Rhode Island needs to learn how entrepreneurship really works

Everybody around the table gave me that friendly look that says, “You speak eloquently and seem to care, but we don’t think you really get what we’re talking about, here.” At the “Make It Happen RI” conference, I was seated at one of about a half-dozen round tables with eight to ten people at each, assembled to talk about entrepreneurship in Rhode Island.

In a half-dozen other conference rooms in the Rhode Island Convention Center, similar tables were filled with similar people, discussing related topics focused on how Rhode Island could “make it happen.”  That is, how leaders in the public and private sectors could get the state off the wrong end of every list, and change the state’s motto — “Hope” — from a bitter joke to a reality.

The statement that had drawn “the look” was that we were too focused on entrepreneurship as this exciting process of birthing cutting-edge businesses to make investors rich.  The plumber who identifies flaws in his boss’s business model, applied to the local market, and who strikes out on his own to test the theory is also an entrepreneur; it isn’t just the Mark Zuckerbergs of the world.

A recent study out of Pepperdine University specifies that entrepreneurs aren’t just “self-employed” people, but “the starter[s] and owner[s] of new businesses,” with an emphasis on “intense and continuous competition between new products and ideas.”  According to the authors, “The entrepreneur as gap-filler and risk-bearer is especially important to economic growth in developing nations.”

Continue reading on WatchDog.org.

Union Firefighter Intimidation Tactics in Warwick

As reported by John Howell at the Warwick Beacon:

CVS Health has found no wrongdoing on the part of one of its employees, former Ward 1 councilman and former chairman of the Warwick School Committee Robert Cushman, in response to demands by the president of the Warwick Firefighters Union.

The union’s president, William Lloyd, threatened a statewide – followed by a national – boycott of the pharmacy chain because of Cushman, a full-time business analyst with the company.

Cushman has been critical of the firefighter and police pension liabilities faced by the city. Firefighters have questioned Cushman’s credentials.

In an email Tuesday, CVS spokesman Michael DeAngelis released the following statement: “After investigating this matter, we determined that Mr. Cushman did not claim to be representing CVS Health or speaking on behalf of the Company when he exercised his rights as a private citizen at a public meeting in his hometown.”

The email continues: “As such, we have no position on his comments. We believe the IAFF Local 2748’s call for a boycott of CVS/pharmacy is misplaced and not warranted. We have a strong track record of supporting emergency responders, and we appreciate all they do to protect our communities.”

Cushman said CVS executives brought Lloyd’s email to his attention more than a month ago. He said the company questioned him, and reviewed tapes of a presentation he made to the City Council in December. Cushman said he was later shown a copy of the CVS reply, which according to DeAngelis closely followed the statement released to the Beacon.

DeAngelis did not feel it proper to release Lloyd’s email to the paper. Cushman did not have a copy.

In an interview yesterday, Lloyd said the letter that was addressed to DeAngelis never called for Cushman’s dismissal, but that because Cushman is an employee “we would not be using CVS anymore.”

“I never made a threat against his job,” Lloyd said. “I never said anything about getting Bob Cushman fired.”

Lloyd said a boycott was not a singular decision, and that the union unanimously voted for it.

“A vote taken by all members, it wasn’t me just spouting off,” he said.

Nevertheless, message sent, no?

Figuring Out Who the Sucker Is

As Rhode Islanders hear about the latest ideas for economic development percolating among their elected and appointed officials, whether minor-league baseball parks or big bucks for a Commerce Czar, Kevin Williamson looks to Maine for an important reminder:

When some lobbyists for a business interest—any interest group, really—come to the state capitol and tell you that they have a tremendous new idea that will create jobs-jobs-jobs-jobs-jobs, grow the tax base and get voters off the backs of citizen-legislators, listen carefully to see if the next sentence is: “All you have to do is to give us a tremendous amount of money.”

As the poker players say: If you don’t know who the sucker at the table is . . .

Perhaps Maine’s legislators were thinking to themselves: “Financiers and their lobbyists are well-known for their selflessness and their sense of public duty—surely they would not lead us astray!”

If so, they should stop thinking that.

In Maine, as Williamson says, “legislators put millions of dollars into a deal that they did not understand.”  Rhode Island is a leading example of legislators attempting to micromanage an economy that they don’t understand — that it is actually impossible for anybody to understand well enough to direct.

On HealthSource RI on State of the State

4-9-2015 HealthSource-RI: Cost, Performance, Future Funding from John Carlevale on Vimeo.

The key points come at the end, when I suggest that Rhode Islanders should see if their representatives and senators are on some of these bills for socialized medicine and never, ever vote for them again.  It’s frightening that people who want to do these things to us could get into office.

Income Inequality and the Middle Class in RI Cities and Towns

Stephen Beale has a story on GoLocalProv, this morning, on “The RI Communities with the Biggest Wealth Gaps.”  The progressives whom Beale quotes all handle the question as one of “income inequality,” but the subject really has more to do with a certain way of looking at the middle class, as on the interactive map from Pew that I’ve mentioned here and on WatchDog.org.

That’s the thrust of the comments that I gave Beale for the article.  Progressive policies create this gap between rich and poor, because they dismantle the structure that families can use to bridge the gap.  As I put it in the article, they “make it difficult to improvise economically.”  Then, they explicitly attempt to redistribute money based on the political demands of government, rather than leave it in the economy, where people can redistribute it themselves through commerce.  The first method benefits political interests, which helps insiders; the second method benefits the economy, which helps everybody.

An example of a progressive policy suggested by Kate Brewster of the Economic Progress Institute (formerly the Poverty Institute) is a fine illustration:

… “Cities may be able to provide some opportunities for residents to improve their economic circumstances through policies that require businesses that receive benefits from the city to hire city residents,” Brewster said.

The most prominent example of such a policy in Rhode Island is the First Source ordinance in Providence, which mandates that businesses receiving any form of aid from the city first attempt to hire local residents before going outside of the city to recruit. However, a GoLocalProv report last year found that the city had largely failed to enforce the ordinance, prompting a lawsuit from the activist group, Direct Action for Rights and Equality.

As Rhode Islanders are learning with every new high-profile development that’s proposed, our state has structured itself such that businesses find it difficult to operate without seeking some sort of benefit from the cities, towns, and state, whether tax deals, grants, or some other relief.  That puts them at the mercy of such policies as Brewster suggests.  Then, those policies place additional burdens.  To the extent that a business can’t simply hire the best candidate for a job, it represents an implicit drag on its operations.

The end result is that entrepreneurs (and less highfalutin small-business owners) can’t or don’t bother to enter the economic game.  That leaves more space for the established players who are able to work the system.  They get richer than they otherwise would be, while the folks at the bottom of the ladder have no rungs to climb up.

Terry Gorman - RIILE

Terry Gorman: Sympathetic Providence Journal Article Encourages Illegal Immigration to Rhode Island

[Terry Gorman of RIILE sent the following e-mail to Providence Journal reporter Karen Lee Ziner in response to her front page article of Saturday. It has been lightly edited for style.]

Regarding your April 18 article in the Providence Journal, “Fight over Obama’s orders“, so much for “HIDING IN THE SHADOWS“. Two women here Illegally delivering 5 children that by current law are U S Citizens. Free pre-natal care, childbirth, post-partum care and long term family planning for two years (evidently not working) all at the expense of taxpayers. Just how much does this group cost US taxpayers and how is it justified in these lean times?

I think this article will only serve to ENCOURAGE many more pregnant illegal alien women to flock to Rhode Island. Why wouldn’t they come if they can arrive Illegally, have as many children as they wish, work Illegally or just not work, receive workers compensation, get free care for a child’s autism, receive subsidies for the new U S citizen children in the form of welfare, SNAP etc., now that it’s been basically ADVERTISED on the front page of a major newspaper? Thanks.

Early Thoughts on a Tiverton Casino

Rumors permeated among Tiverton’s politically active residents, last night, that some big news would be coming today.  I joked to my friends that the town planned to secede to Massachusetts and move the planned Fall River to Tiverton.

As it turned out, that joke was a bit like splitting the zeros on a roulette table.

News is out — see here and here, for examples — that Twin River Management Group has plans to move its Newport Grand facility to Tiverton, along Stafford Rd. directly on the other side of Rt. 24 from an area of Fall River, Massachusetts, that is heavily developed with retail businesses.

Continue reading on Tiverton Fact Check.

No Jobs for College Grads & No Jobs for Anybody

At first look, a study mentioned on MarketWatch appears to provide support for the mantra from Rhode Island’s governing elite that we need “the right kind of well-paying jobs.”  From the color-coded map that Quentin Fottrell includes with his article, the takeaway appears to be that Rhode Island is one of the four states with the lowest numbers of jobs for college graduates.

Comparing that map with my regular employment-versus-peak chart shows that there’s more to the story.  On the map, RI is in company with North Dakota, but in employment, North Dakota is up there with Texas as two states that have put the recession well in their rear-view mirrors.

If you consider the second chart of the study that Fottrell cites, you’ll note that adjustment for population doesn’t help Rhode Island at all, but it does move North Dakota up to the middle of the pack, albeit below the national average.  The key point is that Rhode Island lacks both college-grad jobs and non-college-grad jobs.  In short, Rhode Island doesn’t have much by way of opportunity for anybody (except political insiders and opportunists).

As a college grad who spent much of the last decade working as a carpenter, I’d suggest for the average Rhode Islander having a job comes first.  Benefiting from a college degree comes second.  Judging by the way our governors and legislators set policy, it’s pretty clear that they believe it’s worth slowing down job growth generally in order to make sure that those that are available meet their approval.

Making matters worse is that there’s no guarantee (or evidence, that I’ve seen) that the “well-paying jobs” that elected officials promise will actually go to the Rhode Islanders who are suffering from the state’s moribund economy.  As I keep repeating: the only plausible, or even humane, solution is to back the government off so that Rhode Islanders can develop the kind of economy that serves their needs.

This may just be my undying optimism, but I have a feeling that letting Rhode Islanders do that will improve prospects across the job spectrum.  After all, a good portion of your neighbors do, in fact, have college degrees that they’d like to put to work.  Left free to work and to experiment, they’ll make their own opportunities.

Explaining a Lower Tax Increase in Tiverton

For those who are interested in local political contests, I’ve put in another alternative budget for consideration at Tiverton’s financial town referendum (FTR), this year, to be on the ballot for voting on Saturday, May 16, at the town’s high school.

The town’s informational page about the referendum is here.  I’ve posted an explanation of the budget proposal on Tiverton Fact Check.

Who’s “Working for the Government”?

Two items in today’s Providence Journal “Political Scene” column make me hope for broad agreement on a proposition.  Item 1:

In 2012, Political Scene reported that Kilmartin and his wife, Kristine, derived big chunks of their income the previous year from his $56,862-a-year pension as a retired Pawtucket police officer. When she retired that year, on the cusp of her 51st birthday, as director of the legislature’s data-services office, she started collecting her own $60,030.96-a-year state pension.

Total pensions: $116,893.  According to the RIOpenGov payrol application, Kilmartin added $116,611 via his salary as AG.  Total income: $233,504.

Item 2:

Former Family Court Magistrate John J. O’Brien retired with two state pensions totaling more than $195,000. …

The retired chief judge of the state Family Court, Jeremiah S. Jeremiah Jr., took another path to receive $207,207 in two pensions  — municipal ($22,126) and judicial ($185,648).

Proposition: Can we all agree that it’s simply obscene for households to live this well off the public dime — for work they are no longer doing?  

Really.  Flip over to the commentary section of the paper, and you see a letter from Lorraine Keyes, of West Warwick, who returned to her Westerly business after a few months away only to discover that an oversight in paying her taxes resulted in not only hundreds of dollars of additional fees, but also a heavy-handed threat that the town would be selling her property two months later if the bill were not paid.  Her conclusion:

No wonder people leave Rhode Island as soon as they can. I don’t know if this happens in every town, but it is such a shame that this state tries to drain every cent it can from the average person.

Oh, Lorraine.  Even just in the state system, Westerly’s got 245 retired employees taking home up to $95,237 per year.

Don’t you see?  They don’t work for us (literally, in the case of retirees).  We work for them.  Everything you own in Rhode Island, even if you think you built it, is really just a privilege that they allow you to enjoy while supporting their machine.  If you’re not going to keep up on your payments, naturally they’ll take it all away.

Perverting the Utility of Shame

Speaking of an ailing civic system, Megan McArdle’s worth reading on the subject of public shaming:

In the small groups we evolved to live in, shame is tempered by love and forgiveness. People are shamed for some transgression, then they are restored to the group. Ultimately, the shamed person is not an enemy; he or she is someone you need and want to get along with. This is how you make up with your spouse after one or both of you has done or said something terrible. …

On the Internet, when all the social context is stripped away and you don’t even have to look at the face of the person you’re being mean to, shame loses its social, restorative function. Shame-storming isn’t punishment. It’s a weapon. And weapons aren’t supposed to be used against people in your community; they’re for strangers, people in some other group that you don’t like very much.

The Internet has brought things to a sharp edge, but anybody involved in local politics — particularly if they face progressives who believe they speak for The Community — will recognize McArdle’s notion of shaming as a weapon against an enemy group.  That pretty precisely describes my experience in Tiverton.

Glenn Reynolds sharpens the edge a little more, writing:

They’re not well-meaning people who want to make our shared society better, and sometimes just get carried away. They’re angry, vicious people who want to eliminate disagreement.

At this level of conversation, though, the “they” has to be defined.  McArdle suggests that the people engaged in online social shaming probably would back away from a mob doing it to somebody in person.

Many on the political Right want to turn the psychological warfare of Saul Alinsky back on the Left, but that strikes me as a misunderstanding of objectives (or perhaps evidence that the objectives of some of our conservative friends are more alike to those of our progressive non-friends than should be the case).  Rather, we need a counter-weapon, and as difficult as it might be, the sole antidote may be standing up to the attacks and letting those who’ve sided with the attackers slowly come to the realization that they’re on the wrong side.

Magaziner’s Uninformative Op-Ed

Politics is a game of persuasion… if we’re putting it nicely.  “Deception” would probably be more accurate.

But even within that jaded paradigm, I have to marvel at how uninformative state General Treasurer Seth Magaziner’s op-ed in yesterday’s Providence Journal is.  Even putting aside questions about the green theology, the op-ed doesn’t really explain what the treasurer wants to do.

We’ve got a name change of the RI Clean Water Finance Agency, and we’ve got a couple of green-industry ideas, but shouldn’t the treasurer of the state focus on explaining what the bank would mean, functionally, and how much it would cost?  Presumably, an op-ed is meant to be the policy folks’ medium for explaining their proposal to the broader public.  If the treasurer of the state is offering mainly assertions about the wonders of his idea, who’s going to translate the nuts and bolts for the masses?

Our civic culture is really much-deteriorated around here.

Getting Economic Development Wrong

Readers may get the impression of a broken record with this post.  Before I go on, perhaps I should explain to the younger folks that records were large black vinyl discs, of about 10 or 12 inches, that would spin on a table called a “record player,” with a needle following grooves in the plastic and thereby transmitted prerecorded audio.  If the record were scratched, the needle would skip across grooves and the listener would often hear the same phrase repeated over and over again.

Anyway, repetition is obligatory in Rhode Island, these days, because the people we’ve elected to public office have the completely incorrect view of economic development.  Here’s Governor Gina Raimondo’s Commerce Czar Stefan Pryor responding to the House Finance Committee’s concern that the governor intends to give him a great deal of money and discretion:

… Pryor bluntly told the committee that the corporation cannot grow the state’s economy without the programs proposed in the governor’s budget. He described a conversation he had with the corporation’s executive staff before he formally assumed his new role earlier this year. Pryor said he asked the staff how Rhode Island would attempt to compete with a company that arrived in the state with a list of project terms provided by another nearby state, such as New York.

“This is not a fictionalization. This is the actual answer I got back: We cannot — on any point,” Pryor said. 

“That’s a problem. We must ensure the appropriate level of accountability and the necessary level of flexibility to carry out this work. But the primary problem that we have is we can’t even counter. We can’t help our businesses in Rhode Island grow.”

Simply put, it should not be the role of government to take money away from the people who live in the state in order to outbid other states’ bribes to lure the economic actors whom government prefers to the state.  Rather, the government’s role should be to ensure that Rhode Islanders have the space — in stability, security, and infrastructure — to make their state a place that attracts the sorts of economic actors whom they prefer.

Politicians sometimes say that Rhode Islanders are Rhode Island’s greatest asset, but they don’t really mean it.  If they did, they’d let Rhode Islanders maximize their own efforts toward building their lives and shaping their state.

The technocratic, Raimondian method of economic development is akin to confiscating money from the music industry in order to subsidize companies that make enhanced record players when they should be leaving the money in the economy and trimming regulations in order to allow Rhode Islanders to develop cassettes, compact discs, and mp3 players.

Lincoln Chafee’s sense of modern politics could indicate the U.S. has caught RI’s civic illness

A shock went through the collective psyche of Rhode Island when former governor Lincoln Chafee announced that he had formed an exploratory committee to consider a run for the Democrat nomination for President of the United States in 2016.  As governor, Chafee’s public support became so thin that he announced in September 2013 that he would not seek reelection to his office, which didn’t expire until January 2015.

Stepping back from the local incredulity, however, it’s an open question whether Chafee’s got a political sense that his critics lack.  Maybe things like experience and evidence don’t matter as much as they once did.

Continue reading on WatchDog.org.

A Two Million Plus Dollar a Year Loser of a Stadium: What Does the Governor See that Almost No One Else Does?

Two million dollars per year because that is the projected annual loss for state taxpayers in the just-unveiled proposal by the new owners of the Paw Sox for construction of a baseball stadium in Providence. It’s worth repeating: the numbers offered by the Paw Sox owners THEMSELVES have state taxpayers losing two million dollars per year.

“Plus” – and the plus could be quite a large figure – because the president of the Providence City Council has told WPRI’s Dan McGowan that Providence would be looking to state taxpayers to pick up the property taxes that the owners of the Paw Sox have requested to be relieved of. This suggestion would be a laff riot, especially in light of the state’s multi-hundred million dollar structural deficit, except that the council president seemed quite serious about it.

Earlier today, John Marion tweeted out,

Received a call from someone looking to know if there is an organization actively opposing the PawSox stadium deal. Anyone know if there is?

Most of the reaction I’ve seen and heard can be described as “actively opposing” the stadium (also: vigorously opposing, seriously concerned about and downright appalled by), though a single-purpose opposition organization – presumably what Marion’s caller meant – has not yet popped up. Even Bob Plain over at RI Future, never shy about spending tax dollars, has expressed skepticism about the proposal.

In fact, it would be far quicker to list those who support the Paw Sox proposal. This list so far consists of the building trades unions – not a shock as the Paw Sox owners have promised that the proposed stadium would be built with union labor.

Enter Governor Raimondo, who spoke to NBC 10’s Bill Rappleye today.

“I also think this has the potential to create a lot of jobs – immediately construction jobs,” Raimondo said. “It brings people into the city and could catalyze other economic development in the area, which has been done in other cities. If we do it right, I think it could be a good piece of our economic puzzle.”

The Convention Center Authority, 38 Studios and others – the very last thing that state taxpayers can afford is yet another costly economic development loss leader. But by the Paw Sox owners own calculations, that’s exactly where we would be headed with a minor league baseball stadium in Providence. We would respectfully ask to see your numbers, Governor Raimondo. How exactly would a brand new $2+ million hole in the budget make a good contribution to the state’s “economic puzzle”?

Following Up on EITC

While looking into Rhode Island’s earned income tax credit (EITC) benefit for lower-income workers, I asked Director of Revenue Analysis Paul Dion to clarify something in the revenue expenditure report that his office maintains.  The answer might put Governor Raimondo’s proposal to increase the EITC in a new light.

Under current law, recipients of the EITC can receive 10% of the federal version of the benefit, and 100% of it is refundable, meaning that even if the credit is greater than their actual tax liability, they get the money back as a refund.  (I have confirmed, by the way, that beneficiaries do actually have to have some taxable income.)

The estimates for the cost of the program that I cited from the report were based on the law as it was before the General Assembly changed it last year.  Before, beneficiaries could get 25% of the federal EITC, but they would only receive 15% of a resulting refund.

That change slipped through without much notice, though, because budget documents paired it with a reduction of property tax relief for elderly and disabled residents.  The two changes together actually had a taxpayer savings of $3.9 million.  I, for one, had thought that meant the EITC change turned out to be a reduction, so both parts of the package were cuts.

According to Dion, that was not the case.  The EITC change actually increased the cost of the program by $4,293,291.  Roughly speaking, then, the cost of the program, in 2015, is more like $16 million, rather than $12.2 million, with an average benefit of $167 per year.

For the next budget year, Raimondo’s benefit increase would bring the total program up to $19.1 million, about a 70% increase over two years, bringing the total average benefit to around $192 per year.  The following year would bring the program’s cost up to $22 million or so, because the budget increases it by the same increment in the second year, essentially doubling the cost from its 2014 base.

Can Rhode Island really afford to continue ratcheting up its degree of income redistribution?  Add in other burdens on the economy, like the continually growing minimum wage, and it’s little wonder that our labor force is shrinking and employment struggling.