bought a home ten years ago, you're paying about half the property taxes of the person who bought a similar place this year. Not fair.

And frankly (I say this as a homeowner) most people who own property are better off than most tenants. Not all -- there are no "alls" in taxation policy -- but as a general measure of economic well-being, property ownership is certainly one metric.

Property owners in San Francisco pay far less in the way of taxes than property owners in, say, New York state, where there's no Prop. 13. There are also, generally speaking, better schools in much of New York state. There's a connection here.

Posted by tim on Feb. 22, 2010 @ 6:35 pm