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Corruption as Central to Rhode Island’s Economy

There’s something frustratingly telling about James Bessette’s Independent article on one project that former Democrat Representative Donald Lally undertook when he was working his revolving-door-skirting job within the administration of Democrat Governor Gina Raimondo.

Taking the politics out of it, the story is about Harvey Cataldo’s ridiculous difficulty trying to clear all of the bureaucratic obstacles to open an oyster business.  “I’m good at looking at this stuff on the internet and I could not find a place that said ‘OK, I have to get this, this and this, and then do this, go back and I can have my license,'” he said.

Enter Lally, whose hiring attracted a great deal of attention in September because of its tinge of patronage and with whose political campaigns Cataldo has been involved since the 1980s.

In a Sept. 2 email to Rhode Island Commerce Corp. executives, including Commerce Secretary Stefan Pryor, DBR Director Macky McCleary said Lally was “doing yeoman’s work” helping Cataldo, owner of Bluff Hill Cove Oyster Company, “through the complicated permitting process across several agencies.”

“Just want to give kudos,” McCleary wrote.

What we see, here, is a progressive bureaucratic system that has become so out of whack that a business owner has to rely, for legitimate activity, on his connection to a politician who was given a government job under the shadow of corruption.  It’s the perfect melding of ordinary economic activity with crony corruption, and even though it’s obviously a peculiar case, it ought to open eyes around the state.

The story won’t open many eyes, though, because most people won’t ever come across it and among those who do, a sizable percentage like things just the way they are because the status quo advantages them through either knowing a guy or being the guy to know.

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What If Rhode Islanders Really Had a Say on Budgets, Like Tiverton?

In this video, I wonder what would happen if the people of the Ocean State had a say in the budgeting process. In Tiverton, electors in town have the ability to submit budgets directly to voters. For the third year in a row, a budget that I submitted for the financial town referendum to set Tiverton’s upcoming budget won a strong majority of votes. That makes three years with tax increases under 1%.

By design, Rhode Island politicians at the state level leave the public no time to digest the budget and express their preferences to their representatives, and most of their representatives have no intention of bucking legislative leaders anyway.

Imagine, though, if Rhode Islanders really did have a say, like we do in Tiverton. What do you suppose the result would be?

Watch this new video to learn more now.

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Sustainable? Some of RI’s Corporate Welfare is Funded by Moral Obligation Bonds!

Brian Bishop points out in today’s GoLocalProv that certain corporate welfare handed out by the state is funded not pay-as-you-go, out of the budget, but by moral obligation bonds.

Even if you think historic tax breaks are a necessary evil, we didn’t budget for the cost of these breaks, we used moral obligation bonds through the Commerce Corporation to pay for them, a harbinger of the tax [breaks] and spend ‘fireworks’ economy. The flash and bang from each growth purchase fades quickly, requiring us to head back to the fireworks factory and buy more and more, when we haven’t even paid for the fireworks that have already gone off and faded.

The corporate welfare in the form of crony-targeted tax breaks that Governor Raimondo, with the approval of the General Assembly, hands out are bad enough. But the state also hands out corporate welfare for which taxpayers must pay interest! (Remember, this was also the funding method of the 38 Studios debacle.)

The cool new thing with progressive politicians is “sustainable”, as in “sustainable development” and “sustainable energy”. But how can (re)development funded at someone else’s (taxpayers) expense via high-interest moral obligation bonds be cast as “sustainable”?

In fact, what state and local taxpayers really need first and foremost is sustainable budgeting! And further to that, we need elected officials in the Rhode Island Executive and Legislative branches who recognize these (corporate welfare and, even worse, corporate welfare charged to someone else’s high interest credit card) for the unsustainable policies that they are and put an end to them.

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ProJo Editorial Correctly Highlights Bad Jobs Report

Spot on editorial by the Providence Journal yesterday about last week’s bad jobs and employment report.

Two points in particular to highlight.

1.) Their call for broad-based improvement to the state’s business climate.

Beyond targeted incentives, Rhode Island needs a better tax and regulatory climate that encourages companies that are here to grow and others to come.

Thank you thank you thank you.

2. And this.

Perhaps what is most alarming about last week’s jobs report is that it’s never really felt as though Rhode Island was out of the woods.

Indeed, a well-founded feeling confirmed by the Rhode Island Center for Freedom and Prosperity’s Jobs and Opportunity Index (JOI): our state has been stuck at forty eight since 2012. This is a situation that will only change when state officials take to heart the call by the ProJo and many others to take a much broader approach to economic development than the handing out of welfare to a very narrow list of corporate cronies and occasional, isolated tax reductions that lack credibility as they are unaccompanied by a reduction in overall spending.

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Research and Experience Agree: Socialism Stinks

At nearby University of Massachusetts Dartmouth, one professor has belatedly made the journey across ideological divide and concluded that “socialism doesn’t work”:

“I gradually became disenchanted with Marxism by visiting many of the countries that had tried to shape their societies to conform to its doctrines. I was disillusioned by the realities I saw in … socialist countries – the USSR, Eastern Europe, China, Cuba, etc,” [Jack] Stauder told The College Fix via email.

“I came to recognize that socialism doesn’t work, and that its ‘revolutionary’ imposition inevitably leads to cruelty, injustice and the loss of freedom,” the professor continued.

“I could see the same pattern in the many failed left-wing revolutions of Latin America and elsewhere. By combining actual travel with the historical study of socialism and revolution, I succeeded in disabusing myself of the utopian notions that fatally attract people to leftist ideas.”

Becoming familiar with people who work with their hands for a living in the American West also aided Stauder along, when contrasted with life immersed in left-wing academia.

Some of the first comments to the post are interesting.  Defenders of socialism appear to take two tacks:  1) the bad socialist countries aren’t socialism, but dictatorships, and 2) good countries that aren’t fully socialist are socialism.  One could take the countries listed and suggest that nations deluded into socialism can choose one of two options as socialism gets around to not working.  They can either reform away from it (as Northern European countries have been doing) or move toward dictatorship, which is the inevitable end point when a people refuses to abandon socialism’s core tenets.

Given Stauder’s illustration that it is possible, even late in life, to abandon bad ideas, it’s saddening that socialists in the United States and the internationalists are managing to spread their malignant ideology.  Let’s hope that Americans haven’t destroyed their culture too fatally to avoid the dictatorship option.

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Please Check Out the Gaspee Business Network Thursday!

On Thursday (June 23, 2016) at 5:30 pm, the Gaspee Business Network will be holding a Partner Information event at the Radisson Hotel, 2081 Post Road, Warwick. If you’re a business owner and you’re not satisfied with the state’s business climate, please consider dropping by to check out the “Incorruptible Voice of Rhode Island Business“.

We will be discussing why the GBN is different from other business networking groups and how you can take part in the most formidable force to fight the hostile business environment so prevalent throughout Rhode Island.

For more information about the GBN, click here. Click here to register for the event. Or just show up!

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Curious How “Revitalization” Requires “Longevity” for Officials

One thing conspicuously missing from Kate Bramson’s article today, titled, “GrowSmartRI summit: Speakers share revitalization success stories,” is any statistical evidence that the stories are, indeed, about successes.  Oh, sure, when government agents and activists push hard enough, they manage to fund projects and (eventually) bring them to completion, but when most people hear the phrase “revitalization success stories,” they are likely to expect that the areas were revitalized.  The fact that three “relatively new” restaurants open their doors each night in Attleboro doesn’t tell us much.

This lack of substantial evidence relates to another giant omission in the article — namely, further explanation of this disturbing opening:

Patterns emerged Tuesday as government leaders from three smaller, northeastern cities shared success stories about their revitalization efforts.

Longevity — of elected leaders and employees working for them — was one of several themes that arose before an audience of about 200 business and civic leaders at a summit hosted by the nonprofit GrowSmartRI.

So, “revitalization” requires that voters elect the same officials repeatedly and that the bureaucrats keep their jobs, too?  Well, how convenient.

It’s also obvious.  The entire motivating philosophy of GrowSmartRI, the Brookings Institution, the RI Foundation, the Raimondo administration, and the broader society of progressive elites is that one of government’s central functions (probably the central function) is to plan out the future and enforce that plan so the grimy masses aren’t really free to shape their communities.

When your organizational motivation is to tell other people what to do and how to live, you can’t really abide such disruptive things as individual freedom or the inevitable change inherent in representative democracy.  The goal is to take the permanence that we used to apply very narrowly in a Constitution and Bill of Rights and apply it expansively to minute details of how all we should live.

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With This Year’s Session a Bust, Can RI Try Something Different, Next?

Yesterday, the RI Center for Freedom & Prosperity released its monthly Jobs & Opportunity Index (JOI) report.  By design, the index doesn’t change much month to month, and the multiple data sources cover different periods.  Nonetheless, it was a pretty down month, with employment, labor force, and jobs all down, while Medicaid enrollees were up.  Of the five updated numbers, only SNAP (food stamp) enrollment moved in a positive direction (that is, down).

The key finding of JOI is the longer-term ranking among states, and by that measure, Rhode Island has been stuck at 48th since 2012.  Combine that with the employment stagnation that the recent post in this space pointed out, covering nearly a year, and we’re clearly not in good shape, and we’re clearly not being helped by the approach of Governor Gina Raimondo and the General Assembly.

The problem is that the things that Rhode Island insiders place as their highest priorities — the irreducibles that they will not touch — are not only directly contrary to policies that would encourage economic health, but if politicians are to attempt to do anything at all, the irreducibles require workarounds that exacerbate, rather than alleviate, the problem.  That is, rather than reduce the high taxes, regulations, voluminous give-aways, and labor union stranglehold by which insiders protect their own sinecures, they “invest” our tax dollars in new special interests that are bought off from the start, such as large companies given tax breaks to set up shop, here.

This won’t end well, the only question being whether the Ocean State will continue to bleed out slowly or have a fatal crisis.

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Definitely No Taxpayer “Bridge Financing” – Or Any Other Tax Dollar Involvement – for Superman Building

An editorial in yesterday’s ProJo mentions an interesting and disturbing prospect that I at least had not yet heard about: taxpayer funded “bridge financing” for the Superman Building. (Tolls on “bridges”; now the possibility of “bridge” financing for an empty building. How did bridges suddenly become a new peril for state taxpayers and residents?)

The editorial also identifies the $64 million question that needs to be answered.

It is not the taxpayers’ business to make High Rock whole on a bad investment. But there is public interest in seeing activity there rather than vacancy and slow deterioration. For example, turning the Superman into a classy downtown apartment building with magnificent views of the city and the water would breathe economic life into the downtown, since new residents would dine out, shop and pay taxes.

The question is: How much is this activity worth to the taxpayers?

The latest estimates to rehab the Superman Building are in the $60-100 million range, though this GoLocalProv story from three years ago mentions the even more insane figures of $140 to $145 million.

To answer the ProJo’s question – “How much is this activity worth to the taxpayers?” – there simply is no amount of secondary/related economic activity that could come close to justifying any taxpayer involvement in such an exorbitantly expensive real estate rehabilitation project. Any official who proposes to do so must satisfactorily answer every entirely valid question posed by the Rhode Island Center for Freedom and Prosperity three years ago.

Elected officials would be wise to instead address the conditions that have contributed to the dearth of business tenants that financially imperil this building, and almost certainly others: the state’s business-repulsive tax and regulatory climate. Taxpayers cannot possibly “bridge” the financial chasms, either at 111 Westminster Street in Providence or everywhere else around the state, created by state officials’ continued refusal to do so.

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The Familiar Sound of Venezuela

Reading through a New York Times description of the food riots underway in Venezuela, now that the country’s been destroyed by socialism, I’m struck by some obvious juxtapositions that are well separated in the text.  Paragraph 1:

With delivery trucks under constant attack, the nation’s food is now transported under armed guard.

Paragraph 29:

Down the coastal road in a small fishing town called Boca de Uchire, hundreds gathered on a bridge this month to protest because the food deliveries were not arriving.

Make it more difficult and expensive to bring food, and food will be harder to get.  More stunning is how familiar it all seems.  The scenes of destruction of the very infrastructure necessary to produce, transport, store, and sell food are like something out of Manzoni’s description of the Milan bread riots of the Seventeenth Century in The Betrothed.  And it’s not just the people’s counter-productive behavior.  Here’s the Times:

In response, [President Nicolas] Maduro has tightened his grip over the food supply.  Using emergency decrees he signed this year, the president put most food distribution in the hands of a group of citizen brigades loyal to leftists, a measure critics say is reminiscent of food rationing in Cuba. …

At the same time, the government also blames an “economic war” for the shortages.  It accuses wealthy business owners of hoarding food and charging exorbitant prices, creating artificial shortages to profit from the country’s misery.

Here’s Manzoni (page 232 of the Penguin Classics printing):

People forget that they have feared and predicted the shortage, and suddenly begin to believe that there is really plenty of grain, and that the trouble is that it is being kept off the market.  Though there are no earthly or heavenly grounds for that belief, it gives food to people’s anger and to their hopes.  Real or imaginary hoarders of grain, landowners who did not sell their entire crop within twenty-four hours, bakers who bought grain and held it in stock — everyone in fact who possessed or was thought to possess grain was blamed for the shortage and for the high prices …

… [The magistrates] fixed maximum prices for a number of foodstuffs, they decreed penalties for anyone who refused to sell at those prices, and passed one or two other regulations of that kind.  But all the official measures in the world, however vigorous they may be, cannot lessen a man’s need for food, nor produce crops out of season.  The measures actually taken on this occasion were certainly not calculated to attract imports from other areas where there might conceivably be a surplus. …

… [Grand Chancellor Antonio] Ferrer was behaving like a lady of a certain age, who thinks she can regain her youth by altering the date on her birth certificate.

We have centuries… millennia… of lessons.  Right now, we can learn once again from Venezuela.  I fear too many people lack the basis to make the obvious connections.

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Going to the Heart of Costly Renewable Energy


In this podcast excerpt, I discuss with the Heartland Institute’s Donald Kendal and John Nothdurft the findings of the Rhode Island Center for Freedom and Prosperity’s new report on renewable energy that confirms a very poor cost-benefit return to Rhode Islanders of renewable energy. (Listen to the full podcast of our conversation here.)

Because 98% of Rhode Island’s energy is generated by natural gas, our state already has a comparatively small carbon footprint. Further reducing it to hit purely arbitrary renewable production targets would cost state ratepayers and taxpayers $141–190 million per year in production expenses alone – four to five times the EPA’s recommended cost standard.

Rhode Islanders also cannot afford the cost to the state economy in the form of lower employment levels or in the $670–893 million per year extracted in unnecessarily higher electricity rate payments by private sector businesses and families. When will the status quo learn?

Based on these findings, the Center has strongly recommended that lawmakers reject all proposed new energy mandates and, instead, repeal those that are currently written into law. The EPA’s own cost standard highlighted in the Center renewable energy report demonstrates that state officials can set aside all renewable energy mandates with a clear conscience.

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Reminder: Economics Is a Science of Human Nature

Need a little Monday morning uplift?  It may only be a sliver of silver around the edges, but Michael Munger gives us a reason to think that “Millennials Can’t Just ‘Reject’ Capitalism.”  Why not?  Because capitalism works and makes sense to us as human beings, and it therefore pops up wherever it isn’t violently suppressed (and even there).  Consider:

The notion of profit and loss, explained beautifully by Ludwig von Mises, is what drives capitalism. The usual definition of “private ownership of the means of production,” is a diversion. The point is that producers get paid if—but only if—they produce more value for consumers than the production uses up in resources. Everyone gets a benefit:

  • Labor, owners of machines, and sellers of other inputs all get paid.
  • Consumers only buy if the price is less than what they as individuals value the product (Subjective value, anyone?).

Only if there is something left over does the producer get paid.  It’s a pretty terrific system, and it happens without anyone telling anyone else what to do. In fact, it always happens, even in countries where the government tries to prohibit it.

This is necessarily an abbreviated description of the beautiful balancing that occurs naturally in the process.  After all, producers won’t long undertake a task for which they aren’t able to be paid, which not only causes them to seek ways to provide the product more cheaply, but also leads consumers constantly to readjust the relative values of everything that is on offer.

Therein we find, also, an explanation of the problem with socialism.  Bernie Sanders and the broader culture of deluded socialists who have misled Millennials claim that they want to squeeze greed from the economy in order to provide everybody with necessities, but what they’re really after is the raw power to tell people what to value.

ADDENDUM:

Here’s an illustrative thought related to an area of major expense, in our society, that has always mystified me: sports.  I mean, playing games, with no tangible product, makes people conspicuously wealthy.  Surely, if we were to centrally plan our economy, we could find a better use for those billions.

But the value of sports mainly comes in the large number of people for whom the entertainment is worth a relatively small amount of time and money.  Obviously, if sporting events are going to fulfill their role, those who make it to the top of the pyramid have to be really, really good, which means the payoff has to be out-sized so as to draw a huge pool of candidates to the opportunity.

Money is not the only factor, though; many people play sports purely out of fun and passion.  Even attempting to redistribute the riches incrementally from the stars to the long-shots would disrupt the system, because at the low end, it would displace those with passion with those who see it as an easy way to make more money than their talent is worth.

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You Deserve Better Than a Losing Team

Lawmakers must understand that the people of Rhode Island are demanding that we move in a different direction. As the General Assembly session comes to a close, we have seen another year where the insiders ignore the voice of the people and continue to further their own special interest laden agenda. The big spending in the state budget must end, the backroom deals must end, and the public corruption must end if we are ever to see our state become prosperous again. Rhode Island families are being harmed by the lack of opportunity created by the elitists and the failed public policy culture.

What does the average family have to cheer about in this budget? The few provisions that offer minor relief to some are overwhelmingly outweighed by the huge special interest and corporate welfare spending. Things do not have to be this way.

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GE(e), Rhode Island is Losing Jobs

With the latest numbers, Rhode Island’s jobs and opportunity picture has worsened.

Rhode Island lost 3,900 jobs over the last two months — 1,900 in April and 2,000 more in May — a clear signal that the economy is slowing, according to data released Thursday by the Rhode Island Department of Labor and Training.

Other numbers, like the size of the state’s labor force, are also going in the wrong direction, which unfortunately, corresponds to the state’s ranking on JOI, the RI Center for Freedom and Prosperity’s new, broader spectrum reflection of the state’s employment situation. (Be sure to check back on Monday, when the Center will be updating the Jobs and Opportunity Index.)

State officials are quick to point to a national turn down as a contributory factor to the state’s worsening employment numbers. But that only highlights the need for Rhode Island officials to strengthen the business climate here so that we are not so susceptible to undesirable national trends.

On that front, a note to Governor Raimondo and General Assembly leadership: targeted tax breaks and subsidies do NOTHING to improve the state’s business climate as a whole. (Evidence: the one hundred jobs that General Electric will be bringing here, while welcome, have been engulfed by the 2,000 jobs that the state lost in May.) Corporate welfare only adds to the burden of the average guy and other businesses in the state.

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EPA (Via Its Standards) Says Renewable Energy Offers RI Very Poor Cost-Benefit Return

It is well but perhaps not as widely known as would be desirable for a fully informed discussion on the subject that renewable energy is far more expensive than conventional (fossil fuel) energy sources. Further to this point, the RI Center for Freedom and Prosperity has released a report with the helpfully descriptive title: “Renewable Energy in Rhode Island: Big Cost, Little Difference”. (Link to the full report in PDF here.)

The report points out that by the EPA’s own standards, the cost of Rhode Island abating carbon from its energy supply would far exceed the benefits that would accrue to the state.

Because of this poor cost-benefit “value proposition,” up to five times less than the Environmental Protection Agency (EPA)–suggested standard, Rhode Island should reconsider its existing energy policy approach.

Let’s repeat this very important point and its source. By the measure of the EPA, not exactly a research arm of the vast right-wing conspiracy, it simply is not worth it, in terms of the carbon that would be abated, for Rhode Island to put renewable energy on its grid.

With this information, elected officials – Governor Raimondo and members of the General Assembly – can no longer in good conscience advocate or vote for renewable energy in Rhode Island. In fact, just the opposite, as the Center calls for: renewable energy mandates must be rolled back.

Based on this study’s findings, the Center strongly recommends that lawmakers reject all proposed new energy mandates in 2016 and, instead, repeal those that are currently written into law.

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Matthew Henry Young: Don’t Wait for Economic Stability to Marry!

Rhode Islanders are marrying with less frequency, and waiting longer to get married. According to data compiled in the 2014 American Community Survey, Rhode Island has the 3rd highest median age of first marriage for women (29.4 years old) and the 6th highest median age for men (30.5). Why do Rhode Islanders marry so late? It may have something to do with their financial status: “Nearly three-fourths of younger survey participants said that financial security should preface marriage” writes Gillian B. White in The Atlantic.

I share the concerns of many of my millennial peers. The idea of marriage — and taking responsibility for a spouse and potentially a mortgage and children — sounds terrifying. A struggling economy and weak job market only exacerbate that hesitance. Like most of my peers, I’d like to enjoy financial security prior to marriage. However, these concerns were not as serious obstacles to previous generations. In the same Atlantic article, White observes that “only 55 percent of older Americans felt similarly.”

Perhaps surprisingly, marriage could be a precursor to our financial security, instead of the other way around. Plentiful research seems to show that where stable marriages prevail, poverty rates fall. The addition of children to the mix only accentuates the effect: In Rhode Island, single-parent households with children are four times as likely to fall below the poverty line as married-couple households.

There are many explanations for the phenomenon: Marriage can provide emotional support for both partners, a possible second income, and more-diverse job opportunities. Further, marriage provides many real world savings opportunities such as tax reductions, as well as reduced costs of rent and household items, thanks to cohabitation.

Stable family life and culture is directly tied to economic prosperity — the driving conclusion of the Family Prosperity Index, a research project of husband-and-wife team Wandy Warcholik, Ph.D., and Scott Moody, M.A. The connection between marriage and poverty, as well as many other social and economic indicators, is shown clearly in their research. Rhode Island rates poorly on both social and economic measures, while states like Utah enjoy both financial prosperity and a strong family culture.

This popular myth is busted: You don’t have to wait until you’re financially stable to get married! In fact, marriage may provide the support and security that could boost you — and your spouse — to financial stability. Plus, you get to be with the one you love. Why wait?

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Another Welcome Fire-and-Brimstone ProJo Editorial

… yup, the hits keep coming. All of this makes a very good case for candidates this November who have 1.) not participated in this “rot” and 2.) has not voted for the status quo (tolls and the 2017 budget, to name two of the biggest items).

Dubious grants that benefited Mr. Gallison (who is under federal investigation) brought into question the whole system of handouts by legislative leaders without proper vetting or any attempt to weigh the state’s overall interests. …

A poll shows three-quarters of Rhode Island voters support the line item veto, as does the governor. Forty-four other states benefit from it. But legislative leaders in this state still stubbornly refuse to put it on the ballot. …

This week, we learned that Rep. John Carnevale, a former police officer who has a tax-free disability pension and is vice chairman of the House Finance Committee, is evidently living outside of his district. When he discovered WPRI-12 cameras filming him, the station reported, “he walked out of sight and returned with his face wrapped in a T-shirt, seemingly to avoid being seen on tape” — a literal cover-up.

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Budgeting as Usual…

With respect to the RI House’s passage of next year’s state budget, this ought to be a warning flag, not a consolation:

“Really it should have been a unanimous vote, but for politics,” added House Speaker Nicholas Mattiello, D-Cranston.

Passage in the Senate – now seen as largely a formality – is expected to happen quickly once the Senate Finance Committee meets Thursday to vote on the House-approved plan. Once approved by the full Senate, it will go to Gov. Gina Raimondo’s desk for her signature.

I really do wonder about the mindset of those who support our current political class.  Most aren’t paying attention, many because they long ago concluded that the game was rigged and would never change.  But there must be some people who support this approach to government — and not just because they’re bought into the corruption.  Although, the list of the supposedly positive changes in the budget (mainly targeted tax handouts) can just as easily be read as a list of new members of the corrupt special-interest alliance to fleece everybody else.

Sorry, retirees.  If you’re excited that the state government is going to throw you a little tax advantage, I don’t see how that’s much different than some local organization that gets a legislative grant or other handout.  Without spending reductions, the taxes you keep are taxes somebody else has to pay, just as we all now have to pay — just because they can make us do so — $200,000 to the Institute for the Study and Practice of Nonviolence.

But to return to the central question: Do those who support the status quo really think things are going fine in Rhode Island?  Or do they really think minor tweaks around business as usual will kick in for the better any day now (even as the march of investigative reports about political scandals continues)?

Or maybe we really are a bought-off society.  When you’re getting something from the corruption, it’s easy to ignore the degree to which it’s harming your neighbors and gradually strangling your state.  After all, that little sumpin sumpin you get from the deal feels like a partial repayment of the cost of the system to you and, at the same time, can hardly be said to hurt those who aren’t cut in much more than they’re already being hurt.

(Note, by the way, that Mattiello’s rhetoric about not putting federal programs on the backs of state taxpayers turned out to be just that when it came to the Office of the Health Insurance Commissioner.)

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What’s Really In Your Best Interests? CEO Stenhouse on the 2017 RI Budget

In this episode of “What’s Really In Your Best Interests?”, I talk about the 2017 RI Budget. There are better solutions than big spending in the RI State Budget. It is time to end the insider culture where the little guy is hurt. Only when the total relief package is bigger than new spending can we claim that Rhode Island is heading in the right direction.
The Ocean State must stop supporting special-interest spending policies. Instead, we must demand broad-based tax and regulatory cuts that benefit all. While we recognize the reductions in retiree income taxes, the corporate minimum tax, and trucker registration and beach parking fees, the Center notes that these cuts are themselves narrowly targeted and are more than offset by the increases in corporate welfare, new Uber and marijuana taxes, pre-K funding, and new special-interest bond initiatives.
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At $55,650/Job, RI Cannot Afford the Governor’s Economic Development Approach

In the “Absolutely!” segment of his column in today’s Providence Journal, Ed Fitzpatrick praises Governor Raimondo for bringing one hundred General Electric jobs to Rhode Island. His column continues,

Raimondo has talked about public criticism, saying, “At the end of the day, the governor is judged based upon results.” Well, these are the kinds of results she envisioned in creating an economic development “tool box.” GE will apply for $5 million in tax credits over 10 years and $565,000 in closing funds. While critics decry “corporate welfare,” Raimondo says other states use such incentives, and “you cannot fight with one hand behind your back.”

One hand tied behind your back is a good way to describe what it’s like to try to run a business in business-unfriendly Rhode Island. Yet, rather than improving the state’s business climate by reducing state spending so as to lower taxes, Governor Raimondo has actually been doing the opposite by ramping up a whole array of targeted tax subsidies that everyone else has to pay for.

Yes, we will, indeed, judge the Governor based upon results. But our measure will be much broader than the very occasional photo op success. We’ll be looking for a consensus among national rankings that the state is going in the right direction, for example. And we will definitely be keeping an eye on Rhode Island’s ranking on the RI Center for Freedom and Prosperity’s Jobs and Opportunity Index (JOI).

At anything like $55,650 per job, Rhode Island simply cannot afford the “tools” Governor Raimondo is using, either literally or in the cost of her continued inaction to improve the state’s business climate. She needs to begin looking outside of a “tool box” that, so far, resembles a corporate legislative grant program on heavy steroids.

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Truck Tolls and Learning to Govern Honestly

Yesterday, we talked about the wink-wink-nudge-nudge falsehood that 38 Studios bonds were actually an investment in the videogame company.  Today, we get another yeah-sure moment as Speaker of the House Nicholas Mattiello (D, Cranston) attempts to claim that a budget gimme for local truck drivers isn’t an attempt to offset the cost of tolls for them in a preferential way:

With the national trucking industry threatening to challenge the constitutionality of the truck tolls in court, after the first gantry goes up, House Speaker Nicholas Mattiello was insistent on Thursday that the registration-fee cuts in the newly unveiled budget bill have nothing to do with the tolls.

“I don’t want to connect the two,” House Speaker Nicholas Mattiello said Thursday.

But “if it’s a Rhode Island company with a Rhode Island registration they are going to benefit from this new plan which cuts their registrations in half. If they are registered out of state, they won’t receive that benefit,” he told The Journal, moments before a public briefing on the budget bill got under way.

Well, that’s great.  When courts strike down the tolls as a targeted tax and public outrage makes politicians weak kneed about implementing car tolls, no doubt the General Assembly will keep this nice benefit for in-state truckers.

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One More Time with Feeling: 38 Studios Bonds Were an Investment Scam

From a certain perspective, Katie Mulvaney’s article in today’s Providence Journal doesn’t tell us anything new (or at least that we didn’t strongly suspect), but it’s still worth remembering as elected officials in Rhode Island continue to behave as if there’s no route to economic development that doesn’t involve government making all of the key decisions:

An investment firm is trying to bolster its case against the Rhode Island Economic Development Corporation with federal court records revealing that investors in the $75-million bond deal cared little about the financial health of baseball great Curt Schilling’s 38 Studios video-game venture, since Rhode Island had pledged not to default on the bonds. …

The documents at issue include notes taken by SEC investigators showing that investors were focused not on the financial condition of 38 Studios, but on the fact that their investments were protected by moral obligation and bond insurance.

Put differently, they were not investing in the ability of 38 Studios to make money, but in the Rhode Island government’s ability to take money away from other people and give it to them.  There were only two real differences between this deal and general obligation bonds on which Rhode Islanders are supposed to get a vote:

  1. The state hoped that an unproven videogame company run by a baseball star would be able to cover its debt.
  2. Because that hope was (on paper only) an additional risk, investors got a lot more profit on their investment.

Investors knew there was no new risk, but the state let everybody pretend that there was in order, presumably, to avoid a ballot vote of the people.  Of course, in our corrupt little state, one could also speculate that giving investors a big, certain windfall wasn’t exactly an unintended side effect.

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Major Correction, Governor: GE is Coming Here Due to Corporate Welfare, NOT an Improved Business Climate

So you’ve probably heard – and if you haven’t yet, Commerce Corp, formerly the EDC, will be sure that you do – the mildly good news that General Electric will be creating one hundred new jobs in Rhode Island, and possibly more down the road.

But in announcing this, Governor Raimondo fibbed in a big way.

“This is real validation that the steps that we’ve taken to improve our business climate … are paying off,” Raimondo told reporters during a Statehouse news conference.

No, indeed. Just the opposite. General Electric is bringing those jobs here due to targeted taxpayer subsidies, a.k.a., corporate welfare. From the Governor’s own Commerce Secretary:

Commerce Secretary Stefan Pryor said the expected cost in state incentives for those initial 100 jobs is $5.65 million, over 10 years.

Look, I don’t agree with it, because it is unfair and bad policy. But the reality is that once in a rare while, tax incentives are needed to land a big fish.

Of course, the problem is that the Raimondo administration, with the unwise acquiescence of the General Assembly leadership, has substituted wholesale corporate welfare for the broad-based tax and regulatory cuts that the state’s business climate so badly needs. Worse, however, is that the Governor is attempting to mischaracterize the business-as-usual corporate welfare that she offered to G.E. as the broad-based improvement to the state’s business climate that she is strangely reluctant to undertake.

Rhode Island ranks forty eight out of fifty on the RI Center for Freedom and Prosperity’s JOI, Jobs & Opportunity Index. I’m not going to ask Justin Katz, the Center’s Research Director and chief architect of JOI, whether one hundred good paying jobs would improve Rhode Island’s JOI ranking, in part, because he has more than enough to do but mainly because it’s a good guess that the answer is: marginally if at all.

More important is the big take-away from the G.E. news, which WPRO’s Matt Allen nailed this afternoon: companies will respond to lower taxes by bringing jobs. Let’s throw open wide our doors by reducing taxes across the board, rather than on a case by case basis.

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Economic Development in Our Corporatist Progressive Paradise

News is out that General Electric has deigned to put an office in Providence, and Rhode Islanders should take the opportunity to give some real thought to how we’re letting our society be governed.  Via Ted Nesi’s Twitter stream, for example, comes this take from the Boston Globe:

Rhode Island Governor Gina Raimondo didn’t win the high-stakes battle for General Electric’s corporate headquarters, but she’s coming away with a nice consolation prize.

Raimondo’s office Thursday said the industrial conglomerate would open a GE Digital information technology center in Providence. GE expects to employ 100 people in the near term, with a goal of adding many more over the next several years, state officials said.

Ian Donnis reports that the cost to Rhode Islanders (at least initially) is $5.65 million over 10 years.   So, government officials take our money in order to win consolation prizes from major corporations.  Who, exactly, is in the driver’s seat, here?

The difficulty in assessing this deal is that we can’t just go the way of of RI Commerce Czar Stefan Pryor and assume that income taxes and other benefits from the prize will be a larger sum than the gift.  We also have to imagine counterfactuals.

What if we stopped allowing government to be the dictatorial governing board of all of our lives, and our economy, and made our state the kind of places that individuals and organizations heard about and said, “I want to live there”?  The cost might be higher… for special interests, anyway… but we’d be living in a dynamic community that isn’t dependent on the good graces of large companies able to make deals with politicians.

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Trying to Disguise the Handouts

In the intra-conservative discussion over things like a universal basic income, I have to say I’m with Thomas Sowell:

Welfare-state guarantees of not having to work, however the particular policies are applied, are not a solution. Relieving people of personal responsibility for their own lives, however it is done, is a major part of the problem.

Before there can be a welfare state in a democratic country, there must first be a welfare-state vision that becomes sufficiently pervasive to allow a welfare state to be created. That vision, in which people are “entitled” to what others have produced, is at the heart of the social degeneration that can be traced back to the 1960s.

One halfway step is for conservatives to hide their belief in self reliance by proposing policies like an earned income tax credit (EITC).  As Sowell notes, conservatives say such policies should displace more-economically-disruptive welfare programs, but that never happens.  Instead — in the predictable rope-a-dope wherein progressives hold the rope and conservatives are the dopes — the whole idea just bounces back on itself.  EITC doesn’t displace existing welfare programs.  Rather, it emerges at best as a way to slow the increase of the minimum wage.

The “compromise” that big government offers, in other words, is (A) we don’t touch welfare, (B) we threaten to force harmful expenses on the private sector, but instead, we (C) put that threatened private-sector burden on the public tab through a handout to low-income people.  So, we’ve created a system in which welfare programs reduce incentive to work, and then we tout a program that “rewards” people for working.  As Sowell puts it, we tell them they’re entitled to a certain amount of material well-being (with money confiscated from others) and then attempt to counter-balance that incentive by goosing their pay, at least as long as they don’t advance too far.

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Will RI Be a Frontier When the Federal Empire Recedes

I’ve been warning about the “company state” dynamic whereby an area’s core industry essentially becomes the provision of government services, with the revenue pulled in from the few productive residents and other cities, towns, and states.  The goal becomes to attract and create as many dependents as possible so as to justify sending a larger bill to those who have no choice but to pay it.  Eventually, though, the productive locals will leave or decide to join the dependent club, and other cities, towns, and states will refuse or no longer be able to cover the bills.

I wonder if that sort of civic and economic structure will set Rhode Island to be akin to the frontier areas as the Roman Empire receded.  Here’s Jakub Grygiel:

In those frontier outposts, the locals have to make difficult decisions based on an assessment of how resilient their empire is, how persistent and dangerous the enemy appears, and how strong their own will is. And they experience different stages of geopolitical grief from denial and delusion to perhaps, in the best case, an attempt at indigenous security provision.

Clearly, Grygiel’s talking about security against invaders, but something similar seems likely to happen when a large class of people rely on handouts that simply cease to be handed out, whether one sees the recipients as a replacement for the invaders or you see them as the villagers failing to prepare to defend themselves against events that will damage or take their resources.  Grygiel describes the stages as follows:

  • “First, there is the gradual recognition that imperial forces were not what they used to be.”
  • “Second, after the reassuring presence of imperial might has vanished, the next stage does not include calls for defense or balancing or stronger walls. No. It is the stage of disbelief and self-delusion.”
  • “Third… the people of Comagenis … recognized that security was a creation of force, not a self-sustaining reality. But even before the technical question of how to defend themselves, the locals needed a reason to do it.”

In some ways, we may already be well into the first stage, perhaps into the second.  Government funds cannot be increased at the rate to which officials have become accustomed.  Some things (roads and pensions) are showing the pressure on the finances, and intra-progressive political battles are beginning to pit special interests against each other.  Next comes the refusal to adjust policies to the obvious future and a desperate search to find any and all sources of new revenue to keep the game going.

When that no longer works, we can expect a fatalism as some sit and stare at the financial wasteland and others refuse to let our society return to the principles of freedom, self control, and self reliance that allowed our society to be so successful in the first place.

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Latest (Bad) Rankings of RI: Will the Budget Turn Them Around?

The release of some new/updated rankings of Rhode Island are perfectly timed as we sit on budget watch.

Rhode Island currently has the eighth highest state & local tax burden as percentage of income.

And the Providence Business News points to a new study by WalletHub showing that Rhode Island has the eleventh worst economy in the United States.

These are the rankings that need to be turned around. The Governor’s proposed budget of a couple of months ago won’t get the job done. Will the General Assembly step up to the plate? Judging from alerts via Twitter about the just-announced availability window later today of the Speaker and the new Chairman of House Finance, we will know soon.