Possible Budgeting Illusions from Raimondo

Shortly after Governor Gina Raimondo gave her presentation on Rhode Island’s economy and its budget implications, somebody asked me what I expected in her budget.  Here’s a succinct summary of the presentation from the Cranston Herald editorial board:

Neither cuts nor tax increases, the presentation asserts, will solve the problem. The sales tax would need to be raised from its current 7 percent to 8.8 percent in fiscal 2017 to close the projected budget gap. Meanwhile, the $255.6 million shortfall foreseen for that year significantly exceeds the total budgets of 21 combined state agencies.

The governor’s presentation proposes instead a shifting of resources to focus on job growth, creating a “virtuous cycle” in which those investments in education, infrastructure and property tax relief expand employment opportunities and thus grow the state’s revenue base.

My expectation is that Raimondo will follow the playbook from pension reform, with these steps:

  1. Declare a dire problem, consisting of a short-term emergency and long-term doom.
  2. Propose some technocratic solution that will supposedly fix the long-term problem once and for all.
  3. Make sure that there are enough gimmicks in the solution to defuse the short-term emergency and expect attention to have drifted by the time it falls apart.

The short-term emergency, in this case, is a balanced budget for the  next fiscal year, starting this July, and the long-term doom is the unyielding projected deficits resulting, in large part, from Rhode Island’s continuing economic decline.  The expectation, then, is that Raimondo’s budget will include some sort of new revenue stream, perhaps justified by its use toward some economic development scheme, mixed with budget reductions of the “waste and fraud” variety.  Whether the elusive waste-and-fraud savings could be realized is actually immaterial, inasmuch as the budget would be balanced on paper, and adjustments could be made when the budget is reviewed in November and fixed sometime during the fiscal year, when the eyes of those few who pay attention are mainly focused on the next year’s budget.

That’s what I told the person who asked me.  It was notable, therefore, to see this in yesterday’s Providence Journal:

House Speaker Nicholas Mattiello on Tuesday disclosed that Gov. Gina Raimondo had asked him if she could include “$40 million to $50 million’’ in Medicaid cuts, as a “placeholder” in her first budget proposal, without spelling out how and where she intended to reduce spending in the $2.7 billion government subsidized health-care program.

Mattiello said the governor told him, “in very general terms that there would be some kind of a placeholder and a request for a task force to figure out the cuts.’’

You’re Borrowing from the Banks One Way or Another

Depending on your perspective, it’s either “getting your head around the finance industry” or “adopting a particular perspective on the finance industry,” but whichever it is, once you’ve accomplished it, standard news coverage seems to miss most of the critical observations.  Take this article by Liz Capo McCormick and Daniel Kruger:

Growth is on a tear, hiring is the strongest in decades, and households are the most upbeat since 2011. Yet banks such as Bank of America Corp. keep plowing their burgeoning deposits into U.S. government and related debt — pushing the industry’s holdings past $2 trillion — instead of lending it all out.

What is a government bond, really?  It’s the government borrowing cash now and promising to pay more for it later.  In other words, the banks are lending the money out, just to the government instead of to consumers.

So, who is the government?  Well, if we’re talking about the power that it wields, then we’re mainly talking about an aristocracy of politicians, special interests, and wealthy individuals, but if we’re talking about responsibility for the money that it spends, then the government is all of us.  It’d be more precise, in other words, to say that the banks are lending to us by way of the government, rather than directly.

Why would they do that? Lending to the government is almost risk free, so the banks don’t get a tremendous return on their investment.  Lending to consumers has some risk to it, because people can wind up unable to pay, so banks account for that by requiring larger returns on their investment.

Despite the efforts of the White House and the news media to insist otherwise, there’s still a lot of uncertainty in the economy, and with the Federal Reserve keeping interest rates so low, banks have incentive to accept the lower returns of government bonds.  With such emphasis on keeping inflation down, there’s less incentive to take some risks with money in the lower-risk parts of portfolios to try to keep the real value up.  And with so much in guaranteed returns on government bonds, banks and other investors can gamble those future earnings on stocks for the higher-risk parts of their portfolios.  (After all, much of the cash is simply money “printed” by the Federal Reserve.)

There are a number of vicious circles interlocking, here.  For one, if banks increase their consumer lending, consumers will increase their spending, and general demand will increase in the economy, which will translate into inflation, meaning those government bonds will be worth even less in real dollars.  Meanwhile, the more government debt there is, the less likely rate increases will be, because it would blow up the federal budget if it had to pay more on what it has borrowed in our name.

But hey, maybe the geniuses in government and the finance industry who brought us the mortgage-backed securities crash have really got this whole economy thing figured out and really do want what’s good for everybody, not just their own ever-divergent incomes.

Talking About Rhode Island’s 1%

The interesting part of PolitiFact RI’s review of an income-inequality statement by labor heavyweight George Nee isn’t that the reporters gave him a Mostly False (or couldn’t bring themselves to give him a full-on False), but the line that it draws for the 1% in Rhode Island (emphasis added):

Nee also directed us to a Jan. 26, 2015, report and data compiled by the Economic Policy Institute, another Washington, D.C.-based liberal economic think tank. It compared each state’s highest earners — the top 1 percent — with everyone else.

The institute reports in Table 2 that in 2012, the average income of Rhode Island’s top 1 percent was $966,071 . That’s less than the $1.3 million U.S. average. …

(That report, by the way, concludes that your income needs to be at least $314,647 in Rhode Island to be in the top 1 percent.)

One wonders what sort of people make up this group of roughly 10,000 Rhode Islanders.  Investment types, successful business owners, lawyers, doctors, and so on, probably.  According to the RI Center for Freedom & Prosperity’s RIOpenGov payroll application, it also includes the University of Rhode Island’s basketball coach and university president.  One surprising member of the 1%, apparently, is Neil Steinberg, the President of the Rhode Island Foundation.

Most folks think of the RI Foundation as a mainly charitable organization, but it’s also been investing in socialistic enterprises, like RhodeMap RI, and other political manipulations of the state’s economy.  It’s odd to find that effort headed by somebody with (in the Economic Policy Institute’s words) “outsized” income.

It isn’t clear from the liberal think tank’s report whether it’s measuring household income or individual income.  If it’s the former, of course, Rhode Island’s government and its satellites would account for many, many more members of the 1%.  I mean, even some retired state workers have pensions that would suffice as half of a 1% income level.

Evaluating Tax Incentive Programs: Matching Practice or Kill Order?

When one reads that Rhode Island is engaged in something that might be seen as a “public policy best practice,” cynicism is usually the appropriate response. Such is the case with a Pew Charitable Trusts brief that cites Rhode Island as one of a handful of states implementing good-government reviews of economic development tax incentives.

Ten states and Washington, D.C., according to Pew, have taken steps to ensure “that tax incentives are evaluated regularly and rigorously.”

The legislation in question is a 2013 bill originating in the Rhode Island Senate, number S0734, which evaluates tax incentives and other government activities. The first section of the bill tasks the still-new Office of Management and Budget with “a comprehensive review and inventory of all reports filed by the executive office and agencies of the state with the general assembly.”

So rigorously have Rhode Island’s policymakers been reviewing all of the reports that state government pays itself to create for them that they now require a report on all of the reports that they receive.

Continue reading on Watchdog.org.

A Novel Idea on Transportation Budgeting

This is the eye-catching line from Jenifer McDermott’s Providence Journal story on transportation funding:

“We need to take a comprehensive look at solutions, everything from public-private partnerships to tolling,” she said. “We also need to ensure that we are delivering highway and transit projects quickly and cost-effectively, so that we get the maximum benefit from the federal funding provided.

Here’s a simple idea that one never hears the politicians suggest or the news reporters ask about:  Put all expenditures on a prioritized list, start funding everything at the top of the list, and stop when the money runs out.

That sort of approach is off the table, though, because the list that the public would want to see wouldn’t at all resemble the list that politicians want to be reality.  The former would start out something like this:

  1. Safety
  2. Law enforcement
  3. Transportation

And the latter would look more like this:

  1. Handouts to political friends
  2. Vote-buying schemes
  3. Personal pet projects

Coming up in Committee: Twenty-Nine Sets of Bills Being Heard by the RI General Assembly, February 24 – February 26

1A. S0134: Creates a crime of “unlawful interference with traffic” with reference to “any federal or state highway”, with a minimum prison sentence of one year for a first offense, 60 days of which cannot be suspended or deferred. (At present, the definition of disorderly conduct includes obstructing a “highway…to which the public or a substantial group 12 of the public has access”, punishable by imprisonment of up to 6 months, and a fine up to $500) (S Judiciary; Tue, Feb 24)

1B. H5417: Eliminates the up-to six month prison sentence for most instances of disorderly conduct — including for “obstruct[ing] a highway…to which the public or a substantial group of the public has access or any other place ordinarily used for the passage of persons, vehicles, or conveyances” — except in cases involving domestic violence. (H Judiciary; Wed, Feb 25)

2. S0314: Extends the state’s “facilities support” funding to all charter schools (currently, it is only available to “district sponsored charter public schools”). (S Finance; Tue, Feb 24)

3. S0305 / H5228: Writes into law in-state tuition at RI public colleges and universities for students who graduated from a Rhode Island high school that they spent three years at, including illegal aliens (but not non-immigrant aliens) who have applied for “lawful immigration status” or who promise to when a process is made available under a Federal amnesty law. (S Finance; Tue, Feb 24 &; H Finance, Thu Feb 26)

4. S0122: Tax credits for Rhode Island residents who are college graduates “in an amount equal to the payments made in a given tax year…toward undergraduate or graduate student loan debt, up to a maximum amount for single tax year of one thousand dollars for an associate’s degree holder, five thousand dollars for a bachelor’s degree holder, and six thousand dollars for a graduate degree holder”. (S Finance; Tue, Feb 24)

Spending and Addiction to Debt

A chart that the Wall Street Journal tweeted a few weeks ago is worth revisiting.  It shows inflation-adjusted cumulative growth in household consumer spending from 1989 through 2012, contrasting the top 5% of households with the lower 95%:

Remind you of anything?  Both lines strike me as echoes from a chart I made a while ago showing different trends in the economy.  The top 5% line looks a lot like the total stock market value, and the lower 95% looks a lot like credit & debt, doesn’t it? (Click here for some of my theories related to this graph.)

I won’t go into how the Clinton administration worked to dislodge the stock market from the safe risk-mitigation of national debt, and how the Obama administration has worked to ensure that the folks in the top 5% made back all of their housing-bubble losses by letting them absorb all of the borrowed money.  The larger, more-nonpartisan point is the critical one, here.

We’ve let our economy become dependent on the national debt. After the Great Depression and World War II, debt became the main driver of growth.  During the Reagan years, the United States made a fair attempt at boosting productivity enough to chart a new course, but we never dislodged from debt.  This can’t go on, not the least because of the plain facts shown in the Wall Street Journal chart.

The wealthy are taking much of that imaginary money and cashing it in as tangible items and temporal lifestyle enjoyment.  As periodic stock market crashes prove, imaginary money isn’t very stable, and the Obama “recovery” has strongly suggested that all big losses will quickly be socialized, now, so that we all must take reductions to keep the rich in their glory.

Am I sounding somewhat progressive, here?  Not at all.  Progressive centralization and tyranny have gradually exacerbated this problem.  The solutions are to privilege individual initiative and work, again.  That means real cuts in taxes and elimination of vast swaths of regulation.

Progressives just can’t get their head around the reality that government is not how everybody gets an equal voice in policy.  It’s how powerful forces consolidate their power.  Everybody gets an equal voice when we come to the table as individuals able to interact in ways that privilege our value as human beings, not our ability to jump through the insiders’ obstacle course of hoops.

Learning from the HealthSource Experience

This is a predictable result of letting government run businesses:

The most common complaint into the Call 12 for Action Center over the past three months has been problems with HealthSource RI – so Consumer Reporter Susan Hogan went straight to the source to try to get some answers.

Customers are getting angry with the state-run Obamacare marketplace, saying critical health decisions are being put on hold because they can’t get a straight answer.

It’s bad enough that the government spent nine figures (that means over $100 million) putting together an organization and Web site expecting to have to handle several times more customers and is still having trouble managing the fraction that it actually has.  The real travesty, however, is that anybody with authority thought it would be a good idea to begin with.

Lest we forget, the Affordable Care Act (ACA; ObamaCare) was pushed through  by President Obama and Congressional Democrats on a party-line vote on Christmas Eve using procedural gimmicks and without having been vetted by the legislators, let alone the public.  In Rhode Island, the exchange came into being not as legislation, by an executive order from ideological governor Lincoln Chafee, and without significant public debate, and the accompanying expansion of Medicaid, which is now a major budgetary problem for the state, was pretty much a bureaucratic decision without the visible input of elected officials, at all.

Read Hogan’s article.  These aren’t insurmountable business problems, but it isn’t clear how well government agents can or will surmount them.  In a private business setting, a company that was having such problems after a year of operation despite having many fewer customers than projected would have to fix them pronto or go out of business, but for HealthSource to go out of business it takes major political battles, legislation, and horse trades for other legislation and other political incentives that have nothing whatsoever to do with healthcare.

And HealthSource represents a relatively mild leap into lunacy compared with legislation that some elected officials would like to pass.  Take H5387, for example, with lead sponsors Aaron Regunberg (D, Providence), Teresa Tanzi (D, Narragansett and South Kingstown), Arthur Handy (D, Cranston), Shelby Maldonado (D, Central Falls), and Gregg Amore (D, East Providence).

The legislation would create a new agency that would automatically register Rhode Islanders in government healthcare and collect premiums from them, while forbidding private insurers from offering competing products and setting prices for all doctors and other healthcare providers.  Picture a mandatory HealthSource that wouldn’t even have to risk going back to elected officials to raise money, if it were failing.

If a bill like that were to pass, it would be devastating for the people of the state, and it’s an indication of just how dangerous it is to elect such people to office.

New Governor and Restricting Transparency

It’s been a repeated complaint of mine that legislation sold as increasing transparency, a few years ago, was actually a restriction of it.  It may have become a little easier for novices to get some standard data, but for anybody actually digging into state and local government, things became more difficult.  Suddenly, going to the subject-matter experts in government was no longer possible without being routed through political officials or (worse) department lawyers practiced in routing people in circles.

With the election of Democrat Gina Raimondo as governor, the process appears to have notched to the next level, as folks who follow local journalists on Twitter may have heard.  In his latest “YouGottaBeKiddingMe” blurb, Edward Fitzpatrick writes:

When PolitiFact R.I. fact-checked a statement that the House speaker made about taxes, Governor Raimondo’s office refused to make state tax expert Paul Dion available. When a second case of meningococcal meningitis arose at Providence College, the state Health Department referred questions to the governor’s office, prompting Journal reporter Paul Grimaldi to tweet: “Why does @GinaRaimondo have a ‘gag’ order on a potential contagion outbreak?” And on Thursday, Journal State House bureau chief Katherine Gregg tweeted: “One after another, knowledgeable/respected people in govt. are telling me they have been ordered to direct all Q to gov’s office #muzzled.”

When Independent Lincoln Chafee was first elected to the governor’s office — ideologue that he was — he barred his administration from appearing on WPRO.  This strikes me as significantly worse.

Government already has too many advantages shaping its message for public consumption, to the point of giving voters a distorted view of what they’re voting on.

Looking for Environmental Scams on the Monthly Electric Bill

For those who have remained hesitant to jump into the great green tug-of-war over climate change, the reason may be the whiff of fraud that permeates it all.  Although most scientists are, as the saying goes, hard-working and honest folks, there is bound to be some bad apples amid the bunch.

It’s tough not to think the bad rap might be somewhat deserved when the stories roll in like another snowstorm over New England: from the fuel-guzzling private planes and helicopters used to get the super-rich to a Davos, Switzerland, so they can talk about saving the environment, to the Oregon governor stepping down amid accusations that his significant other used her connections to win contracts for a green-energy consultancy for which she worked, to mounting suspicion that temperature data is simply being adjusted to make it say what environmentalists need it to say.

The schemes and scams just seem to be everywhere, and one needn’t turn over too many rocks to find them.

Continue reading on Watchdog.org.

Selective Worries of Environmentalists

So, I was poking around on ecoRI and came across this article by Tim Faulkner:

Left out of the talking points that support expanding pipelines in New England are the efforts by energy companies to deliver that natural gas to Canada for export overseas.

Documents show that developers are already moving forward with this concept. Last October, Pieridae Energy filed a federal application to send domestic natural gas from Massachusetts to Nova Scotia, where it would be converted to liquefied natural gas (LNG) and exported. According to Peiridae, a company in Germany has already agreed to buy the exported LNG.

I’m no expert on this topic, but it seems to me that Faulkner uses a whole bunch of plural nouns when he appears to be talking about one company that may have a single prospect with another company.  It’s clear, moreover, that the concern of the activists quoted later in the article is not that the export business will pull increased supplies of natural gas out from under the New England consumer, but that it will encourage continued development of the natural gas industry in America, which would soften demand for very expensive renewable energy.

According to the application at the link, Pieridae is requesting a two-decade window during which it can explore these options, which would start either on the date of the first sale or seven years after its request is approved.  As the article makes clear, environmental activists have already applied to prolong the application process.  In other words, this is pretty long-term planning.

But what’s the concern?  The company won’t sell gas overseas unless it is more profitable to do so.  In other words, unless people in these other countries are willing to pay so much that the profit margin is better if Pieridae chooses to ship the gas additional hundreds of miles, then liquefy it, then ship it, and then unliquefy it, rather than simply direct it to energy plants and consumers closer-by on the pipeline.  And then there are other possibilities, like the flow being reversed to ship the natural gas from Canada or elsewhere to domestic consumers.  What’s scary in this mix… other than the very existence of a fossil fuel industry?

Then we turn to another article, by the ecoRI News staff:

A common algae commercially grown to make fish food holds promise as a source for both biodiesel and jet fuel, according to a new study published in the journal Energy & Fuels.

Why, in contrast to the pipeline story, is this not scary?  Similar to ethanol’s effects on food prices, wouldn’t increasing the demand for this algae increase its price, thus driving up the cost of farm-grown fish, thus pricing out lower-income consumers and making the depletion of wild fish stock that much more attractive?

There’s a wave of specifics to consider before worrying about such a thing, but it doesn’t strike me as much less plausible than the dark insinuations made in the pipeline case.

Rhode Island and New Hampshire Education Trends

According to his bio line, Ron Wolk is an advocate for “performance-based assessment” in schools, so his argument in a recent Providence Journal op-ed should be considered with that in mind.  That’s a minor qualifier, though, inasmuch as one expects people typically to advocate for things they believe in.

It’s just something to keep in mind while considering his comparison of education trends in Rhode Island and New Hampshire.  The two states, he suggests, began moving toward reforms at around the same time, and with much the same plan, but then:

As the years passed, Rhode Island marched in place for a while and then retreated when most schools continued with business as usual. The commitment to multiple measures was never fully accepted, and state officials steadily increased the 10 percent limit on New England Common Assessment Program scores until a “passing score” was deemed necessary for a student to graduate. Today, the state remains mired in a system where time is the constant and learning is the variable, and where the “learning” is largely “delivered” through classroom instruction. 

Meanwhile, New Hampshire has stuck with its vision, working at ground level with principals, teachers, parents and students to make CBE successful. Much work remains to be done, but progress is steady. More students are earning credit for supervised internships and projects in communities. Research shows significant declines in dropouts, school failures and disciplinary problems. Student engagement and learning have increased. Students say their work is more challenging and their interactions with teachers are more rewarding.

It’s a distortion to say that a “passing score” became obligatory in Rhode Island, rather than just a mild improvement of a non-passing score, which is the truth.  But putting that aside, is his characterization of the states’ trends accurate?

Looking at the RI Center for Freedom & Prosperity’s online application to compare states’ results on the National Assessment of Educational Progress (NAEP) tests, I’d argue that the answer is, “no.”  If you scroll down the application and compare the two states by multiple measures, a few trends emerge:

  • New Hampshire started the millennium considerably higher than Rhode Island.
  • New Hampshire is considerably less diverse (as evidenced by the fact that the “all students” category tracks so closely with the “white students” group.
  • Looking at just white students, for a more direct comparison, and averaging grades (four and eight) and test subjects (math and reading) Rhode Island moved from a 5.5-point deficit in 2003 to a 1.75-point deficit in 2013.

The most important observation, though, is that the overall impression of the trends is actually, as I’ve written before, a more-rapid improvement in Rhode Island than elsewhere… up until the point that Governor Chafee’s administration put a stop to the reforms that Wolk laments.

“Performance-based assessment” may prove, in the long run, to be an excellent principle by which to organize education, and the specific approach that Wolk appears to advocate may prove workable, but I don’t think this particular comparison is the evidence that he thinks it is.

Consolidation Reminder

This whole consolidation/regionalization thing is just another example, in Rhode Island, of the common wisdom having reality backwards, in my opinion:

In their presence, Raimondo put her signature on an executive order that gives a host of responsibilities to a former Cumberland mayor, Lt. Gov. Daniel J. McKee.

The order calls for McKee to consult with cities and towns and develop “best practices” for addressing municipal costs and for consolidating, or “regionalizing,” municipal services.

The order also charges McKee with drafting legislation that would establish incentives for cities and towns that make efforts at regionalization. McKee, it says, will also try to help communities find other sources of revenue, beyond property taxes and the motor-vehicle excise tax.

Lest we forget, the Central Coventry Fire District (now on RI’s public bankruptcy list) started out as a consolidation project.  Here’s my quick summary, at the beginning of a liveblog of a meeting in April 2012:

… back in 2007, the town consolidated four fire districts into one Central Coventry Fire District, with (some folks tell me) the promise of lowered costs.  Instead, during the process of consolidating, various deficiencies were found in the buildings and equipment, around 10 full-time firefighters were hired, and the fire tax went up four times.  That’s what I was told; an Internet search hasn’t led me to a decent summary of events.

Interestingly, an Internet search for variations of “Coventry fire district consolidation” turns up more stories about other RI municipalities citing Coventry as an example than explanations of what went on in the town when the change was actually made.

It’s one thing to combine activities like salt depots and police shooting ranges.  On a larger scale, though, consolidation can build a new pyramid — a higher one, with a superadministrator overseeing just as many lower administrators as there used to be — that isn’t directly under municipalities’ control and that is often a step or two farther from voters.

In cases where direct or representative democracy remains, consolidation still moves the fight to larger venues, where the consolidated interests of the unions can even more easily overwhelm the disbursed interests of the voters.  (How many local taxpayer groups have experienced hitting a wall built by the unions’ friends in the State House?)

This is one area in which government manifestly does not operate like businesses do.

Should Rhode Islanders Join In with Insider Optimism

I wish I could be as optimistic as this Ted Nesi article makes it sound like I should be.  Apparently, political leaders and “business leaders” (defined, it appears, as being in attendance at the Greater Providence Chamber of Commerce annual legislative luncheon) think this could be the year that the annual promise to focus on the economy actually turns into something, what with a new, more-business-friendly Speaker of the House and Mrs. Big Investment in the governor’s office.

Maybe my cynicism meter just hasn’t gone back down since the commission to study elimination of the sales tax meeting at which a Greater Providence Chamber of Commerce representative said it would be “a crime to threaten” a government revenue stream.  To be sure, the high reading on the cynicism meter was reinforced when RI Hospitality stepped forward to defend a government expenditure of which it gets a healthy chunk and a Greater Cranston Chamber of Commerce leader proclaimed himself in favor of a move toward socialized healthcare in Rhode Island.

Something about “business leaders” who speak out against the free market produces a red flag, for me.

Put simply, it would be reasonable to suggest that workaday Rhode Islanders should be highly pessimistic about a political environment that makes the people in that room feel optimistic.  House Minority Leader Brian Newberry (R, North Smithfield, Burrillville) provides the beginnings of the proper attitude when he suggests merely a “note of caution” that we might see “rent seeking” (i.e., insiders manipulating the system to benefit themselves).

As I’ve spent a good part of this week arguing (start reading from here), Rhode Island’s already built to consolidate the economy and preserve the lifestyles of insiders for as long as possible, no matter how many opportunities that solution allows to pass by.

And so, we’ve got the Speaker of the House wanting to give a tax break to people who are on their way out of the workforce (or already out) while the Senate President takes a more directly labor-union-friendly approach of emphasizing apprenticeship programs and shoveling more money to government-run schools, and the governor wants to make it even more explicit that state policy is to make economic decisions from the top down, even if it means giving away land to preferred organizations.

Please tell me there was somebody in that room who felt like screaming, “Oh, come on now!”



The apprenticeship and education emphasis is especially telling, given my review of business openings and closings in the state.  If motivated self-starters are finding it difficult to build their dreams in Rhode Island, then most of the government’s investment in training and education either is preparing us to be cogs in somebody else’s machine or will go out out the window when our young go-getters go get it where it actually exists to be gotten — somewhere other than Rhode Island

Prices Are Just Signals That Create Incentives

Here’s a good video explaining a point that I make again and again.

Policies that attempt to fix prices (whether the price of labor known as wages or the prices of goods and services) are sort of like ancient medical practices based on superstition.  Sometimes they cover the symptom while the illness heals; sometimes they don’t really do anything; sometimes they make things worse; and most of the time, they fail to do anything, of themselves, to fix the underlying problem.

Health care exists in a supposedly ‘free’ market where government sets the prices

The other day, my Medicare-eligible father took the position in a discussion between us that centrally managed health care was superior to free-market health care. He cited the state of American health care as his proof.

His proclamation of evidence is nothing if not debatable (see here and here, for example), but even to acknowledge that much goes too far.  The debate starts from a false premise.

Continue reading on WatchDog.org.

House Rules to be Voted On Today: A Half-Step Forward, Three More Needed

The full Rhode Island House of Representatives will vote on the rules for their chamber this afternoon. The proposed rules, amended since their introduction last week, contain at least one significant improvement over the originals. The first draft of the new rule 12(a) would have allowed a bill to be denied a hearing, without appeal, if “it appears from the subject matter that the issues presented would be substantially similar to those matters already heard”. In the rule 12(a) to be voted on today, a bill can only be denied a hearing, without appeal, if “it appears from the subject matter that the issues presented would be substantially similar to those matters already heard” ONLY IF the bill was filed after the 40th legislative day.

Beyond this, the rules of the RI House still are lacking in three substantial areas that need improvement, if the House is to operate in democratic fashion.

1. An amendment to rule 12(f) in this year’s rule makes clear that committee members cannot move to reconsider bills that are “held for further study”, i.e. once a bill is “held for further study”, it can only be brought back with the informal consent of the Speaker and a committee chair which, in practice, gives a one-man veto to the Speaker over every bill proposed. A clear procedure should be established in the rules by which a committee member can ask for a bill that’s been held for further study be considered, which the committee would decide on by majority vote.

I defy anyone to explain why establishing such a procedure would be a bad idea, without turning it into a defense of the idea that a group of people will run wild, unless they are held in check by the power of one strong leader.

2. Related to the challenge above, the Rhode Island House should adopt the rule already in place in the RI Senate, where the committee assignment of a member cannot be changed without the member’s consent (rule 5.2). This would eliminate the possibility of future repeats of Representative Patrick O’Neill being stripped of his Judiciary Committee seat, simply for exercising his basic rights as a legislator and calling for a bill to be voted on.

3. The language regarding discharge petitions in rule 20 should be streamlined, clarifying the meaning of potentially ambiguous statements like “but only one petition may be presented for a public bill or resolution during the course of a session” and thereby establishing that any bill bottled up in committee is eligible for a discharge petition. Also, the only-valid-after-50-legislative-days rule for discharge petitions should be eliminated.

The good news is that, because of the amended 12(a), House members can submit changes to the rules at any time before the 40th day of the session, and the leadership cannot instantly kill them on the basis that the rules bills for this session have already been heard. What happens after that, of course, is up to the members themselves.