Jobs and employment data allow different interpretations and come back (as every issue around here seems to do) to competing political philosophies.
The nonpartisan Congressional Budget Office (CBO) spent February releasing research findings that showed the flaws of progressive policies.
I’m not sure what the right word is to describe today’s press release from the Rhode Island Dept. of Labor and Training (DLT). Cheeky? Audacious? Banal? It could go any direction. Take a look (emphasis added):
The RI Department of Labor and Training announced today that the state’s seasonally adjusted unemployment rate for January 2014 dropped to 9.2 percent, down one-tenth of a percentage point from the revised December 2013 rate and down four-tenths of a percentage point from the January 2013 rate. This is the lowest unemployment rate since November 2008.
Now take a look at the corresponding press release from last April (emphasis added):
The RI Department of Labor and Training announced today that the state’s seasonally adjusted unemployment rate for April 2013 dropped to 8.8 percent, down three-tenths of a percentage point from the March 2013 rate and 1.8 percentage points from the April 2012 rate. This represents the 10th consecutive over-the-month drop in the state’s unemployment rate, and is the lowest unemployment rate for Rhode Island since October 2008.
If you’re confused about how a 9.2% unemployment rate could in fact be lower than an 8.8% unemployment rate, then you haven’t heard about the big revision that significantly darkened the 2013 employment picture. You’d think the DLT press office might have hesitated to proclaim a historical low.
Circumspection is especially called for considering that the latest numbers show a 6,500-person drop in employment, since last year, and a 9,700 drop in labor force. The complacency within our state government and the adviser class that orbits it is unconscionable.
Representative Raymond Hull’s legislation to make business decisions for Cox Communications is a fine example of why Rhode Islanders are suffering.
Rhode Island’s revised employment picture for 2013 is now one of decline, and Rhode Islanders have to stop allowing that to be acceptable.
One of my favorite moments from the series of joint legislative commission hearings to study the Sales Tax Repeal Act of 2013 was when John Simmons, the director of the Rhode Island Public Expenditures Council (RIPEC), stated, “I’m not a numbers person. I’ve been accused of it, but I don’t like numbers.” Here’s the video (clip culled from Capitol TV coverage):
I emphasized the word “expenditures,” above, because expenditures tend to be numerical. It must make for a long workday to run an organization whose bread and butter you don’t like.
Recently, Simmons and RIPEC appeared in Investors Business Daily talking about what Rhode Island needs to do to turn its economy around, including this:
“The problems are so systemic and so far-reaching in terms of Rhode Island’s lack of competitiveness that we need to do everything,” said Kelly Rogers, RIPEC’s manager of policy and public affairs, in response. “We need to change the structure so that we have a more thoughtful data-driven approach.”
Simmons go on to emphasize the “thoughtful” part, meaning small adjustments over time. That fits perfectly with my recent experience with state government and policy: In the hands of Rhode Island’s insiders, data bogs ideas down. It’s always an excuse not to do something.
Their approach to being “data driven” is to be driven away from substantive reforms because the numbers look scary. (Except, of course, when it looks like it means more money for them.) “Data driven” comes to mean that they stare at a model and try to find some gap they can use to game the system and maybe make some little progress, but definitely without taking any risks.
Don’t get me wrong; data is critical (and I happen to really like numbers). It just isn’t a driver. Principle is a driver. People are drivers.
What Rhode Island needs is a people-driven approach based on the principle that individual Rhode Islanders know best what they need, what their opportunities are, and what they’ll strive to build. And frankly, I don’t think you can ease into that approach without risk.
Races start with a gunshot or a bell, not a slow tip-toe so as not to awaken reality.
Josh Barro’s willingness to break a few eggs for the minimum wage omelet raises questions about the Congressional Budget Office’s economic assumptions.
A New York Post editorial from a couple of weeks ago, about the problem of departing residents that New York state shares with Rhode Island, puts the problem well:
It’s not just taxes prompting migration to their shores, though certainly the lack of an income tax in either the Lone Star or Sunshine state has to be a large part of the attraction. These growing states are also creating jobs, and generally offer a lower cost of living. And as a general rule, human beings do not move away from opportunity.
“As a general rule, human beings do not move away from opportunity.”
The General Assembly can pour more money into failing public schools. It can layer on workforce training program after workforce training program. But even if every program does for its beneficiaries what it’s supposed to do, if there is no opportunity in Rhode Island, they will take their taxpayer-funded skill sets elsewhere.
The reality is that government officials like these programs because they give them something to do. They collect the taxes to pay for it all and keep control over how the programs operate, what they supply, and to whom they supply it.
Rhode Island is leading the region in blindly ignoring the unmistakable reality that it needs to rethink its priorities. We have to start trusting people to make their own way, rather than trusting politicians and special interests to allow some spare feed to scatter on the ground around them.
I’ve been having a Twitter discussion with a just-retired Providence teacher who’s known around the local Internet as “Snow.” She isn’t happy with her union leaders because, as she argues, she now would have been better off putting those pension investments in the stock market for 30 years.
A quick check shows that, from 1982 to 2013, the compound annual growth rate (CAGR) of the total market was 10.5%. That is, indeed, higher than the 7.5-8.0% (or whatever it might have been before) that the state government has been assuming for its bookkeeping.
In both her calculations of the stock market and her estimates of what she’ll have throughout her retirement, however, she completely ignores risk.
For the long-term investment of a pension, it would have been reckless of Snow to put 100% of her investments into stocks. That’s why the pension fund mixes stocks with safer investments.
Who could have guessed, back in 1982, when it was considered a dire predicament that the national debt had crossed the one-trillion-dollar mark, that the federal government would continue inflating the market with so much debt? We’re now over $17 trillion, adding about one more per year, every year.
On the other end, who really expects this to continue for the twenty years or more of Snow’s retirement? In the shadow of that ominous thought, a guarantee of six times what she put in looks like an enviable deal.
But let’s turn to unemployment. Supporters of a government-driven economy have been brushing off concerns about the unemployment and labor participation rates as simply a consequence of an aging population. In that case, was it wise to base so much of our economy on national debt, and is it wise to drown the chickens in even more, as they come home?
The bottom line is that Snow’s generation built its sunny expectations on the backs of mine and those after, with the public sector layering on another thick layer of graft. It can’t last.
The promises that her union extracted were unreasonable; the guarantee is fanciful; and I fear history will to prove the demands to be the height of selfishness, in retrospect.
Ed Achorn just tweeted another masochist feather in Rhode Island’s cap — or maybe “another arrow in its back” would be a better metaphor. The Ocean State achieved the dead-last place on Gallup’s Job Creation Index, this time around.
Of particular note, our partner at the low-outlier end of my monthly distance-from-peak-employment chart, Michigan, made Gallup’s top 10, this year. In last year’s iteration, Gallup noted Michigan, up 32 points since 2009 that year, as the state with the most improvement.
What has Michigan been up to?
Let’s look at things in crass political terms to start. Here’s Gallup:
Three of the five states with the longest track records at the top of the state job creation ranking — North Dakota, South Dakota, and Nebraska — are strongly Republican in party affiliation. All three states with a long track record (at least four years) at the bottom — Rhode Island, Connecticut, and New York — are heavily Democratic.
Last May, I ran the peak employment chart over several election cycles, color-coded for party control of the state legislature, and found a lot of switching toward Republicans, with such states doing a bit better. But look at Michigan.
At the beginning of the recession, Michigan had a split legislature (Republican Senate and Democrat House) and a Democrat governor. Over the next two years, it dropped from roughly 94% of peak employment to under 88%, while Rhode Island dropped from to a little under 92%.
In 2010, Michigan voters switched the House to Republican and put Republican Rick Snyder in the governor’s seat. In the latest version of the chart, Michigan has almost caught back up with Rhode Island, which is now hovering at around 91%.
However, crass politics are not critical, policies are. The bold marker in Michigan was its switch to right-to-work, last year.
Rhode Island needs to do something, and almost nobody on the political scene is even talking about policies with enough umph to turn things around. Either they’ll have to start changing their tune, or Rhode Islanders will have to change them.
Otherwise, we should just get used to being last, and dead.
Based on Paul Grimaldi’s reporting, one hopes those who attended the Greater Providence Chamber of Commerce luncheon, yesterday, left with a profound sense of despair.
The legislators on the stage talked about their regulatory reform, but mainly what they’ve got to show is a bureaucracy researching regulations. Meanwhile, the General Assembly piles on new regulations and mandates every year.
On taxation, even the “little bit more aggressive” approach proclaimed by Senate Minority Leader Dennis Algiere (R, Westerly) amounts to a piddling poking around the edges of Rhode Islanders’ tax burden. The biggest claim to success that Speaker of the House Gordon Fox (D, Providence) could come up with was what hasn’t happened (yet):
“Sometimes you need to measure where you may have been,” save for certain actions, Fox said. …
Also, Fox noted, much energy has been used to blunt efforts to undo some of that work, such as the decision to lower the top personal income tax rate from 9.9 percent to 5.99 percent.
“There’s a large effort to backtrack on what we’ve done,” Fox said.
This is as much as to say to the unemployed: “Sure, you’ve got no hope of a job, but at least we haven’t driven every employer out of the state.”
It brings to mind something in a John Stossel column, out yesterday:
What about all the new businesses that would have gotten investment money but didn’t have [Al] Gore on their boards? What new ideas might have thrived if old industries weren’t coddled? We don’t know. We will never know the greatness of what might have existed had the state not sucked the oxygen out of the incubator.
Rhode Island government’s goal posts are devastatingly out of place if it’s touting the fact that it hasn’t allowed itself to do even more damage. Stossel suggests that we’re turning into “a nation of favor-seekers instead of creators and producers.”
I say, look to Rhode Island for the lesson. We’re already there. If some of the businesspeople at the luncheon left despondent, at least we’d know that they aren’t all in on it.
I have a somewhat miraculous view of literature. It seems more often than not to be the case that when I reach into the many boxes of books that I’ve inherited and pick out something to read, almost at random, it has a direct relevance to things I’d already been thinking about.
This time, it’s Erich Fromm’s Escape from Freedom (1941). Fewer than 100 pages in, I’ve already got notes for myriad essays scribbled in the margins, but the following quotation, I just had to share. It’s actually something Fromm quotes from Jacob Salwyn Schapiro’s doctoral dissertation Social reform and the Reformation (1909).
The time period described is the later part of the Middle Ages, as medieval society gave way:
Notwithstanding these evidences of prosperity, the condition of the peasantry was rapidly deteriorating. At the beginning of the sixteenth century very few indeed were independent proprietors of the land they cultivated, with representation in the local diets, which in the Middle Ages was a sign of class independence and equality. The vast majority were Hoerige, a class personally free but whose land was subject to dues, the individuals being liable to services according to agreement … It was the Hoerige who were the backbone of all the agrarian uprisings. This middle-class peasant, living in a semi-independent community near the estate of the lord, became aware that the increase of dues and services was transforming him into a state of practical serfdom, and the village common into a part of the lord’s manor.
Frankly, I don’t think I’ve read a better description of what’s happening right now in any modern punditry. All that’s required is to update the language and replace “Hoerige” with “productive class” and the lord with the government.
It’s well and good to spend some words attacking the premises of progressive policies and calling their supporters the intellectual progeny of slaveholders. But unless we’re willing to declare that we have no responsibility to each other, no Golden Rule, then we need an alternative approach.
Let’s start by defining (one, two) the economic universe as the total value that human beings attribute to existence, as measured by the maximum amount of productive effort that we could expend to live it fully. Some large portion of this total lays fallow, as economic “potential.” We can break this down again into smaller parts: Some of our potential is locked up in things we haven’t learned to do yet or psychological hang-ups we haven’t overcome; some of our potential we set aside for simple enjoyment, like hours spent in the yard tanning or simply conversing with loved ones.
The active economy, then, is what remains: the value that our society measures with money. (Remember that money is not value, of itself.)
The goal of social policy (in and out of government) ought to be the greatest possible realization of value from life. The active economy can be a good indicator — inasmuch as it shows how much people are motivated to work for things they value — but it’s not sufficient. Work is not the goal or the thing to be maximized.
Free-marketers often write and speak of the complexity of the economy, arguing that central planners can never have sufficient information, collected quickly enough, to guide an economy in a competent way. The conclusion is that we’re better off, as a practical matter, letting prices reflect value organically.
My framework, herein, not only compounds this complexity with all of the intangibles that make human existence valuable, but also makes central planning a moral presumption. The central planners aren’t only trying to balance the needs of the economy, they’re also presuming to pass judgment on what each person should find fulfilling in life, including to compromise it for some in the name of uncertain attempts to unlock the potential of others.
Let me pick up the thread by acknowledging a major difference between slavery and the minimum wage — namely, the fact that the wage earner keeps the profit from his or her own labor. In slavery, the seller takes some of the value at the time of purchase and the owner takes the rest over time.
Objectively, that may not be as big a distinction as it at first appears. One supposes that some enterprising slaveholders in history discovered that they received better work when their slaves were well cared for, which could be seen as a form of bartering, without the middle step of cash.
Still, the core beliefs and logic with which we approach a topic will affect the sorts of solutions we propose when we find the system requiring correction. In that context, I’d suggest that the progressive mindset puts low-income people in the same box as their intellectual predecessors once put slaves.
The reason — more explicit with a “living wage” — is that a minimum wage is set as the minimum value of a human being’s time, not as the minimum price of the task that he or she performs. Somebody other than the worker is setting that price, and the worker is not permitted to determine that he or she is willing to perform the task more cheaply.
Those acting with cynical political motivation are essentially selling the human agency of low-income workers for the profit of votes. Those of a more charitable bent receive their profit as good moral feeling.
This presumption has practical, actual economic effects, and I think it follows naturally that policies that aren’t correctly ordered toward human fulfillment will inevitably produce bad outcomes.
However, my point is that we come up with a much different prescription if we recognize human beings as the source of value in the economy, with the autonomy to determine their own priorities for their “kinetic” economic energy as well as the degree to and manner in which they unlock their own potential.
Wall Street Journal reporter David Wessel tweets the information that a record 2,999 Americans renounced their citizenship in 2013, mostly (he says) for tax reasons.
We should be clear-eyed about the fact that this is around one one-thousandth of a percent of the population (while admitting the likelihood that they account for quite a bit more of government revenue than that). Still, the stunner is the comparison to other years:
That’s a very dramatic change in the annual number of expatriates, almost like the canary in the coal mine of American hope. The dip during the election year looks like a pause to watch for signs of change.
Which makes me think of Rhode Island. On net, almost 4,000 Rhode Islanders left for other states, last year.
The Ocean State’s civic problems may be too deeply entrenched, at this point, for there to be any hope of a turnaround, but the rest of the United States should take the warning before allowing President Obama and Congress to continue moving the nation in our direction.
Last time around, I closed with the assertion that a world of machines churning out products would essentially have no “economy,” because machines are indifferent. There’s no entity to value what they’re doing. It’s not an economy; it’s a process.
Put a collection of machines in the woods and watch them sit there. Put a collection of people in the woods and watch civilization blossom. To the objection that highly advanced machines — “universal constructors” — could theoretically build a civilization from scratch, perhaps even with some sort of creativity, I’d suggest that somebody would have to set the machines in motion, programming them with initial purpose. The value, in other words, comes from the developers.
There’s a point, in this line of as-yet imaginary “what ifs,” at which it would become difficult to make the distinction between mankind and machines. At that point, however, we must step away from logic and into theology.
Suffice it for now to say that at the definitional core of economics are beings (human beings) able to unlock their own economic potential, or to decide not to do so.
That principle is central to the evil of slavery. Even where, in history, slaves have been treated as well as paid servants might expect to be, we rightly recoil from the notion that they were no better than work animals or machines. They had no choice whether to work or what to do for work.
(If one were inclined to branch into an uncomfortable topic, it would be possible to begin making the case that there’s ultimately no separation between “fiscal” and “social” issues. My reasoning, above, applies at the biological level. A random cell placed in a womb will “sit there.” An embryo in the same environment will become a human being unless prevented from doing so.)
To return to the topic with which this series began, the irony is that those who proclaim the compassion of welfare, minimum wage, and such inevitably wind up conceiving of human beings in the same way as slave owners.
Ted Nesi puts it in context of the company’s move toward the health-services space, what with the MinuteClinics that it announced an intention to open, in November. In Ted’s telling, it’s a peer-pressure, good-for-the-image thing, perhaps to defuse some of the opposition that had the clinics on the receiving end of Rhode Island’s infamous licensure blockade back in 2005.
Amy Payne, from Heritage, proclaims it as evidence that corporations can do the right thing without government coercion.
Of course, it’s also possible that the company has been given reason to believe that the government is preparing to change the rules of the game. One indication of that possibility is House bill 7166, which would prevent any “health care facility” from having a license for tobacco sales “issued, renewed, or maintained.”
It’s win-win. The government makes a threat, and the company gets to respond to that threat by shooting for some good publicity. The only losers are consumers buying the legal product from their local stores, taxpayers who find the government shifting the tax burden to other collections than cigarettes, and company shareholders whose stocks lose value to the extent that the company can’t continue selling a profitable product while also branching out into new healthcare services.
Jason Becker poses some questions to Justin on tax policy, government services, and the migration of Rhode Islanders.
Jason Becker poses some questions to Justin on tax policy, government services, and the migration of Rhode Islanders.
By way of a quick follow up to my post on the state’s taxpayer-migration study, Ted Nesi’s related post, mostly quoting Revenue Analysis director Paul Dion, offers an excellent opportunity for some meta-analysis of how perspective affects one’s policy conclusions from a given set of data.
Dion plays it very close to the vest. More than once, he states, “That is significant.” But he doesn’t take the next step of telling readers why he believes that. Why is it significant that older, wealthier Rhode Islanders who were “movers” — that is, who continued to file tax returns in Rhode Island after changing their residences — were so much more likely to head to Florida?
Perhaps he’s thinking of the common wisdom (which I heard RI Foundation’s Neil Steinberg voicing the other day) that people migrate to Florida for the weather. However much that’s true for some people, it remains an important question: If the tax comparison were different, would they change their habits to remain in Rhode Island half a year plus a day, rather than the other way around?
Something similar arises with this:
As for Goners [those who left and never filed another RI return], the largest percentage was in the $200,000-to-$500,000 AGI category and was skewed younger than the Movers. This indicates to me that this group is likely comprised of executive-level professionals who relocate because of a new job.
Maybe Dion’s instincts are correct, and it’s easy to imagine status quo apologists concluding: “See, it’s not our tax climate; they’re moving for jobs!” But that’s not a relief; it’s a problem. Why aren’t those jobs here.
Dion also notes that Massachusetts becomes a more prominent destination for those who leave when one focuses on younger wealthy Rhode Islanders. That could indicate both that they’re taking jobs out of state because they want to stay within reach, but can’t find jobs in RI, and that they’re making their moves as a means of avoiding Rhode Island’s burdensome environment of taxes, regulations, and other mandates.
In any of these cases, how one approaches the data affects whether one concludes that Rhode Island can continue to impose its present burden on people in a mobile society.