Economy RSS feed for this section

CORRECTED: Raimondo’s Doomed-to-Fail Progressive Method of Economic Planning

Yesterday, the takeaway about Governor-elect Gina Raimondo’s plan for an economic summit was that most of it would be closed to the news media.  Today, it’s that she has relented and decided to open the doors to the whole thing.  That’s for journalists.  It’s still a closed event in the sense that only invited guests can participate in the sessions, and that’s a problem indicative of the entire strategy of Rhode Island’s ruling class for our shared economy.

The purpose of this summit, per Raimondo’s spokesman, appears to be not to better understand what Rhode Islanders need, but to get some expert feedback on how to supply the things that Raimondo already presumes to know that Rhode Islanders need:

He said the media is invited to the beginning of the meeting because Raimondo wants reporters to hear the “assignment that she’s laying out for the evening.”

Because people have asked, I’ll say that I’m not aware of anybody I know who was invited to participate.  We’re not, apparently, among Raimondo’s understanding of the top 80 “thought leaders” in the state.  (How many articles and TV news segments have to appear about one’s ideas to count as qualification for being a “thought leader” has not been explained.)

As I’ve been saying for years, now, Raimondo is a progressive.  In terms of organizing society, that means that she likely sees society in terms of groups of people, and progressives tend to organize by finding (or appointing) people who are treated as representative of their groups.

The theory is that those representatives bring the concerns of their peers back to the central planner, who weighs all of the feedback according to his or her sense of balance and makes decisions for the good of the whole society.  Two problems with this approach are obvious (at least to anybody who’s watched Rhode Island operate for any length of time:

  1. The individuals selected as the representatives are not perfectly representative of everybody in their group (often barely so), and they have their own interests.  Whether their motivation derives from their particular companies or from their particular factions within their social groups, they are likely to use their platform to shape society’s rules to their advantage.  A businessperson will see things that serve his or her own business model and increase its competitiveness as being critical for that industry as a whole.  A member of a demographic group will tend to use his or her representation of the whole as a way to win internal disagreements.
  2. When the central entity is as domineeringly powerful as the government in Rhode Island, the select few will stop representing their groups to the government, and instead begin representing the government’s insider system to their groups.

In short, it appears that Raimondo intends to formalize as official policy the approach that is destroying her state.  Of course, that assumes that this isn’t all just window dressing around her plans to do whatever she wants to do for political reasons.

Death by “Let Them Eat Cake”

I bought a basic cell phone for my grandmother, last night.  As the clerk in the Massachusetts store was adding the phone to my family plan, he remarked, “Wow, you pay a lot of taxes!  Oh, you’re in Rhode Island.”

With that anecdote in mind, this morning, I’d suggest that Rhode Islanders should be wary of advice from an economist who admits that (according to Kate Bramson of the Providence Journal) she’s “puzzled” that Rhode Island’s largest sector, education and healthcare, “is failing to enjoy the growth it’s seeing in the region and the country”:

“…  it seems like there’s this party going on in education and health services,” she continued. “And Rhode Island is not at that party, so I’m not sure why that’s not happening in this state.”

Could it have anything to do with Rhode Island’s heavy regulations and taxes, maybe?  Could it have anything to do with the fact that Rhode Island leads the country in health insurance mandates?  Could it have anything to do with Rhode Island’s teachers’ unions being toward the front of the national pack in their power, especially in political activity and the resources going to the union and union members?

Also on the front page of today’s Providence Journal is a Jennifer Bogdan article about Governor-elect Gina Raimondo’s visit to the White House.  Although the visit, alongside other governors, was mainly a photo-op and meet-and-greet, Bogdan writes, “There were also a few moments for cake.”

Raimondo brought the president a slice of Death by Chocolate Cake from Gregg’s restaurant.  Isn’t that just perfect?

While Rhode Island is failing to join the economic party, the woman who will soon be governor is bringing cake to the president and kicking off her big economic strategy:

“My focus all day … my constant question was, ‘What can you do to help get Rhode Island back to work?’ ” Raimondo said. “I’m going to be very aggressive about knocking on doors.”

In other words, her economic strategy is to be a salesperson, not to change the underlying problems.  That won’t work.  The problem isn’t that business people around the country don’t know Rhode Island is here. It’s that they know what Rhode Island is all about.  It’s all about cake for insiders and shackles for people who want to bring their own little circles of the economy in a personalized direction.

Decreasing taxes, regulations, and mandates and allowing broad school choice would bring the economic party to Rhode Island, but anybody hoping that Raimondo is going to go in the direction of freedom over insiderdom is probably going to be disappointed.

Is RI’s Ruling Class Capable of Learning the Lesson?

A story from yesterday and a story from today, both in the Providence Journal, raise the question of whether the people who operate Rhode Island’s government are capable of learning the lesson of our state’s predicament.  (That they apparently haven’t learned it yet comes pretty close to answering the question.)

Let’s start with Randal Edgar’s story today:

Taking stances that could complicate the challenges facing lawmakers and Governor-elect Gina Raimondo, the Department of Children, Youth and Families, the Department of Human Services and the Judiciary are among the departments and agencies that say they can’t cut their way to a balanced budget.

Instead, they are seeking more money, or suggesting that some of their costs be assigned elsewhere.

The recurring theme is that the departments say they can’t make the necessary budget reductions without cutting into their staffing or programs, to which I say, “Well, yeah.”  They’re going to have to cut.  Government can’t be the one sector, in Rhode Island, that’s recession proof (or even societal-decline proof).  Agencies are going to have to do less with fewer people.  Sorry.

HealthSource RI is an excellent example of the problem.  Reading Edgar’s article, it’s clear that implementing the ObamaCare health benefits exchange and the related expansion of Medicaid were terrible decisions.  Like somebody addicted to gambling or credit cards, Rhode Island government has long been counting on a recovery that’s never going to come.

The good news is that the department heads’ complaint that cuts would be draconian are blowing smoke.  Look to the RI Center for Freedom & Prosperity’s Spotlight on Spending report for tips on how a few tens of millions of dollars could be found easily.

For another example of why the cuts must be made, turn to Paul Edward Parker’s article about T.F. Green Airport, yesterday.  Be sure to read to the end:

At the end of the day, though, there’s only so much [Rhode Island Airport Corporation President Kelly Fredericks] can do to boost passenger levels at Green. He needs sharp marketing, and plans to extend the main runway will help. But two more significant factors will remain beyond his control:

How will Rhode Island’s economy fare?

Will airlines change strategy to put more emphasis on secondary airports?

This isn’t complicated.  If more people are doing business year round in Rhode Island, airlines will have incentive to increase direct flights, including from distant locations.

Every one of these stories related to the local economy in recent years has the same moral:  Government must loosen its tax and regulatory grip on the Rhode Island economy so that we, Rhode Islanders, can find the best ways to put our talents and resources to use.  When we’re thriving, the government can start to think about expanding again, but until that point, it ought to be in a hurry to get out of our way.

Dangerous Complacency at Rhode Island League of Cities & Towns Towards RhodeMap RI?

A friend forwarded me an interesting and alarming e-mail thread with regard to RhodeMap RI. Below is the text of two of the e-mails, which went out this afternoon, followed by the author and his title. On Thursday morning, the State Planning Council will vote on a proposed Economic Development Plan which largely incorporates the […]

RhodeMap RI: Bipartisan Group of Legislators Calls for Delay; Cite Its “near-total lack of an economic development focus”

The following statement was received via e-mail this afternoon. Attached was a letter addressed to Kevin Flynn, Associate Director of the R.I. Division of Planning.

State Planning Division Faulted For Pursuing “Predetermined Result” With Little Economic Development Focus

Senators, Representatives To File Legislation To Correct Imbalance

State House, Nov 18 – A group of five Republican, Democrat and Independent legislators today called for a delay in approval of the hotly-criticized RhodeMap RI.

The legislators want to correct an imbalance that seems to exclude meaningful action to improve Rhode Island’s poor economic performance, something the State Planning Division has continually tried to characterize as the goal of the effort.

Frustrating Doggedness for a Strategy That Doesn’t Work

On one page of the Saturday Providence Journal Kate Bramson reported a “here we go again” story:

The Rhode Island Commerce Corporation paid $62,500 to the California-based Bridge Bank to keep The Corporate Marketplace current on a $3.75-million loan that the state guarantied in 2011 under a controversial state financial program.

Meanwhile, the Commerce Corporation is working with the company “to restructure the company’s financials and review all options,” with a goal of keeping the company “viable while minimizing exposure to taxpayers,” Commerce Corporation Executive Director Marcel A. Valois told The Providence Journal.

The North Kingstown company is one of four granted loan guaranties under the program that backed a $75-million bond sale to benefit former Red Sox star Curt Schilling’s video-game company.

Apparently, the big lesson that the state learned from 38 Studios was that the government shouldn’t hold companies to the job-creation benchmarks to which they pledged in order to get the money (and which were arguably the core selling point for the program in the first place).

Meanwhile, on another page of the same paper, Bramson reported on the wishlist of special arrangements that functionaries working on behalf of the state would like to put on the table to develop the land freed up through the I-Way project:

[Jan Brodie would] like no sales tax and no corporate taxes for projects built on [the land in Providence]. She’d like an “institutionalized , predictable” tax-stabilization agreement for city property taxes that would last at least 15 years…

She’d like some flexibility on the … obligation to pay back the bonds that were sold to … complete the final phase of the highway project. …

She wants an innovation fund…

Finally, she wants Governor-elect Gina Raimondo and Providence Mayor-elect Jorge O. Elorza to “hit the road,” traveling outside Rhode Island to seek specific businesses that might locate here.

Rhode Islanders need to start laughing these people out of the room and insisting on the much simpler (and more-conducive-to-freedom) plan of eliminating and stabilizing taxes and regulations for everybody in the state, while stopping the practice of incurring debt on which the government later requires “flexibility.”

Exempting Retirement and Social Security Income

Rhode Island needs to cut all sorts of taxes on everybody.  However, it’s important for policy makers and the general public to ask questions about particular proposals.  What’s the goal of a particular cut; who benefits; where’s the money going to come from?

Conservatives have periodically asked me about the proposal that House Speaker Nicholas Mattiello (D, Cranston) and Senate President Teresa Paiva Weed (D, Newport) are publicly considering — to exempt retirement and Social Security income from taxes.  Although it may be popular to promise senior citizens things, the questions still apply.  Regarding the goal of the policy, Providence Journal reporters Katherine Gregg and Linda Borg offer this summary:

Neither idea is new. But this year, the Democratic leaders of the House and Senate are both talking about how they can keep retirees — and their retirement income — in Rhode Island.

Given limit political ability to cut taxes, does this reform target the group (1) that’s most notably leaving Rhode Island and (2) that Rhode Island needs most to stay?  I wouldn’t say so.  The state has long shed many young, single, college educated residents.  The largest losses by family type have been married families with children.  Once again, our biggest and most important losses are from the “productive class” — people who are interested in using the local economy to change their time and talents into money.  That’s what really grows an economy.

It helps that cause a little to let relatively idle people keep and spend more of their cash, particularly if it keeps them in the state, but it’s indirect and subject to bleeding.  A retiree’s tax-cut-funded vacation in another state helps young working families in Rhode Island not at all.  A retired couple that keeps its Rhode Island house, instead of moving, keeps a younger family from buying that house.

On the question of how the General Assembly would make up for the reduced revenue, it’s encouraging to see Mattiello talking about cuts in spending, but we should believe that when we see it.  The state legislature has a habit of finding ways of shifting burdens around, rather than actually limiting the size of government.

Rhode Islanders Have to Stop Allowing This to Happen

So the city of East Providence has gone so far as to ban the sale of dogs and cats.  Worse, it did so in a way that looks like the ordinance targeted a specific business:

The owners of an East Providence pet store asked a federal judge Thursday to strike down as unconstitutional a city ordinance banning the sale of cats and dogs.

The City Council on June 3 passed an ordinance making it a criminal offense to sell cats or dogs, just weeks after the Perfect Puppy opened its doors at 1235 Wampanoag Trail.

You know, folks are railing against mayoral candidate Vincent Cianci, saying that it would send a terrible signal about Rhode Island governance to elect him as mayor of Providence, once again, but I have to wonder whether that’s worse than headlines suggesting that people starting businesses around here might find themselves suddenly targeted by city ordinances and state laws that pull the rug out from under their investments.

Ultimately, I don’t think the courts should interfere with the ability of representatives to pursue such horrible policies and practices.  That just moves them to a venue over which the people have less control.

Rather, the people of East Providence should take responsibility for their contribution to the bad reputation that’s driving Rhode Island into the ground and replace their city council with one that doesn’t see government as a way to pick and choose what our neighbors can do for a living.

Question #4: In-State Employment Rate of URI Engineering Grads Does Not Justify $125 Million Tab for Taxpayers

This Tuesday, Rhode Island taxpayers will be asked if they are willing to pay an eye-opening $125 million, excluding interest, to construct a new building and renovate existing buildings at URI’s College of Engineering. Proponents claim it will improve Rhode Island’s workforce, but how many URI engineers are actually staying to work in the state, right now?

Journalists Another Group with an Interest in the RI Status Quo?

Last week, I pointed out that Rhode Island teachers lead the country in pay, when adjusted for the cost of living in each state — at least teachers in categories that tend to be overwhelmingly dominated by government labor unions.  An obvious next question is what other categories of professions put Rhode Island at the top of the pay chart.

So far, I’ve only found one: “reporters and correspondents.”

At $60,871 per year, Rhode Island’s journalists make even more than those in Washington, D.C., where their peers take home a cost-of-living-adjusted $54,154.  (In fairness, Washington reporters and correspondents make more in absolute terms, but it’s more expensive to live there, so the adjustment knocks their average pay down about $10,000, while it boosts Rhode Island’s by about $800.)

It’s interesting to note that “broadcast news analysts,” the only other category that I could find under the broad category of “journalist,” fall back to the 10-15 ranking range that seems to be Rhode Island’s overall home.  (Note that these professionals make a little more than the “reporters and correspondents,” but their peers in other states surpass them.)

Some aspects of the news business might make Rhode Island unique.  For instance, in a larger state, like Massachusetts, the salaries of urban and statewide reporters might be significantly diluted, in this data, by many more small-market, local reporters.  The local reporters are toiling away in Rhode Island, of course, but there are fewer of them.  On the other hand, Delaware falls in the middle of the pack, for this category, and Maryland is nearly last.

Disclaimers aside, the apparent fact that the Rhode Island socio-politico-economic system benefits journalists so disproportionately raises questions about why that is, and whether it indicates an occupational bias against the sorts of dramatic changes that the state so desperately needs.  Folks can be forgiven for seeing a connection to some surprisingly status-quo-friendly endorsements from the Providence Journal, this cycle.

The Expanding Nature of Government “Investments”

Here’s the latest word on the major public works program related to the land in Providence formerly occupied by Route 195:

It’s the kind of project the I-195 Redevelopment District Commission and state economic leaders have long said they hope to foster on nearly 20 acres of prime real estate. In the spring, [Lawyer Timothy H.] Ehrlich’s team submitted a bid to the commission to create [a biotechnology] incubator.

But after working all summer, Ehrlich is convinced the project needs financial help from the state, and that the help must be more than the life-sciences tax credits outlined in the state law that created the commission.

No doubt a variety of people would jump at the chance to tell me I just don’t understand how these things work.  Government must invest in economic development.  Biotech is a growth sector, and an incubator will attract all those “well-paying jobs” that we hear about.  Every other state is subsidizing this industry.  And yet, somehow Rhode Island will become a hub, even though small and late to the game.  Yadda yadda yadda.

Indeed, the article has Marcel Valois, the executive director of the Commerce Corporation (which was formerly the Economic Development Corporation that invested in 38 Studios), insisting that “the project would ‘absolutely’ help the economy.”

Still, I just can’t get past the plain-language description of this whole process.  The government invested in a project to move a highway because it would free up all sorts of “prime real estate” that could be sold to raise money and make economically productive use of the land.  Now we’re “investing” in the process of luring organizations to the property.  Next, those organizations will need massive subsidies to get off the ground.  And then the start-up companies that this particular project attracts as clients will need additional subsidies to afford its services.

I ain’t a biotech-investment guru by a long shot, but this has all of the common-sense markers of a bad way to go about economic development and all of the common-sense markers of a scheme for empowering government agents and enriching connected individuals.

Timothy H. Ehrlich is, according to Kate Bramson’s Providence Journal article, “very encouraged by gubernatorial candidate Gina Raimondo’s knowledge and background as a venture-capital investor.”  He’s so encouraged, it appears that he’s given Raimondo’s campaign $1,500 since May 2013, although the campaign refunded $250 of that two weeks ago.

The name on the campaign reports is “Tim Ehrlich,” but the address given belongs to this $1.4 million property in Concord, Massachusetts, which is owned by “Timothy H. Ehrlich,” matching the article.  The article also calls Ehrlich a “lawyer,” and the campaign finance reports list the donor as employed by Boston law firm Gunderson Dettmer, where partner Timothy H. Ehrlich “focuses on the representation of start-up, emerging growth and public companies in the information technology, biotech and medical device industries.”

Progressive Policies Hurting Minorities

Looking at the brief report that the RI Center for Freedom & Prosperity released, yesterday, showing some slices of employment data, something struck me about the numbers for labor force participation — that is, percentage of each demographic group that is either working or looking for work:

Notice that a larger percentage of black and Hispanic Rhode Islanders are either working or looking for work.  Inasmuch as the unemployment rate (i.e., those who are looking for jobs) is almost two times higher for blacks than the average and more than two times higher for Hispanics than the average, we can infer that the higher labor force participation rates for those groups result mainly from the unemployed.

That makes sense, of course, because the income levels for these minorities tend to be lower than the average, so their need for jobs is greater.  The gap between people’s need to work and their ability to find work is a humanitarian concern, but it’s also an indication of lost opportunity for our economy.

Here we see another indication of the harm that Rhode Island policies (and progressive policies more broadly) do to the productive class, no matter what race we’re talking about.  These Rhode Islanders want to exchange their productive effort and their talents for money.  Oppressive big-government policies make that exchange more difficult.  High tax rates remove money from the economy and reduce incentive to expand productive activity (both work and investment), and invasive regulations make it more difficult to engage in productive activity legally.

It’s not surprising that minority groups are most profoundly affected by a wrong-headed approach to government.  It is surprising, though, that the votes of different racial groups prove that they haven’t caught on to the abuse, yet.

Invested in Inequality

Writing in the Providence Journal, John Kostrzewa notes that Federal Reserve Chairwoman Janet Yellen has an expanded view of her organization’s concerns:

…Yellen has another, perhaps more immediate concern that is holding back growth: economic inequality.

In a recent speech to the Corporation for Enterprise Development, she said: “We have come far from the worst moments of the crisis, and the economy continues to improve. But the effects of the recession are still being felt by many families, particularly those that had very little in savings and other assets beforehand .”

That declaration seems… well… convenient, considering that the current economic “recovery” engineered by the policies of Yellen’s organization and the current administration of the federal government has benefited exclusively the top 10% of income earners (roughly above $120,136 per year) and mostly the top 1% (starting just shy of $400,000).

Indeed, the whole dance takes on a bit of a sinister tone when you consider a recent story that’s gotten a shockingly small amount of play:

It’s an extraordinary document. There is not space here to do it justice, but the gist is this: The Fed failed to regulate the banks because it did not encourage its employees to ask questions, to speak their minds or to point out problems.

Just the opposite: The Fed encourages its employees to keep their heads down, to obey their managers and to appease the banks. That is, bank regulators failed to do their jobs properly not because they lacked the tools but because they were discouraged from using them.

I’d propose that it isn’t coincidental that the growth of big, nanny-state, central-planning government has coincided with a phasing out of average Americans’ benefit from economic expansion.  Most of that expansion, after all, has been fueled by government debt, increasingly relying on investment schemes to translate into the economy.  With the Obama Era, we saw the final switch flipped in ensuring that the losses of those schemes would be totally socialized, so that the investment class never lose in the deal.

The loop has closed, in other words, between the non-producing rich and the smooth-talking progressive politicians.  The next step (perhaps that to which Yellen is alluding) is for the money handlers to increase the use of government to spread more of that unused wealth directly to constituencies so that they’ll be less tempted to overthrow the whole regime.

Gina’s Quantum Position on Raising Taxes; Or, “Dual Nature” Doesn’t Just Describe Matter and Light

On Thursday, Gina Raimondo, democrat candidate for governor, held a press conference during which she accepted the endorsement of Planned Parenthood and expressed a desire to lift the ban in Rhode Island law on partial birth abortion. (Yes, to confirm, contrary to what she lied … er, broadly implied at the press conference, Allan Fung does not wish to change the parameters of Rhode Island’s abortion law, she does.)

This has created some controversy, as well it should, especially on the radio and social media.

On his radio show this morning on WPRO, John Loughlin took a bigger picture perspective to make the case that one of the mistakes candidate Raimondo made at her press conference Thursday was the strategic one of getting off message.

That’s probably true. But there are a couple of additional factors that come into play. Firstly, the General Treasurer is probably pleased to get her candidacy any kind of publicity, even if it doesn’t adhere to her campaign script. (Tomorrow’s episode: “Will She Take Communion???”, co-starring a vociferous cast of advocates, some in the ranks of the press, standing by to canonize her if the Catholic Church moves to bar her from communion.)