[Following up on the second post responding to Aaron Renn’s “toolkit” for Rhode Island policy.]

“3. Is Rhode Island addressing the areas where it is worst in class or otherwise particularly disadvantaged?”

This question is entirely lacking in perspective.  I’m speculating, here, but I tend to doubt that, when Tim Howard switched from basketball to soccer, he was the absolute worst basketball player in the world.  It could be that he was a terrible singer.  Would it have been a wiser decision for him to work on his music rather than change his sport?

I’ve already insisted that the state isn’t like a person, but the point is that Rhode Island’s performance relative to other places is only significant if the thing we’re talking about is important relative to other things.  It doesn’t much matter if Rhode Island isn’t very good at digging for oil or finding water in the desert; it’s a big problem if we burden our tourism industry in such a way as to reduce our natural advantage in that industry.

Scale matters, too.  It could be that Rhode Island’s business registration forms are the most aesthetically objectionable in the country.  That wouldn’t much matter if a business could immediately improve its bottom line by 5% by choosing to locate here, rather than a few miles away in another state.

Renn’s question number 3 seems mainly intended as another way to exclude policies that he just doesn’t happen to fancy.  “Rhode Island’s sales tax isn’t low, but it’s not nearly the highest in the country either, especially when local taxes in other states are factored in,” he writes.  But so what?  Much of the impact of sales taxes is local or regional.  Would it change the significance of the tax in Rhode Island if all of the states from Alabama to California were to shave a percentage point or two off of their sales tax rates?

Instead, Renn labels Rhode Island’s unemployment insurance system as “worst rated” and holds that up as a problem that ought to take precedence over sales tax reform.  But it’s just an assertion, and when he fleshes out his reasoning, he doesn’t talk about relative ratings. Instead, when Renn actually argues against “one local free market type” who wants to reduce the sales tax, he doesn’t talk about the unemployment insurance system or claim that it has a bigger economic effect than our merely not “low” sales tax.  Rather, he shifts gears (or changes “toolkits”) and states that “‘beggar thy neighbor’ policies and border wars are seldom positives over the longer term.”

The reason I generally think Renn is arguing backwards from preferred conclusions (rather than applying objective principles to Rhode Island’s circumstances) is that he simply dismisses a policy that would seem to have much support in his broader argument:

• In another post, he argues that economic health, in New England, is largely dependent on “access to New York and Boston money.”  How does he suppose New Hampshire manages that feat?  Wouldn’t Rhode Island have to “beggar thy neighbor” by drawing more of that money its way?
• He asserts that “Massachusetts has way more ammunition to fight with” in a border war, but he also argues that Rhode Island has to admit that it doesn’t have the resources to match the feel-good progressive policies of wealthier places.  That cuts both ways.  The people of Massachusetts would have to decide not only that they want to compete with the tiny Ocean State on the sales tax, but also that doing so would be more important than maintaining the big-government policies that they are better able to afford.  (One must also consider that the important thing, in this competition, is the rate, not the revenue.  It would cost Massachusetts a whole lot more to match Rhode Island’s sales tax rate.)
• Perhaps the core point of Renn’s whole RI series is that “Rhode Island has to swallow hard and recognize that it is not a premium location for business and has start behaving like and making decisions like it’s in a competitive market.”  In this regard, a major reduction of the sales tax would be unique as a fresh-air breeze that all Rhode Islanders would feel, thereby having a better chance than smaller, more-targeted adjustments to fundamentally shift the population’s thinking.
• And anyway, what’s Renn’s argument?  That we have to understand that we’re “in a competitive market,” but not actually compete, because that would “beggar our neighbor”?  This framework seems like a convenient way for central planners to cast their preferred policies as “competitive” (“like it or not, the state border is never more than a few miles away”) while tarring those that increase people’s freedom as buggery.

[Read part 4, here.]