Search results: "productive class"
justin-katz-avatar-smiling

Robbing productive class Peter to pay college graduates Paul

Is the departure of recent college graduates keeping Rhode Island at the back of the pack economically? Progressives in the state’s legislature apparently think it would be beneficial to have taxpayers subsidize student loans. A look at student debt data suggests that would be a major burden on a population that’s already heavily taxed–and that the idea may, in fact, backfire.

The debate has been raging almost since the turn of the millennium: With Rhode Island’s population waning, who’s leaving?  The first assumption was that the rich were fleeing the high taxes, which inspired policies meant to keep them — like an alternative flat tax and a phase-out of the capital gains tax.

Progressives objected that the evidence did not show flight of the rich, and as it turned out, they were right.  The departing demographic was the “productive class” — families in that highly motivated period of their lives when they’re exchanging their time, sweat, and talents for a trip up the rungs to the middle class.

To make that group stay, though, politicians can’t cut taxes in exchange for the campaign support like do for the wealthy.  And the productive class doesn’t use direct government handouts, so the government can’t make them stay by handing out entitlements.  They need less regulations so they can work and innovate, and they need to be able to keep the money that they’ve earned, rather than having it taxed away.

If we look at who is sponsoring two relevant pieces of legislation on the subject, it becomes clear that Rhode Island progressives have decided to try and bribe recent college graduates into staying in the state. Based on the rationale described in the bills, they hope a younger crowd will be like their older brothers and sisters in helping the economy to grow.

Continue reading on WatchDog.org.

justin-katz-avatar-smiling

Keeping the Productive Class, Not in Government’s Interest

Roger Williams University Professor Thomas Lonardo has picked up a thread of the apocalyptic Rhode Island tapestry that I noted about a decade ago:

However, a major part of the Rhode Island population typically associated with middle- and upper-middle-class taxpayers seems to be ignored, the 35-to-54-year-olds. This group makes up 26.8 percent of the population. Although income class distinctions are a moving target, it is assumed that the middle- and upper-middle-class income range is $75,000-149,999, with 27.4 percent of the households in Rhode Island in this range.

‘The modest overall decline of the Rhode Island population of 1,365 from 2010 to 2013 may not raise concerns. What should be of concern is the decline in the 35-54-year-old population by an astounding 16,567!

This is another way of getting around to describing what I’ve called the productive class.  If I could pick any age range, I’d probably go with something closer to 28-50, but that’s a minor and largely arbitrary distinction.  The point is that this is the age range during which people make something of themselves.  They go from being on the lower rungs to getting near their full potential.  It’s a lot of human initiative, sweat, time, and investment, and as people climb those rungs in large numbers, they bring the economy up with them.

Lonardo sticks to thinking of people in their groups, so I don’t think he quite gets to the heart of why the productive class is important.  It’s not about employers versus employees and everybody fitting in their groups.  As in physics, the real action happens with acceleration.  I think, therefore, there’s a simpler answer to this question:

Why doesn’t retention of this taxpayer class seem to be a primary focus of our elected officials? Maybe because the solutions that make a public opinion impact beyond an election cycle are not worthy of consideration. Possibly because solutions include difficult decisions and bold comprehensive strategies addressing the myriad of troubles facing the state such as: high taxes (including fees and surcharges), substandard roads and bridges, underperforming public schools, etc. 

Fundamentally, the problem is that the government can only help the productive class by relinquishing control and taking care of the basics.  The government would have to get out of the business of telling people what they can do in every minute aspect of their economic lives and start taking care of boring stuff like infrastructure.  

People accomplishing things create a competing source of power and authority to that of government in a way that people who already have a lot of money or who have almost no money at all cannot match.  Indeed, the already-wealthy have incentive to work with government to keep the upstarts out, while the poor represent a client-and-voter base for the government.

justin-katz-avatar-smiling

The Millennial Wave That Might Not Be

For years, we’ve heard how much attention must be paid to the Millennial generation, because its members would soon change the face of society and politics.  They may very well do that, as a large generation, but a tidbit from Ian Donnis’s latest Friday column reminds us that Millennials are human, too:

Which generation has the greatest increase in voter registration in Rhode Island from 2014 to 2018? Would you believe the Silent Generation (people born between 1928-45), which had a 39 percent bump, from 996 to 1,381 over the last four years, according to Secretary of State Nellie Gorbea’s office. Boomer (born 1945-64) registrations jumped 30 percent, from 4,163 to 5,423, while Xers (1965-1980) climbed 20 percent, from 5,055 to 6,060. Generation Z (1997-) is up 9 percent, 3,290 to 3,574, while Millennial (1981-1996) registrations dropped 11 percent, from 12,275 to 10,892.

So why would the number of voter registrations among Millennials drop as we head toward elections that the mainstream media has been hyping as their chance to save humanity?  An answer would take more digging than I’ve time for at the moment, but I think we can return to my old thesis about the “productive class.”

Over the last four years, the youngest Millennials have moved on from college, or whatever they were doing as they transitioned into their 20s, and the oldest Millennials moved into their late 30s and (gasp!) middle age.  As I’ve been saying since even the oldest Millennials were still in their 20s, the people who tend to leave Rhode Island are those in the “meaty, motivated segment on the cusp of the middle class” — people who want to cash in their talents and labor to build their lives.  That transaction remains much more difficult in Rhode Island than elsewhere.

The harder question may be who remains behind.  Some Millennials in their still-idealistic (read: naive) youth, probably.  However, the non-Millennial cohort could surprise us.  Will they be defined by newly wizened GenXers who have too much experience to fall for socialist promises or seniors too far removed from their careers and too reliant on other people to resist the lure of big government?

We’ll see.  In the meantime, perhaps we should take the lesson that demographics are not destiny and at least some people can change their minds… or move.

justin-katz-avatar-smiling

Matt Brown’s Disastrous Platform

One can have little doubt that Matt Brown’s platform is right in line with the views of progressive Democrats.  One can also have little doubt that Matt Brown’s platform would be economically disastrous for Rhode Island:

On policy, Brown said he wants to reverse various recent state tax cuts, such as by raising the top income tax rate from 5.99% back to 9.9%, where it stood until 2010. He also said he would raise the top corporate rate from 7% back to 9%, but wants to create a graduated system that lets smaller companies pay a lower rate. He has not yet decided whether he wants to raise the estate tax, he said.

Brown pledged to increase funding for Medicaid, the state-federal health insurance program for low-income residents that has grown to about a quarter of the state budget.

So, increase dependency on government and suppress the free market dynamism that pays for government programs.  Brown’s program would push Rhode Island into the accelerated spiral that Connecticut is experiencing and the flight of the productive class.

It seems unlikely that Brown will actually have a chance to push his program as governor, but his end point is that toward which progressives are incrementally moving the state.  We need to take his succinct statements as a warning.

justin-katz-avatar-smiling

Licensing’s Contribution to Inequality

Occupational licensing takes rungs off the mobility ladder for those who most need them, suggests Jared Meyer, writing in the Washington Examiner:

According to estimates by the Archbridge report’s authors, the growth of licensing corresponded with up to a 6.7 percent decline in absolute mobility, depending on the state. In other words, because of occupational licensing, children who grow up in low-income families are less likely to achieve the American Dream when they are adults. …

Researchers are still discovering just how much occupational licensing harms economic mobility, but there is no question that these barriers disproportionately harm low-income individuals. The Archbridge Institute’s new report, along with a continued focus on the problem by state and federal policymakers, offers hope that more positive policy changes are coming.

According to the report, the reduction in upward mobility for Rhode Island due to its licensing regime is 3.7%, and the increase in the Gini Coefficient (a measure of income inequality) is 8.6%.  That is, occupational licensing helps those who’ve already made it keep it and serves to block those who haven’t from doing so.

Added to tax burdens and every other drag that Rhode Island puts on economic activity, licensing is one reason the “productive class.”  We don’t need more programs, government handouts, and central control.  We need more freedom and opportunity.

justin-katz-avatar-smiling

Jobs Lost to Regulation

Katie Wendell’s article on occupational licensing in Ohio brings to mind questions about Rhode Island:

Ohio lawmakers are considering changes to some requirements amid concerns that over-regulation is keeping some people — including many from the generation most apt to leave the state — from gaining employment.

“Ohio’s licensing requirements have prevented more than 7,000 people between the ages of 25-45 from pursuing licensed occupations in the state,” says a new study by the Buckeye Institute, a conservative think tank.

I don’t think it’s so much a generation that might leave as a class, which I’ve called the “productive class.”  (Again, that description is meant to distinguish from, say, an “investor class” or “student class,” not a “lazy class” or something.)

I do wonder what the Buckeye Institute’s model would find Rhode Island’s job prevention number would be.  According to the Institute for Justice, Rhode Island has the 10th most burdensome licensing laws for low-to-middle-income occupations, compared with Ohio’s 38th.

justin-katz-avatar-smiling

An Economy Headed in the Wrong Direction

For his weekend column, Ted Nesi draws attention to another indicator that what we’ve been saying around here for years is true — namely, that Rhode Island’s economy is headed in the wrong direction, whatever a misleading unemployment rate might suggest:

Back in November 2014, the conference projected Rhode Islanders’ personal income would total $59.8 billion this year and $61.8 billion next year. Fast-forward to last month, and the conference’s revised income forecast is far more modest: only $54.4 billion this year and $56.3 billion next year. Put another way, Rhode Islanders’ personal income in 2018 is now expected to be nearly 10% lower than forecast three years ago. That’s billions of dollars less in Rhode Islanders’ pockets than officials had thought would be there. It’s also a major contrast with the forecasts for payrolls (only about 1% lower now than was expected three years ago) or the unemployment rate (roughly a percentage point better now than was expected three years ago).

With state government insisting on keeping both its regulatory and tax thumbs on Rhode Island’s economy, the state is not a good place in which to really invest effort to succeed.  That’s why the productive class has been leaving, taking its motivation and financial resources with it.

Unfortunately, the incentives in this state are such that people in power will not change what needs to be changed, which means that voters must change them.  The remaining question is whether we’re so far down the spiral that those whose incentive is to work to keep their government-derived advantages alive as long as possible can win every time, almost without trying.

justin-katz-avatar-smiling

The Advantage of the Blue States

Providence Journal columnist Mark Patinkin continues his series of essays learning about the United States by way of his old college buddies with a review of what one of them learned by biking across the country.  The short version:  The fly-over states are filled with nice people whom our economy is bypassing, which explains why they were willing to look past Donald Trump, the man, and see him as a challenge to the establishment.

Of more interest, to me, is this bit of parochial chauvinism in the comments to Patinkin’s article, from Douglas Maiko:

people in blue states are much wealthier than midwest red states. It comes down to blue state economic policies and great opportuites to create wealth for one self here in blue land. Red State people tend to be cynical about the american dream, watch too much fox news, obsess with cultural issues. The numbers speak for themselves, move to a Blue state if you want the american dream

Even to the extent that there’s truth to his assessment of economic balance, Maiko’s attitude exhibits the dangerous arrogance seen in successful civilizations whose people believe their condition is permanent.  The likelihood is that the coasts are thriving based on a legacy of lucky geography and historical accident.

After all, the East Coast is the oldest region in the country, and both coasts have access to the world’s waterways, which is of decreasing value.  The coasts’ living generations, in other words, started from an advantaged place that had nothing to do with “blue state economic policies.”  Rather, the natural and cultural advantages of the areas allowed advocates of those economic policies to impose them without people’s feeling it as acutely as they would in regions requiring harder work and more sacrifice.

We should fear that our advantages won’t last if we keep driving out our productive class — those who want to cash in their drive and abilities for income, forcing established players to compete.  The crisis point may take time, or it might come all at once, when some fly-over city comes up with the next big thing that makes our legacy institutions and industries unnecessary.

Perhaps they’ll maintain the generosity that Patinkin’s friend observed in their roadside diners even when the coasts become dependent on the fly-overs.  Counting on that probably wouldn’t be a wise plan, however.

justin-katz-avatar-smiling

Universal Basic Income and Our Aspirations

Once upon a time, folks actually hoped that a universal basic education plus a prosperity-driven increase in free time would draw people toward intellectual pursuits and self improvement.  I’m sure there’s data on such things, but for my purposes, here, let’s just speculate that most folks’ general sense would be that it hasn’t quite worked that way.

In a recent Wall Street Journal op-ed, Dan Nidess asks why we would expect a universal basic income to have a different effect.  Indeed, he suggests that the policy “addresses the material needs of citizens while undermining their aspirations”:

At the heart of a functioning democratic society is a social contract built on the independence and equality of individuals. Casually accepting the mass unemployment of a large part of the country and viewing those people as burdens would undermine this social contract, as millions of Americans become dependent on the government and the taxpaying elite. It would also create a structural division of society that would destroy any pretense of equality.

UBI supporters would counter that their system would free people to pursue self-improvement and to take risks. America’s experience over the past couple of decades suggests that the opposite is more likely. Labor Department data show that at the end of June the U.S. had 6.2 million vacant jobs. Millions of skilled manufacturing and cybersecurity jobs will go unfilled in the coming years.

Notably, Nidess uses the term “productive class,” which I’ve been using for years in attempting to describe what populations have been leaving Rhode Island.  Basically, the Ocean State has been attracting the poor and (largely) holding on to the wealthy while driving out those who are looking for some way to transform their smarts, brawn, and effort into wealth.

Put in those terms, it’s clear that Nidess fears the UBI would bring about a national version of what I’ve called the “government plantation” or “company state,” whereby the government draws in dependents in order to provide services billed to somebody else.  Whatever arguments and motivations may underly such policies, they certainly don’t have the feel of being healthy for our society.

justin-katz-avatar-smiling

The Story of Rhode Island in the Trump-Clinton Divide

The other day, the Providence Journal published an interesting map showing that, much like the country as a whole, Rhode Island’s presidential votes were split by region, with the coastal municipalities’ going to Hillary Clinton and the interior going to Donald Trump.  The image oversimplifies, of course; several cities and towns in the northeast of the state don’t touch the coast, and Charlestown and Tiverton went to Clinton without her winning even half of the vote.

Reporter Paul Edward Parker touch on some of the nuance in the numbers:

Four of the five communities with the highest median household incomes voted for Clinton, as did seven of the eight communities with the lowest incomes.

Essentially, Clinton drew her support from the wealthiest and poorest places, while Trump drew his from the middle.

Laying this out in more detail arguably tells the story of Rhode Island’s current condition in a single chart:

RImuni-clintonvotevsincome

In that red U, we see both the story of the “productive class” and the workings of the “company state.”

Refer back to this 2009 post on Anchor Rising, and you’ll see that the bottom of the U is almost exactly in line with the population that has been leaving Rhode Island throughout this millennium.  As those Rhode Islanders flee the state, those who remain are increasingly part of the “company state” or “government plantations” model, wherein highly paid service providers in and around government have incentive to increase the number of clients requiring subsidized services as a pretense for taking money away from those above the line for subsidies.

This model harms the economy and drives people away because it reduces the incentive and opportunity to work.  The “productive class” is characterized by the economic role of the people who tend to be within it.  It’s the broad class of people whose main function in the economy is to turn their effort and ingenuity into money that they can use to support and advance their families.

This trend is terrible for a state for a multitude of reasons, but two stand out as particularly profound and overarching.  The first is that the “productive class” is the group whose activities are the foundation of a thriving and advancing society.  They are the dynamism and hope for the future.

The second is that the erosion of this tier of the economy as a source of balance eliminates political competition. A loss of political competition will inevitably lead to a political monolith that is not only incapable of correcting itself, but also susceptible to simple, wasteful, and demoralizing corruption.

Those who sympathize with the high points of the U really need to reevaluate the long-term good of their policies.  The rest of us need to redouble our efforts to turn the tide.

justin-katz-avatar-smiling

The Pension Disaster Will Be Addressed

Springboarding from the woes of California’s public-sector pension problems, The American Interest suggests that it might be too late to avoid some sort of crisis with such pensions across the country:

This long-running failure of governance may be irreversible. All that’s left for state governments to do now is reform pension systems for new employees, phasing out defined-benefit systems for 401(k)-style plans, and, where possible, trim benefits or raise contribution requirements for current workers. In the meantime, federal policymakers should start thinking about a reform-for-relief framework that will enable states and localities to honor their obligations to retirees while getting their finances back under control for the long haul.

We should consider it evidence of the extent of the problem that the generally wise American Interest falls back to the irresponsible cop-out that the federal government ought to step in and make the problem go away — as if the feds aren’t already headed toward dozens of trillions of dollars in debt absorbing every other bad policy decision made throughout the country over the past century.  That is, pensioners relying on the writer’s solution would have to hope that none of the other myriad problems and looming crises comes to a head and absorbs the nation’s very last tolerance for debt before the pension problem.  (My wager is that the multiple crises will cascade into one uber crisis.)

If the idea of the government takething away the pensions that it gavethed is inconceivable, peruse the ruling issued this week by Rhode Island Superior Court Judge Sarah Taft-Carter (internal citations removed):

It was clear that to avert disaster the City had to act. (p. 11)…

Notwithstanding a finding of substantial impairment, a contract modification remains constitutionally valid if the City produces sufficient credible evidence that the modification was done to further a significant and legitimate public purpose and if doing so was reasonable and necessary. (p. 30)…

… the Court is satisfied that the City has produced sufficient credible evidence through the testimony of Mayor Fung, Mr. Strom, and Mr. Sherman that the Great Recession, the decline in state aid, and RIRSA’s requirements created an unprecedented fiscal emergency neither created nor anticipated by the City. (p. 34)

Taft-Carter affirmed that cities cannot be expected to raise taxes indefinitely, and unless I missed it, she didn’t so much as speculate that the state could be forced to intervene.  The same will prove true up the scale, all the way to our giant national blob of debt.  At the state level, one could imagine a judge considering something like my argument about the flight of the “productive class” as evidence that higher taxes would accelerate a death spiral already underway.

For those who think the same couldn’t happen at the federal level, one can only suggest that they not take the risk of finding out.

justin-katz-avatar-smiling

Two Paths When Things Go Bad

As the scarcity of posts in this space illustrates, I’ve been extremely busy, this week.  Things have slowed, but I’m still getting back on track.

One thing I’ve been doing has been to sift through the data available from the Family Prosperity Initiative (FPI).  In summary, the conclusion seems to be inevitable that Rhode Islanders are good people who are just relatively unhappy, with something having happened around 2012 to reinforce that feeling, as suggested by adverse changes in things like new business establishments after that year.  Notably, that was the year that Rhode Island first sank to 48th in the country by the RI Center for Freedom & Prosperity’s Jobs & Opportunity Index (JOI), where it has remained since.

But the broad data from the FPI has some interesting contrast.  Rhode Island does poorly on almost all markers, whether economic or having to do with healthy behavior, with an up-tick around that year in, for example, obesity.  Yet other positive markers also jumped that year, or soon thereafter, including an increase in marriages, a decrease in divorces, an increase in weekly church attendance, and an increase in the percentage of children living in married households.

I wonder if some of these results are an indicator of two distinct paths’ that Rhode Islanders follow.  I’ve long been saying that Rhode Island has been driving out its “productive class“; that is, people at a point in life during which they want to make progress and be productive tend to account for a disproportionate share of the Rhode Islanders parting for elsewhere.  I’ve also been describing the “company state” mentality, whereby the state government pursues policies that increase the number of clients who give it justification for taking money from other people (the producers), in the state and elsewhere.

Maybe what the data shows is that, when a community gets in a funk, some people turn toward things that have traditionally led to stability, meaning, and success (religiosity and family), and other people turn to unhealthy behaviors, like drug use.  This is speculation, at this point, but I’d wager that there’s a strong correlation between these two paths and the other options of leaving the state, on the one hand, or falling into government dependence, on the other.

justin-katz-avatar-smiling

The Model of Redistributing Education Money

The American Interest highlights a model for education funding in Illinois that strikes a number of familiar chords for Rhode Island (via Instapundit):

A big part of blue state politics is the effort to equalize school spending across districts; rich Illinois suburbs can afford better schools than poor towns and cities, so they are asked to send extra money to Springfield to subsidize underfunded schools in Chicago. And it’s not just Illinois—state Democratic parties across the country are eager to subsidize schools in poor places with money raised in rich ones. (Incidentally, this may be one reason Democrats are struggling at the state level).

In the author’s opinion, this model might be just fine except for the fact that local interests on the subsidized side of the ledger want to keep control over their own affairs.  That is, they want to set their own priorities and budgets and tell the folks in wealthier communities how much money to send.

Things may operate a little differently in Rhode Island than Illinois, given our size.  The urban ring is a proportionally larger part of the state, so its representatives have an easier time running the state government for their own regional interests.  That simply makes matters worse, though.  In Rhode Island, all of government is an exercise in taking money from whoever has it in order to give it to whoever’s connected.

With fix-the-system reforms in the last decade, the administration of Republican Governor Donald Carcieri attempted at least to make districts accountable by implementing consequential statewide testing and some limited school choice through charters.  The insiders didn’t like the pressure, so they’re successfully pushing back.

Democrat Governor Gina Raimondo’s alternative approach of setting up about a half dozen in-district “empowerment schools” that must have strong insider buy-in and that won’t be up and running for a number of years is simply not going to be consequential.  So, children will continue to suffer the effects of poor education and the state will continue to suffer the loss of its productive class as people who want to live in a dynamic society continue to make the decision that it’s not worthwhile to remain in a place where government sees them as nothing more than a funding source.

justin-katz-avatar-smiling

Experts Who Miss the Obvious

A Sunday Providence Journal article by Kate Bramson is worth a quick look by way of raising the question of why experts seem to miss the obvious. A few quick hits, starting with this, from “labor economist” Paul Harrington:

“Older workers are going to retire at some point or other, and it’s going to be followed by a generation with less labor-force participation and less work experience” than earlier generations had, Harrington said. “To me, figuring out, ‘How do I get work experience for young people in urban areas?’ — that would be a top priority.”

This isn’t a difficult problem. Eliminate the minimum wage, lighten up mandatory benefits for employees (including both those imposed as regulations and those imposed as entitlement taxes), and end policies that attract low-skilled workers from other countries. Rather than non-living-wages for legal and illegal immigrants, you’d have additional spending money for lower-income households and young adults with work experience.

Then there’s this, from University of Rhode Island Economics Professor Leonard Lardaro:

“We’re much more about the here and now, and we never allocate enough resources for investment,” Lardaro said. “The result? Our physical infrastructure — roads and bridges — are among the worst in the country. The skills of our labor force are nowhere near what we need…. We have to be much more of a society that allocates toward investment, and we’re avoiding it.”

Various data points make this hypothesis suspect. We already spend a great deal on education, for example, which is ostensibly done as an investment. Meanwhile, younger “productive class” Rhode Islanders are leaving the state, which indicates a willingness to risk a little short-term discomfort for a long-term improvement. Even if we look at insiders, we see long-term thinking: The labor unions fight for things like longevity, and pensions are a central focus of their activism, while insiders put in some years of long hours and relatively low (or even no) pay on various boards and councils or in the legislature, with the expectation that they’ll be able to cash out with a cushy patronage job or benefit in some other way.

The people who set Rhode Island policy do plenty of long-term thinking. The problem is that we allow them to use government to serve their own interests. Fix the general mindset that such systemic corruption is acceptable, and the state’s seemingly intractable problems will begin to clear up. Unfortunately, the Raimondo-Mattiello Era is proving to represent a mad dash in the opposite direction, leaving us only the hope that the dash indicates a sense that we’re almost to the point of collapse.

justin-katz-avatar-smiling

The Hot-Head’s Told-Ya-So

For a variety of reasons… I know… there are folks doing their best to do best by the state of Rhode Island who would like very much to be able either to ignore me or to say that I’m wrong, whatever I say.  Much to my own dismay, frankly, I’m not wrong as often as I’d like to be.

Note this item from Ian Donnis’s weekly Friday column:

Rhode Island’s unemployment rate dipped again in September, even as the state continued shedding jobs. Meanwhile, the ProJo’s Kate Bramsontook note this week of a worrisome trend: “While population has been stagnant, there is evidence that qualified individuals are leaving the state, which reduces the pool of qualified labor.”

Look, this isn’t rocket surgery. Progressives ’round these parts like to attack my credentials; I was a carpenter when I looked at the data honestly and began writing about Rhode Island’s loss of the “productive class” years ago.  This is obvious stuff.  Anybody who pretends it isn’t obvious wants to avoid the inevitable conclusions.

Rhode Island needs to stop electing big-government, insider-focused Democrats (or Republicans, for that matter) and give people the freedom to act in their own self interest.  The folks in power — whether they’re politicians, locally respected businessmen, or journalists — have been misleading everybody about the way the world works and killing the state.  They’re trying to preserve a fantasy that lets them believe the world is as it isn’t and (more often than not) gives them financial security in the process.

It isn’t a sure thing that Rhode Island can even be saved at this point, but it’s worth a try.  Start learning lessons, please.  If you need some incentive, consider that a right-wing carpenter is able to out-predict you by the better part of a decade because you won’t acknowledge the truth.

justin-katz-avatar-smiling

Exempting Retirement and Social Security Income

Rhode Island needs to cut all sorts of taxes on everybody.  However, it’s important for policy makers and the general public to ask questions about particular proposals.  What’s the goal of a particular cut; who benefits; where’s the money going to come from?

Conservatives have periodically asked me about the proposal that House Speaker Nicholas Mattiello (D, Cranston) and Senate President Teresa Paiva Weed (D, Newport) are publicly considering — to exempt retirement and Social Security income from taxes.  Although it may be popular to promise senior citizens things, the questions still apply.  Regarding the goal of the policy, Providence Journal reporters Katherine Gregg and Linda Borg offer this summary:

Neither idea is new. But this year, the Democratic leaders of the House and Senate are both talking about how they can keep retirees — and their retirement income — in Rhode Island.

Given limit political ability to cut taxes, does this reform target the group (1) that’s most notably leaving Rhode Island and (2) that Rhode Island needs most to stay?  I wouldn’t say so.  The state has long shed many young, single, college educated residents.  The largest losses by family type have been married families with children.  Once again, our biggest and most important losses are from the “productive class” — people who are interested in using the local economy to change their time and talents into money.  That’s what really grows an economy.

It helps that cause a little to let relatively idle people keep and spend more of their cash, particularly if it keeps them in the state, but it’s indirect and subject to bleeding.  A retiree’s tax-cut-funded vacation in another state helps young working families in Rhode Island not at all.  A retired couple that keeps its Rhode Island house, instead of moving, keeps a younger family from buying that house.

On the question of how the General Assembly would make up for the reduced revenue, it’s encouraging to see Mattiello talking about cuts in spending, but we should believe that when we see it.  The state legislature has a habit of finding ways of shifting burdens around, rather than actually limiting the size of government.

justin-katz-avatar-smiling

Progressive Policies Hurting Minorities

Looking at the brief report that the RI Center for Freedom & Prosperity released, yesterday, showing some slices of employment data, something struck me about the numbers for labor force participation — that is, percentage of each demographic group that is either working or looking for work:

Notice that a larger percentage of black and Hispanic Rhode Islanders are either working or looking for work.  Inasmuch as the unemployment rate (i.e., those who are looking for jobs) is almost two times higher for blacks than the average and more than two times higher for Hispanics than the average, we can infer that the higher labor force participation rates for those groups result mainly from the unemployed.

That makes sense, of course, because the income levels for these minorities tend to be lower than the average, so their need for jobs is greater.  The gap between people’s need to work and their ability to find work is a humanitarian concern, but it’s also an indication of lost opportunity for our economy.

Here we see another indication of the harm that Rhode Island policies (and progressive policies more broadly) do to the productive class, no matter what race we’re talking about.  These Rhode Islanders want to exchange their productive effort and their talents for money.  Oppressive big-government policies make that exchange more difficult.  High tax rates remove money from the economy and reduce incentive to expand productive activity (both work and investment), and invasive regulations make it more difficult to engage in productive activity legally.

It’s not surprising that minority groups are most profoundly affected by a wrong-headed approach to government.  It is surprising, though, that the votes of different racial groups prove that they haven’t caught on to the abuse, yet.

justin-katz-avatar-smiling

Progressive Policies Hurt Working People

Kevin Williamson is on a roll, lately:

Progressives argue that we need deeper government involvement in the economy in order to assuage the ill effects of economic inequality. But, as Joel Kotkin points out, inequality is the most pronounced in places where progressives dominate: New York City, San Francisco, Los Angeles, Chicago. The more egalitarian cities are embedded in considerably more conservative metropolitan areas in conservative states. “Part of the difference,” Mr. Kotkin writes, “is the strong growth of higher-paid, blue-collar jobs in places like Houston, Oklahoma City, Salt Lake, and Dallas compared to rapidly de-industrializing locales such as New York, San Francisco, Chicago, and Los Angeles. Even Richard Florida, the guru of the ‘creative class,’ has admitted that the strongest growth in mid-income jobs has been concentrated in red-state metros such as Salt Lake City, Houston, Dallas, Austin, and Nashville. Some of this reflects a history of later industrialization but other policies — often mandated by the state — encourage mid-income growth, for example, by not imposing high energy prices with subsidies for renewables, or restricting housing growth in the periphery. Cities like Houston may seem blue in many ways but follow local policies largely indistinguishable from mainstream Republicans elsewhere.” In Detroit, Chicago, and Philadelphia, African Americans earn barely half of what whites earn —  and in San Francisco, African Americans earn less than half of what whites earn. Hispanics in Boston earn 50 percent of what whites make; but it is 84 percent in Riverside County, Calif., a traditional Republican stronghold (it holds the distinction of being one of only two West Coast counties to have gone for Hoover over FDR and is Duncan Hunter’s turf), and the figures are comparable in places such as Phoenix and Miami.

As in many other recent political arguments, Rhode Island offers an excellent test case.  As I’ve long been pointing out, the group that is struggling and leaving Rhode Island is the “productive class,” those people who are striving to transform their labor into money and comfort.  The rich are insulated and the disadvantaged are well served, relative to other places.  Meanwhile, the insider culture (which includes government unions) creates a path to the middle and upper-middle classes for people willing to play along, but at the expense of the working and lower-middle classes.

justin-katz-avatar-smiling

Affordable Housing: Second Verse, Same as the First

The lack of affordable rental properties in Rhode Island is front-page news in the Providence Journal, today.  The article is entirely a description of the problem, without any suggestions that the government must act to supplement housing or anything (although those story lines tend to develop across multiple articles, like this one):

HousingWorks, a nonprofit research group, planned to release data Wednesday showing that 59 percent of the state’s young renters spend more than 30 percent of their income on housing. Housing is deemed affordable if it costs no more than 30 percent of income. …

The HousingWorks analysis also showed that 25- to 44-year-olds make up 40 percent of Rhode Island’s renter population, the largest share of renter households. With a median income of $40,000, 45 percent of these households are housing cost burdened, but they “earn far less than the $57,000 needed to afford the median-priced single-family home [$190,000] in Rhode Island,” Housing Works said.

What is the cause, here?  Are landlords taking advantage and gouging renters?  Can the government step in with more restrictions and demands to fix the situation?  I’d suggest that government involvement is causing problems on both sides of the equation.

On the demand side, Rhode Island’s high taxes and crushing regulatory burden, mixed with generous benefits for lower-income households are skewing income levels lower.  As the productive class moves away to places that actually have those Rhode Island rarities of jobs and opportunity, the imbalance gets worse.

On the supply side, it’s just not very attractive to rent properties in Rhode Island.  Here’s one example: I just discovered that prospective landlords have to take a three-hour, $50 course on lead paint and pay a lead inspector to look through the property at least every two years.  The way the instructions are written, it doesn’t look like it matters whether the landlord has removed all lead paint from the house; it’s all about the age of the building.  Meanwhile, acquaintances who’ve tried renting properties in the past tell horror stories about the difficulty of evicting bad tenants.

The list of thumbs on the scales would have to be the subject of a research article, not a quick blog post, but every layer of mandates sheds some people and some properties from the group of potential rentals, the redistributionist bent of state government pushes demographics to the range that requires cheaper housing, and the lack of opportunity ensures that families are slow to move out of the low-income strata and that the go-getter types who might venture into renting out property go elsewhere.

justin-katz-avatar-smiling

Living Through an Echo of History

I have a somewhat miraculous view of literature. It seems more often than not to be the case that when I reach into the many boxes of books that I’ve inherited and pick out something to read, almost at random, it has a direct relevance to things I’d already been thinking about.

This time, it’s Erich Fromm’s Escape from Freedom (1941). Fewer than 100 pages in, I’ve already got notes for myriad essays scribbled in the margins, but the following quotation, I just had to share. It’s actually something Fromm quotes from Jacob Salwyn Schapiro’s doctoral dissertation Social reform and the Reformation (1909).

The time period described is the later part of the Middle Ages, as medieval society gave way:

Notwithstanding these evidences of prosperity, the condition of the peasantry was rapidly deteriorating. At the beginning of the sixteenth century very few indeed were independent proprietors of the land they cultivated, with representation in the local diets, which in the Middle Ages was a sign of class independence and equality. The vast majority were Hoerige, a class personally free but whose land was subject to dues, the individuals being liable to services according to agreement … It was the Hoerige who were the backbone of all the agrarian uprisings. This middle-class peasant, living in a semi-independent community near the estate of the lord, became aware that the increase of dues and services was transforming him into a state of practical serfdom, and the village common into a part of the lord’s manor.

Frankly, I don’t think I’ve read a better description of what’s happening right now in any modern punditry. All that’s required is to update the language and replace “Hoerige” with “productive class” and the lord with the government.

Quantcast