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Rhode Islanders Need to Run the Bases Around 38 Stadium

The other night, I attended the forum on the PawSox Stadium deal hosted by Leadership Rhode Island that Ted Nesi moderated. I walked away with two observations: The 38 Studios affair is still very much on the minds of Rhode Islanders, and the people of our state are reaching their breaking point.

The best part of my job is talking to Rhode Islanders. We’re a plainspoken people, never afraid to tell you the way things are in our state. However, it is frustrating when it does not amount to more than talk.

I want to see the people of our state take action, and change the way things are for the better. At the RI Center for Freedom & Prosperity, we often say that the status quo is the enemy of our future, and that is the truth. Our people need another path forward to building a Rhode Island that has a future that can be truly free and prosperous.

At the forum, I was chatting with a retired woman who said she only had one piece advice for the young people of our state, “buy a plane ticket.” Maybe I’m too much of an idealist, but I don’t think things are that hopeless. It is still worth it to fight for Rhode Island. She told me that the stadium deal is sure to be another 38 Studios — that our state had just tried this experiment and it failed. Based on the boos and jeers from the crowd toward the two pro-stadium spokespeople, this woman’s sentiments were shared by all but the smallest margin of the attendees.

The 38 Stadium deal is well on its way to becoming more of the same failed status quo thinking that has brought Rhode Island to the brink. I love baseball and everything it stands for, and I love the PawSox. But I don’t want to see my state held hostage to another special interest. With the opposition to the stadium deal mounting, the lack of investigation into the 38 studios disaster, and our state’s tax and spend ethos, it is easy to see why people are angry.

It doesn’t have to be this way in the Ocean State. I like to remind people that they have all the power. Our elected leaders will listen when you force them to do so. When we don’t take action, there is no one to blame for the way things are but ourselves. Sitting in the dugout on this issue is not an option.

You have the right to demand a Rhode Island that is based on the principles of limited, transparent government, free-market policies, and an open playing field for everyone, not just the chosen few.  We all deserve to go around the bases, not sit in the stands while insiders swing for the fence.

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Building Cities for Urban Planners

Aaron Renn makes the point that urban planners should give some thought to the type of area that a particular city should be, given its unique geography, history, and competitive advantages, rather than prioritizing their vision of the ideal city:

Where Ashland Ave. BRT fails is not in its attempt to improve transit service or to accommodate those who choose not to have cars. Rather, the problem is that it is rooted in a vision, propounded mostly by coastal urbanites, that believes car use should be deliberately discouraged and minimized – ideally eliminated entirely – in the city. Thus the project is not just about making transit better, but also about actively making things worse for drivers. That might work in New York, San Francisco, or Boston, where the car is more dubious, but in Chicago this philosophy would erode one of the greatest competitive advantages the city enjoys. In Chicago, the car free strategy only works along the north lakefront and downtown, not the Ashland Ave corridor or most of the rest of the city.

The no-car philosophy as the norm, not just an option, would undermine one of the greatest strategic advantages of Chicago. Why would you want to do that? Particularly when it would also make family life in the city more difficult for many. There is where urbanists need to start putting on their strategic thinking hat. Otherwise they may end up undermining the very places they seek to improve.

Renn seems to think this is a Midwest versus Coast dynamic, but Rhode Islanders should put on their strategic thinking hats, too.  One of the great advantages of the whole state is the ability to move around.  On a whim, when a business associate was staying in Providence, we zipped down to a restaurant near First Beach in Newport for breakfast.  Sports leagues regularly direct my family around the state.  Based on my experiences and positive things that are generally said about Rhode Island, progressives’ war on cars — like just about every progressive policy — would only hurt Rhode Islanders.

This point has a much broader application.  With RhodeMap and every other central-planning project undertaken by the state government, the fatal flaw is the conceit that planners can and should figure out what the state needs and push it in that direction.  The people of Rhode Island have a much better sense of the attractions and advantages of their state than any small group of planners, and they aren’t going to give over their information at public meetings, even if the planners could correctly interpret what they were saying, because only a narrow subset of Rhode Islanders ever knows about such meetings, let alone bothering to attend.

The solution is freedom, with money as the measurement of what people are doing.  With freedom and capitalism, businesses can identify opportunities at a very small, local level, and the people will tend to get more of what they want, and in an improved way.

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The Thing with Regulation

One helpful outcome when particular controversies arise over regulation is that statements of principle and assumption emerge that offer a common-sense check.  So, as taxi companies sue to impose regulations on the ride-sharing service Uber — rather than advocating to have the regulations under which they, themselves, must operate eased (go figure) — we get statements like this:

Echoing a larger global fight over ride-hailing services, the taxis argue that under Rhode Island law any driver or company providing for-hire automobile rides must comply with the stringent regulations enforced by the Public Utilities Division. 

“None of them do, and all of the services provided by Uber and Uber drivers are therefore illegal,” the lawsuit says. “This massive illegal operation puts the public and consumers at risk and erodes the viability of licensed, authorized and legal taxicab operators.”

In what particular ways do ride-sharing services “put the public and consumers at risk”?  The cars could be in bad repair or with some sort of health issue or infestation.  The driver might have mental issues.  Who knows?  The world is an unpredictable place.

But if freelance cars through Uber really offer an inferior or dangerous service, shouldn’t taxi drivers be able to compete?  Couldn’t there be a national certification that they, themselves, could promote through Uber or by setting up a competing app?

Special interests like to talk about their concern for the consumer, but they treat them as if they aren’t really people, as if we’re all just drones who won’t make any decisions but will slide right into a filthy, smoking wreck of a car driven by a guy in a hockey mask just because an unregulated app brought it to the curb.  If consumers aren’t drones, then shouldn’t it be relatively easy for the clean cab with a national certification and a friendly driver to charge a little bit more and put the scary guy out of business?

Of course, that would mean the taxi company would have to compete with drivers and with technology, and the reality is that the ride-sharing service isn’t a nightmare.  That’s why the established companies are scared.

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Updated – Terrible Tolls Would be a Win-Win for Governor Raimondo and a Lose-Lose for Rhode Island

From the wow-that-didn’t-take-long department, the Providence Journal’s Kathy Gregg, in a piece of kick-butt journalism yesterday, reports that the tolling of all vehicles is now on the table as an option. It seems that, at Speaker Mattiello’s suggestion, Governor Gina Raimondo is carrying out an “economic analysis”.

In recent months, the administration also commissioned an “economic analysis” of Raimondo’s truck-toll plan and a variety of other possible revenue-raising options that could, potentially, include: other new “user-fees,” gas taxes and a revived effort to toll all vehicles — not just big trucks — on Route 95 near the Connecticut border.

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Progressives’ Old Fashioned View of the World

The mobility of human beings has advanced to the point that technology allows us to accomplish many of the things we used to have to move around to do without leaving our homes.  Meetings.  Research.  Shopping.  Collaboration.

With the growing trend of a dispersed workforce, what’s the progressive solution for saving Providence government financials? Well, if Sam Bell, leader of the state branch of the Progressive Democrats of America, is representative:

“If Providence were able to tax the income of wealthy commuters who live in the suburbs, we could eliminate or drastically reduce property taxes and solve Providence’s fiscal nightmare overnight. This is the policy solution many other states take to this challenge, but the General Assembly will not allow Providence to implement it. And so our central city crumbles—plagued by poverty, a shrunken police and fire force, struggling schools, brutally high taxes, and fundamentally impossible math,” Bell added.

The first thing to note is that Bell should really be required to substantiate his “many other states” assertion.  A quick online search mainly brings up articles about cities that are seeking this particular golden goose, but their success seems limited mainly to Pennsylvania (Philadelphia and Scranton… stop laughing).  New York City let its commuter tax expire with the last century.

More important, though, is the sheer economic illiteracy, matched with historical anachronism.  Cities’ main problem is that people no longer have to interact with them.  When transportation was limited to feet and horses, it made life a lot easier to live close to work and to the services that other people provided.  Those days are gone.  Not only can we drive and telecommute, but individuals and businesses alike can order products from around the world and have them shipped quickly and cheaply.  Increasingly, we can order products and services that can be delivered instantly via the Internet.

Now that necessity is moving out of the picture, the challenge for cities is that people have to want to go there — for work, convenience, or entertainment.  Taxing them to work there while living somewhere else makes working there less desirable.  (It’s a complicated equation, I know.)

At bottom, the progressive view on such policies winds around two poles: being able to tell people how to live and distributing government services (while collecting votes in exchange).  That’s a very old-fashioned model, and it’s the one that cities still serve best, as proven by the strength of Democrats in cities even within Republican-dominated states like Texas.

This simple truth is easily forgotten, but our society shouldn’t be structured entirely around government services.  That’s not what life is supposed to be about, and people should be suspicious of anybody who seems to believe otherwise.

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To Whom Is Central Planning Useful?

Ted Nesi is striving to keep the forthcoming Brookings Institution report about Rhode Island as an open question.  That’s an understandable — responsible — approach, considering that the fact of the study was just announced and it’ll be the better part of a year before there are results to report.

That said, I’d encourage Rhode Islanders to push their assumptions one more step and question those, too.  Here’s Nesi:

Hopefully the $1.3 million being spent on the report – paid for by foundations and a few wealthy Gina Raimondo supporters – will at least buy some robust new data about the state’s present economic condition.  Beyond that, the onus will be on Brookings to show why this report’s recommendations will be more useful than those in all the reports that came before it. … They could provide a useful service if they tell it like it is.

The question is:  A useful service to whom?  Somehow, I don’t think the people funding the report are planning to offload some of the market research expenses from private businesses and individuals.  That means the report will mainly be useful to the wealthy, powerful interests who are taking it upon themselves to contrive a detailed direction for the whole state.

And it’s not even just the state.  Consider another item from Nesi’s Saturday column:

Also on the topic of economic development, Congressman Joe Kennedygave a noteworthy speech last month that called for local leaders to start thinking beyond the borders of their two states. … His idea, he said, is “about starting to rethink the way we pursue economic development on the South Coast. Leveraging the assets and strengths of this region in a comprehensive, collective way. Treating Fall River, New Bedford, Attleboro, Taunton, Tiverton and Providence not as isolated silos, but as a combined economic force.”

Who will make decisions for this “combined economic force”?  In Tiverton, for example, residents just blocked a major development along Route 24 next to the Sakonnet River Bridge; a year ago, they played a large role in reversing the push for tolls on that bridge.  Next year, they’ll likely decide yea or nay on a casino on the border (with early indications giving the better odds to yea). One can disagree with any of these results, but the opinions of local residents ought to have more sway than the state government’s, let alone the demands of some regional coalition or authority.

Yeah, maybe lightning could strike for Southern New England, and (despite its historical record of corruption) the machinations of influential people could create a global dynamo.  If that’s the vision, though, how could a few hundred people in a high school auditorium be permitted to wield a veto?

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Unweaving the Regulatory Noose

This chart, from ZeroHedge, sums up some of the points I’ve been making recently:

Note that the “Reagan Dip” isn’t a reduction in the number of pages of regulation, it’s just a reduction in the rate of growth.  The summary of the economic growth of the Reagan era was that the federal government kept up its creation of money in the present through debt while cutting taxes and slowing the growth of regulation, thus allowing the debt-driven cash to flow into productive activity.

This collection of policies revved the economy, and what should have happened in the ’90s was a reduction of debt along with further reductions in taxes and real reductions in regulations.  The economy’s growth may have slowed, but the country would have been on a stronger footing, with new digital technologies having already begun to emerge.

Instead, regulations kicked back into high gear, and the Clinton Administration transferred the burden of creating fake money onto the stock market and housing debt.

Regulation helps lock wealth in where it exists, so it’s good for the powerful.  But when things begin to fall apart in earnest (as they probably will soon), turning the above chart into negative territory, by actually eliminating regulations, would provide a boost to the economy that would actually help the working and middle classes and shift resources more efficiently.

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Economic Laws Will Assert Themselves in China and the U.S.A.

We really are living in an era intent on testing whether the laws of economics and “The Gods of the Copybook Headings” actually exist.  We’d do well to heed Kevin Williamson, here. The essay’s too cohesive to pluck out a satisfactory quotation, but this gives the sense:

That Chinese industrial contraction is a short-term problem and a long-term problem. The short-term problem is obvious. But the long-term problem is more difficult to see: Sure, if you’re sitting on a bunch of warehouses full of plate glass and the price is at rock-bottom, you’re in trouble. But if your country’s glass factories are organized (labor, machines, transportation, logistics, storage, etc.) to produce x amount of glass each month when the market wants a good deal less than x, what do you do? You can’t just wave a magic wand and turn those glass factories into BMW factories. (And no, Mr. President, you can’t just break the windows.) And, don’t forget, you’ve built roads to connect those superfluous factories to customers who no longer exist, and you’ve built water-lines and electricity connections for them. The malinvestment goes all the way through the economy, distorting public and private sector alike.

Although we can delude ourselves in proportion to our society’s wealth and the government’s willingness to oppress, we can’t pretend economics and common sense don’t exist.  Every attempt to do so adds weight on top of the shaky foundation of the prior delusion, and we’re all clinging to the structure at one level or another.

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The Brookings Activity Guide for the RhodeMap

Among those who don’t tend to think that the state government of Rhode Island should be tasked with completely ordering the lives of the people who live within its borders, the conversation about the relationship of the recently announced Brookings Institution study and RhodeMap RI has already begun.  Some think that RhodeMap was the framework to which Brookings will add specifics.  I don’t think that’s quite right.

Consider these two disconcerting paragraphs from Ted Nesi’s WPRI article, yesterday, drawing out some details of the intentions:

“This is an opportunity that you don’t get that often, to take a shot at putting the state on a different trajectory,” [Mark Muro, director of policy for Brookings’ Metropolitan Policy Program] added. “It’s been a rough decade.” …

“I think in most parts of the U.S. it’s still, the government does this, the corporations do that, the universities are somewhere else,” [Bruce Katz, the nationally-known head of the Metropolitan Policy Program] said. “In the successful places around the world there’s a seamless interaction between all these different sectors, and if they’re all on the same page – then that’s when you get the bigger returns. So it’s not just the policy … it’s this foundation of collaboration.”

This study will be part of the same ideological program as RhodeMap, but they’re distinct pieces.  RhodeMap is concerned with controlling where people live and how they structure their lives.  Brookings is going to instruct the state government about what professional activities Rhode Islanders should be engaged in while they live here and how to bring the private sector into alignment with the central plan.  (Whether they’ll go into detail about what laws to pass to force compliance, or just make friendly-sounding suggestions about how to create incentives to benefit special interests that are aligned with the program or are willing to adjust, we’ll have to wait and see.)

Consider this carefully, Rhode Island.  Even in a small state of about one million people, you can’t have “seamless interaction.”  Our entire government system is (or was) set up so that we can interact in a way to ensure the maximum freedom while allowing us to work together peacefully.  That’s the central challenge of a free society; progressives can’t just ignore it away.

When they skip over that challenge, what they’re really assuming is that they will be able to pick people in non-government sectors — in business, in academia, and in cultural institutions — who will stand in as if they speak for their whole sector and who will agree to follow the plan.  You may be able to live your life your own way, but it will become progressively more difficult to the extent that you want to do something of which the pointy heads at Brookings and the control fanatics who invited them in disapprove… or even that they don’t quite understand.

If what you want to do conflicts with the powerful people, well then, you’ll have to be banned.

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About That “Inspiring Environment”

As Anchor Rising-Ocean State Current readers know, Governor Gina Raimondo’s budget for the upcoming year refinanced a bunch of state debt.  Simply refinancing would have save taxpayers millions upon millions of dollars; instead, the governor took the money up front (ultimately costing taxpayers additional money in financing costs) in order to plug it into big spending projects, mostly having to do with top-down economic development.

Whatever else these projects accomplish, they’ll give her opportunity for many positive-sounding announcements, with the first being the money going toward school buildings.  One line in a related Providence Journal article gets to the heart of the philosophical difference:

“We know our kids can’t learn in crumbling school buildings and that they must have access to a learning environment that inspires them to do their best,” Raimondo said in a news release announcing the authority’s launch.

Upon just a little bit of thought, I’m sure, most people would readily admit that there’s more to an inspiring learning environment than the condition of the surrounding building.  Many might go as far as to say that’s among the least important factors.

One, of course, is family structure.  And in this area, progressives like Raimondo tend to support anti-family policies, like welfare programs that replace stable homes with government checks, easy divorce, and the redefinition of marriage to remove the centrality of raising children.

Another is has been more on my mind in the past week or so, though.  Between welfare cliffs and tax-and-regulatory policies that make the ladder to success difficult to climb, there isn’t much to which to aspire.  Whatever a student’s grades, the government will take care of him or her, and the odds of success are getting smaller.  The vision of “making it if you try” that President Obama articulated in 2012 was a modest living with “a little vacation with your family once in a while — nothing fancy, but just time to spend with those you love.”

Add in progressives’ reflexive condemnation of successful people (as if success indicates cheating or theft), the cult of self esteem, and high-profile battles over whether it’s fair to have objective graduation standards, and the message we send to children is crystal clear.  Fortunate children have parents or other adult confidants who hold them to high standards and push them along, but that just brings us back around to progressive attacks on the family.

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Subsidized Degrees for Something Not Needed

It seems as if the feel good, “government helps people” stories tend to be the best examples of government behaving badly… not in the sense of mischief, necessarily, but certainly in the sense of acting without due consideration and with likely undesirable consequences.  I’m thinking of a taxpayer-funded program to get college degrees to childcare providers:

Rhode Island College is offering a program that makes it easier for childcare workers to earn a bachelor’s degree in early childhood education, giving them a chance to teach in a public school and earn more money. 

The college has partnered with the Rhode Island Department of Education to provide childcare workers with a nearly tuition-free track to a bachelor’s degree. Paid for by a grant from the U.S. Department of Education, the program is aimed at childcare workers who have an associate’s degree.

Later, we learn that entry-level teachers in public schools “typically” earn about twice what some childcare workers make, but two conspicuous pieces of information are left out.  First, there is no mention of the cost of the program to taxpayers, whether state or federal.

Second, and more important, the article gives no consideration at all to whether the state actually needs more teachers certified for early childhood.  My experience, being married to a woman with that degree and certification, is that the competition for such jobs is already a challenge, making job hunts very political.  It would take some research to determine whether this is typical, but a very common career path for holders of early childhood degrees around here is several years (up to a decade or more) of waiting for the phone to ring every morning, hoping for low-paid, one-off substitute teacher assignments followed by diversion into a private school or (ahem) childcare setting that pays poorly.

The market for teachers may be different elsewhere in the country, but that’s mainly an illustration of how inappropriate it is for the government to dabble in the market.  Funding new teachers in Rhode Island is an extremely inefficient way to produce teachers for some other state in some other region.

It is, however, an sure way to buy the government some constituents in the recipients of the benefits, to create some work for unionized government professors, and to ensure that public school districts and labor unions have the upper hand when dealing with employees and members.  It’s also a good way to flood the market and ensure that the pay for private school teachers and childcare workers, generally, stays well below what the government is able to force taxpayers to pay for its own employees.

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Planning According to the Speaker’s Interests

In my Watchdog essay, yesterday, I mentioned the support that Speaker of the House Nicholas Mattiello (D, Cranston) has expressed for moving the minor-league Pawsox baseball team to Providence as an example of attempted “quality of life” economic development.  Today, I see in a Kate Nagle interview that Mattiello is confident that he’s negotiating such a great deal that the stadium, of itself, will be a profitable venture for taxpayers.

The primary question that comes to mind is:  Why do the team’s owners need public backing, then?  If this is such a sure thing, why aren’t investors lining up to get a piece of the action?

The next question is why this should be the government’s business even if the stadium and any spillover economic activity create a profit for the state government.  This gets back to central planners’ preferred notion of economic development.

The central planners’ reasoning goes something like this: The economy and businesses require people, and people don’t work and advance the economy for the sake of money, per se.  They want money in order to do things and live full lives.  So, if the government can figure out how to provide those attractions, then the economy will grow, and the area will be a better place to live for everybody.

Of course, people differ greatly in their lives and in their interests, sometimes in conflicting ways.  Writing about cities, Joel Kotkin suggests that hip young professionals in flashy industries need “good restaurants, shops and festivals,” not family-oriented stores and kiddie museums.  They won’t, therefore, be much help pushing back against powerful interests like teachers’ unions, which can undermine the interests of not-as-hip older professionals with children.  Balancing so many interests is impossibly complex.

Rhode Islanders should be very skeptical about promises that the government has found a profitable new venture — think everything from 38 Studios to HealthSource RI.  More generally, we should insist that the government stop trying to be the guiding force for our state.

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Cutting Taxes for Reliable Economic Development

When it comes to economic development in blue states like Rhode Island, politicians prefer to focus on subjects like “quality of life.” A recent study published in the National Bureau of Economic Research discussing the impact state taxes have on the migration of top earners should direct attention back to the basics of economic growth.

A few years ago, with the Rhode Island struggling to recover from the recession, legislators mandated an economic development plan. What the state wound up with was a local application of the federal Department of Housing and Urban Development’s six “livability principles,” with the lead benefit, according to then-governor Lincoln Chafee (D), being “pride and appreciation” of local environment, architecture, and culture.

More recently, the speaker of the Rhode Island House, Nicholas Mattiello (D), has backed the expensive idea of moving the Pawsox, the state’s minor league baseball franchise, a few miles down the road, from Pawtucket to Providence. The team has threatened to move across state lines, and advocates like Mattiello see it as part of the state’s culture.

Economists agree that quality of life, geography, and other factors obviously affect an economy, and the NBER report’s authors, Enrico Moretti and Daniel Wilson from the University of California at Berkeley and the Federal Reserve Bank of San Francisco, respectively, acknowledge that tax rates aren’t everything.

Their study specifically looks at “star scientists,” those in the top 5 percent for the number of patents that they file. Moretti and Wilson were not able to predict numbers of star scientists based purely on tax rates. “The effect” of tax rates, they write, “is swamped by all the other differences across states.”

Pointing to that concession, however, is a long way from figuring out which non-tax thing should be changed and, even more, finding politicians to pick the right direction. By contrast, according to the economists, reducing personal income and corporate income tax rates has “large, stable, and precisely estimated effects” on star scientists’ decisions about where to locate.

Continue reading on Watchdog.org.

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Generational Dads

As a angst-ridden GenXer, my first instinct in response to an article titled “Millennial ‘Mr. Moms’ turn out to be all talk” is to scoff, but to a large extent, their plight is mine, too.

According to Naomi Schaefer Riley’s article, the picture comes through in  opinion polls:

  • 70% of Millennial men say they’d stay home to watch the children if it helped the career of their significant others.
  • 78% feel childcare should be divided into equal shares.
  • But only 5% of Millennial fathers do the stay-at-home thing, with 85% working full time, 6% working part time, and 4% unemployed.
  • They also still tend to be the leading breadwinners in their families, with 60% bringing home at least 59% of household income.
  • And their attitude aligns with their realities, with 67% of Millennial men and women thinking it’s “very important” for them to support their families, while only 40% say the same for women.

In summary, Millennial men feel obligated to work (indeed, the economy that the Baby Boomers left us leaves most families little choice), they feel responsibility to work hard enough that they could be the sole source of income, if they had to be, but they still feel like they have to pick up an equal share of home workloads.  The whole picture certainly describes my circumstances — working from home for my family’s primary income while watching our toddler and picking up an equal amount of housework.

Given all this, contrary to Danielle Paquette and Peyton Craighill’s recent article in the Washington Post, it isn’t surprising at all that “three-quarters of mothers and half of fathers in the United States say they’ve passed up work opportunities, switched jobs or quit to tend to their kids.”  Child care is expensive, meaning that extra work must really pay well in order to make up for it, and parents tend to want to be involved in their children’s lives.

Naturally, the article in the Washington Post presents this as a problem for government to solve, but government involvement would be about the worst thing that our society could do.  Government incentives have played a large role in changing the decision making of families to get us to the point that families can’t live on a single income, in large part by pushing trends toward a more-egalitarian attitude more quickly than the culture was ready to do.

Perhaps we’re now seeing the culture absorb this change, with families reasserting the value of home life.  Subsidizing that trend might make it marginally easier for some families, but if history is any guide, it would make it more difficult for many more.  Somebody has to pay to subsidize child care, after all, and changing the financial calculation in favor of child care will make it more difficult for those families that would rather spend more time with their families to do so.

Of course, subsidizing child care leads families to rely on government and makes a special interest out of child care providers, which ensures votes and power.

 

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Fiorina on Making it in the U.S.A.

Heed Carly Fiorina, America:

First, we have to remember what the engine of economic growth is in this nation. You know what it is? Small businesses. Family-owned businesses. Community-based businesses. I started out as a nine-person real estate firm typing and filing. That’s how most people start. Two-thirds of misses are supported by small businesses. We’re crushing them. That’s why we have to roll back this regulatory burden. Take a 70,000 page tax code and make it three pages. Because guess what. When have a big costly complicated government. Only the big, the powerful, wealthy and well connected can deal with it. It’s called crony capitalism. It is why we just reduce the size of government. So, we have to get small businesses up and growing again. To do so, we just reduce the power, the scope, the complexity of government.

… I spent twelve years in the state of California, a state that’s been ruled by liberals for a long time. And guess what you have: about a hundred and thirty billionaires–good for them–the highest poverty rates in the nation, the exodus of the middle class, the destruction of industry after industry after industry. Income inequality is worse under progressive policies, because progressive policies favor the wealthy, the well-connected, and the powerful.

The economy  grows and income inequality goes down when the people with the most motivation — that is, the people for whom another dollar of income is worth the extra work to claim it, however much work that must be — are able to turn their talents and efforts into money.  That means the lowest person on the ladder works for whatever wages he or she is willing to work for (often in exchange for something other than money, whether it’s experience, connections, flexibility, or ease).  The person building a business keeps costs down (in part by offering employees some of those non-cash benefits) and works hard to build a small business into a bigger business.  The larger businesses facing the new competition work to streamline their own businesses, leveraging their own advantages (which will tend to lean toward things like higher pay and security), to keep prices down and spark operational innovations.

Understandably, a lot of people are nervous about the unknowns of it all and the tendency to cheat in a competitive system, but the choice is not between competition and some ideal situation.  The government can’t impose rules without distorting the economics and thereby making it easier to find ways to cheat.  This is most clear, as Fiorina points out, in the degree to which established businesses find that their biggest advantage is in using government to impose barriers on smaller, more-flexible competition.

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Under the Thumb of the Regulatory State

Today’s posts seem to have a theme, so far, so we might as well keep it going with Jeff Carter’s suggestion that “America Is Close to Losing Its Freedom” (via Instapundit):

We are in danger of losing our republic.  America is on the brink of becoming something else, a regulatory state.

Regulatory states don’t pay attention to the rule of laws.  The law bends, dances, jumps and moves whatever way the regulator wants it to move.  This is not an isolated instance.  It’s happening in almost every vertical business silo.

Yesterday I was talking with a medical startup.  They told me that doctors were sick of the consolidation that has been happening and accelerating in the medical industry.  Doctors are being treated as commodities. I responded that this is repeating itself in every American industry.

So, if you choose to stay in a state that seems more focused on inside deals that taxpayers can’t afford and decide to attempt to make the grueling transition from dependence to self-sufficiency in the modern welfare state, you’re likely to face a cliff of regulations that make it more difficult to get rolling, that act as a defensive wall for those who are already established, and that give government a long arm into all of your affairs.

This is the progressive central planning utopia.  Even if you’re able to shake your welfare-state shackles, the planners want you dependent on a big business for your livelihood.  That way, they can work and negotiate with the poohbahs of big business, with all of our livelihoods as the chips.

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A Rhode Island in Which It Doesn’t Pay to Try

Following up his article about the welfare life in Woonsocket, Arthur Christopher Schaper has posted an interview with a Providence baker who found the story very familiar:

My family has owned an Italian Bakery/Pizzeria in Providence for 25 years.

This once vibrant immigrant built city has become a third-world wasteland of Government Subsidies and lost hope.

Our business has unfortunately had to accept EBT to survive, and the abuse and fraud I see firsthand is nauseating. If you ever needed specific examples, I could give you plenty.

It seems no one feels the need to go to work anymore, at least in my neighborhood.

One telling comment that the baker makes is gaining attention nationally, and it wouldn’t be surprising if the problem is worse than usual in Rhode Island:

[James Hallal, of J’s Deli, has] had prospective employees come right out and tell him they can’t work more than 30 hours/wk. or they will lose such and such benefits.

If I can make close to same amount of $ and not have to work in a 90 degree bakery, why would I chose to work?

We’ve set up “welfare cliffs,” over which people can actually lose money if they make more money.  In 2012, Gary Alexander ran the numbers for Pennsylvania and found that a single mother who began to earn more than $29,000 per year (about $14 per hour on a 40-hour workweek) would lose money unless she earned $69,000 (about $33 per hour).  In Cook County, Illinois, that single mother would have to skip from $12 per hour to $38 per hour for it to be worthwhile to get a raise.

Looking specifically at New York City for City Journal, Myron Magnet describes the role of welfare reform, of the kind that encourages (rather than discourages) work, plays in turning struggling areas around.  Of course, the people most harmed by these progressive policies, I would argue, are those born into challenging situations who would actually prefer to make something of themselves.  Tripling your pay to get from dependency to self-sufficiency is quite a gap.

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Keeping Up with the Wealthy Neighbors Down the Block

John Loughlin’s been making insightful comments on his Facebook page about some of Rhode Island’s more visible policy proposals, lately.  Here he is on the proposal for a minor-league baseball stadium in Providence:

North Carolina ranks #3 in best places to do business while Rhode Island ranks 46th! (that’s out of 50 in case your scoring at home)! Also North Carolina ranks 4th in lowest cost to do business while Rhode Island is at 36th and Rhode Island has the second worst regulatory climate in the country at 49th. Until we improve the above, the LAST thing we should throw a dollar at is a sports franchise – that’s clearly not what ails Rhode Island.

If your neighbor down the street spent years investing in his career and, therefore, climbing the ladder, as well as living prudently and within his means, he may be able now to afford nice cars, a swimming pool, and expensive vacations.  If you’ve spent the same years concentrating on milking the system, giving money to friends for special favors, and racking up debt, you’re not going to be able to afford those things.  Having a fancier car won’t get your finances in order.

Next time one of your fellow Rhode Islanders tells you he or she is thinking about moving to North Carolina — and it happens pretty regularly, to me at least — as whether the minor league ballpark is the reason.  Somehow, I suspect it won’t be.

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Correction on Corporate Tax Apportionment

As a side note to my post about the effects of tax changes on the residency decisions of “star scientists,” I stated:

If corporate income taxes have a wage component when calculating the percentage for the particular state, the effect is even greater, and wages make up one-third of the calculation for apportioning the tax in Rhode Island.

This was correct for the time period described in the study, but a change in the law that went into effect this year changes it.  As of January 1, 2015, Rhode Island General Law 44-11-14 calls for the state corporate income tax to be calculated entirely on revenue: “total receipts from sales or other sources during the taxable year which is attributable to the taxpayer’s activities or transactions within this state during the taxable year.”

This being the case, according to the study’s authors, cutting corporate taxes in Rhode Island should have no effect on encouraging top-shelf scientists to move to the state or to remain, if they’re already here.  The reduction in the corporate income tax that the General Assembly passed as part of its fiscal year 2015 budget — spearheaded by then-new Speaker Nicholas Mattiello (D, Cranston) — was only a cut in the rate.  Changes in the law made it revenue neutral, so it wouldn’t isn’t clear whether it would have helped or hurt the scientists reflected in the study.

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Obama’s Latest Step Toward Killing Representative Democracy

It’s difficult to say which is more astonishing: President Obama’s willingness to skip Congress and adjust the crown that he imagines himself to wear or the news media’s lack of interest in calling him on it.

That’s from a general point of view; from a pragmatic point of view, neither is very astonishing, considering that they both see themselves as left-wing activists.  The president wouldn’t attempt such things as creating new energy law without bothering with our elected legislature if he didn’t expect the news media to cover for him, and the news media wouldn’t ignore it if the partisans and ideologues who compose it didn’t support the Democrat party or disagreed the policy.

But any American with even a passing education in civics should read the following and ask, “Umm, where does he get the authority to do that?”

Touting the plan at a White House ceremony, Obama described his unprecedented carbon dioxide limits as the biggest step ever taken by the United States on climate change. On that point, at least, his opponents agreed. They denounced his proposal as egregious federal overreach that would send power prices surging, and vowed lawsuits and legislation to try to stop it.

The federal overreach isn’t even half of the problem.  Even if the federal government had the Constitutional authority to impose such a policy on the states, how in the world does the president, acting unilaterally through a regulatory agency, have the authority to make “the biggest step ever taken by the United States on climate change”?  This ought to be the stuff of impeachment and revolution, because it means we simply do not have a federalist, Constitutional, representative democracy.

We still get to elect the president… for now and discounting the realities of media bias, voter fraud, and immigration policy designed to counteract the American electorate… but this is not how our system is supposed to operate.

One suspects, frankly, that the move (indeed, the entire climate change hysteria) is primarily intended as a ruse to eliminate the rights of the people to control their own government and, therefore, their own lives.  As Betsy McCaughey notes in The American Spectator, the amount of actual improvement in climate change results (even assuming the questionable models are correct) is minuscule.

If the American people don’t wake up and see through this very soon, we deserve the next step in this takeover of our country.

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The Next Wave of the Real Estate Bubble Pop

Two Mondays ago, the Providence Journal reported on the health of the local real estate market:

June was a good month for Rhode Island real estate, with 1,094 house sales, up 16 percent from June 2014, and the busiest month in 16 years, according to the Rhode Island Association of Realtors.

In June 1999, there were 1,099 houses sold in Rhode Island, and even at a high point for the market, in June 2004, there were 1,048 house sales, the association.

Not only that, but median prices are up and the boom covers multi-family dwellings, too.  That does look good, but as with rocketing employment numbers, I can’t help but wonder about the cause.  Following local news, one hears about Teespring leaving, not waves of new employers.  And indeed, despite the high employment numbers, the number of jobs actually present in the state dipped in June and, long term, has been growing at a slower rate than in previous years since the bottom of the crash.

If things were as rosy as (some of the) statistics show, wouldn’t we be feeling and hearing about it more?

My suspicions are along the lines of Kevin Williamson’s:

… when house prices are rising at 6 percent or 7 percent a year (and rents rising even faster) while U.S. incomes are growing at their slowest rate at any time since Beyoncé Knowles has been walking the Earth (NB: Beyoncé’s income is doing just fine, thanks: She just spent $300,000 on a pair of diamond-encrusted stilettos from House of Borgezie) it isn’t supply and demand at work.

Instead, housing prices are going up for the same reason that college tuitions are: because the government facilitates lending people money at concessionary rates to purchase them. The Fed has, despite the occasional sobering gander in the direction of reality, been keeping the cheap-money sluices pretty much wide open. The federal regulators have loosened their grip over Fannie Mae and Freddie Mac’s lending activities, and, according to a Fed report released Monday, banks are once again loosening up their lending standards.

Jobs in the state aren’t growing anywhere near 16% per year, and neither are incomes.  Add a housing crash to the reckonings sure to result from the Obama-Chafee-Raimondo Era in Rhode Island.

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Where Tuition Dollars Go

This analysis of management at Syracuse University is astonishing:

The report states 211 managers, or 30 percent, have only 1 “direct report,” and another 134 managers have just two people reporting to them. Ninety-three managers have three people reporting to them, it adds, noting the private university employs “too many decision makers.”

Almost one-third of managers manage one person?  I’m sure some of this has to do with the way “managers” are defined, meaning that people with responsibility over others have responsibilities of their own, but it sure seems like a lot of bloat (which, indeed, the analysis suggests it is).

As with my post about part-time professors, yesterday, high numbers of administrators are to be expected when an organization’s central mission changes from the provision of a product (education) to the provision of jobs and customers have relatively low incentive to be demanding about the product their receiving.

I wonder what the numbers are at the University of Rhode Island, Rhode Island College, and the Community College of Rhode Island.

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Stadiums and Economic Activity

With the push for a taxpayer-subsidized minor-league baseball stadium in Providence continuing, this quotation from a 2012 essay in The Atlantic seems like something worth keeping handy (emphasis added):

… according to leading sports economists, stadiums and arenas rarely bring about the promised prosperity, and instead leave cities and states mired in debt that they can’t pay back before the franchise comes calling for more.

“The basic idea is that sports stadiums typically aren’t a good tool for economic development,” said Victor Matheson, an economist at Holy Cross who has studied the economic impact of stadium construction for decades. When cities cite studies (often produced by parties with an interest in building the stadium) touting the impact of such projects, there is a simple rule for determining the actual return on investment, Matheson said: “Take whatever number the sports promoter says, take it and move the decimal one place to the left. Divide it by ten, and that’s a pretty good estimate of the actual economic impact.”

Others agree. While “it is inarguable that within a few blocks you’ll have an effect,” the results are questionable for metro areas as a whole, Stefan Szymanski, a sports economist at the University of Michigan, said.

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Part-Time Professors Illustrate the Problem of Output-Driven Reforms

Lynn Arditi’s Providence Journal article on the plight of part-time professors gives a good indication of what happens when you attempt to address economic issues at the output end.

If the colleges and universities are getting away with something they shouldn’t be, it’s at least partly because the system is generating too many people willing to do the work part time and at that salary.  The problem is exacerbated by the fact that public subsidies and loans for tuition, along with the marketing message that a degree is a magic door to more money, brings in clientele who have no clear mission for their education and a low proclivity to assert their own interests while in the program.

At the end of the day, colleges and universities have to provide courses in order to fulfill their primary mission, which buys them tremendous advantage in public esteem.  If they couldn’t find enough teachers, they’d either have to increase the pay or require full-time faculty to do more work.  (I’m isolating the employment aspect, here.  No doubt, colleges and universities would attempt to fill the gap in other ways, too, such as pushing loopholes that have graduate students teach the classes for free or adjusting the mixes of their classroom offerings using technology or teaching strategies.)

One of the reasons, I’d propose, is that the system — with government subsidies, tenure, and labor union leverage — inflates the value of full professorship.  It’s already rewarding, highly respectable work to which many people incline naturally, and with the opportunity for such perks as relatively light workloads that allow for enjoyable intellectual pursuits.  Add in unusual job security and relatively high pay, and the profession is sure to draw more candidates than it has positions available, a job-scarcity that the cost of each employee makes worse.  Meanwhile, the cost of full-time professors gives both the college and the faculty incentive to limit their numbers.

So, when you get the mix of interests pushed by the organization, by the professors, and now by unionized part-timers, the system becomes rigid and built with the primary purpose of providing jobs rather than providing an education.  Those bricks fall on people like Kenneth Jolicoeur, who, according to the article, was making a decent living by working all year at two universities, with an additional part-time job at the University of Rhode Island.

Enter the part-timer union (not to mention the Obama administration, with ObamaCare and other job-killing regulations), and Jolicoeur’s course-load was restricted and his administrative job ended.  Meanwhile, the entire higher-education system is so swamped with these sorts of perverse incentives that many suggest the bubble is reaching its limits.

Unfortunately, our society has long since fallen into the habit of trying to force the world to fit our desires, so we rarely address underlying problems until we are forced to do so by painful reality.

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New England Elite’s Short Sightedness

Anybody with experience in higher education in the past quarter century or (I get the impression) elementary or secondary education within the past fifteen years has likely been presented with the notion that privileged people — by which is typically meant that source of all evil, the straight, white, conservative, and (even if latent) Christian male.  “Check your privilege” is the advice that accompanies them for their first quarter century of life and beyond.

Those lessons came to mind while reading David Holahan’s argument in today’s Providence Journal for remaining a Connecticut resident.  Writes the manager of public relations for Connecticut architectural firm Centerbrook Architects and Planners:

If you can’t find something to do here to cheer you up or to engage your mind and spirit, you probably won’t be happy anywhere. A recent article in the New York Post, of all publications, documented the allure of Connecticut living to outsiders; Town & Country Magazine followed up with a feature touting the “Golden Triangle” of Essex, Old Lyme, Old Saybrook and their environs as the “New Hamptons.”

The magazine points out what many of us often take for granted, what motivates visitors to travel long distances to get here: there are a bazillion things to see and do and enjoy in just the one corner of the state that was the subject of the article. Last I checked, the stuffy old Hamptons had hardly anything to compare with what southeastern Connecticut offers.

That’s all well and good, of course, unless the thing that would be most conducive to one’s happiness is finding a way to be able to build a career and maybe one day have the leisure time to enjoy Holahan’s beloved Hadlyme Ferry.  As government grows in both taxes and in the number of requirements in laws, licensing, and regulation before a resident can do anything for which other residents are willing to pay, the economy will throw off fewer dollars to fund the niceties that folks like Holahan can afford to enjoy.

One imagines Mr. Holahan’s fellow passengers floating down the Connecticut river pondering the ways in which other people’s activities must be restricted in order to keep the scenery pristine (and, ahem, the established parts of the economy and government sufficiently free of competition to ensure the leisure time of the lucky few).

At the end of the journey, though, somebody has to pay the $350,000 or so every year to subsidize boat rides on what the Connecticut Dept. of Transportation calls “a quaint wonder.”  Based on numbers in a 2010 Hartford Courant article, tacking another $3 for every person and car that boards the ferry would bring the boat to profitability.  If people aren’t willing to pay that to a private ferry operator, why should people who are struggling to make ends meet have to pay it to the government?

As Holahan notes, fewer are willing to do so, and they’re leaving.

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Rhode Island’s ‘Ouroboros’ approach to economic development

At the request of third graders from an elite Newport private school, lawmakers in Rhode Island this year declared the American burying beetle to be the official state insect. The designation is appropriate not only because the Ocean State is one of the few that still can claim the bugs as residents, but also because the species feeds on and breeds in carrion — i.e., “the decaying flesh of dead animals.”

If Rhode Island legislators are looking for ideas for next year, the Ouroboros should be a candidate for the official state economic symbol. Historically, the mythical snake eating its own tail has been emblematic of renewal and self-creation, but Rhode Islanders may finally answer its greatest mystery: What happens when the snake finishes?

Rhode Island’s strategy of subsidizing every step in the economic chain has a similar circular feel.

Continue reading on Watchdog.org and then… return for this bonus ending, only on the Ocean State Current:

Despite a one-month increase of 1,100 jobs in “education and health services,” the total number of jobs located in Rhode Island decreased by 300, in June, after a longer-term trend of slowed growth, and the latest economic development controversy is the shift of a local star start-up company, Teespring, to Kentucky, after that state provided $2.5 million in tax incentives while Rhode Island officials had no interactions with its executives.

Bugs that require carrion to survive must live in a world of living animals.  Somebody has to pay for expanded government programs that provide services to beneficiaries of other government programs.  Otherwise, the economy will ultimately become a central-planning head with nothing left to eat.

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A House and a Heart Attack-ack-ack-ack-ack; Is That All You Get for Your Money?

Lee Habeeb’s reflections upon his father’s decision finally to leave New Jersey will have a very familiar feel for Rhode Islanders.  He bought his house for $32,000 at a time when property taxes were so low he can’t remember how much they were.  Now property taxes, income taxes, and sales taxes give him good reason to worry that his retirement income and savings won’t be enough.

(To some degree, it seems, Social Security is just a way to shift local taxes to younger federal taxpayers.)

Habeeb refers to people who leave a state to escape the confiscation of their property by the strong-armers in state and local governments as “refugees.”  Rhode Island has produced a lot of those.

Unfortunately, experience suggests that Habeeb’s skepticism is amply justified:

… businesses are fleeing New Jersey for the same reason so many residents are fleeing: the high cost of doing business there. Indeed, New Jersey ranked 50th, dead last, in the Tax Foundation’s 2015 State Tax Business Climate Index.

It’s a vicious cycle, and stopping it is no small task. The country watched in disbelief as one of our great American cities, Detroit, created over a million refugees over five decades, as its population fell from a peak of nearly 1,700,000 in 1960 to its current 680,000. It spent, mismanaged, and shrank itself into bankruptcy. How states, cities, and nations treat capital — the human kind and the money kind — matters. How leaders think about capital matters too. The ability to manage, nurture, and preserve it, and to grow a healthy tax base (not destroy it), is what will separate winners from losers.

Megan McArdle gives some sense of the challenge when she writes about of the stupidity of rent control policies:

… this has one key advantage for local politicians: People who are not already living in your city cannot vote in local elections. Maybe in 25 years, when rent control has pushed unregulated prices sky-high and your city can’t grow because there’s nowhere to put anyone, this will become a problem for politicians. But those will be some other politicians in charge by then.

So while virtually all economists can agree that rent control is a terrible idea, local politicians may well think it’s splendid.

No development is more threatening to powerful insiders than successful non-insiders, especially those who don’t know the local rules of the game and want to do things just because (gasp!) they make sense.