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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.

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After All, Theme Parks Are Places to Visit, Not to Live

Something sounds familiar about this description of Rome, doesn’t it?

A survey by the European Commission two years ago placed Rome last out of 28 EU capitals in a ranking for the efficiency of city services. Despite great food, superb coffee and an enviable climate, on an index of quality of life, the capital came second to last, with Athens at the bottom. Its Renaissance churches, cobbled streets and vibrant piazzas still wow tourists from around the world, but beyond the historic centre, the city is a mess and life is a struggle for locals.

As I’ve said before about Rhode Island, if you’re having to work too hard to go to the beach, don’t have the disposable income to go out for dinner, and have to cut corners on your grocery bill, living in a place with such attractions doesn’t do you much good.  In fact, when the local establishment leverages the premium that people are willing to pay to live in such a place in order to confiscate high levels of taxes and return low levels of service, living in such a place can do you harm.

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Local Politics Should Work Out Problems, Not Put Them Off

I’ve put a post up on Tiverton Fact Check that takes up an aspect of the mixed-use Tiverton Glen project — which opponents are calling “the Mall,” now “the MegaMall” — that hasn’t been mentioned.

The issue and, especially, the opposition have really picked up steam in the past few weeks, in part perhaps because the process has set off a number of alarms.  Notably, after a long and controversial planning-board process, the developer submitted additional requests for zoning changes to the Town Council just before a town hearing.

Still, as often happens around here as issues heat up and a local political action committee called Tiverton 1st turns on its machine, personal attacks are poking through discussion of issues and there’s a frenzy for conformity that makes a too-simple “yes” or “no” question into a heated single issue under which all substantive discussion is rolled.

One larger question that’s been lost is what sort of development will ultimately go in that location.  Somebody’s paying around $20,000 in taxes on that land every year.  Making its sale and development a question of raw political power raises the possibility that the next proposal will come from somebody with more political power and less regard for the interests of the community.

With the state continuing to expand its push for affordable housing — including cut-rate tax bills for affordable developments — those opposing every commercial development that comes down the pike may be setting up a new neighborhood that, far from promising at least some fiscal benefit in the long term, comes nowhere meeting the costs of the government services it uses.

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Fiscal Condition Versus Making a Living: Live Free or Die

Rhode Islanders should be pleasantly surprised to find their state coming in at number 38 out of 50 on the Mercatus Center’s ranking of the states’ fiscal condition.  Any list that keeps the Ocean State out of the worst 10 is apt to be received with either relief or suspicion among the people who live here.

Of course, this particular list was sweetened by the fact that Rhode Island came in second best in New England — behind only New Hampshire, which southern New Englanders tend to see as an impossible-to-replicate land of low taxes and “live free or die” liberty. As WPRI reporter Ted Nesi put it, Rhode Island’s placement is “not great, but notably higher than Connecticut (#47) or Massachusetts (#48).”

Given this unexpected result, though, there’s reason to wonder whether Mercatus’s methodology misses the ways in which Rhode Island games every system.  After all, comparing states’ employment levels with their pre-crash peak, Massachusetts is nowthe fourth best in the country.  In MoneyRates.com’s “Best and Worst States to Make a Living 2015,” Massachusetts is #20, while Rhode Island is in its more-familiar territory in the bottom 10 (at #42).

Shouldn’t the health of a state’s economy bear some relation to its fiscal health?

Continue reading on WatchDog.org.

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Let’s Make Sense Out of Refinancing

Governor Gina Raimondo’s proposed RhodeWorks project to repair Rhode Island bridges and roads with debt financed through tolls on truckers is a 10-year project:

Our plan will get us to 90% structurally sufficient bridges by 2025, make Rhode Island more attractive for businesses, and create about 11,000 job-years over the next decade

The latest variation is the one that passed the state Senate, which the House may (or may not) take up in an autumn session.  The Senate’s version presents a smaller scale, down to a $500 million bond, from $700 million, but it also includes “an additional $120 million… through the refinancing and restructuring of prior federal debt.”  Folks should take a closer look at that part.

Reviewing supporting documentation, it appears that the extra money is actually the first four years of lower debt service from refinancing GARVEE bonds for an extra four years.  As things currently stand, the state still owes $289 million on the bonds and will be done paying them after 2021.  The refinancing will extend the payments to 2025 and add another $15 million in interest.  (Refinancing costs aren’t mentioned, so let’s assume it’s part of the $15 million.)

Think about that.  Over the ten years of the RhodeWorks project, this refinancing will actually cost $15 million.  It will direct $15 million away from infrastructure or some other area of state spending.  If the state simply pays off the bonds, it’ll spend around $50 million a year through 2021 and then that money will be freed up for the final three years of RhodeWorks.

By contrast, if the state refinances, it will free up $20 million early on but add $30 million in the later years, with an overall increase of $15 million when all is said and done.

Now let your imagination run wild and consider the possibility of the state’s paying for bridge and road repairs with savings rather than debt.  $500 million is $50 million per year for 10 years.  Over the course of the RhodeWorks program, the last three years would be paid for simply by paying the GARVEE debt on time.

It boggles the mind to wonder how many decisions like this are piled up on the regular expenditures of the state’s nearly $9 billion annual budget.

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Huge Employment Growth in a Slowing Economy?

It’s no secret that I’m extremely skeptical about the government’s employment data for Rhode Island, and I do periodically hope to be proven wrong.  But I just don’t see how one can reconcile the state’s employment surge in the past six months with this, in the Providence Business News:

Rhode Island’s economic growth failed to meet expectations in the first quarter, posting a gain of 1.5 percent, according to the Rhode Island Current Economic Indicator briefing released Monday by the Center for Global and Regional Economic Studies and the Rhode Island Public Expenditure Council.

While the briefing said the economy experienced growth, it is showing continued signs of weakness, as its rate of growth slowed from the fourth quarter, when it grew 1.7 percent.

It also failed to meet previous projections of 2 percent growth for the first quarter.

It’s possible Rhode Islanders are finding jobs in neighboring states, but when I investigated that possibility last year to dig into another inexplicably good first-half for Rhode Island, the evidence didn’t seem there.

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A Budget for Special Interests

The budget that appears poised for passage through the General Assembly and Governor Raimondo’s office fills me more with dread than hope.  In recent years, state budgets have moved us incrementally in a worse direction.  The combined effort of Raimondo and House Speaker Nicholas Mattiello seems almost like a reordering of things in the favor of special interests, with substantial risks for the future, like a wrecking ball held high somewhere in the dark.

Consider the programs that directly offload risk from private development companies and create union jobs.  A sample from Patrick Anderson’s Providence Journal article:

The other large tax break Raimondo proposes is a “tax-increment financing” program that would allow new state tax revenue created by big development projects to be funneled back into paying for the project or infrastructure surrounding the project.

Most commonly attached to local property taxes, a state TIF could involve a range of state revenue, including income tax, sales tax and hotel tax. For example, a developer proposing a neuroscience building that includes a hotel and shops could pay off a bond using a portion of the new state taxes it generates.

What a contorted concept.  When does a developer get his or her hands on tax revenue to pay off his or her own debt?  Never.  These would be non-voter-authorized bonds taken out with future tax revenue as security.  Whether tax revenue actually goes up or not, the money must be paid.

Maybe most frustrating, though, is that the call of the obvious is finally starting to permeate the discussion, but our supposedly fiscally responsible leaders are refusing to hear it.  Here’s a line about the Superman Building’s limbo:

… if demand for downtown Providence real estate were stronger and companies were clamoring for Financial District offices, someone, if not the current owner, would come to the rescue.

And here’s a word from an economist:

“Providence seems to have a surplus of empty buildings already, so providing incentives for more is not going to make this better,” said Brown University economics professor Matthew Turner. “If they are vacant because it takes hundreds of thousands of dollars in legal fees and two years at City Council to get approved, then the government should be simplifying the permitting process. If the answer is that no one wants to occupy them, you will end up with more empty buildings.”

The fatal problem that appears destined to destroy Rhode Island and undermine the United States is that simply making things better and easier for everybody does not create enough opportunity for political favors and self-dealing.

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Wanted on Family Leave: Clarity of Thought

Herewith, an example of the reason our nation may be in inexorable decline, from the AP’s Jennifer McDermott, under the Providence Journal headline of “In R.I., residents gush about paid family leave“:

Rhode Island last year began allowing workers to take up to four weeks of paid leave. Many workers say they love the program, and employers say it hasn’t hurt business as some had feared. …

About 5,000 people have taken paid family leave in Rhode Island so far. New Jersey and California are the other states that provide it, and several states are considering it. Washington state passed legislation but has put off implementing it.

Those two paragraphs convey a fundamentally un-factual and misleading impression.  Rhode Island didn’t just “begin allowing” workers to take off paid leave last year.  There has never been a ban on paid time off.  I’m sure employers have offered that as a benefit to workers, whether formally or ad hoc, as circumstances have come up, and there’s private insurance that people can purchase (or receive as a benefit) to accomplish the same thing.  Similarly, the state doesn’t “provide it.”  In effect, the state is simply mandating the insurance, whether people want it or not.

This program is actually an excellent example of the illness that the West’s creeping progressive political philosophy has wrought.  The government is forcing us to pay for a program that not everybody needs or wants, and then the government takes credit for “providing” the program.  The state is forcibly taking money away from everybody, causing harm to the economy that is difficult to measure, and then taking credit for the relatively small population that benefits (buying votes and excusing even more government power).

The Associated Press found a couple of extreme examples, but we can be sure that the 5,000 people who’ve received some benefits range from those cases, on one end, to abuse of the system, on the other, probably with a bell curve between them.  And even then, only 1% of people holding Rhode Island-based jobs have benefited.

The fact that “the state’s largest employer” found the 500 of its employees who’ve used the program to be a “nonissue” does not tell us the economic effect.  The state is forcing people to pay real money to mitigate a risk that they’re otherwise willing to accept, perhaps because they have contingency plans (like, you know, savings).  When benefits are paid out, there’s no guarantee that the money isn’t just offsetting something that isn’t as economically productive.

Put differently:  Taking money away from people who are working to pay people for not working is not economically neutral, and it’s politically corrosive.

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Does Licensing Ensure Quality?

A recent study from the Mercatus Center found that occupational licensing does not appear to affect service quality, but does drive up the cost of that service.  As Peter Fricke summarizes on the Daily Caller:

Their data reveals that, “Annual optician earnings are substantially higher (by approximately $7,000) on average in states that have optician licensing statutes than in states that do not regulate the profession.”

Even after accounting for “other unobservable differences” between states by comparing optician earnings before and after the enactment of licensing requirements, they say, “there is evidence of higher earnings (more than $4,300 greater) after a state has adopted licensing legislation.” …

“Quality can be subjective and difficult to measure precisely,” the authors concede, but suggest that premiums for vision and malpractice insurance provide an adequate stand-in, since better service quality should generally coincide with higher consumer prices and lower malpractice rates.

On both measures, they find that premiums are almost exactly the same regardless of whether a state requires licensing of opticians, indicating that insurance companies “do not appear to consider a lack of licensing a risk factor.”

Whether we’re talking opticians, barbers, or taxi drivers, professional licenses are special interest benefits for established players in a marketplace, with the cost falling on (you guessed it) the consumer.

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Excitement for the Wrong Direction for I-195 Land?

Rhode Island’s informderati is all atwitter (pun intended) with the news of a “life-sciences complex” proposed for the land formerly occupied by I-195:

A real-estate investment and development company that partners with universities and hospitals across the country to build research parks has submitted a joint proposal to build a multimillion-dollar facility on 5 acres of former highway land in Providence — drawing praise from Governor Raimondo, House Speaker Nicholas Mattiello, Senate President M. Teresa Paiva Weed, Providence Mayor Jorge O. Elorza and others. 

Wexford Science & Technology of Baltimore, a subsidiary of BioMed Realty Trust Inc. in San Diego, and CV Properties LLC, the Boston firm leading development of South Street Landing on Eddy Street in Providence, hope to build a life-sciences complex with lab space, academic research space, a hotel, and retail and residential space. Richard Galvin, founder of CV Properties, said it’s too early to pin down exact costs, but “it will be several hundred million dollars” to build.

The details are sparse, so far, and one question that will need to be made explicit is whether “partnership” with a bunch of non-profit organizations means tax exemption for the development once it’s done.  One can imagine a bunch of tax deals to get the thing built and then payments in lieu of taxes (PILOTs) once it’s operational.

Off the top of my head, the scorecard for that supposedly game-changing property is:

  • Student housing
  • A minor-league baseball stadium
  • A facility with no prospective clients, thus far, other than non-profit universities

These strike me as things that a state should seek when its people are thriving, not when they’re tapped out for taxes and leaving the state in despair.  But whaddayagonnado, I guess.

So far, developers that have submitted proposals are seeking tax-stabilization agreements with the city because Providence’s commercial property taxes are far higher than in other communities. Yet the city has not granted any such tax treaties yet.

It all comes back to an institutional mandate to maintain the power of government insiders.  Unless that changes, Rhode Island’s done.

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Why Not Set the People Free?

J.D. Tuccille highlights some murmurs in Europe that remind one of the Rhode Island attitude:

The shadow economy—off-the-books business and labor that would be perfectly legal if people felt like subjecting themselves to taxes and regulations—ebbs and flows with the years. Right now, it’s down a bit in many countries from the days of the recession, but shadow economic activity is still huge. Across the European Union, it’s estimated to amount to 18.4 percent of GDP. Why people work off the books is no secret—high taxes and burdensome regulations are constantly cited by economists as primary drivers for people to hide what they’re doing. So, current policies are like kryptonite to people who want to keep the fruits of their labor. Got it. The obvious solution then is to…harangue and coerce people back into the official economy?

Even though regulations are pushing people out of the taxed-and-regulated economy, leaving them with effectively no taxes or regulations, government officials aren’t simply going to reevaluate their approach.  In their view, it isn’t government’s job to accommodate the people.  The diktat has been issued, and the people must be made to comply.

Even if it means banning cash so every transaction can be traced.

At least in Rhode Island, government officials make periodic noises about easing regulations.  Still, the plan appears to be to try every power-centralizing solution they can imagine for a hundred years before simply doing the obvious and leaving people alone.

(Via Instapundit.)

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Robbing productive class Peter to pay college graduates Paul

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

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

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

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

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

Continue reading on WatchDog.org.

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Keeping the Productive Class, Not in Government’s Interest

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

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

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

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

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

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

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

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

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The History of Rhode Island Crony Deals

Steven Frias had another excellent essay in the Providence Journal, yesterday:

Using funds raised through a refinancing of state debt, Raimondo proposes spending about $35 million, in total, for a First Wave Closing Fund, a Small Business Assistance Program and a I-195 Redevelopment Fund. The Rhode Island Commerce Corporation and the I-195 Redevelopment District Commission would have broad discretion over how these funds are be spent and over which businesses benefit. 

Supporters of Raimondo called these programs “bold” and “game-changing.” However, Rhode Island politicians have used various government financing programs to benefit select businesses for more than a half-century, with little success at reversing Rhode Island’s decline. History shows that the state’s efforts to select businesses for help have been, at best, ineffectual at improving the economy in the long-term, and at worst, disastrous for taxpayers.

I’ve been thinking that it would be useful to have an online museum exhibit, of sorts, that presents timelines of various controversies, themes, and trends, in Rhode Island.  Unfortunately, most of the people I know who would undertake such a project are busy trying to support their families while doing some work to try to save the state for itself.  Meanwhile, it’s hard to see an academic taking it on, because it would inevitably make big government look bad, which academics aren’t allowed to do.

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Churn Can Be Good, If That’s What It Is

If this is an indication of economic creative destruction, then it might be positive in the long run, but that might not be what’s going on:

The long feared “retail apocalypse” may be hitting with little or no fanfare if a growing list of store-closing plans by major chains is any indication.

Major U.S. retailers have announced the closing of more than 6,000 stores from coast to coast. The list includes only those retailers that have announced plans to close more than 10 outlets this year and next.

I fear that it’s actually an indication that the supposed economic recovery has really been a masterwork of smoke and mirrors.  Government policy nationally (and more so in Rhode Island) is not letting the economy really heal.

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A Streetcar Named Big Government

Referring to Art Norwalk’s essay from last week, Ian Donnis quotes Providence Mayor Jorge Elorza:

“I think it’s smart for the city because it’s not just about transportation, it’s about economic development. Take New York City, for example. Look at property values right by a subway line as opposed to property values in a building that’s maybe 10 or 12 blocks away. Everyone wants to be right by the subway, and in just the same way, in cities that have done a streetcar, people want to be right by and develop by the streetcar, so it’s good for economic development.”

Here’s the thing:  Lots and lots of people have wanted to live in New York City for a long, long time.  If they bid up the properties near the subway, that may indicate the value such residents place on transportation (in a city that’s famously challenging for car ownership), but it doesn’t mean they moved to the city because of the subway.  As the still-vacant I-195 land illustrates, Providence isn’t quite as active as the Big Apple.

State, city, and town governments in Rhode Island need to get back to basics:  fixing roads and lowering taxes.  Leave the economic development to the people whose livelihoods depends on it and who are willing to risk their own money for that purpose.

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No Superhero to Save Businesses Killed by Minimum Wages

If you harbor any support for minimum wage laws — or, especially, “living wage” laws — Ian Tuttle’s profile of a San Francisco comic book shop is must reading:

“I’m hearing from a lot of customers, ‘I voted for that, and I didn’t realize it would affect you.’” So says Brian Hibbs, owner and operator of Comix Experience, an iconic comic-book and graphic-novel shop on San Francisco’s Divisadero Street, of the city’s new minimum-wage law….

… Hibbs says that the $15-an-hour minimum wage will require a staggering $80,000 in extra revenue annually. “I was appalled!” he says. “My jaw dropped. Eighty-thousand a year! I didn’t know that. I thought we were talking a small amount of money, something I could absorb.”

I don’t know how a small-business owner could have not done the quick math of what a $15 minimum wage would cost him.  Whatever the case, now Hibbs is in the position of trying to think of new add-ons to his business model that will bridge the gap.  A small local bookstore that was going to have to close down was saved, temporarily, by crowd-funding — essentially charitable gifts to cover the additional expenses.

Hibbs notes that only so many businesses can get away with charging a “keep us open” fee before customers are tapped out.  His solution has been to put together a graphic novel club that provides at least some semblance of additional service for the money given, but if it’s enough to bring in another $80,000 in revenue per year, it’s difficult to understand why the store and its customers hadn’t figured that out already.  In other words, it looks like a pretense for charity.

The comic-store owner says he’s a progressive, but even so, he’s inclined to wonder:

“Why,” he asks, “can’t two consenting people make arrangements for less than x dollars per hour?”

One suspects that he’s missing the key aspect of progressivism.  Promising minimum wages allows politicians to buy votes, selling a pledge to make people’s bosses pay them more.  Supporting minimum wages allows voters to capture charitable endorphins on the cheap, by forcing others to pay the bill.

There’s no rational compromise, because the point is for people facing no or minimal consequences to tell other people what to do, and the consequences require some understanding of logic and economics.  Consider: If Hibbs’s new innovation turns out to be a profit center, he might credit the minimum wage law with forcing him to innovate, but the next business down the block might not have the advantages of an artistic and cliquey industry.  One hopes Hibbs and his customers would still be realizing the damage they’ve done to real people’s lives with their votes, but it’s unlikely.