Disdain for “for profit” companies is an indication that progressives believe all property actually belongs to the government, and taking extra is a type of theft.
Based on the numbers, Rhode Island’s employment woes appear to be coming to an end. The numbers feel wrong, though, and some experts’ explanation doesn’t seem to fit.
Here’s a pretty good example of how Rhode Island politicians and the special interests who govern them look at their neighbors’ plight. The legislation is Senate bill 2410, sponsored by Hanna Gallo (D, Cranston, West Warwick), Erin Lynch (D, Cranston, Warwick), and Dominick Ruggerio (D, North Providence, Providence), and House bill 7391, sponsored by John Edwards (D, Portsmouth, Tiverton), Donald Lally (D, Narragansett, South Kingstown), Christopher Blazejewski (D, Providence), and Katherine Kazarian (D, East Providence).
Basically, the legislation — which Governor Chafee signed into law (naturally) — triples the fine for a first offense violating the chapter of Rhode Island law dealing with the licensing of plumbers, from a painful $500 to a potentially devastating $1,500. Second and subsequent offenses more than doubled, from $950 to $2,000. There may be a variety of violations that could spark the fines, but mainly, they have to do with performing unlicensed plumbing or disregarding plumbing regulations.
That’s right: After years of Rhode Island’s being thousands shy of its peak employment, after months of its having the worst unemployment rate in the country, during an era of low or non-existent economic growth and taxpayer flight, the Rhode Island General Assembly finds it important to tighten the screws on one of the better-paying blue-collar occupations.
In the upcoming election, voters should consider that the only legislators who don’t think a time of economic agony is ripe for cracking down on people trying to make ends meet were Rep. Michael Chippendale (R, Coventry, Foster, Glocester), Rep. Doreen Costa (R, Exeter, North Kingstown), Rep. Karen MacBeth (D, Cumberland), Rep. Michael Marcello (D, Cranston, Scituate), Rep. Patricia Morgan (R, Coventry, Warwick, West Warwick), and Joseph Trill (R, Warwick). Not a single senator voted against the bill.
Here are the “yea” votes in the Senate:
YEAS- 33: The Honorable President Paiva Weed and Senators Algiere, Archambault, Bates, Conley, Cool Rumsey, Cote, Crowley, Doyle, Felag, Gallo, Goldin, Goodwin, Hodgson, Jabour, Kettle, Lombardi, Lynch, McCaffrey, Metts, Miller, Nesselbush, O’Neill, Ottiano, Pearson, Picard, Pichardo, Raptakis, Ruggerio, Satchell, Sheehan, Sosnowski, Walaska.
And in the House:
YEAS – 66: The Honorable Speaker Mattiello and Representatives Abney, Ackerman, Ajello, Almeida, Amore, Azzinaro, Bennett, Blazejewski, Canario, Carnevale, Casey, Cimini, Coderre, Corvese, Costantino, Craven, DeSimone, Diaz, Dickinson, Edwards, Fellela, Ferri, Finn, Gallison, Giarrusso, Guthrie, Handy, Hearn, Hull, Johnston, Kazarian, Keable, Kennedy, Lally, Lima, Lombardi, Malik, Marshall, Martin, McLaughlin, McNamara, Melo, Messier, Morin, Newberry, Nunes, O’Brien, O’Grady, O’Neill, Palangio, Palumbo, Phillips, Ruggiero, San Bento, Serpa, Shekarchi, Silva, Slater, Tanzi, Tomasso, Ucci, Valencia, Walsh, Williams, Winfield.
Preliminary employment numbers for June produce the following chart. I’ll have the final chart and all its companions tomorrow. One thing’s clear, though: The employment numbers are still impossible to believe and likely to be revised dramatically after the election.
The effect of taxes on a state’s economic health is one of those repeated questions that is never resolved. The obvious reason (I’d propose) is that it’s one of those areas that depends hugely on specific circumstances, but the ideological intentions of those having the discussion tend to promote specific findings as broad conclusions.
The last sentence of the most recent academic contribution to the debate, by Pavel Yakovlev of the Mercatus Center, probably captures about the broadest statement that can be made:
… not all tax variables exhibit a significant correlation with the selected measures of economic activity, but when they do, the relationship is usually negative.
Yakovlev concludes his summary in a way that’s probably more comprehensible to the average person:
Not all types of tax increases can be expected to significantly harm economic outcomes, but higher taxes are generally correlated with lower standards of living.
In the phrasing of a popular meme: I don’t always affect the economy when I increase taxes, but when I do, it usually hurts.
Another important variable that Yakovlev mentions in the course of presenting his findings is the quality of public services provided. It is assumed that in some circumstances (or at least to some people) the trade-off of higher taxes for quality government services favors the latter. Presumably, it is less common for people to want to have high taxes in order to finance poor government services.
Throughout the study, Yakovlev looks at two competing ways of calculating the correlation of variables that can sometimes serve to support different ideological preferences. On the government-spending side of the ledger, the results find a positive correlation between taxpayer migration and education spending, but negative correlation of migration with infrastructure spending, public health spending, and public welfare spending.
Especially on the infrastructure count, that finding might be counter-intuitive, because we tend to think of better roads and bridges as a contributor to economic health. One plausible explanation for the results is that the amount of spending on infrastructure doesn’t translate well into results. In other words, over a basic minimum of spending on roads and bridges, additional dollars are wasted.
Of course, an objective viewer of Rhode Island would have to conclude that this level of discussion is mostly moot in the Ocean State, as the latest competitiveness report card from the RI Center for Freedom & Prosperity illustrates.
All of our taxes are high. Most of our services are poor. People are generally leaving; opportunity remains difficult to find. And the hope of substantive change is limited.
Channel 10 has a report up on the sorry state of Rhode Island’s roads and bridges and the absence of funds to address the problem. Here’s the missing question that really needs to start being asked: Where is all the money going?
From 2003 to 2013, Rhode Island’s budget increased from $5.4 billion to $7.7 billion. That’s a 42% increase, or 3.56% per year compounding. Over that same period, the gross state product (GSP) went up 32% (2.79% compounded per year), and inflation was 27% (2.39% per year). (From 2005 to projected 2015, by the way, the state budget increase is 46%, or 3.88% compounded annually.)
With the government’s budget growing so much more quickly than either the state’s economy or inflation, where is all the money going?
According to WJAR’s Susie Steimie:
President Barack Obama is pushing Congress to put $300 billion toward road repairs. The president warns if we don’t put money toward infrastructure repairs the economy will suffer.
We must stop letting politicians off so easily. $300 billion doesn’t materialize out of nowhere. From where does Obama plan to take that money, and why won’t that hurt the economy?
Unless we move past the superficial analysis of noting problems and insisting that the solution is money, we’re like children being governed by the Coachman on Pleasure Island.
Ultimately (part 6 of 6) Aaron Renn has to explain why a small group of decision makers have a better chance of success than Rhode Islanders acting on their own initiative.
Part 5 of a response to Aaron Renn: What kills the entrepreneurial spirit in Rhode Island?
Aaron Renn’s prescriptions for RI. Part 4: Who is the “you” who puts us to use?
Countering Aaron Renn’s central planning in Rhode Island. Part 3: What’s unemployment insurance have to do with the price of gasoline in Seekonk?
Skepticism about Aaron Renn’s suggestions for Rhode Island. Part 2: shedding pounds by changing location or voting differently.
Rhode Islanders’ excitement with the fact that Aaron Renn suggests considering reality when setting public policy should be tempered by skepticism about his suggestions. Part 1: innovations and bandwagons.
A Providence Journal article extolling the virtues of lead-paint regulations fails to acknowledge a downside or provide context for the harm it seeks to alleviate.
A retro-liveblog of remarks made by Speaker of the Rhode Island House of Representatives Nicholas Mattiello, at this Saturday’s summer meeting of the Rhode Island Taxpayers organization. The areas the Speaker touches on include education, the gas-tax, reducing regulations in RI, and some general ideas about what governing means and how it should be done.
Employment results were positive, in Rhode Island in May. The Ocean State still lags the country, though, and it’s getting more and more difficult to believe that the government’s numbers are accurate.
The lack of affordable rental properties in Rhode Island is front-page news in the Providence Journal, today. The article is entirely a description of the problem, without any suggestions that the government must act to supplement housing or anything (although those story lines tend to develop across multiple articles, like this one):
HousingWorks, a nonprofit research group, planned to release data Wednesday showing that 59 percent of the state’s young renters spend more than 30 percent of their income on housing. Housing is deemed affordable if it costs no more than 30 percent of income. …
The HousingWorks analysis also showed that 25- to 44-year-olds make up 40 percent of Rhode Island’s renter population, the largest share of renter households. With a median income of $40,000, 45 percent of these households are housing cost burdened, but they “earn far less than the $57,000 needed to afford the median-priced single-family home [$190,000] in Rhode Island,” Housing Works said.
What is the cause, here? Are landlords taking advantage and gouging renters? Can the government step in with more restrictions and demands to fix the situation? I’d suggest that government involvement is causing problems on both sides of the equation.
On the demand side, Rhode Island’s high taxes and crushing regulatory burden, mixed with generous benefits for lower-income households are skewing income levels lower. As the productive class moves away to places that actually have those Rhode Island rarities of jobs and opportunity, the imbalance gets worse.
On the supply side, it’s just not very attractive to rent properties in Rhode Island. Here’s one example: I just discovered that prospective landlords have to take a three-hour, $50 course on lead paint and pay a lead inspector to look through the property at least every two years. The way the instructions are written, it doesn’t look like it matters whether the landlord has removed all lead paint from the house; it’s all about the age of the building. Meanwhile, acquaintances who’ve tried renting properties in the past tell horror stories about the difficulty of evicting bad tenants.
The list of thumbs on the scales would have to be the subject of a research article, not a quick blog post, but every layer of mandates sheds some people and some properties from the group of potential rentals, the redistributionist bent of state government pushes demographics to the range that requires cheaper housing, and the lack of opportunity ensures that families are slow to move out of the low-income strata and that the go-getter types who might venture into renting out property go elsewhere.
This article in yesterday’s Providence Journal, by Kate Bramson, is emblematic of Rhode Island’s current predicament and enlightening with regard to the reasons and the potential solutions:
Commercial real-estate developer Richard Miller, of The Pegasus Group, visited Rhode Island in 2011 and again this spring; he liked what he saw enough to pick a potential parcel on the western side of the river near Chestnut Street.
But in the end, his team chose not to submit a proposal to the Route 195 Redevelopment District Commission, which controls about 40 acres in the heart of the city, 20 of which are available for development.
Miller says Pegasus was put off by the city’s real-estate tax rate, car taxes and the idea that if they seek a lower commercial tax rate on the now-vacant land, they must negotiate with the city and hope for the best. Meanwhile, they’d be spending money on architects, renderings of proposed buildings and other costs, not knowing if it would be worth their while.
Read the whole thing. In keeping with much of what we write, on this site, Rhode Island is designed as a tell-people-what-to-do, insider-driven state. Taxes are high; regulations are crushing; but everything can be waived or compensated if you know the right people. The only way it makes sense to invest in that environment is if you’ve already made the investments of time and money to gain the right kind of influence.
Recent scandals and controversies really bring this fact into public view, whether we’re talking about the 38 Studios debacle, the Superman Building lobbying, or the unique interests of “business community” organizations that take bizarre positions on issues related to their constituencies. Outside investors are not going to want to invest in a state that puts them at such a disadvantage, and Rhode Island is driving out the non-connected locals who may have made up for some of that deficit in the past.
That’s another — maybe more insidious — way in which Rhode Island simply doesn’t have the size or demographics to continue the approach to policy that has, as Aaron Renn recently argued, defined the state for way too long. The solution is ever more clearly simply to reduce the burdens and insider deals, not to continue pursuing “economic development” that gives insiders a strong hand in deciding what can be done, when, and where.
Working with the federal government, the state government of Rhode Island has managed to keep its budget growing more quickly than inflation. The people of Rhode Island, however, have not been so lucky.
Aaron Renn’s explanation for Rhode Island’s current condition has some worthwhile insights, but when he reaches for conclusions, he falls into the technocratic rut.
Garthwaite et al. analyzed what happened in 2005, when the state of Tennessee discontinued Medicare health insurance coverage for about 4% of its non-elderly adult population, many of them nondisabled low-income adults without children at home. With a new need for private health insurance, which is often provided by employers, many of these people found new jobs. State employment rose by 6 percentage points from 2004 to 2006. This change mirrors the Congressional Budget Office projections of the decline in employment due to the expansion of public health insurance mandated in the U.S. Affordable Care Act.
Unfortunately, public schools have failed to educate generations of Americans not just about economics, but about critical thinking. Meanwhile, progressive deconstruction has undermined the more social means by which people learn how to think outside of the classroom.
The REMI model that the state used to promote dismissive projections for large changes to the sales tax is built on very similar, dehumanizing assumptions about how Rhode Islanders would react to changes in policies. If, for example, a reduction in revenue were to cost highly educated, well paid state employees their jobs, REMI assumes that they’d either leave the state or take much less money in one of the newly created retail jobs — not that they’d find similar jobs in the private sector or even create similar jobs by starting their own businesses. If (for some inexplicable reason) lawmakers didn’t address the revenue shortfall by removing the many government spending extravagances, and instead cut across the board, then REMI assumes people who would have received subsidized heart surgery and the like would simply go without it — harming the “economically impactful” healthcare industry.
In other words, the government would adjust its spending to mitigate harm to Rhode Islanders, and Rhode Islanders wouldn’t adjust their spending to save their own lives.
At some level of the lefty hierarchy, the people promoting progressive policies must realize what they’re doing, which means they want to further a cycle of dependence on government. Unemployment and human suffering are just temporary necessities to push people to the total dependence on government that is the only true route to nirvana.