A host of new national and state economic indicators reflect what many Florida families are feeling this holiday season: The recovery from the Great Recession is progressing, but not as quickly or as robustly as hoped. The conflicting signals underscore the fragility of the improvement and the inherent risks in focusing on tax cuts in Washington and Tallahassee rather than on more government pruning to reduce spending and prudent public investments to create more jobs.
On the national front, the Commerce Department reported Tuesday that retail sales rose for the fifth straight month in November. Store sales and inventories have continued their slow, steady increase. Yet the national unemployment rate has been stuck above 9 percent for a record 19 months, leading the Federal Reserve to announce it is continuing its $600 billion program to buy Treasury bonds. The Fed also stated the obvious: The "economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment.''
No one has to tell that to Floridians. The state's unemployment rate is even higher at 11.9 percent, and Gov.-elect Rick Scott has made job creation his top priority. There are some bright spots: The state has added a modest number of new jobs this year; tourism inched up in the third quarter; and school enrollment is expected to see its largest increase in six years in 2011. All of that suggests Florida is not "over," despite the question raised by a Wall Street Journal headline three years ago.
Yet Floridians have to squint to see something positive. For example, state economists on Tuesday reported that key tax collections are growing compared to last year. But sales taxes and other revenue are not growing nearly as fast as expected even a few months ago, and costs for schools and Medicaid next year are rising even faster. The bottom line: Scott will take office next month facing a potential budget deficit of $3.5 billion. That's not as bad as the red ink washing through California, but it is $1 billion worse than expected.
The sum of these economic snapshots does not make a compelling case for the package of tax cuts President Barack Obama and congressional Republicans are rushing to approve before Christmas. Those tax cuts will not significantly reduce the unemployment rate. They will add more to the federal deficit and less to the economy than the original stimulus package that prevented an economic catastrophe in Florida.
Meanwhile, the economic challenges facing Scott became significantly harder Tuesday. He should focus on further streamlining government, job creation and investments that create jobs such as high speed rail. With such a large deficit, his campaign pledges to eliminate the corporate tax and reduce school property taxes by 19 percent are even more unrealistic. If anyone claims a return to the good old days of tax cuts, job creation and a booming economy are just around the corner, remember this final note from state economists: Florida's economy will recover so slowly that the state will not take in as much tax revenue as it did in 2005-06 until 2013-14.