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Funding Cronies in the Company State

Aw, well, isn’t this a nice “things we choose to do together” government report?

Gov. Gina Raimondo and other state officials unveiled Skills for Rhode Island’s Future at a Bank of America call center in East Providence, which is hiring some new workers through the program.

That’s what people will take away, but what they should focus on is the background story that’s somewhat visible in the details:

  • The federal government gave Rhode Island $1.25 million to hire the private non-profit Skills for America’s Future.
  • This is the corporation’s second location, expanding from Skills for Chicagoland’s Future.
  • The founder of the organization, Penny Pritzker, went on to become Obama’s secretary of commerce.

The group’s IRS filings fill in the picture a bit. Between 2012 and 2014, its total revenue ranged from $3,316,498 to $3,943,121, with the better part coming from government.  If the linked article above is correct that it has “found jobs for more than 3,100 people in Chicago,” the per-job cost is over $4,000.

I’ve written frequently about the idea of a “company state” model under which government becomes the central industry for an area (like the State of Rhode Island) and strives to expand the services that it can provide in order to justify confiscating money from disfavored groups in the area or in other states.  Skills for Rhode Island’s Future is a great example.

With the federal government as its anchor client, the organization is expanding across the country like a franchise, spending copious amounts of money to make people feel dependent on government, acting as a recruiting contractor for connected companies and acting as an entry point for people’s reliance on government.

According to the office of Governor Raimondo, Skills for Rhode Island’s Future will not be interacting with state welfare offices or be plugged into the Unified Health Infrastructure Project (UHIP) system, which would direct clients to any and all other government services for which they might qualify.  That would be a relatively short step, though, once the organization is established.

As this system becomes entrenched and integrated, companies will have increasing incentive to play ball and get in on the scheme, while workers will have incentive to become the sorts of people whom the government and the corporations want them to be. Thus will more people be drawn through the dependency portal, leaving fewer who aren’t under the direct influence of and subject to reliance on government.

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National Popular Vote and the Company State

Yesterday, Dan Yorke had Providence College Political Science Professor Joseph Cammarano on his 630AM/99.7FM WPRO show, discussing a variety of topics.  When I first tuned in, a caller was growing angry that the professor wouldn’t say for whom he intended to vote, and over the next hour or so of sporadic listening, I came to see how Cammarano might have inspired that response.  His bias came through, most notably in his drive for equivalence with Republicans whenever a caller brought up Democrats’ malfeasance.

One question that came out of nowhere was the professor’s opinion of the electoral college, and he clearly supports the efforts of states, including Rhode Island, to work around the Constitution with the national-popular vote movement.  In not so many words, he that it makes no sense — given our increasingly national culture — to have a system in which we think of states as states, regardless of their population.  That is, he thinks it’s obvious that states don’t have an equal standing of themselves, as political entities, necessitating that the votes of people in low-population states are weighted to give them greater balance against the national votes of people in high-population states.

When this topic came up a few years ago, I mainly thought of it in terms of politics and the calculation for Rhode Island.  After all, Democrats tend to do better in urban areas, so the General Assembly’s signing on to the national popular vote compact was a partisan act, not a representative one (as in advocating for the people whom one actually represents).  The reason Rhode Island gets no attention in national politics isn’t that we’re small; it’s that we’re one-sided.  Republicans have no chance, and Democrats don’t have to work for our electoral votes.  But the reality is that the national popular vote scheme would cut Rhode Islanders’ electoral sway in half.  Why would our representatives agree to do that?

Cammarano’s short statement was the first time I’ve considered this question since stumbling upon the idea of the “company state.”  I’ve been noting that certain cities and the whole state of Rhode Island are moving toward a civic business model in which government becomes the major industry, with incentive to import or create new clients for its services as justification for taking money away from other people in order to finance them.  As Rhode Island has long been learning, the flaw in this model is that the payers can simply leave, and the state is under constant risk that, due to recession or otherwise, people in other states will push back on the federal government’s subsidization of the scheme.

The electoral college, in other words, is one protection against having this “company state” model become truly national, such that municipal and state governments that rely on the compulsory transfer of wealth will be able to reach any wealth from sea to shining sea.

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Rhode Island “Company of the Year” (and State Ward) Already Has a Broken Turbine

Much to the detriment of the state’s rate payers, Deepwater Wind began generating electricity on December 12. Less than three weeks later, one of its five turbines broke (oopsie). As though wind energy isn’t already expensive enough, now we have to add the cost of making repairs thirteen miles out on the ocean. (‘Cause the cost of water and seawater-related repairs is always very reasonable, right, boat owners …?)

It probably was not a coincidence that the company made this embarrassing admission on a day – the Friday before Christmas – sure to glean the absolute minimum amount of public attention.

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Observations of Political Scene on Out-of-State Raimondo Fundraising

Let’s dispense with the minor observation of today’s Political Scene in the Providence Journal:

Rhode Islanders contributed [to Gina Raimondo’s campaign fund] more than any other geographic group — a total of $440,557 between Jan. 1 and June 30 to Raimondo’s anticipated bid for reelection, according to her most recent filings with the state Board of Elections. She banked another $23,025 from Rhode Island-based PACs, such as the RI Laborers PAC and the Hospital Association of Rhode Island.

Isn’t this kind of expected?  In fact, isn’t the more-newsworthy point something that Katherine Gregg never mentions: namely, that Raimondo has received roughly 60% of her donations, this year, from people out of state?  I can’t help but feel that if Raimondo were a Republican the Providence Journal’s question would be the same as mine:  Whom is this woman serving?  A big majority of Raimondo’s political income, so to speak, comes from people out of state.  How central can the state’s interests actually be to her?

The more-intriguing observation (which may help to answer the first) comes from this:

Also among Raimondo’s first-quarter contributors is Peter G. Peterson, a one-time U.S. Commerce secretary and CEO of prominent companies including Lehman Brothers before founding the private equity firm Blackstone Group, which he grew “into a global leader in alternative investments,″ according to his online biography.

This may be mostly a story about how small the world of investment elites actually is, but as I’ve detailed before, Blackstone purchased the parent company of Wexford — of I-195-subsidy fame — in 2015 and spun off the Wexford component in 2016.  It would go beyond the scope of my resources to investigate the amount of profit these transactions created and sort out the timing of Raimondo’s Commerce RI dealings with Wexford, but it’s telling nonetheless.

Regardless of the specifics, one could easily summarize that the governor Rhode Island receives a substantial majority of her political donations from people outside of the state that she governs, and some not-insignificant number of her donors are conspicuously connected to deals that she makes as the governor.  These associations sure ought to raise more questions than those posed by a weekly political-interest column.

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Money-Grubbing Company’s CEO Praises Politician Who Paid Him

It’s tempting to wonder whether Democrat Governor Gina Raimondo made a governor-praising op-ed by CEO Bob Baird a condition of the state government’s tax-dollar handout to pen-company A.T. Cross:

Enter Gov. Gina Raimondo. In 2014, soon after she was elected, Governor Raimondo called to tell us she loved our history in Rhode Island and looked forward to using a Cross pen to put her signature on official documents. Later, when the governor and her team learned we were talking to other states about pulling up our roots and beginning anew somewhere else, they made it clear they value Rhode Island companies that have been here all along. The governor, Commerce Secretary Stefan Pryor and their team made a compelling case that our business is best served by staying in Rhode Island and that our employees will find everything they are looking for here at home.

Most likely, though, the CEO’s public promotion of the governor was more of a wink and nod affair than a contractual stipulation, or maybe it’s simple etiquette in the you-scratch-my-back-I’ll-scratch-yours crowd.

I will say that I’ll never deliberately buy an A.T. Cross pen, now, although if the company decides to send a thank you gift to every Rhode Islander for our involuntary contribution to the company’s bottom line, I’ll take one.

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Disgraced Speaker Fox Fueled the ShapeUp State-Taxpayer Gravytrain

Responding to a question related to my finding that ShapeUp, which made news recently when its new owner, Virgin Pulse, agreed to remain in Rhode Island in exchange for $5.7 million in state-government subsidies, a Rhode Island House spokesman tells me that the Economic Development Corp. (EDC, now the Commerce Corp.) and Dept. of Health weren’t the only government agencies that whet the company’s appetite for taxpayer dollars.

Disgraced and imprisoned former Speaker of the House Gordon Fox, a progressive Providence Democrat, directed $12,000 to ShapeUp through the General Assembly’s controversial legislative grant program.  The first $7,000 installment of that money arrived in 2007, shortly after the non-profit started.  Another $5,000, half in 2010 and half in 2012, flowed the company’s way as it moved toward for-profit status and received its $100,000 EDC handout.

One wonders how much companies that buy Rhode Island start-ups consider the many paths of claiming Rhode Island taxpayer dollars when shopping for acquisitions.

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How Much to Lure High-Tech Company into Low-Tech Building?

When I hear that Internet innovator PayPal is considering a move into the Providence Superman Building — which has been vacant for so long, if I recall correctly, in part because it lacks capacity for the technology of modern companies — I can’t help but wonder what the dollar amounts will be.  Here are Ted Nesi and Dan McGowan:

Matt Sheaff, a spokesman for the R.I. Commerce Corporation, declined Wednesday to comment specifically on whether PayPal is looking at the building but confirmed that state officials remain in active discussions with the company about potentially expanding into Rhode Island. …

One sticking point on a PayPal-Superman deal could be cost. [Owner David] Sweetser has repeatedly argued the building needs significant renovations that cannot be funded without government assistance.

Oh, and don’t forget: “Any transaction would also likely require a break on Providence property taxes, which are among the highest in the country for commercial real estate.”

So Rhode Island’s economic development strategy is to create an environment in which businesses have difficulty operating and “iconic” old buildings can’t find non-government investment to bring them up to date.  Then the governor goes out looking for big companies that would represent, as the article puts it, “a major coup” and promises to give them money taken from the  residents and businesses who are still able to manage to survive in the state, somehow.

This approach may do wonders for political insiders and corporate big-wigs looking for crony relationships.  For the rest of us — particularly those of us struggling to get ahead in the world — not so much.

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So the ProvPort Non-Profit Operating Company is Just a Front?

One of the poorly (deliberately?) advertised additions to the 2017 budget last night was a $20 million bond proposal which would fund the acquisition by the Port of Providence of certain properties on Allens Avenue. RI Center for Freedom and Prosperity CEO Mike Stenhouse accurately calls the bonds more corporate welfare.

GoLocalProv’s Kate Nagle has an excellent investigative report showing that

ProvPort, the non-profit operator of the Port of Providence seeking a $20 million taxpayer bond, paid management fees to a sister for-profit company of more than $11 million over the three most recently reported years. The $11 million is approximately half on ProvPort’s total revenue. …

The relationship between the non-profit and for-profit raises concerns. The non-profit takes in the money, only has one employee, and transfers millions every year over to a for-profit company.

Probably this arrangement is legal, though it certainly seems like a convenient set up to avoid corporate taxes.

So the proposition by Smith Hill leaders is that we should pay our hard-earned tax dollars to help fund real estate acquisitions for a company that is attempting to DODGE taxes? And, no, it doesn’t mitigate the situation that the state would own the new parcels. The parcels would still benefit ProPort, not to mention the larger point that state government should get smaller, not larger.

Look, I don’t want to have to look at or care about the corporate structure or tax arrangements of a company. But you’re forcing me to by proposing to reach into my wallet on their behalf. Out of all of the bond referenda on the ballot this November, this should be the easiest and fastest “No” of the bunch.

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Magaziner Exemplifies State’s Skewed Priorities

One can just about sympathize with Democrat General Treasurer Seth Magaziner.  When taxpayers across the state are complaining on talk radio that the tax return checks with his name on them seem greatly delayed and when the pension fund under his control is actually losing money, the politician must feel an intense pressure to come up with newspaper headlines that somebody might see as positive:

On Wednesday, Rhode Island Gen. Treas. Seth Magaziner announced a new policy that seeks to use the proxy-voting power that comes with Rhode Island’s billions of investment dollars to encourage companies to place more women and racial minorities on their boards of directors.

Unfortunately, many people fall for foolish politically correct showboating.  Heretofore, the state’s index-fund manager, State Street Corp., has done the voting to which Rhode Island’s investments entitle the state.  Presumably, State Street’s votes have been cast with an eye toward maximizing returns on its clients’ investments.

But maximizing returns is clearly not the priority of Rhode Island’s chief fiduciary, Seth Magaziner.  Worse still, not only does Magaziner acknowledge that Rhode Island’s votes may make little difference, but the method by which it will cast them is hot-pan-on-a-silk-tablecloth dumb:

“Any time a man is nominated to be a director at a company where fewer than 30 percent of existing directors are women (or racial minorities), we will vote no. If we end up voting no at a high rate, we will be making an important statement on the financial materiality of board diversity,” Magaziner said.

No individual consideration.  All that matters is body parts and skin color.  Of course, I’m making an assumption, there; Providence Journal reporter Kathy Gregg didn’t ask Magaziner if the vote will be cast according to biological fact or by the personal assertions of the nominee.

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A Fishy, Misnamed State Bank

The more I read about this “Rhode Island Infrastructure Bank” being proposed by Governor Gina Raimondo and General Treasurer Seth Magaziner, the worse the idea sounds:

As they envision it, $22 million or so in state tax dollars, left-over federal stimulus dollars and bond proceeds would be funneled to the cities and towns for energy-cutting projects, such as these, through the renamed Rhode Island Clean Water Finance Agency, created in 1990 to provide loans for improvements to sewage and drinking water systems.

So, this will be new municipal debt without, it seems, voter approval.

… the legislation would also salt away an unspecified amount of state money away in “one or more” loan-loss reserve funds to encourage private banks to lend money to private homeowners and businesses for similar kinds of energy-saving building upgrades. The legislation does not say how much.

So, the public would absorb the risk for projects financed by private companies for private entities and individuals.

When asked why National Grid was among those backing legislation that could cut into its revenues by reducing energy use, company vice president Michael Ryan said the answer lies in an earlier “decoupling” law guaranteeing National Grid a “bump” in its rates if usage drops, as a result of energy-efficiency efforts.

So, it won’t actually save Rhode Island money on energy; it’ll simply shift the burden from government agencies and private entities that are able to get the loans onto those who are not.

The answer from treasury staff to many of those questions [about limits to the funds and processes for claiming losses] was this: the “operational details” are not spelled out in the latest, 80-page version of the bill. According to Rogers, details such as these — along with the mechanism for repayment of the loans — would be spelled out, at a future date in “rules and regulations.”

So, the make-or-break details will be out of legislators’ hands.

Robert Boisselle, the lobbyist for the Associated Builders and Contractors of Rhode Island, was among those raising red flags about references in the legislation to “Project Labor Agreements.” Boisselle said such agreements (“illegal in 22 states”) effectively bar non-union shops — with 80 percent of the state’s laborers — from bidding.

So, the prices will be driven up in order to make sure that the money goes directly to union members (and thus filtered back into advocacy and donations for Democrats).

If the whole thing seems risky and even fishy, keep looking, a reader tells me via email.  In an op-ed supporting the bank, Magaziner cites the Connecticut Green Bank as a model.  Look into the Connecticut Green Bank, and you find this:

[Coalition for Green Capital (CGC)] leaders Reed Hundt, and Ken Berlin were involved with the establishment of Connecticut’s green bank from start to finish and remain closely involved with the banks operations.

Internet searches for former FCC Chairman Hundt, now an investment advisor, turn up a lot of overlap with Magaziner’s father, Ira.  More notably, his name turns up in campaign finance reports, with $2,000 in donations to the RI Democratic State Committee in October and $1,000 to Gina Raimondo, last June.

On the other hand, some of us might not need to do that level of digging.  It’s enough to know that we have the worst roads and bridges in the country and the people in charge of the state government want a state “infrastructure” bank that helps governments pay to replace their windows.

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Hobby Lobby and the Lack of Church-State Separation

With progressives across the country in a delusional tizzy over the implications of the Supreme Court’s ruling that the federal government (through administrative action) can’t force a company to provide abortifacients (i.e., drugs that kill early-stage human beings in the womb), Jennifer Roback Morse takes a step back and looks at the context in the United States’ current practice of “separation of church and state” (italics in original):

Only after the program was over, did the pattern become fully clear to me: the caller (and the State) will allow the Church to be independent of the State, but only for things they think don’t matter.

We the State, allow you the Church, to have jurisdiction over who gets to receive Communion and Christian burial. That is because we consider those things unimportant.

But we the State, intend to have full authority over everything we consider important, like property settlements and child custody. And, as a matter of fact, if there is anything else we come to believe is important, we will take jurisdiction over that too.

And so here we are, with a relatively favorable ruling from the Supreme Court on the Hobby Lobby case. The Supreme Court has restrained the Administration from imposing upon the Mennonite Hahn family, owners of Conestoga Wood, or the Evangelical Green family, owners of Hobby Lobby, in as catastrophic way as they might have. But the State has certainly not given up its authority over religious institutions and religious people, when they deem the subject matter sufficiently important.

We don’t have separation of church and state, in the United States.  We have a thumb on the scale on behalf of statists and the non-religious, who often look to the government as a moral arbiter.  The government is their mechanism for avoiding the necessity of persuading their neighbors to a different position, which can be hard work.  (One suspects the anti-religion statists think it’s impossible work, inasmuch as they see religious people as constitutionally irrational.)

It’s all legerdemain.  As with progressives’ selective adulation of science, they present their opponents’ morality as derived from subjective, superstitious sources, while their morality derives from simple truths about the universe.

To the extent that they succeed in their use of the government toward (what they see as) moral ends, it’s nothing other than an establishment of religion.

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RI Center For Freedom & Prosperity: “State Cannot Afford Operation of HealthSourceRI”

As readers may know, ObamaCare RI, a.k.a., HealthSourceRI (funny that they had to give it a different name), was created via Executive Order by Governor Chafee with federal funds that disappear next year.

HealthSourceRI has turned into the consummate bloated, expensive and unnecessary governmental bureaucracy without even accomplishing one of its important claims of increasing Rhode Islanders’ healthcare options, a claim that laid the foundation for a corresponding implication by its proponents about increased affordability of coverage. Not only has health insurance in Rhode Island not gotten cheaper since the creation of HealthSourceRI, the number of health insurance companies offering coverage in Rhode Island has not increased. In fact, this is another fact that casts strong doubt about the necessity of HealthSourceRI: it administers (too strong a word?) policies offered by at most three companies. In the case of individual coverage, HealthSourceRI “administers” exactly one company: Blue Cross Blue Shield. $16 – $20 million per year to do only that?

In a statement released earlier this afternoon, Mike Stenhouse at the RI Center For Freedom & Prosperity raises another serious concern about the existence of HealthSourceRI: its (lack of) affordability.

January 16, 2014

Providence, RI – Following the Governor’s Wednesday night address and after initial review of his 2015 budget, where it is obvious that significant state funds will soon be needed to continue operation of the state’s healthcare exchange, the Rhode Island Center for Freedom and Prosperity, a nonpartisan public policy think tank, today called on public officials to consider termination of the state’s operation of the HealthSourceRI exchange, and instead transfer its management to the federal government, which currently operates exchanges in dozens of other states.

The exchange was originally formed in Rhode Island by executive order by Governor Chafee as part of the implementation of President Obama’s Affordable Care Act, and which made federal funds available for its construction and launch through the end of 2014. It is anticipated that ongoing operation of HealthSourceRI could cost Ocean Staters over $20 million per year.

“The exchange is a federal mandate, it is very expensive to operate, and it is clear that we cannot afford it once federal funds expire. Our own General Assembly rejected operation of the exchange in the first place, so how can we justify burdening Rhode Island taxpayers with footing the bill,” asked Mike Stenhouse, CEO for the Center, which plans to conduct further research into exploring the process of executing this transfer.

Contact: Mike Stenhouse: 401-429-6115, info@rifreedom.org

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This Is What State Leadership Looks Like?

I’ve been trying to figure out if we have any state leadership here in RI. When we have a Governor who gets embroiled in what to call an evergreen adorned in lights in December and a General Assembly who is more concerned about what appetizer they want to endorse, I’m trying to figure out if they have any ability to lead. Apparently, some states have it figured out.

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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.

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The Transformation of Vermont

Take it as a warning or as an illustration of opportunity, but Rick Holmes’s history, in the Fall River Herald, of Vermont’s political transformation is a worthwhile read.

Basically, the interstate highway system brought “flatlanders” to the state for foliage viewing, skiing, and indulgence in a hippy aesthetic.  By the time the indigenous conservatives tried to push back, it was too late:

“The hippies won,” says John Gregg, a Vermont journalist whose office is a short walk from the Connecticut River. In a small enough place, the influx of new citizens, even in modest numbers, can change a state’s political trajectory.

Rhode Island is different, of course.  Our population is a bit bigger, and the particular flavor of progressivism isn’t hippy socialism as much as insider socialism.  An historically different flavor of immigration brought with it a little more cultural conservatism and a little bit less libertarianism.  Moreover, the “influx of new citizens” affecting Rhode Island isn’t the migration of relatively privileged progressives, but rather the deliberately lured clients for the company state/government plantation.

These differences bring with them unique challenges, but in both places it’s too late for an ordinary political campaign to change things.  Instead, we have to change the local culture, which is no easy task when the people who see the right way forward tend just to leave.

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What Are City Governments’ Real Priorities?

Ted Nesi reports (if I may paraphrase) that Rhode Island cities have been crawling over each other to slurp from the sluice some money from the Boston Federal Reserve:

Federal Reserve Bank of Boston President and CEO Eric Rosengren visited Rhode Island on Thursday to award $400,000 grants to three local cities through the bank’s Working Cities Challenge.

The program aims to promote collaboration between local leaders to address socioeconomic challenges. The three Rhode Island winners are Providence, Cranston and Newport. Eight other cities submitted applications but did not win grants, which are funded by public and private contributions, not the Fed. …

Appearing on this week’s Executive Suite, Rosengren said the four-year-old program grew out of research conducted by the Boston Fed that showed efforts to tackle cities’ challenges worked best when leaders from different groups worked together toward a common goal.

Readers may recall that the Boston Fed’s involvement with Lawrence, Massachusetts, under a project in the same program is what kicked off my thinking about the “company state” or “government plantation” model, whereby government services become an area’s core industry, with the revenue coming from other taxpayers or higher levels of government (such as state or federal taxpayers).

With these new grants, we should also put the matter in the context of political structures and incentives.  Here we have cities competing to charm “public and private” outside interests with their proposals.  That is, they’re competing to match the values of the Boston Fed and the people or groups funding the project.  Sure, these “community” projects have local advocates (most often ideological activists, special interests, and other insiders), but ultimately, these projects are things being done to local constituents, not for them.

It’s time we stop seeing money that our governments manage to collect from other sources as money that we’ve somehow received.  It isn’t.  That’s especially true when it’s used for projects that the government wouldn’t otherwise have bothered to do.  It’s money that goes to the sorts of people who know how to get government money and spent in order to shape our society in ways that other people want, not us.

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Don’t Want “Devastating” Cuts? Don’t Rely on Federal Government.

It seems that the special interests who rely on federal money for their income in Rhode Island (in and out of state and local government) have been working to keep stories like this in the news every week:

Potential cuts to the National Oceanic and Atmospheric Administration put forward by the Trump administration could have devastating effects in Rhode Island.

The Coastal Resources Management Council, the state agency that oversees development along the state’s 400 miles of coastline, would lose nearly 60 percent of its funding.

This is the problem with the government plantation/company state model.  When you’ve built your economy around the government’s ability to make other people pay for services that the government insists on providing, local taxpayers will move away and people in other states may decide to cut funding.  It’s a risky dead end of an economic development approach.

Our goal as a state (similar to our goal in our cities and towns) should be to react to news of changes at the federal level by expressing relief that we don’t rely on the federal government for much of anything.  That would be a state of both freedom and stability.

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Never Any Way to Fix Costly Government Programs, Medicaid Edition

Reporting on a study by a couple of health care experts, Ted Nesi writes on WPRI:

Using 2015 data, their projections showed Rhode Island would lose $514 million in annual federal Medicaid funding under such a formula – a huge amount of money, equal to 22% of the state’s $2.3 billion in total Medicaid spending during the 2014-15 budget year. Massachusetts would lose $3.4 billion under the scenario.

First, let’s have a little perspective, here.  The revised spending on “Medical assistance (including Medicaid)” for fiscal 2015 was $2,382,919,281.  The year before — in fiscal 2014 — it was $1,819,597,682.  If you don’t have a calculator handy, that’s a difference of $563,321,599, or about $50,000,000 more than the “huge amount of money” in the possible reduction.

According to the mainstream calculus, government spending can never go down, even just to the prior year’s level.  On the one hand, we’re told it would be a terrible thing if Congress were to block grant Medicaid based on state income because states that rely on the program as a large part of their budgets would face massive reductions.  As the study says, it “would result in a seismic redistribution of federal spending.”

On the other hand, the authors go on to say, we can’t possibly calculate block grants based on current spending, because that “would lock in large and arguably unfair variation in funding across states.”  The only solution, clearly, is to just keep giving states as much money as they need for however many Medicaid recipients they’re able to sign up.

Folks, this is the government plantation, or company state.  As I wrote when I first began tracing that economic model in Rhode Island, when the state’s major industry (government) relies on its ability to sign up people for services in order to charge other people for them, the people forced to pay the bill will eventually flee the system, if they’re local, or push their own representatives to stop the bleeding, if they’re in other states being soaked by the feds.

Rhode Island should take the opportunity of the Trump Administration to get off this track.  The chasm toward which it leads has no bridge.

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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.

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