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Excitement for the Wrong Direction for I-195 Land?

Rhode Island’s informderati is all atwitter (pun intended) with the news of a “life-sciences complex” proposed for the land formerly occupied by I-195:

A real-estate investment and development company that partners with universities and hospitals across the country to build research parks has submitted a joint proposal to build a multimillion-dollar facility on 5 acres of former highway land in Providence — drawing praise from Governor Raimondo, House Speaker Nicholas Mattiello, Senate President M. Teresa Paiva Weed, Providence Mayor Jorge O. Elorza and others. 

Wexford Science & Technology of Baltimore, a subsidiary of BioMed Realty Trust Inc. in San Diego, and CV Properties LLC, the Boston firm leading development of South Street Landing on Eddy Street in Providence, hope to build a life-sciences complex with lab space, academic research space, a hotel, and retail and residential space. Richard Galvin, founder of CV Properties, said it’s too early to pin down exact costs, but “it will be several hundred million dollars” to build.

The details are sparse, so far, and one question that will need to be made explicit is whether “partnership” with a bunch of non-profit organizations means tax exemption for the development once it’s done.  One can imagine a bunch of tax deals to get the thing built and then payments in lieu of taxes (PILOTs) once it’s operational.

Off the top of my head, the scorecard for that supposedly game-changing property is:

  • Student housing
  • A minor-league baseball stadium
  • A facility with no prospective clients, thus far, other than non-profit universities

These strike me as things that a state should seek when its people are thriving, not when they’re tapped out for taxes and leaving the state in despair.  But whaddayagonnado, I guess.

So far, developers that have submitted proposals are seeking tax-stabilization agreements with the city because Providence’s commercial property taxes are far higher than in other communities. Yet the city has not granted any such tax treaties yet.

It all comes back to an institutional mandate to maintain the power of government insiders.  Unless that changes, Rhode Island’s done.

James Cournoyer: Please Allow Municipalities to Have the Flexibility of a Three Platoon Firefighting System

[James Cournoyer sent the following e-mail to members of the General Assembly. It is published here with permission. Additional background on this subject is available here.]

Dear members of the General Assembly,

Please reject House Bill H-5473 and Senate Bill S-0533, which seeks to make fire-fighter Platoon Structures / Shift Schedules subject to Collective Bargaining, and therefore potentially subject to the decisions of unelected and unaccountable arbitrators.

These bills serve only to further erode essential Management Rights and the ability of municipalities to exercise home rule.

Employees are already afforded an abundance of work-place and employment protections via the myriad of state and federal labor laws and regulations that currently exist.

Why Not Set the People Free?

J.D. Tuccille highlights some murmurs in Europe that remind one of the Rhode Island attitude:

The shadow economy—off-the-books business and labor that would be perfectly legal if people felt like subjecting themselves to taxes and regulations—ebbs and flows with the years. Right now, it’s down a bit in many countries from the days of the recession, but shadow economic activity is still huge. Across the European Union, it’s estimated to amount to 18.4 percent of GDP. Why people work off the books is no secret—high taxes and burdensome regulations are constantly cited by economists as primary drivers for people to hide what they’re doing. So, current policies are like kryptonite to people who want to keep the fruits of their labor. Got it. The obvious solution then is to…harangue and coerce people back into the official economy?

Even though regulations are pushing people out of the taxed-and-regulated economy, leaving them with effectively no taxes or regulations, government officials aren’t simply going to reevaluate their approach.  In their view, it isn’t government’s job to accommodate the people.  The diktat has been issued, and the people must be made to comply.

Even if it means banning cash so every transaction can be traced.

At least in Rhode Island, government officials make periodic noises about easing regulations.  Still, the plan appears to be to try every power-centralizing solution they can imagine for a hundred years before simply doing the obvious and leaving people alone.

(Via Instapundit.)

When the Students’ and the Teachers’ Interests Differ

This paragraph out of a 2010 Julia Steiny column has come to mind periodically ever since, but I somehow never got around to posting about it.  It makes an important point that is too easily forgotten as the state argues over standardized testing, teacher evaluations, charter schools, school choice, and even property taxes:

When Marcia [Reback, President of the RI Federation of Teachers] had had enough, she outted the elephant in the room. The interests of the teachers and kids are not the same, but were sometimes in direct conflict with one another. And when their interests diverge, she said, “I represent the teachers.” And shrugged. Who could argue with that?

Think about that.  Here we have a wealthy and powerful union organization, funded with money forcibly taken from taxpayers and frequently used to help elect politicians and modify laws in order to tilt negotiations and the entire educational landscape in its favor, whose mission is, at least in part, to advocate in opposition to the needs of school children.

Reback’s statement has come to mind for two reasons, this week.  The first is that the school choice legislation on which I’ve been working is being heard by the RI Senate Education Committee, today.  The second is that the 0.9% budget that I put in for Tiverton won, and the local school department has been threatening not to go forward with all-day kindergarten in the upcoming school year if it didn’t get its full budget request (even though doing so is a no-brainer).

In both cases, we’ll get some indication whose interests elected officials put first.

That’s a critical question at the local level.  Sure, most cities and towns probably have it written down, somewhere, that school committees are supposed to put the children first, but the incentives undermine that mandate.  Many school committees are stacked with teachers, whether retired or active in other communities, and many others were elected with the help of teachers unions and their activist allies.  Even if they weren’t, the nature of their position creates incentive to balance the demands of the teachers with the needs of the students and their families, not to advocate for the latter.

It’s an imbalanced system that can’t do otherwise than harm children.

 

Robbing productive class Peter to pay college graduates Paul

Is the departure of recent college graduates keeping Rhode Island at the back of the pack economically? Progressives in the state’s legislature apparently think it would be beneficial to have taxpayers subsidize student loans. A look at student debt data suggests that would be a major burden on a population that’s already heavily taxed–and that the idea may, in fact, backfire.

The debate has been raging almost since the turn of the millennium: With Rhode Island’s population waning, who’s leaving?  The first assumption was that the rich were fleeing the high taxes, which inspired policies meant to keep them — like an alternative flat tax and a phase-out of the capital gains tax.

Progressives objected that the evidence did not show flight of the rich, and as it turned out, they were right.  The departing demographic was the “productive class” — families in that highly motivated period of their lives when they’re exchanging their time, sweat, and talents for a trip up the rungs to the middle class.

To make that group stay, though, politicians can’t cut taxes in exchange for the campaign support like do for the wealthy.  And the productive class doesn’t use direct government handouts, so the government can’t make them stay by handing out entitlements.  They need less regulations so they can work and innovate, and they need to be able to keep the money that they’ve earned, rather than having it taxed away.

If we look at who is sponsoring two relevant pieces of legislation on the subject, it becomes clear that Rhode Island progressives have decided to try and bribe recent college graduates into staying in the state. Based on the rationale described in the bills, they hope a younger crowd will be like their older brothers and sisters in helping the economy to grow.

Continue reading on WatchDog.org.

Tracing the Problem of School Budgets

Two Providence Journal articles related to Warwick schools, yesterday, raise a broader question, and a partial answer to that question raises an important point that one seldom hear’s considered, in Rhode Island.  First up is the tale of the excess capacity:

The consultant hired to help consolidate the district’s 23 schools briefed City Council members and Mayor Scott Avedisian on Wednesday, and said as much as 40 percent of classroom space is sitting vacant. 

“I’d have to say, it’s the most dramatic I’ve seen in all my years of analysis,” said Edward Frenette, a senior vice president at Maini & McKee Associates, the Cambridge, Mass.-based firm in charge of crafting a master plan for the district. The firm has done 21 school consolidations in Rhode Island and Massachusetts.

The second article has to do with Mayor Scott Avedisian’s suggested use of those savings:

Edward Frenette, a consultant with Symmes, Maini & McKee Associates working with the School Committee, has told city officials Warwick could have as many as 8 to 10 more school buildings than it needs.

“Closing school buildings and consolidating schools is not an easy task,” Avedisian said in his budget message to City Council members. “It is very difficult and I will stand behind whatever decision is made. But a decision must be made. Simply not making a decision is costing millions of dollars a year that could go to technology and programs.”

A taxpayer advocate’s first response might (rightly) be to wonder why tax relief wouldn’t be on that list of things for which school consolidation savings could be used.  The study’s conclusion is that taxpayers are paying for school capacity that the city doesn’t need, so why wouldn’t it make sense to return that money to them?

The question is partly rhetorical.  One suspects that government officials see the current tax revenue as what the public is willing to pay for government, so if money is saved on one thing, it should just be spent on another.  I don’t think most taxpayers look at it that way; they tend to think they’re paying only what they have to for necessary services.

In fairness to Avedisian, though, state law complicates things.  Cities and towns are required to keep up maintenance of effort, which basically means that local school funding can never go down.  Municipalities can calculate that funding on a per-student basis, to account for falling enrollment, but I’ve never seen a clear answer to how that works.  In Tiverton, for example, the administration simply projected more students to enter our schools next year.  Taxpayers could presumably look at a ten-year average, or something, but the potential exists for an expensive legal battle.

As the article intimates, closing schools is difficult enough without the unknowable factor of a lawsuit.  So, the money stays with a school.

The question of why a union-dominated General Assembly would impose that difficulty on cities and towns pretty much answers itself.

The Budget Fight in Tiverton

For those who take a keen interest in Tiverton politics, local politics in general, or seeing a town employee shout at me and threaten to “get in my face,” I’ve put up a number of posts on Tiverton Fact Check in recent weeks:

  • An explanation of the 0.9% budget (Budget #2) that I submitted.
  • Video clips of outbursts from Town Administrator Matthew Wojcik’s (a Cumberland resident and Republican) directed toward residents, including me.
  • A video clip of my explanation of the budget.
  • A review of misleading statements from town officials and activists at a one-sided infomercial that they produced for public-access television.
  • My letter to the editor describing the positive vision for Budget #2.
  • Some additional points to dispel the fear that the school committee will cancel plans to go to full-day kindergarten if they don’t get $126,000 that they don’t need.
  • A review of a falsehood promoted by Tiverton 1st coordinator Brian Medeiros that one of Tiverton’s many massive tax increases in recent years came because the town didn’t have money in its reserves to soften the blow of a reduced state reimbursement for the now-forgotten car-tax phase out.
  • An analysis of the misleading comparison of Portsmouth’s larger reserve fund to Tiverton’s (still very large) one.
  • An explanation of the utter falsehood pushed by Tiverton 1st in a mailer that went out to some residents.

Dissembling on HealthSource Tax

This Kathy Gregg article on Governor Gina Raimondo’s reaction to poll results showing a new HealthSource tax to be hugely negative should not slip through the cracks.  The results of the poll found 63% opposed to the tax and only 27% in favor.  Here’s Raimondo:

“It’s out of my hands. I can’t say we are not going to have the health exchange,” Raimondo told reporters Thursday, the morning the poll results were released.

“Obamacare is what is is, the Affordable Care Act is there. I had nothing to do with it. [But] we have to implement it … and pay for it. And what I tried to do is present a proposal to the General Assembly which would put the least amount of cost on business owners for the maximum amount of benefit.”

Well, no.  It’s not out of her hands.  Handing it over to the feds means that “we” — i.e., the state government — are not paying it.  True, either way, Rhode Island health care customers will be paying the bill, but the distinction between the state and federal governments is not immaterial, not the least because of the games government officials are playing with the numbers.

“So we can either give it to the federal government or we can do it,” Raimondo said, again characterizing her proposal as one that “makes sure we run it in Rhode Island at a cost which is equal to or lower than the federal government.” …

In calendar year 2016, House fiscal staff advised lawmakers the new surcharge — that Raimondo describes as a “health reform assessment” — would be 4.74 percent for individuals and 0.98 percent for small businesses. During the next fiscal year, which begins on July 1, 2016, individuals would pay an extra 3.76 percent, and small-employers 1.05 percent to raise $11.2 million.

Kathy Gregg compares this with a 3.5% federal fee that would raise $8.6 million, but that isn’t an apples-to-apples comparison.  The federal 3.5% is applied to plans in the exchange and then spread out to all health care customers with similar plans.  In other words, the effective rate for the to people actually paying would be much lower.

The HealthSource tax, by contrast, starts with the budget for the exchange and then applies its 4.7% and 1.0% fees to all plans.  In the federal case, the federal government carries all of the risk for cost overruns, because its fee is set by law.  In the state case, the state government carries all of the risk, and the director of HealthSource can just adjust the tax as she sees fit.

I’d also take issue with the assertion that “business owners” are hurting and need that lower rate.  Are individual health consumers not hurting, or are they just not organized enough to be a political problem?

Legitimacy and the Trust Deficit

Scott Rasmussen notes that the American people are losing trust in government for all sorts of (justified) reasons, which erodes the public sense that the government has any real legitimacy as a representative organization:

Until people can trust government, the government cannot enjoy the necessary consent of the governed. That’s true whether the distrust comes from a black teenager in Baltimore or a Tea Party leader in Texas.

For government in America to regain its legitimacy, government officials must change their behavior. People may gain power by winning an election, getting a badge or landing a job with the IRS, but legitimate authority is something that has to be earned every day.

This observation, at the national level, is evidence of my theory that the ills that plague Rhode Island, and similarly governed places, will eventually spread like an infectious disease if they are not cured at their source.  Rhode Islanders have long had a sense that they are locked out of government, that the rule of law does not exist (at least not in a fair, even way), and that things will never change.

There’s a reason people will be surprised if the public doesn’t help fund a second minor-league baseball stadium in the heart of Providence, on land that was promised to be a source of tax revenue and economic development.  This level of distrust is what happens when it’s clear that special interests will manipulate laws, as with the Central Coventry Fire District, in order to ensure that they never lose.

Although not to that level, yet, the “government versus the people” dynamic goes on in every city and town in Rhode Island, every year.  When voters approved, by nearly a two-to-one margin, an alternative budget that I proposed last year in Tiverton, holding the tax levy to a 0.0% increase, elected officials didn’t embark on a year of soul searching to figure out (or even ask) what people want.  They spent the year using their public meetings to attack me as if I somehow fooled the community, and they (apparently) worked in back rooms to come up with threats that might help them turn out the vote.  (This is nothing new.)  Now, we’ve got Town Administrator Matt Wojcik using a public forum (in front of other town employees over whom he has managerial authority) to snarl at me as if I’m a reckless deceiver simply for giving the people an alternative.

I think that’s what Rasmussen means about earning legitimacy every day.  In Rhode Island, and increasingly at the national level, the emphasis is on finding ways to give the people something the insiders say they need, but that they may not want and would not accept if they could actually make representative democracy representative.

Rhode Island’s Medicaid Reforms Bank on Speculation and Shift Costs

As a state under annual threat of budget deficits that also has the country’s highest Medicaid cost per enrollee, Rhode Island can’t afford not to think about reforming the public health care program.

In the waning days of the presidency of George W. Bush and the governorship of Republican Donald Carcieri, the state experimented with a nation-leading“global waiver” to lower costs in exchange for flexibility.

Even though the experiment was largely successful, intervening governors and the federal Affordable Care Act (ACA; ObamaCare) appear to have blocked parts of the reform and let others peter out.

Now, progressive Democrat Governor Gina Raimondo has convened a Working Group to Reinvent Medicaid, with a collection of reforms of her own, designed to save or raise $91.1 million in state money next year–a little less than 10 percent of the state’s total Medicaid spending.

Continue reading on WatchDog.org.

Race Riots Aren’t the Only Evidence that Big-Government Progressivism Doesn’t Work

With race riots in Baltimore shocking the nation, streamed in full color and graphic video across the Internet and social media, discussion has turned to the causes.

Speaking two days after the riots began, President Obama blamed the failure of a Republican Congress to pass his agenda.  Writing on National Review, Kevin Williamson focuses on the progressive Democrats who’ve tended to dominate cities that are wracked with such uprisings.  “They are incompetent, they are corrupt, and they are breathtakingly arrogant.”

Boiled down to core beliefs, there are two mutually exclusive political hypotheses on the table.  Either a centralized government can implement programs to raise up struggling communities, or centralizing government creates a font of money and power that will attract the sorts of people who use — prey on — those communities.  Both cannot be true.

My article on WatchDog Arena, this week, looks at Rhode Island’s rank of 42nd among states when it comes to return on taxpayer investment in government, according to WalletHub.

Put in Williamson’s terms, poor infrastructure maintenance shows incompetence, green energy boondoggles (not to mention regular arrests of legislators, including the last speaker of the Rhode Island House) show corruption, and the regulatory overreach shows a “breathtaking arrogance” about insiders’ ability to control an entire society.

If only because it shares New England’s typical lack of racial diversity, Rhode Island is not likely to face race riots anytime soon.  (Rhode Island is 7.5% black, to Maryland’s 30.1%; Providence is 16% black, to Baltimore’s 63.7%.)  That may only mean that the consequences of one-party rule dominated by a big-government progressive philosophy will come in another form.

When people are being pushed into difficult situations by a government that doesn’t serve their needs, and over which they feel they have no control, they can respond in different ways.  In Baltimore, large protests of people with few options are turning into riots.  In Rhode Island, people with more options are leaving.

The difference may only be a matter of time, though, as the state attracts people who think they need government services, even as those who pay for them exit.  Americans from all states should work to ensure that the experiments performed on collapsing and riotous cities don’t have to be tested across the country.

A Fishy, Misnamed State Bank

The more I read about this “Rhode Island Infrastructure Bank” being proposed by Governor Gina Raimondo and General Treasurer Seth Magaziner, the worse the idea sounds:

As they envision it, $22 million or so in state tax dollars, left-over federal stimulus dollars and bond proceeds would be funneled to the cities and towns for energy-cutting projects, such as these, through the renamed Rhode Island Clean Water Finance Agency, created in 1990 to provide loans for improvements to sewage and drinking water systems.

So, this will be new municipal debt without, it seems, voter approval.

… the legislation would also salt away an unspecified amount of state money away in “one or more” loan-loss reserve funds to encourage private banks to lend money to private homeowners and businesses for similar kinds of energy-saving building upgrades. The legislation does not say how much.

So, the public would absorb the risk for projects financed by private companies for private entities and individuals.

When asked why National Grid was among those backing legislation that could cut into its revenues by reducing energy use, company vice president Michael Ryan said the answer lies in an earlier “decoupling” law guaranteeing National Grid a “bump” in its rates if usage drops, as a result of energy-efficiency efforts.

So, it won’t actually save Rhode Island money on energy; it’ll simply shift the burden from government agencies and private entities that are able to get the loans onto those who are not.

The answer from treasury staff to many of those questions [about limits to the funds and processes for claiming losses] was this: the “operational details” are not spelled out in the latest, 80-page version of the bill. According to Rogers, details such as these — along with the mechanism for repayment of the loans — would be spelled out, at a future date in “rules and regulations.”

So, the make-or-break details will be out of legislators’ hands.

Robert Boisselle, the lobbyist for the Associated Builders and Contractors of Rhode Island, was among those raising red flags about references in the legislation to “Project Labor Agreements.” Boisselle said such agreements (“illegal in 22 states”) effectively bar non-union shops — with 80 percent of the state’s laborers — from bidding.

So, the prices will be driven up in order to make sure that the money goes directly to union members (and thus filtered back into advocacy and donations for Democrats).

If the whole thing seems risky and even fishy, keep looking, a reader tells me via email.  In an op-ed supporting the bank, Magaziner cites the Connecticut Green Bank as a model.  Look into the Connecticut Green Bank, and you find this:

[Coalition for Green Capital (CGC)] leaders Reed Hundt, and Ken Berlin were involved with the establishment of Connecticut’s green bank from start to finish and remain closely involved with the banks operations.

Internet searches for former FCC Chairman Hundt, now an investment advisor, turn up a lot of overlap with Magaziner’s father, Ira.  More notably, his name turns up in campaign finance reports, with $2,000 in donations to the RI Democratic State Committee in October and $1,000 to Gina Raimondo, last June.

On the other hand, some of us might not need to do that level of digging.  It’s enough to know that we have the worst roads and bridges in the country and the people in charge of the state government want a state “infrastructure” bank that helps governments pay to replace their windows.

Helping the Public to Start Waking Up

A new state representative from Cranston, Robert Lancia, has begun his work trying to inform the public:

Back in 1992 the General Assembly, due to the banking crisis, began to end the practice of using restricted receipt accounts. Restricted receipt accounts were created to put collected money into specified accounts for specific purposes.

For example, user fees were implemented at state beaches; $1 for state residents and $4 for non-state residents “to be dedicated to development and renovation of recreation projects and for additional acquisition of recreation areas.” Essentially, the money was to be used for a “state beach, park, and recreation development fund.” We paid those beach fees back then, and even higher fees now, because we were told the money went to promote recreational areas.  Now your beach fees can go to any program within the state budget. Did you know that?

Here’s another limited transparency issue.  Look at your next landline or cell phone bill, notice the $1 assessed on each bill for 911.

In 2014, over $15 million was collected for 911 services. Of that amount collected, only a little over five million dollars ($5,400,000) was used for that purpose. In 2000, the General Assembly changed the law redirecting these previously restricted revenues into “the state general fund.”  Did you know that?

And on it goes.  We’re all busy in our lives, and it’s easy to forget each affront as they pile upon each other.  It’s worth reading reminders.

Taxing the Privilege of Owning Property Might Have to Wait

I’m slow to mention this, so readers have likely seen it, but it’s worth marking down Ian Donnis’s RIPR post for the record:

House Speaker Nicholas Mattiello wants to eliminate the “Taylor Swift tax”  — Governor Gina Raimondo’s proposed statewide property tax on vacation homes worth more than $1 million.

“I’m hoping that the revenues are there to eliminate that,” Mattiello said during a taping Thursday of Rhode Island Public Radio’s Political Roundtable. “You could look to see that eliminated. I agree with the public sentiment that you don’t open the door to a new tax, because it’s just going to expand in the future, so that’s something that I’m really looking to eliminate.”

Mattiello added, “I don’t want to speak for her, but I believe the governor concurs with that at this point, and we’re doing that collaboratively.”

Of course, before the governor announced her budget, we knew that the state’s revenue was running higher than the estimates that she was required to use for her budget.  It was therefore predictable that there would be items that would be easy to pick off.

Perhaps the policy and politics folks in the governor’s office figured they might as well use that fact in order to make budget feints, shoring up progressive support by going after The Rich and letting Mattiello take the heat (and opposing rewards) for removing the absurd policy.

If that was the plan, though, I have to wonder whether this particular one wasn’t a bit of a fumble.  The association with a pop star blew the proposed tax up from a local story to a national one, adding to the narrative that holds Rhode Island to be anti-business and generally anti-success.  Even just locally, though, the proposal might have cost Raimondo the last benefit of the doubt that more-conservative Rhode Islanders might still have been giving the former general treasurer for attacking pension reform.

(Naturally, I still prefer to believe that it was the parody song that did it.)

Press Conference To Oppose Taxpayer Funded Stadium Tomorrow at 3:45 pm; Meanwhile, PawSox Graciously Offer to Buy the Land

As you may have heard, tomorrow at 4:00 pm, the Commerce Corporation (formerly the EDC) will meet to hear a proposal from the PawSox for locating a baseball stadium in Providence — and what they want from state and Providence taxpayers to do so.

Almost simultaneously, all of the organizations and individuals* opposing the PawSox proposal will be holding a press conference — right outside of the building where the Commerce Corporation will be meeting with the PawSox. In the event you are able, please stop by. It will kick off at around 3:45 pm. Below is the address of the Commerce Corporation, where the meeting will be taking place inside and the press conference opposing will be taking place outside.

315 Iron Horse Way
Providence, RI 02908

Helpful tip: should you need directions from Mapquest or Google, as I did, be sure to enter “555 Valley Street, Providence” instead.

So the latest development is that the PawSox have offered to purchase from the state the prime, waterfront land upon which they propose to build, largely if not exclusively at taxpayer expense, a baseball stadium.

They presumably still want $4 million/year from state taxpayers. (They have, remarkably and not very credibly, actually increased their estimate of offsetting tax revenue to the state from $2 million to $2.4 million/year. Let’s remember that, while the tax revenue from the stadium is a pure guess … er, projection, the $4 million/year from the taxpayers to the owners of the PawSox would be a firm obligation.) And they’d presumably still like to be relieved of the obligation to pay property taxes, an obligation that Providence Council President Aponte quickly tried to shift to state taxpayers.

Even WITH the PawSox offer to purchase the land, these constitute remarkably aggressive terms for a use whose seasonal nature prima facie limits its potential for economic activity.

In a way, the PawSox proposal is worse than 38 Studios. As WPRO’s John Loughlin pointed out, 38 Studios was a Hail Mary pass. But a Hail Mary pass has some chance, however remote, of succeeding. With this stadium, EVERYONE, including our elected officials, KNOWS UP FRONT that it would be a financial loser for taxpayers.

We all very much want the Pawtucket Red Sox to stay in Rhode Island, if not Pawtucket. But the price has turned out to be very high, indeed. No one has made a remotely rational case as to why, in the face of red budget ink as far as the eye can see, our elected officials, on behalf of state taxpayers, should take on yet another economic development loss leader like the Convention Center Authority.

We cannot easily divest ourselves of that $15 million/year net loss. But for heavens sake, we also don’t need to knowingly add another $2 – $4 million/year into that budget column.

Rhode Island needs to learn how entrepreneurship really works

Everybody around the table gave me that friendly look that says, “You speak eloquently and seem to care, but we don’t think you really get what we’re talking about, here.” At the “Make It Happen RI” conference, I was seated at one of about a half-dozen round tables with eight to ten people at each, assembled to talk about entrepreneurship in Rhode Island.

In a half-dozen other conference rooms in the Rhode Island Convention Center, similar tables were filled with similar people, discussing related topics focused on how Rhode Island could “make it happen.”  That is, how leaders in the public and private sectors could get the state off the wrong end of every list, and change the state’s motto — “Hope” — from a bitter joke to a reality.

The statement that had drawn “the look” was that we were too focused on entrepreneurship as this exciting process of birthing cutting-edge businesses to make investors rich.  The plumber who identifies flaws in his boss’s business model, applied to the local market, and who strikes out on his own to test the theory is also an entrepreneur; it isn’t just the Mark Zuckerbergs of the world.

A recent study out of Pepperdine University specifies that entrepreneurs aren’t just “self-employed” people, but “the starter[s] and owner[s] of new businesses,” with an emphasis on “intense and continuous competition between new products and ideas.”  According to the authors, “The entrepreneur as gap-filler and risk-bearer is especially important to economic growth in developing nations.”

Continue reading on WatchDog.org.

Income Inequality and the Middle Class in RI Cities and Towns

Stephen Beale has a story on GoLocalProv, this morning, on “The RI Communities with the Biggest Wealth Gaps.”  The progressives whom Beale quotes all handle the question as one of “income inequality,” but the subject really has more to do with a certain way of looking at the middle class, as on the interactive map from Pew that I’ve mentioned here and on WatchDog.org.

That’s the thrust of the comments that I gave Beale for the article.  Progressive policies create this gap between rich and poor, because they dismantle the structure that families can use to bridge the gap.  As I put it in the article, they “make it difficult to improvise economically.”  Then, they explicitly attempt to redistribute money based on the political demands of government, rather than leave it in the economy, where people can redistribute it themselves through commerce.  The first method benefits political interests, which helps insiders; the second method benefits the economy, which helps everybody.

An example of a progressive policy suggested by Kate Brewster of the Economic Progress Institute (formerly the Poverty Institute) is a fine illustration:

… “Cities may be able to provide some opportunities for residents to improve their economic circumstances through policies that require businesses that receive benefits from the city to hire city residents,” Brewster said.

The most prominent example of such a policy in Rhode Island is the First Source ordinance in Providence, which mandates that businesses receiving any form of aid from the city first attempt to hire local residents before going outside of the city to recruit. However, a GoLocalProv report last year found that the city had largely failed to enforce the ordinance, prompting a lawsuit from the activist group, Direct Action for Rights and Equality.

As Rhode Islanders are learning with every new high-profile development that’s proposed, our state has structured itself such that businesses find it difficult to operate without seeking some sort of benefit from the cities, towns, and state, whether tax deals, grants, or some other relief.  That puts them at the mercy of such policies as Brewster suggests.  Then, those policies place additional burdens.  To the extent that a business can’t simply hire the best candidate for a job, it represents an implicit drag on its operations.

The end result is that entrepreneurs (and less highfalutin small-business owners) can’t or don’t bother to enter the economic game.  That leaves more space for the established players who are able to work the system.  They get richer than they otherwise would be, while the folks at the bottom of the ladder have no rungs to climb up.