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Tax Reform Points to Potential to Be a Northeast Beacon

Writing for Bloomberg View, Jared Dillian describes a policy question that Rhode Islanders need to consider seriously:

Of bigger concern is how the leadership of high-tax states will respond [to the loss of a federal tax deductions for some of their residents’ state and local taxes]. If individuals and businesses leave, eroding the tax base, states will face a choice between cutting spending or raising taxes. Less spending is hard with existing pension obligations, so there’s a strong possibility that a state like New York or Connecticut could enter a “death spiral” where residents leave, the state raises taxes, more leave, and so on. Since the governments of the high-tax states are nearly all Democratic, I doubt many have the desire to cut services when faced with net migration out of the state.

It goes further. People are starting to figure out that an inability to fully deduct property taxes results in lower real estate valuations. If there is more tax on your house, your house is worth less. This is just math. I suspect the market is rather efficient and real estate values will drop in high-tax jurisdictions, and the drop will accelerate as people leave and bids evaporate.

Dillian also describes the existence of some border experiments, as between high-tax Maryland and lower-tax York, Pennsylvania.  Right now, Rhode Island is on the wrong side of most of those balances.

The real shame of that reality is that the Ocean State could make profound gains as an oasis right in the heart of the Northeast — warmer than New Hampshire and with more waterfront, as well as closer proximity to New York City — if only our leaders would put our interests as independent individuals first.

Of course, the deeper “if only” applies to the general public’s finding the will and way to break through the barriers protecting special interests.  That is, we have to empower Rhode Islanders with vision in opposition to those with entrenched power.

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Returning to the Rule of Law and Consent of the Governed

A recent Wall Street Journal editorial applauded the work of the Trump administration in its “great rules rollback”:

The results have been impressive. Ms. [Neomi] Rao [of the White House Office of Information and Regulatory Affairs] reported this month that through Sept. 30 the Trump Administration had taken 67 deregulatory actions but only three new significant regulatory actions. That’s a 22 to 1 ratio. She also reported that since fall 2016 more than 1,500 planned regulatory actions have been withdrawn or delayed. For fiscal 2018, the current agenda includes 448 deregulatory actions and 131 regulatory actions, a better than 3 to 1 ratio.

One reason for success is forcing agencies to abide by the Administrative Procedure Act, which outlines a public comment period for proper rule-making and which the Obama Administration routinely ignored.

Imagine government following its own rules!  After eight years of Obama, that feels new and refreshing — as if we have the rule of law and the consent of the governed (or are moving back toward it).

In recent weeks, I’ve been noticing a number of Trump skeptics come around (which is to say, people more skeptical than I was, which was pretty skeptical).  The reevaluation is justified, and minds ought to be changing across the political spectrum, not the least for reasons like this:

… the far larger impact is lifting the pall of government hassle and arbitrary enforcement from business. In the Obama era, CEOs never knew when or how a federal agency might strike for political reasons, no matter the law. Simply lifting that constant fear has had a liberating effect on risk-taking and investment.

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Minimum Wage Calories Go Right to the Hips

Via Tyler Cowen (by way of Instapundit) comes a study of minimum wage law effects from the University of Zurich, abstracted as follows:

We study the impact of increases in local minimum wages on the dynamics of prices in local grocery stores in the US during the 2001-2012 period. We find a signifi cant impact of increasing minimum wages on prices in grocery stores. Our baseline estimate of the minimum wage elasticity of grocery prices is 0.02. This magnitude is consistent with a full pass-through of cost increases into prices. We show that price adjustments occur mostly in the months following the passage of minimum wage legislation rather than at the actual implementation of higher minimum wages. This forward-looking pattern of price adjustments is qualitatively consistent with pricing models that feature nominal rigidities. We fi nd no differential price effect for products consumed by poorer and richer households, and no evidence for demand effects. Our results suggest that consumers rather than firms bear the cost of minimum wage increases. Moreover, poor households are most negatively affected by the price response. Price increases in grocery stores alone offset at least 10% of the nominal income gains of the poorest households.

Companies pass the cost on to consumers, and it harms lower-income households disproportionately.  So, if employers reduce hiring, low-income households lose income; if employers raise prices, low-income households have to spend more for the same goods.  That doesn’t sound like a very helpful policy.

One wrinkle not mentioned is that government gets to win on two fronts.  Politicians take credit for “giving” people raises, and then the government itself gets a boost.  If income goes up, government gets a bigger income tax take, and if prices go up to pay the salaries, government gets a bigger sales tax take to the extent that the goods are taxable.

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The Post Office’s Delivery Neutrality

One suspects that Wall Street Journal reporters Cara Lombardo and Paul Ziobro saw their recent article on the United States Post Office’s imbalance with Amazon as residing in the “Trump tweets versus the world” category.  On the social media platform, the president expressed frustration that the money-losing government agency is basically subsidizing Amazon’s business by keeping shipping costs artificially low.

The ins and outs of that conflict — woven through consumer interests, the destruction of local brick-and-mortar retailers, and so on — are interesting, but for my narrow purpose, here, it occurred to me that the matter offers a serviceable analogy to net neutrality:

… some critics suggest that the USPS is underpricing such services and that the e-commerce deliveries are being subsidized by the universal service obligation that the USPS must maintain under congressional edict. The universal service obligation is a collection of requirements that ensures all users receive a certain level of service at a reasonable price.

Like Internet service providers, the post office has a limited amount of bandwidth, and it wants to keep prices down to maximize the number of individuals and organizations that can use the service.  That low price, however, creates a framework on which major players can lean their business models for greater profits than would be possible if the providers were able to absorb some of them to provide their mission-critical link in the chain.

Both issues present a need for balance, and people can obviously apply different priorities; the distinction between government and private corporations also has an effect.  Both seem to me, however, to show quite readily the complex nature of balancing society’s interests and the folly of attempting to channel them through blunt government instruments.

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Minimum Wage Up, Pressure on Jobs Down

Rachel Nunes writes succinctly about one change in Rhode Island policy and economics as of the start of the new year:

Thousands of workers in Rhode Island will see an increase on their next paychecks.

On Monday the start of 2018 brought a 50 cent increase to the minimum wage, bringing it to $10.10 per hour. That’s an increase of about six percent.

I’m just wondering:  what do folks suppose is the most-direct economic effect of increasing the cost of a particular segment of workers by 6%?  Sure, those with such jobs will have more money to spend, which they’ll do in a dispersed way, in and out of the state and with a varying degrees of broader economic benefit.

I’d argue, though, that the most-direct economic effect is to make such workers more expensive for employers and reduce the number of such employees.  Those whose work is correctly valued at below the minimum amount will not be able to find work, which is just one of the reasons this legislative conceit and political ploy is immoral.

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Rhode Island In 47th Place On The Jobs & Opportunity Index

Happy New Year! In 2018, Rhode Islanders want to achieve their hopes and dreams of better life for their families. In order for the Ocean State to prosper, we need an economic climate that rewards hard work, encourages small-business growth, and creates quality jobs. In this regard, the traditionally cited monthly unemployment rate is often used by state lawmakers as a benchmark to evaluate the results of their policy initiatives. However, this rate represents only a very narrow look at the employment health of a state and can often paint an incomplete, or even inaccurate, snapshot of the broader economic picture.

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Pawtucket Senators’ Wrong Focus

Yesterday, the Rhode Island state senators who cover Pawtucket put out a press release (which does not appear to be online):

The Pawtucket delegation to the Rhode Island Senate today expressed their profound disappointment at the closure of Memorial Hospital, effective January 1, 2018. They had taken many steps to avoid the closure. Earlier this year, they won enactment of legislation they sponsored to facilitate the hospital’s sale. When negotiations for the sale of the hospital broke down, they implored the Department of Health to reject the closure plan and laid out potential steps forward that could keep medical services in the community. …

Senator Nesselbush (D – Dist. 15, Pawtucket, North Providence) said, “For more than a century, Memorial has been relied upon by the people in our community for affordable, quality health care. The detrimental impact of Memorial’s closure is substantial to us in the community. We are grateful for the attempts being made by the Department of Health to address some of the unique challenges associated with the closure, but remain concerned that nothing can replace the accessible care we have come to know and expect at Memorial.”

Rhode Island needs its legislators to stop trying to maintain the status quo in the face of the state’s deterioration.  Want to maintain a vibrant medical offering in your community?  Then stop trying to find ways to restrict people and business and start trying to free them.  Take restrictions off of medical providers and insurers specifically and businesses in general.

Not only will providers be able to make a profit, but the economy will revive and the tide will start coming into the Ocean State, rather than inexorably sliding away. A state that sees itself as mainly serving the people who need services will find fewer and fewer people willing to constrain their ambitions — their lives — in order to pay the bills but be unserved.

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The Air You Breathe Can Become a “Public Accommodation”

In the category of essays breaking down very simply a complex evolution in political philosophy, Kevin Williamson traces how a royal proclamation that, specifically, a ferry owner can be regulated because he crosses a public water way between his two private docks has (nearly) become license for bureaucrats to command a small-time baker to offer a specific product for a particular event:

From the regulation of public waterways comes the principle that a man may not grow wheat on his own farm for his own use without the king’s permission: The slope is, in fact, slippery.

The principle that private property takes on an unalterably public character whenever a chicken crosses the road is central to American civil-rights law — which, contrary to the account sometimes given by our Democrat friends, has a history that does not begin in 1964. …

It is not the case that discrimination is discrimination is discrimination. Telling a black man that he may not work in your bank because he is black is in reality a very different thing from telling a gay couple that you’d be happy to sell them cupcakes or cookies or pecan pies but you do not bake cakes for same-sex weddings — however much the principle of the thing may seem superficially similar. If the public sphere is infinite, then the private sphere does not exist, and neither does private life. Having a bakery with doors open to the public does not make your business, contra Justice Harlan, an agent of the state. A bakery is not the Commerce Department or the local public high school.

As Williamson notes, the slope is slippery, and it’s always some seemingly desirable principle that drags us farther down.

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Something Rhode Island Needs to Stop Believing

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When People Get to See What Was in the Bill

If by some chance you haven’t seen the video below, by all means watch it.  Here’s the quick summary by David French:

… CBS talked to three different families in three very different financial circumstances — a single mom in North Carolina who makes less than $40,000 per year, a married couple in Rhode Island with no kids who make $150,000 per year, and California parents with three kids who make more than $300,000. Each family gets a break – which shouldn’t surprise anyone who’s closely followed the details of the tax plan. But two of the families thought their taxes would be higher.

Procedurally, we’ve seen a lot of comparisons between the GOP’s tax cut and the passage of ObamaCare, but the direction is entirely different, thanks to the mainstream media’s converse activism in both cases.  Some parts of ObamaCare proved popular, but they were well advertised.  The surprises were the things that folks were told would not happen, like losing plans and doctors that they liked.

With the tax cut, the surprise will be that most people will actually see a decrease in their taxes.  If the plan delivers on stronger economic growth, as well, public opinion could not just improve, but flip.

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California Lessons for Central Planners

Victor Davis Hanson’s suggestions for California would be well taken by big-government types across the country, particularly in Rhode Island:

What are the lessons for the nation from these random glimpses of 21st-century California? Fix premodern problems before dreaming about postmodern solutions. Loudly virtue-signaling about addressing misdemeanors does not excuse quietly ignoring felonies.

Learn how an entire culture is fed, housed and fueled before faulting those who address such needs. …

Remember that voting progressively in the abstract does not automatically translate into living progressively in the concrete.

I’d modify the one about learning how a culture is “fed, housed and fueled,” however.  Hanson is referring to government attacks on the private sector, and while the people who would centrally plan our society should certainly strive to understand how it works, we should all prefer that their conclusion is that they shouldn’t attempt to manage it closely in the first place.

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Presenting My Voice of Skepticism in the Projo

Kate Bramson’s Providence Journal article about the latest employment numbers broadens the presentation beyond what the unemployment rate often enjoys, and not just because she quotes me:

A clearer picture of the state’s jobs data will be available early next year, when the U.S. Bureau of Labor Statistics revises states’ jobs data for the year. The numbers released each fall aren’t always the most accurate depiction of the local economy because monthly reports are calculated based on survey data from the prior autumn. The federal revisions take into consideration newer data.

Justin Katz, research director for the nonprofit Rhode Island Center for Freedom and Prosperity, said the state’s jobs numbers are “not encouraging.”

“Both employment and Rhode Island-based jobs have fluctuated around painfully low growth rates since the recession ended years ago, and the loss of Rhode Islanders even interested in working has provided a perverse silver lining by artificially lowering the unemployment rate,” Katz said in a statement. “If the upcoming revision of annual data by the Bureau of Labor Statistics follows the usual pattern, Rhode Island will have seen barely any increase in employment since the summer of 2015.”

It’ll be nice, one day, when Rhode Island’s economy negates my skepticism and brings about upward revisions of our employment data.  Perhaps national policy can bring about that outcome, but I suspect it’s going to take Rhode Islanders’ declaration that they’ve had enough of the status quo and forcing of a new economy philosophy in state government.

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Life Expectancy and Drug Overdose Deaths Don’t Fit the Identity Politics Narrative

The headline that the Providence Journal gave to a Washington Post story, “Fueled by drug crisis, US life expectancy declines for a second straight year,” hides the key point:

Overall, life expectancy dropped by a tenth of a year, from 78.7 to 78.6. It fell two-tenths of a year for men, who have much higher overdose death rates, from 76.3 to 76.1 years. Women’s life expectancy held steady at 81.1 years.

American women now have five full years of additional life, on average, than American men.  You better believe that if the sexes were reversed that would be not only the headline, but a theme for national coverage everywhere for a week.

Looking at a leading cause of the change only amplifies the point:

Men of all ages (26 deaths per 100,000) are twice as likely to die of a drug overdose as women (13 per 100,000).

In Rhode Island, where female Democrat Governor Gina Raimondo hosts an annual student contest that discriminates against boys, the number of overdose deaths among men is almost three times that of women:

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The most important antidote to drug use and overdose isn’t a government program, it’s hope.  Unfortunately, that’s only a word on our flag in Rhode Island.

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