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The Government Plantation Dragging Down California

Trying to understand why wealthy California would have the highest Supplemental Poverty Measure, which includes cost of living, Kerry Jackson describes what I’ve been calling the “government plantation“:

Self-interest in the social-services community may be at fault. As economist William A. Niskanen explained back in 1971, public agencies seek to maximize their budgets, through which they acquire increased power, status, comfort and security. To keep growing its budget, and hence its power, a welfare bureaucracy has an incentive to expand its “customer” base. With 883,000 full-time-equivalent state and local employees in 2014, California has an enormous bureaucracy. Many work in social services, and many would lose their jobs if the typical welfare client were to move off the welfare rolls.

The change, since 1971, is that this tendency of social welfare bureaucracies has metastasized to the entire government.  The leverage isn’t just one agency as opposed to others, but government itself, as a sector in society.  Whether elected or appointed, government officials’ incentive is to create new services to provide and to increase the number of people receiving them.  This expands their base of support while ratcheting up the amount of money they can extract from others.

The well-advertised benefits available attract people interested in collecting them, even as the increased costs and restrictions on private-sector life drive away the people whose work is supposed to grow the economy that pays for it all.  California started from an enviable position, which put in place some massive wealth centers, but even so, a growing tumor will eventually kill even the healthiest animal.

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Linking Poverty and Licensing in a Comprehensive Philosophy

An editorial in the Orange County Register makes the important connection between poverty, welfare, and occupational licensing:

Following the critical passage of tax reform, congressional Republicans and President Trump might now turn their attention to reforming at least some of the nation’s vast, too often ineffective social safety net. …

Ultimately, of course, the best way to combat poverty is to ensure America’s economy continues to grow and jobs remain accessible to as many Americans as possible. Tax reform and Trump’s halt on excessive new regulations are important steps toward that. But the White House and Congress shouldn’t be content with that. Other areas are ripe for improvement as well, like occupational licensing reform to remove artificial barriers to work.

For a while, it seems, the political right lost sight of the need for competing visions.  People’s political views tend to result from some sort of balance between freedom and security (not only for themselves, but as organizing principles for the benefit of others).  It isn’t sufficient, therefore, to combat the statist vision of tasking government with everybody’s well-being and simply (simplistically) making it so with simply cutting taxes and taking all limits off of the wealthy.

Of course, very few people really hold that second view, but the actual philosophy that it caricatures has to be better articulated.  Part of removing limits, for one, means removing them from the poor and working class, as well, which should place a market-driven pressure on the wealthy that is greater than the supposed pressure that government manages.  (I’m always mystified that the same people who warn that the rich control government think they can use government to limit the rich.)

Similarly, the case has to be made that the outcomes that the pro-license advocates claim to be protecting us against aren’t really a danger or don’t justify the heavy hand pushing down on individuals’ opportunity and our economic health.

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The Necessary Schemes of the Government Plantation

Red Jahncke describes one part of the government plantation funding strategy:

… 42 states tax hospitals. Why? One answer is the perverse incentives built into the Medicaid law. When a state returns tax money to hospitals through Medicaid “supplemental payments,” it qualifies for matching funds from Washington. Connecticut hospitals will pay $900 million in taxes, but the state will offset that with $600 million in supplemental Medicaid payments—matched with $450 million of federal funds, meaning Hartford comes out ahead in the whole scheme by $750 million. Nice work if you can get it.

As Jahncke closes his essay by suggesting, if government wants to do this, it should be straightforward about it. The problem is that, increasingly, the business model of government is to seek people to whom to provide benefits or services and then find ways to make taxpayers at all levels of government pay for it.  If the wealth transfer were more obvious, then the people paying the bill would more quickly decline to do so, especially for those portions funded across state lines by the federal government.

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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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The Missing How with Food Stamp Backlog Clearance

One crucial thing is missing from an AP article on the judicially appointed special master’s elimination of Rhode Island’s UHIP-driven backlog of people waiting for food stamps:

The attorney appointed by a federal judge to deal with failures in Rhode Island’s food stamp system says the state has eliminated a backlog of thousands of applications. The state has been grappling with problems since it introduced a new computer system last year.

Deming Sherman also said in a report filed in U.S. District Court in Providence last week that the state is almost current on processing new applications.

If we take this self-reporting at face value, the key question is:  How did he do that so quickly?  It is critical that Rhode Islanders know why an appointed Mr. Fix-It was able to accomplish in weeks what the professionals in state government could do in months (going on years).  Something really must be going wrong if the state’s endemic problems are so easily fixed by somebody slightly outside of the system.

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PawSox: Suddenly a Legislative Hot Potato?

Kathy Gregg is reporting in today’s Providence Journal that

[Senate President Dominick] Ruggerio said the Senate Finance Committee will unveil a revised version of the PawSox financing bill next week, and then vote to “hold it for further study,” so the public can see it, discuss it and debate it before the General Assembly convenes for its 2018 session on Jan. 2.

Yesterday on the WPRO airwaves, Dan Yorke, an open supporter of the state’s financial participation in a new stadium for the PawSox, noted that he had been aware since last week that this would happen. More interestingly, he reported that members of the House have been urging their colleagues in the Senate “do not send us this bill”.

Interesting. Are some in the House seeing the folly, financial or political or both, of the state getting involved in a sport when far more important matters have been budgetarily neglected or outright cut? For example – and feel free to add to this list of unwise legislative priorities – of course, excessively generous state pensions had to be cut, though bringing the fund from 49% funded to only 56% funded was in no way worthy of the fawning national media coverage showered on the governor for this “feat”. But bigger picture, should public pensions take a secondary position to a very seasonal “economic development” (please, no snickers) sports project?

And as was demonstrated by both the Rhode Island Center for Freedom and Prosperity and the Republican Policy Group, headed by Minority Leader Patricia Morgan, the money to repair Rhode Island’s as roads and bridges could easily have been found in the budget. But Governor Raimondo pretended otherwise and the legislature unwisely followed her lead in passing a highly destructive and inefficient toll plan (the implementation of which is not going swimmingly). Really? Our roads and bridges are less important than the state participating in the frivolity of a sport?

What does it say about Rhode Island’s priorities if the state participates in the PawSox stadium? That needs to be the point that House members and leaders mull over as they consider the PawSox request and the Senate’s bill. Possibly, it is the basis of the quiet push-back, referenced by Yorke, that the Senate is getting from the House and that has hopefully turned the PawSox stadium into a political hot potato.

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Rhode Island 49th On The Jobs & Opportunity Index

Rhode Islanders want to prosper in an economic climate that rewards hard work, encourages small-business growth, creates quality jobs, and can lead to a better life for their families. In this regard, the traditionally cited monthly unemployment rate is often used by state lawmakers as a benchmark to evaluate the effectiveness of state economic policy initiatives. However, this rate represents a very narrow glimpse of 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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Government Good Intentions Edge in on the Family

Breakfast in school for lower-income children is not a public policy that many people are inclined to spend time arguing against, this author included.  That said, something in Bob Plain’s RI Future article promoting the program is worth highlighting:

Too many schools in Rhode Island are leaving federal money on the table when it comes to providing free breakfast to their students,” said Governor Gina Raimondo, who recently visited Veazie Street Elementary to draw attention to its breakfast program. “We know students can’t do their best work if they’re hungry.”

We should be careful not to lose the distinction between two things in the governor’s statement:

  1. Students who are well fed do better in school.
  2. Schools are missing out on money.

While I’ve forgotten the details, I recall from local discussions some years ago that districts can make their food programs into a bit of a profit center.  On the money front, the range goes from a well-intentioned effort to secure funding in order to feed children who otherwise wouldn’t be fed to a more-cynical plan to maximize money for the district for whatever purposes districts use money (mainly personnel).

Wherever a particular advocate or school district falls in that range, however, we ought to spare some sensibility to be shocked at something that is never mentioned in this context.  Nobody appears even to think of the possibility that some of the students for whom districts could collect money are adequately fed at home and that, by pushing the program, the government is pulling children away from a potentially family-boosting interaction.  At the very least, they’re transferring some of the child’s sense of who provides for him or her from the parents or guardians to the government.

We see this with government-subsidized child care.  On average, studies suggest that students receiving such care perform worse, particularly in behavior, and one explanation is that they draw children into a classroom setting instead of leaving them with parents, grandparents, or other individuals with direct relationships with the children.

We’re far too cavalier about the potential side effects of using government as a cure.

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To Lift All Boats, the Tide Has to Come In

What’s your first thought upon reading the following, from a Linda Borg article in the Providence Journal?

The rising tide of economic recovery has not lifted Rhode Island’s poor, the 2017 Report on Hunger in Rhode Island found.

Rhode Island, at 12.8 percent, has the highest rate of poverty in New England, with 130,000 people living in households with incomes below the poverty line. One-third of the jobs created in Rhode Island last year have an annual wage of $26,529, the study says.

Unless you believe the politicians’ rhetoric that our state’s economy is strong — in which case, you’ll see these 130,000 as inexplicably slipping through the cracks — you’ll probably conclude that Rhode Island’s economy needs to improve so the tide actually is rising.  As the RI Center for Freedom and Prosperity’s Jobs & Opportunity Index (JOI) shows, it’s not.

But Borg’s article, which is essentially promotion of a Rhode Island Community Food Bank report, never challenges our state’s approach to economic development.  Rather, it advocates against Republican policy proposals in Washington and spares a word to chide the state government for the UHIP debacle.

Charity is an important part of the equation when it comes to helping our fellow human beings, but the higher goal — mentioned whenever the topic comes up — should always be to get folks on their own feet and in a condition to be charitable toward others.  That is how the rising tide works, and too much reliance on government suppresses it.

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Retroactive UHIP Checks Illustrate the Hazards Inherent in the System

The latest UHIP debacle provides a warning about what this system will look like when it’s fully operational:

The update caused the Unified Health Infrastructure Project (UHIP) system to recheck the eligibility of applicants for the State Supplemental Payment program, and in cases where they were found to have been eligible for payments for a number of previous months, they were retroactively sent an individual check for each month. But no note was attached to explain why the identical checks had arrived.

Move past the scandal of the system’s not working and imagine what this looks like when it’s functional.  People will automatically get checks, and they’ll automatically go up and down with their eligibility.  That will be a very visible incentive for people not to earn money, because they’ll be accustomed to watching their benefit amounts go up and down.

The popularity of lotteries and raffles show that people can be irrational about money in this way.  Just as people will shell out cash for an almost imaginary possibility of winning, they will sometimes give up the potential for more money when they see an existing income source reduced.  Or they can learn the lesson the other way:  After their work-related income goes down, they’ll see an automatic increase in welfare to help make up for it.

One suspects that the number of welfare recipients (or people, for that matter) who keep spreadsheets and line graphs of their total income to be relatively small, especially quantifying benefits that don’t necessarily come with an obvious dollar amount.  Moreover, people will tend to put a thumb on the scale of their feelings when it comes to exchanging assistance for work to the extent that the jobs available to them aren’t the most exciting.

This is one of the many ways that UHIP will enhance the negative effects of a welfare state more than it gains taxpayers in efficiency.

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Two Candidates for Governor

Two tweets posted on Twitter today within one minute of each other are telling, as well as related to part of my conversation with John DePetro for my weekly call-in yesterday.  First:

Second:

I don’t juxtapose these to promote Patricia Morgan, or even to advocate against Gina Raimondo.  An impression of Democrat Governor Gina Raimondo has been building, and it could (and should) be a barrier to her reelection no matter how much money she’s able to dump into Rhode Island’s relatively small media market.

When it comes to actual crises and errors in the executive branch, Raimondo takes an incremental approach.  A new revelation puts UHIP in the news, so she comes up with something that appears to be a response and walks away again.  Meanwhile, her affection for photo ops and staged events is well established.

That isn’t leadership, and people know it isn’t leadership.  Whatever collage of pleasant feelings canned photo ops might generate can be washed away by manifest bad management.  To the extent that her ample professional staff (in and out of the campaign) believes that photo-ops are indispensable, every single one of them should be of a leader fixing problems.

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