Alarming – Budget Article 17 Could Set Up Stream of 38 Studios-Style Failures

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Another problem article in the proposed House budget would, remarkably, put state taxpayers in positions of equity in certain, chosen companies. See the language below on page 9:

(b) Notwithstanding anything in this chapter to the contrary, the commerce corporation may make a loan or equity investment as an alternative incentive in lieu of the provision of tax credits so long as the applicant otherwise qualifies for tax credits under this chapter.

This is a bad idea and poses serious dangers to taxpayers if it passes, as Rep Patricia Morgan (R – Coventry, Warwick & West-Warwick) outlines in the following statement just issued.

Rep. Morgan Questions New Commerce Article Which Puts Taxpayers at Risk

STATE HOUSE — Representative Patricia Morgan (R-District 26 Coventry, Warwick, West Warwick) is calling attention to the new provisions in Article 17, which relate to commerce and economic development.

“The new language governing the Commerce Corporation’s program for economic development on the 195 land is troubling. The new law would fundamentally change the original intent of the program and lead the state into areas best left to financial experts. Financial money managers risk private money, the state risks taxpayer money,” stated Representative Morgan.

“Rhode Islanders have made it clear that they do not want tax dollars given to projects that should be left to the private marketplace. In the past, we have granted authority for the Commerce Corporation to issue tax credits which have the goal of growing tax revenue as the company thrives. However, the Commerce Corp. is now asking for the ability to make equity investments. This investment puts taxpayers in the position of being owners of the company.” explained Morgan.

“If the company thrives, the state not only receives the investment, but also a potential profit. However, if it fails, as in 38 Studios, state would lose the entirety of the taxpayer investment. Public money should never supplant private investment in the marketplace. It’s dangerous for taxpayers.”

Other provisions the Article17 also raise a red flag. “In existing statute the Commerce Corporation is authorized to give up to $15 million, capped at 30% of the total cost of the project, to a developer. The new Article allows a developer to split the project into two and accept $15 million for each portion for a total of $30 million. Additionally, the new language allows the Commerce secretary to waive the 30% cap once a year. That takes away taxpayer protections.”

“One major concern is a taxpayer funded subsidy for the Superman building project in Providence. In current law, economic development incentive programs for the 195 land reclamation project, include the Downtown Providence area with the Superman building. The budget article before the General Assembly increases the maximum aggregate tax credits for this program. The program has been increased to $150,000,000. With such a high program cap, the fear is that money will be diverted to fund redevelopment of the Superman building without taxpayer input.” explained Morgan.

“While these changes were presented to the Finance Committee, albeit well after midnight, they have not been thoroughly explained or vetted. The financial impact to Rhode Island must be thoroughly reviewed before any budgetary vote. I, as a House Representative, want to be fully confident this program will not lead taxpayers down another dead-end path of wasted taxpayer money.”

“Ultimately, our state’s leaders need to do more than find creative corporate subsidies. This welfare takes money away from hardworking Rhode Islanders and is funneled to companies of specific choosing. The State should not be in the venture capital business. Instead we need to do the hard work of reforming our economic climate; reducing property taxes, eliminating costly and non-value added regulations, changing a hostile legal system, restoring ethics, and reducing the cost of government instead of tacking on new taxes, fees and tolls each year.”

“Companies should come to Rhode Island because it’s a great place to grow, not because we pay them to come.”

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At $55,650/Job, RI Cannot Afford the Governor’s Economic Development Approach

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In the “Absolutely!” segment of his column in today’s Providence Journal, Ed Fitzpatrick praises Governor Raimondo for bringing one hundred General Electric jobs to Rhode Island. His column continues,

Raimondo has talked about public criticism, saying, “At the end of the day, the governor is judged based upon results.” Well, these are the kinds of results she envisioned in creating an economic development “tool box.” GE will apply for $5 million in tax credits over 10 years and $565,000 in closing funds. While critics decry “corporate welfare,” Raimondo says other states use such incentives, and “you cannot fight with one hand behind your back.”

One hand tied behind your back is a good way to describe what it’s like to try to run a business in business-unfriendly Rhode Island. Yet, rather than improving the state’s business climate by reducing state spending so as to lower taxes, Governor Raimondo has actually been doing the opposite by ramping up a whole array of targeted tax subsidies that everyone else has to pay for.

Yes, we will, indeed, judge the Governor based upon results. But our measure will be much broader than the very occasional photo op success. We’ll be looking for a consensus among national rankings that the state is going in the right direction, for example. And we will definitely be keeping an eye on Rhode Island’s ranking on the RI Center for Freedom and Prosperity’s Jobs and Opportunity Index (JOI).

At anything like $55,650 per job, Rhode Island simply cannot afford the “tools” Governor Raimondo is using, either literally or in the cost of her continued inaction to improve the state’s business climate. She needs to begin looking outside of a “tool box” that, so far, resembles a corporate legislative grant program on heavy steroids.

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Major Correction, Governor: GE is Coming Here Due to Corporate Welfare, NOT an Improved Business Climate

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So you’ve probably heard – and if you haven’t yet, Commerce Corp, formerly the EDC, will be sure that you do – the mildly good news that General Electric will be creating one hundred new jobs in Rhode Island, and possibly more down the road.

But in announcing this, Governor Raimondo fibbed in a big way.

“This is real validation that the steps that we’ve taken to improve our business climate … are paying off,” Raimondo told reporters during a Statehouse news conference.

No, indeed. Just the opposite. General Electric is bringing those jobs here due to targeted taxpayer subsidies, a.k.a., corporate welfare. From the Governor’s own Commerce Secretary:

Commerce Secretary Stefan Pryor said the expected cost in state incentives for those initial 100 jobs is $5.65 million, over 10 years.

Look, I don’t agree with it, because it is unfair and bad policy. But the reality is that once in a rare while, tax incentives are needed to land a big fish.

Of course, the problem is that the Raimondo administration, with the unwise acquiescence of the General Assembly leadership, has substituted wholesale corporate welfare for the broad-based tax and regulatory cuts that the state’s business climate so badly needs. Worse, however, is that the Governor is attempting to mischaracterize the business-as-usual corporate welfare that she offered to G.E. as the broad-based improvement to the state’s business climate that she is strangely reluctant to undertake.

Rhode Island ranks forty eight out of fifty on the RI Center for Freedom and Prosperity’s JOI, Jobs & Opportunity Index. I’m not going to ask Justin Katz, the Center’s Research Director and chief architect of JOI, whether one hundred good paying jobs would improve Rhode Island’s JOI ranking, in part, because he has more than enough to do but mainly because it’s a good guess that the answer is: marginally if at all.

More important is the big take-away from the G.E. news, which WPRO’s Matt Allen nailed this afternoon: companies will respond to lower taxes by bringing jobs. Let’s throw open wide our doors by reducing taxes across the board, rather than on a case by case basis.

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Trying to Disguise the Handouts

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In the intra-conservative discussion over things like a universal basic income, I have to say I’m with Thomas Sowell:

Welfare-state guarantees of not having to work, however the particular policies are applied, are not a solution. Relieving people of personal responsibility for their own lives, however it is done, is a major part of the problem.

Before there can be a welfare state in a democratic country, there must first be a welfare-state vision that becomes sufficiently pervasive to allow a welfare state to be created. That vision, in which people are “entitled” to what others have produced, is at the heart of the social degeneration that can be traced back to the 1960s.

One halfway step is for conservatives to hide their belief in self reliance by proposing policies like an earned income tax credit (EITC).  As Sowell notes, conservatives say such policies should displace more-economically-disruptive welfare programs, but that never happens.  Instead — in the predictable rope-a-dope wherein progressives hold the rope and conservatives are the dopes — the whole idea just bounces back on itself.  EITC doesn’t displace existing welfare programs.  Rather, it emerges at best as a way to slow the increase of the minimum wage.

The “compromise” that big government offers, in other words, is (A) we don’t touch welfare, (B) we threaten to force harmful expenses on the private sector, but instead, we (C) put that threatened private-sector burden on the public tab through a handout to low-income people.  So, we’ve created a system in which welfare programs reduce incentive to work, and then we tout a program that “rewards” people for working.  As Sowell puts it, we tell them they’re entitled to a certain amount of material well-being (with money confiscated from others) and then attempt to counter-balance that incentive by goosing their pay, at least as long as they don’t advance too far.

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Will RI Be a Frontier When the Federal Empire Recedes

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I’ve been warning about the “company state” dynamic whereby an area’s core industry essentially becomes the provision of government services, with the revenue pulled in from the few productive residents and other cities, towns, and states.  The goal becomes to attract and create as many dependents as possible so as to justify sending a larger bill to those who have no choice but to pay it.  Eventually, though, the productive locals will leave or decide to join the dependent club, and other cities, towns, and states will refuse or no longer be able to cover the bills.

I wonder if that sort of civic and economic structure will set Rhode Island to be akin to the frontier areas as the Roman Empire receded.  Here’s Jakub Grygiel:

In those frontier outposts, the locals have to make difficult decisions based on an assessment of how resilient their empire is, how persistent and dangerous the enemy appears, and how strong their own will is. And they experience different stages of geopolitical grief from denial and delusion to perhaps, in the best case, an attempt at indigenous security provision.

Clearly, Grygiel’s talking about security against invaders, but something similar seems likely to happen when a large class of people rely on handouts that simply cease to be handed out, whether one sees the recipients as a replacement for the invaders or you see them as the villagers failing to prepare to defend themselves against events that will damage or take their resources.  Grygiel describes the stages as follows:

  • “First, there is the gradual recognition that imperial forces were not what they used to be.”
  • “Second, after the reassuring presence of imperial might has vanished, the next stage does not include calls for defense or balancing or stronger walls. No. It is the stage of disbelief and self-delusion.”
  • “Third… the people of Comagenis … recognized that security was a creation of force, not a self-sustaining reality. But even before the technical question of how to defend themselves, the locals needed a reason to do it.”

In some ways, we may already be well into the first stage, perhaps into the second.  Government funds cannot be increased at the rate to which officials have become accustomed.  Some things (roads and pensions) are showing the pressure on the finances, and intra-progressive political battles are beginning to pit special interests against each other.  Next comes the refusal to adjust policies to the obvious future and a desperate search to find any and all sources of new revenue to keep the game going.

When that no longer works, we can expect a fatalism as some sit and stare at the financial wasteland and others refuse to let our society return to the principles of freedom, self control, and self reliance that allowed our society to be so successful in the first place.

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The Impossibility of Big Government You Can Trust

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The impossibility of holding government accountable illustrates a fatal flaw in the progressive approach to society.

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Reforms of Community Grants… in Which Direction

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The big news for that very narrow cut of the Rhode Island population that pays really, really close attention to state-level politics is that the House and Senate leaders have agreed to reform the subset of what are known as “legislative grants” that are more specifically labeled as “community service grants.” As Katherine Gregg explains, the current process is that the legislature allocates money to departments within the executive branch and then sends them jointly signed letters of intent that direct each agency which private organizations should receive the money.

Now, it appears, the legislature will include some of those grants as line-items in the budget and let the agency determine what to do with the rest of the money.  (Wink, wink.)

As Ted Nesi reports, some good-government types are enthused:

John Marion, executive director of Common Cause Rhode Island, welcomed the proposals. He recalled that Rhode Island voters passed a constitutional amendment more than a decade ago requiring separation of powers to remove legislators from telling agencies what to do outside of statutes.

“If they manage to pull off the changes that they proposed, over time this is going to fix the program,” Marion told WPRI.com.

That seems optimistic, to me.  If we apply the skepticism that Rhode Island government has done so much to deserve, one could argue that the actual change in policy is that the paper trail allocating the money will now be traded for a telephone call or a conversation in the hallway.  Legislators will just have to signal their “intent” by some other means, and it’s sure to be less transparent.  Sure, maybe over time legislators will get out of the habit of sending their clandestine signals, but that isn’t likely, unless the character of the state’s legislators changes such that they would reform the program anyway.

In the long run, the only feasible reform is to stop taking some people’s money in order to give it to others.  Leave Rhode Islanders more money and get the government out of the way so the economy can thrive, and worthy charities will do just fine.  Contrary to the assumptions of people who support big government, we’re good people, around here, who care about our neighbors.

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PawSox Upgrade RFP: Taxpayer Participation Ends with Funding of the RFP

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The Pawtucket Red Sox will be issuing an RFP today. The cost of the $100,000 RFP will be underwritten by state taxpayers, Pawtucket taxpayers and the PawSox. It will determine, in the words of Pawtucket Mayor Donald Grebien

… what McCoy Stadium’s needs are both from a physical standpoint, an economic standpoint and the value it brings to the community.

That’s nice. Undoubtedly, many Rhode Islanders will be watching with mild interest.

However, whatever the results/recommendations of the RFP, taxpayer participation ends here, today. The headline of GoLocalProv’s editorial today nails it.

Not One Penny of Public Money for the Billionaire PawSox Owners

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Parking Meters and the Purpose of Government

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On GoLocalProv, Kate Nagle conveys the concern of Providence retailers that expanded parking meter usage is driving them out of business:

“When the parking meters were installed, it became a real deterrent for my customers to shop in my area. They would much rather go to University Plaza or Providence Place Mall, where they could easily find parking [than] to battle on-street parking on Thayer and Waterman,” wrote [Donald Sommers with Advanced Communications Technologies who was a Verizon Premium Retailer]. “Then, to throw salt in the wound, they made the metered parking ridiculously difficult to figure out, which ultimately led to the downfall of my business. On a daily basis we would get people poking their head in the door just to ask how and where they would be able to get the ticket for their dashboard! When we initially moved in, we were doing approximately 65-75 phones a month. In the next couple of years we grew the business to between 150-175 phones a month but today, I’m lucky to see 50 phones a month with nothing else to attribute the loss in sales but what the customers are saying about the metered parking.”

Tellingly, not only do the meters appear to be harming businesses, but the city is effectively offloading its customer service onto those same businesses.  Of course, I use the term “customer service” in a tongue-in-cheek way.  One of the comments to Nagle’s article gets to a key point, writing that the “cradle to grave demands” of “unionized workers” still “don’t grow on trees.”  Who is serving whom?

Politicians in the state like to talk about creating jobs and having a vibrant economy, but their actions and priorities don’t match their words.  Economic development, to them, is using taxpayer dollars like a special-interest payout to lure businesses that are willing to work within the state’s fundamentally corrupt civic society.  That’s because the real first priority of Rhode Island is now the maintenance of government, its welfare clients, and its employees.

Parking meters, tolls, small-scale summer rental taxes… whatever.  The objective is to find ways to take more money from you and give a growing number of government agents more power and resources.

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Designing Welfare Policy as If We’re Designing the World

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In Plato’s Republic, the philosopher goes through the exercise of designing a society from the ground up.  Nowadays, that very theme defines a genre of videogame, in which the gamer must make decisions about investments, exploration, and undertakings to help a society, business, or theme park grow.  Of course, such games are subject to the same boundary as real life (although much restrained, naturally): the limits imposed by the imagination of the designer.

In the world of public policy, writers sometimes fall into a strange trap, designing policies that accord with the artificial rules of their theoretical worlds, but that do not accord with the real world.  That is, they sound plausible within careful boundaries, but they fall apart once the various “if” clauses come into contact with the outside universe.

Charles Murray provides a good example, writing in support of a universal basic income (UBI) in the Wall Street Journal:

First, my big caveat: A UBI will do the good things I claim only if it replaces all other transfer payments and the bureaucracies that oversee them. If the guaranteed income is an add-on to the existing system, it will be as destructive as its critics fear.

Well, there you go.  Upon reading that paragraph, we can put aside the discussion.  We can barely… sometimes… maybe get government bureaucracies to slow down the rate at which they increase the harm they do to our lives.  Any public policy that requires the elimination of bureaucracy for the good of the people is simply not going to happen.

Of course, UBI continues to strike me as having additional layers of unreality.  Because it would be a policy set by government, it would be subject to the incentives for politicians.  If the policy is small relative to the economy, then the incentive will be for politicians to continue growing it as a campaign pledge; by the time it gets big enough to build up constituencies for restraining it, the program would ipso facto already be having an effect on the economy.  A hidden cost, then, is that a UBI requires a centralized power sufficient to squash political incentives.

What our civilization really needs is an economy that creates a natural UBI based simply on the fact that the basics are sufficiently inexpensive to produce at prices that almost anybody can be sufficiently employed to afford, or that others will supply simply by the greater weight of their sense of moral obligation.  This economy doesn’t require big government programs.  It requires advancing technology, a baseline education (not saturated with fluff and false ideology), the proliferation of prosperity, and broad freedom to determine our own sets of values and experiment.

Any other approach is, ultimately, just a way to work around the artificial rule that we can’t expect to be able to trust in people’s goodness and good sense.

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Dan Doyle Proclaims His Innocence

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… though he offered almost no specifics at today’s news conference as to why and how. “I can also assure that I will not leave this planet until my name is cleared, as in completely cleared,” he said. “And I will not leave this planet until the individuals behind this are held fully accountable and […]

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Overtime Rules and Government by People Who Think They Know Better

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Kevin Williamson adds two excellent points to the federal government’s meddling in overtime rules.  Jobs can have benefits that aren’t tangible and for which rational (even very intelligent) people will trade increased money, and work can have motivation beyond filling out a standard workweek

I once tried to hire a very smart young woman graduating from a reasonably good college to work at a small newspaper I edited, where she’d been an intern. She turned me down to work for less money at a big book publisher in Manhattan, where the cost of living is about four times what it is in the Philadelphia suburbs. But her reasoning was solid: She didn’t want to work at small-town newspapers for the rest of her life — she wanted to work for a big-time publishing company, and if that meant being poor for a few years in her middle 20s, she’d rather be poor at 26 than regretful at 35.

This is, you’ll note, a behavior that takes roughly the same shape as saving and investing: forgoing present comforts for the hope of large, meaningful returns in the future. …

… does it occur to no one that an extra ten hours at ordinary pay might be very welcome indeed for a person in an hourly job who isn’t there because he grew up wanting to work in a warehouse outside of Lubbock, Texas, but because he is in desperate need of money? Or that development and advancement are things that happen in jobs that do not require college degrees, too? Or that there are people in this world who cannot distinguish themselves by being cleverer or more creative than the rest of their colleagues but who can distinguish themselves simply by outworking everyone else?

The problem is that we have a political/governing class that really and truly lack imagination and empathy (and that thinks it can sell handouts to people who aren’t inclined to work through the economics).  They want to — and feel they implicitly have the authority to — step into all of our lives and tell us what criteria we can use to negotiate our time and work and every human interaction.

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Whew, No Subsidies for Superman Building – At Least, This Year

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WPRI’s Dan McGowan reports the good news (pointing out that the ProJo had announced it first).

The effort to secure millions of dollars in taxpayer-funded subsidies to revitalize Providence’s tallest building has again stalled at the Rhode Island State House.

This is a very good thing, as far as it goes. City and state taxpayers already pay too much in taxes, fees and cost-of-living without also being compelled to compensate property owners for the effects of both a real estate market that has not fully rebounded but especially for the state’s abysmal business climate that is keeping prospective tenants out of the state.

“As far as it goes”, however, because, like the Terminator, the owner of the Superman Building has promised, “I’ll be back” next year to once again try to tap into the taxpayer’s already seriously overextended wallet.

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Fighting Poverty and Doing Everything Upside Down

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On the whole (to the surprise of nobody, I’m sure), I generally agree with Gary Sasse’s thoughts, in GoLocalProv, concerning a rethinking of the way in which our country addresses poverty:

Conservatives have been advancing reforms to help needy American families achieve self-sufficiency and upward mobility. The foundation to implement these reforms must include policies encouraging two- parent households valuing personal responsibility, good schools and fiscally sound government.

Economic opportunity is a mirage if children are held captive in failing schools. An education agenda based on accountability, student performance and choice is a precondition for economic and social mobility.

Safety net programs are placed in harm’s way when government is not fiscally responsible. Wasteful spending and crony capitalism may give public officials no option but to shred the safety net. Efficient government provides a firewall to protect the social safety net.

It’s difficult to argue with any of that, but I wonder if Sasse and other conservatives of like mind accept too many of the assumptions of the Left.  Why, most of all, must we continue with the top-down, federal-to-state-to-local model of government, particularly that part of government that redistributes wealth?  Sure, doing so moves money from wealthy areas of the country to less-wealthy areas.  On the other hand, people locally are better-positioned to offer their neighbors the help that they need; additionally, the top-down approach doesn’t do well addressing the possibility that people shouldn’t continue to live in a particular place, given current opportunity.

Not only does the reliance on nationalized hand-outs give the federal government unavoidable leverage (making broader reforms impossible across a wide array of policy areas), but it creates areas in which the provision and receipt of government benefits pretty much constitute the local economy.

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The Average Guy Pays: Insider Schemes Are Disruptive To The Marketplace

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Your family deserves to live in a state where they have the freedom and opportunity to achieve greater prosperity. The only thing that stands in the way of this happening is the status quo public policy culture in Rhode Island. For too long one voice has dominated the public debate, and it has led to a series of political scandals and corporate welfare handouts. It is time to end the culture on Smith Hill that rewards the chosen few, while the rest of us are left to suffer under their high tax and spend culture. Both the left and right can agree that we can do better than more handouts from the insiders.

Corporate cronyism does virtually nothing for the average family and it adds the further insult of forcing the average guy to pay for it. Governor Gina Raimondo’s stated goal is to restore Rhode Island’s troubled economy through big handouts to target industries. But is there any proof that this approach will work? Rhode Islanders already saw a similar idea fail in the 38 Studios disaster. The people of our state cannot afford another government run fiasco where our hard earned tax dollars are used to further the status quo’s agenda.

Recent research from the American Legislative Exchange Council (ALEC), directly implies that New York’s failed “Start-Up NY” program is likely a bad omen for Rhode Island’s similar RI Innovates plan. After a $53 million national advertising blitz, Start-Up NY created on net only 76 new jobs. The Start-Up NY program demonstrates the failure of government directed economy and corporate cronyism. Further, as ALEC points out, this elitist, insider approach towards economics is not only unfair, but it is disruptive to the marketplace and may actually shrink the overall jobs pie.

Imagine an Ocean State, where it would be easy for our family members to achieve their hopes and dreams. I don’t think too many would say that status quo public policy culture in Rhode Island is making anything easy for us. For too long, the political elites have rewarded their cronies, and made it harder for new business to take hold here in our state. This needs to change. I encourage you to speak out against the cronies and the handouts that further their own personal interest instead of what’s really in the best interest of you and your family. Please have a happy and safe Memorial Day, and remember all those who have served.

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Isn’t Taxation Supposed to Be Consensual… At Least in Theory?

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This point in the Sakonnet Times editorial I mentioned earlier is worth a little more mental energy:

Voters, of course, flock to the bargain rate — a 3.5 percent tax hike faces long odds against a 0.9 percent alternative.

Specifically, it’s the “of course” that stands out, because it seems to imply that the job of government is to trick or otherwise coerce people into paying more in taxes than they would voluntarily pay for the services that government is delivering.  This way of thinking fascinates me, because I have to believe that if the people who say and write such things were to think them through carefully, they’d be forced to confront clichés that allow them to support certain comfortable positions that have no justification.

Thinking in terms of economics, the more-accurate statement is that Tiverton voters are not willing to pay the price demanded for the services actually offered.  Having spoken with many of them, I can attest that some significant portion, at least, is willing to risk deterioration of the services they do utilize on the chance that they can push back against corrupt waste sucked up by special interests.

The town library provided a good example of how the corruption works by pushing its supporters to approve of $1.3 million more in taxes so that their special interest could receive another $16,500.  On the day of the vote, one angry library supporter acted as if I was being ridiculous for complaining about the $16,500, when the reality is that simply paying that amount wasn’t on offer.

A more didactic example may be garbage pickup, which Town Council member Joe Sousa threatened might go away if the budget I proposed were to win.  The rationale for town-provided trash pickup is that the economies of scale make it less expensive than individual contracts, but that ceases to be true if the town government uses the threat of eliminating trash pickup to pour money into other things for which people do not wish to pay.  You don’t get the discounted trash pickup unless you also support everything else that goes with bloated government.

Throughout Rhode Island, taxpayers are realizing that the cost of the services that they do receive from government (often very poorly) have been made inextricable from things for which they would never willingly pay, like absurd job security and benefits for union members and handouts for favored groups, whether in human services or corporate welfare.  That’s why productive residents leave, and it’s a major part of the toxic formula that has pushed Rhode Island into its current death spiral.

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Big Red Flag When Left & Right Agree: End RI’s Corporate Welfare

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Gary Sasse, founding Director of the Hassenfeld Institute for Public Leadership at Bryant University, and Sam Bell, state Coordinator of R.I. Progressive Democrats, have written an op-ed correctly condemning Governor Raimondo’s brand of lazy (my word) and expensive (to the taxpayer) economic development, printed in yesterday’s Valley Breeze.

We think that the core of voter discontent in Rhode Island originates in the widespread belief that public policy is disproportionately benefiting the well-connected. The poster child for this is the emphasis that the governor and General Assembly place on corporate welfare.

Corporate welfare exists when tax dollars are used to finance preferential tax deals, loans, and direct cash subsidies to specific businesses.

One of the biggest initiatives of the governor and General Assembly was the massive expansion of the corporate welfare agency that did the 38 Studios deal. Rebranded the Commerce Corporation, the controversial agency now has the power to hand out millions of dollars per year in cash subsidies directly to corporations.

Well said. And disturbing.

Remarkably, on her ongoing listening tour, Governor Raimondo actually lists her expansion of these tax credits and subsidies, via the agency that implemented 38 Studios (formerly the RI EDC; now the RI Commerce Corp), as an achievement of her administration. Further, as Sasse and Bell note, the General Assembly is fully complicit in this highly undesirable expansion of state-sponsored corporate welfare as it approved these line items in the budget.

Last year, a taxpayer-subsidized baseball stadium proposed for Providence was killed by a loud, across-the-political-spectrum bronx cheer. Similarly, this bi-partisan/non-partisan denunciation by Sasse and Bell – who speak for many, many of us across the spectrum – of these programs should be a big red flag for both the Governor and the General Assembly that a serious re-assessment and sharp cutting back of these programs are in order.

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Seek the Government Distortion to Solve Affordable Housing Problem

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Upon reading an article such as a blurb by Christine Dunn in today’s Providence Journal, about Rhode Island’s high rental costs, my first reaction is always to wonder why nobody ever looks to the causes of supposed problems:

Rhode Island’s state minimum wage is $9.60 per hour, but a worker would need to earn $19.06 an hour to affordably pay a rent of $991 a month, the state’s fair-market rent for a two-bedroom apartment, the study added. The estimated mean hourly wage of Rhode Island renters is $12.59.

“Today’s report shows what we already know: we need to invest in and build more housing in Rhode Island,” said Barbara Fields, executive director of Rhode Island Housing.

Of course, one should challenge the assumptions of an article that is so thoroughly in line with the cause of an activist who has a personal interest in public policy on the issue.  Why should we assume, for example, that a person earning the state’s average should be able to afford a two-bedroom apartment on his or her one paycheck?  Add in a spouse or a roommate at the average, and suddenly Rhode Island rentals are very affordable.  Or hey, do what millions of families (like mine) have done and take on additional work!

But even going with the concept that Rhode Island needs “to invest in and build more housing,” why ought that to be done with government involvement?  Unless something (probably government policy) is getting in the way, the market should take care of this.

If apartments are drawing such an exorbitantly high rent for the area, then more people should be seeking to become landlords.  The higher the profit, the greater the motivation.  This should ensure that housing expands until its ready availability drives the price down to the point that the incentive to build more is no longer there.

If that isn’t happening, something is keeping the cost of building and maintaining rental property artificially high or keeping wages artificially low.  In Rhode Island, it’s probably both.  Or maybe the assumptions about what is “affordable” are flawed.

Whatever the case, using government to force more money into housing — with strings and bureaucratic rules — doesn’t solve the underlying problems, but takes resources away from something else that our community needs and wants, which could be the very something that will help resolve those underlying problems.  (Hint: like innovation and jobs.)

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Rhode Island, Land of No Jobs & Opportunity

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This week, the RI Center for Freedom & Prosperity released its second monthly iteration of the Jobs & Opportunity Index (JOI).  With eight of the 13 data points that make up the index having been reported, Rhode Island’s score improved a little, although we’re still 48th in the nation.  Nonetheless, we did slip some, compared with our New England neighbors… not that there’s any danger of any New England states overtaking us, since we’re already trailing the pack.

 

The area of increase merits a closer look.  Where Rhode Island improved was the Job Opportunity factor, which puts the state’s labor force, as reported by the Bureau of Labor Statistics (BLS), in the numerator and three alternative measures of unemployment in the denominator: long-term unemployed, people who are marginally attached to the labor force (i.e., they don’t count, because they didn’t look for work in the prior month, but they’d like to work except for some problem), and those who are employed part time, but would rather be full time. The alternative measures are released quarterly, so they’ll have a bigger effect when they change.

Specifically, the Job Opportunity factor saw the numerator edge up slightly (pretty much flat), and the alternative measures decreased in the denominator, leading to a better score.  Even so, some interpretation is necessary.  All told, 3,700 Rhode Islanders left that denominator, but not many were added to the numerator.  Because the labor force is both employed and unemployed, these people on the edge of Rhode Island’s working economy must have simply given up and stopped even thinking about work, to the extent that the numbers can be combined in this way.

What all this parsing indicates, more than anything, is how painfully stagnant Rhode Island is.  We need to have clear improvements to the economy, as proven by people working, new jobs, and higher total income.

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Gov Raimondo Hands out Another $7M in Tax Dollars In Lieu of Real Econ Development

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From the Providence Business News.

The R.I. Commerce Corp. voted to approve more than $7 million in state relocation and redevelopment credits Monday to several corporations that plan to invest in or bring jobs to Rhode Island.

“These are three fine projects that are helping to advance our economy,” said R.I. Commerce Secretary Stefan Pryor.

What is actually needed to advance the state’s economy, Mr. Secretary, is substantive improvements to the tax and regulatory climate to signal to out-of-state businesses (and the jobs they bring) that they can come here and prosper without having to go on BENDED KNEE to state officials for CORPORATE WELFARE.

What is even more disturbing is the revelation that taxpayers are, in fact, being forced to come out of pocket via these subsidies to compensate for the business climate and market conditions created by decades of costly, anti-business policies that the Raimondo is studiously choosing not to address.

The company has developed two other hotel properties in Rhode Island, including the Hampton Inn & Suites in downtown Providence. Like those, this project needs state assistance in bridging the financial gap created by market conditions. In Boston, he said, the company has properties built at similar cost that fetch $300-a-night for rooms. In Providence, similar rooms would be booked at $170 a night.

“But for this supplement, this project would not happen,” Karam said.

Remarkably, at a recent stop on her “listening tour”, Governor Raimondo actually touted the fact that she had increased such taxpayer-funded tax credit and give-away programs as though it were an achievement of her administration!

Rhode Island needs someone at the State House to be the adult here. Minimally, these taxpayer-funded subsidies need to be shut down while we wait for the governor to come to her senses about the real action needed on economic development … or, if that is not going to happen, until the next governor is installed which, hopefully for the sake of the taxpayer’s wallet, will be in two and a half rather than six and a half years.

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UPDATED – Monetized Firefighter Sick Time is Straight Up Rip-Off of Taxpayer

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Great, important and infuriating article in the Warwick Beacon a couple of weeks ago written by publisher John Howell. From city documents obtained by taxpayer advocate Rob Cote, it demonstrates that Warwick taxpayers are being compelled to needlessly pay for monetized, unused sick days.

An examination of payroll records and information provided by Fire Chief James McLaughlin show that virtually no paid sick leave is used by department personnel, and that at the end of the year department members get a bonus – in some cases more than $5,000 – for unused sick days.

The total cost to taxpayers for the calendar year ending Dec. 31, 2015, was $442,913.87.

The huge problem here is that the basis for this abuse – sick days – shouldn’t even exist but is a completely unnecessary addition to the firefighter contract because Rhode Island law, Title 45-19-1, effectively stipulates that firefighters and police officers (more specifically, “police officer, fire fighter, crash rescue crewperson, fire marshal, chief deputy fire marshal, or deputy fire marshal”) shall receive unlimited sick and injury days.

This is not a criticism of firefighters but of Warwick officials who have agreed to a contract which includes these completely unnecessary, utterly wasteful provisions funded by Warwick taxpayers. Ken Block, who had previously completed a statewide analysis of the high cost of Rhode Island fire departments, identifies in the article why elected officials have done so.

He reasons payment for unused sick time has simply become a means for elected officials seeking firefighter union support to bloat their pay without making it obvious to the taxpayers who have to foot the bill.

Two things.

1.) Warwick officials, you’re busted. This utterly wasteful practice is a rip-off of taxpayers and needs to end immediately.

2.) What other cities and towns are similarly abusing their taxpayers by including sick days in their first responder contracts? Remember, Rhode Island law (Title 45-19-1) makes sick days completely unnecessary. Accordingly, the presence in any police or firefighter contract of sick days – which can then be monetized and abused – is not out of necessity but due to the selfish motivation of that municipality’s elected officials.

UPDATE

After review of the law and contracts, Justin Katz contacted me to point out a couple of errors.

1. The RI law cited is not quite as blanket about on-duty sick and injury as indicated in my post and the Beacon article. Justin reports:

In order to get injured on duty (IOD) pay, personnel have to file affidavits that they received their injury or contracted their illness directly as a result of their work. Just catching the flu wouldn’t do it. There is justification for having some provision that allows emergency personnel to call in when they aren’t physically up for doing their job for some reason.

2. The Warwick police contract does, in fact, include provision for sick and injury days, though it is far more tightly capped than the fire contract.

The Warwick police contract currently in effect includes separate sections for sick time and injured on duty time, *as does the fire contract,* …

It doesn’t look like the police get to cash in their sick days. However, they do get 8 hours of “miscellaneous time” if they go six months without using sick days.

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JOI? About that Unemployment Rate, Governor

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Governor Gina Raimondo’s approval rating isn’t good and, in fact, is going in the wrong direction due to

a sharp rise in her negative ratings this year, according to a newly released poll.

Asked about this in a couple of different instances by the press, the Governor responded by citing purported achievements of her administration but always including a reference to the state’s dropping unemployment rate – this one courtesy WPRI.

Asked Thursday how she reacted to seeing her approval rating at 41%, Raimondo replied: “I was pleased.”

“You know, it’s early in my term,” she continued. “We’ve been on for a year. We’ve had a lot of momentum. Our unemployment rate dropped.”

Actually, the unemployment rate is an inadequate reflection of the measure of employment as, among other things, it fails to distinguish between part and full time employment and actually counts a declining labor force participation rate as a good thing.

The Rhode Island Center for Freedom and Prosperity has developed a more comprehensive snapshot, called JOI (Jobs & Opportunity Index), of the larger state economic picture, as opposed to the narrow snapshot of the monthly unemployment rate. From the JOI webpage:

JOI is a national index of states that incorporates three major factors, comprised of over a dozen variables derived from government reported data:

1) A proper measure of employment as it relates to labor force,
2) A measure of job/employment levels as compared with public assistance rolls, and;
3) A measure of personal income as compared with government tax receipts collected”

By this measure, Rhode Island ranks forty eighth nationally – not at all a ranking that any state official should or could brag about.

Be sure to keep an eye out for Rhode Island’s JOI ranking as the Center will be updating this important new measure every month when the state’s unemployment rate is released.

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Letter: Don’t Add Superman Subsidies to the Taxpayers’ Tab

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Well said by Catherine Orloff in a letter to yesterday’s Providence Journal. She uses the word that occurred to me: bailout.

Sure, a rehabbed “Superman” building would be great. But whose job is it: the owner’s or the public’s? …

No way should all Rhode Islanders be forced into yet another bailout.

Indeed, the public – a.k.a., the taxpayers – already has far too many costly problems on its hands, the vast majority inflicted on us by bad decisions and poor policies on the part of our elected officials. We don’t need to add yet another in the form of a bailout for the out-of-state owner of the Superman Building.

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RI Government Has Created Way Too Many Programs to Shovel Tax Dollars Out the Door

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Thanks to a Rhode Island press corps that has been doing kick-butt investigatory work, developments are coming fast and furious in the “non-profit” entity aspect of the multi-tentacled Ray Gallison scandal.

To focus on just one new development, there were not one but two non-profit organizations affiliated with now-resigned Representative Ray Gallison that were receiving tax dollars. The new organization called “Man Up”, brought to light by WPRI’s Ted Nesi and Tim White, received tax dollars from what appears to be two sources within the Governor’s office: a grant from the new Real Jobs Rhode Island program and a grant from the Governor’s Workforce Board of Rhode Island. Following inquiries from Target 12’s Nesi and White, the Governor’s office announced yesterday it had frozen the Real Jobs grant. And the Providence Journal reports this morning that the Governor’s office had suspended the balance of both grants and would be auditing payments received by the two organizations affiliated with Gallison. (Important side note: is handing out tax dollars for this sort of baloney what constitutes the frequently referenced “education and training” part of Governor Raimondo’s economic development initiative?)

These are, of course, in addition to the $1.7 million in community service grants that Gallison’s other non-profit had received courtesy the General Assembly leadership … of which he was a member (*clutches head*).

All of this is still very much unfolding. And the public has yet to hear about the status of the criminal inquiry into other areas of former Rep Gallison’s activities. Two things, minimally, are already crystal clear:

1.) There are way too many state programs in existence whose sole purpose is to hand out tax dollars.

2.) The state is handing out way too much of the taxpayers’ money. This is all the more egregious because there appears to be little to no oversight or accountability that accompanies this public money.

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No Welfare for the Superman Building

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Meanwhile, with all eyes on Smith Hill and the unfolding Gallison scandal, good catch by the Providence Business News, which reports that the owners of the Superman Building will hold a press conference tomorrow.

A host of business, labor and community leaders on Thursday are holding a press conference to talk about the redevelopment of the so-called Superman Building at 111 Westminster St., Providence, which has been vacant for about three years.

The PBN reports that, ominously, the owner of the building has been talking to the state Office of Corporate Welfar … er, the R.I. Commerce Corporation.

The development team has been in discussions with the R.I. Commerce Corp. for the past four months, according to Fischer, and while he characterizes those meetings as productive, no finalized deal has emerged.

Honest to pete, if I had the time, I would picket this press conference. (Potential chant: “Hey hey! Ho ho! Corporate welfare has got to go!”)

Not one taxpayer dime, state or local, should go to redevelop the Superman Building. State and local taxpayers already carry a heavy burden due to the state’s tax-base shrinking abysmal business climate. It is out of the question to add to that an attempt to compensate property owners for real estate values diminished by that exact same business-repulsing tax and regulatory climate.

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Shouldn’t a Business Editor Be Pro-Business?

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When it comes to mainstream newspaper editors and columnists with targeted subject assignments, like the business section of a newspaper, one can often detect a point of view that isn’t necessarily in perfect accord with the subject’s primary consumers, but Providence Journal business editor John Kostrzewa’s column in today’s paper — titled “Minimum wage hike is only the start” — is really stunning.

Writing about the annual meeting of Rhode Island’s far-left pro-redistribution think tank, the Economic Progress Institute (formerly the Poverty Institute), Kostrzewa approvingly moves through some of the additional burdens that progressive activists wish to place on our already-struggling economy, such as this:

Many of those proposals come with a cost, to either employers or taxpayers, and a conference attendee asked where the revenue would come from to pay for the benefits or services.

Sarita Gupta, executive director of Jobs with Justice, a national organization, answered that it would take partnerships and creative ideas to raise revenue. She pointed to a proposal being studied in Connecticut to fine employers with 500 or more workers in the state $1 for each hour of work by an employee who earns less than $15 an hour. By some estimates, the proposal could raise from $189 million to $305 million a year.

How could a newspaper’s business guy convey that horrible, business-killing, big-government idea as simply, “Hey, here’s a thought”?  It boggles the mind almost as much as his tone-deaf chiding of business owners for not attending an event geared toward those who want to take their money and tell them how to operate:

But Raimondo and Paiva Weed were among only a few public officials in the crowd. There were not many business owners there, either.

That’s a missed opportunity, because the election showed it’s time for a wider discussion among public and private leaders about the anxieties of working people, and the government’s role in providing relief.

If anybody needs more indication of why Rhode Island is struggling as it is, Kostrzewa provides a doozy.  The one brief nod toward the damage that these policies could do to businesses and the economy reads as if some copyeditor questioned publishing a business column without some mention of policies’ possible effects on businesses.

With the business pages now a collection of outside content and standard reports, one wonders why the Projo bothers to publish another left-wing redistributionist columnist in that space.  It’s certainly not to provide any ideological balance to the paper’s overwhelmingly progressive bias.

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If Progressives Had Perspective on the “Living Wage”

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Maybe it’s an act, but sometimes it’s almost comical how little progressives understand economics and how unable they are to think of other people as, well, people trying to make the best decisions they can under the circumstances.  Oh, they say they have empathy for this group or that, but anybody who responds to actual incentives in the real world slips immediately into the bad-guy-who-gets-no-empathy column if they conflict with progressive fantasy.  Consider:

States and cities whose lawmakers proudly passed “living wage” laws are finding it difficult to make sure employers actually pay their workers accordingly.

Here’s a thought: Maybe the employers are finding it difficult to pay their employees at the level “lawmakers” decide suits their own ignorant vanity.

And many workers — especially those in precarious situations — fear they’ll be fired if they speak up.

And maybe those “firings” wouldn’t be retaliation so much as the simple calculation that government has forced on the employers.  See, wages before the increase were the rate that employers’ ability to pay matched employees willingness to work.  Progressives dehumanize workers by insisting that they can’t actually be making rational decisions to work for what they accept, and they devalue work by assuming it gives those who do it well no leverage — that they’re at the mercy of their employers.

If one imagines these interactions from a more empathetic point of view, the scenario can be one in which employers tell their employees the honest truth that meeting the arbitrary demands of government officials will put them out of business or at least force them to lay off employees’ coworkers and insist on more work from those who remain, leading the workers to voluntarily stick to the pay that they were already willing to accept.

How instances of that positive scenario balance out against instances of the evil-people scenario that progressives prefer is almost immaterial.  Politicians who pass these dumb laws are forbidding adults from making such decisions.

So, progressives double down on stupid:

“It’s pretty shocking how common the violations are,” said Donna Levitt, director of the labor enforcement office in San Francisco, which began ramping up to $15 an hour last year. …

The new laws are meaningless without proactive enforcement, labor advocates say, citing research that shows roughly one in four businesses nationwide already cheat their workers out of minimum wages.

What comes to mind is the IRS practice of aiding and abetting illegal immigrants who are committing fraud with Social Security numbers because, “It’s in everybody’s interest to have them pay the taxes they owe.”  So, why isn’t it in everybody’s interest to let people work for what they’re willing to work for?

The government would rather make it more difficult for people to come to voluntary agreements that ensure that they have some income.  That way, the taxes of those who actually keep their jobs can be used to make politicians and bureaucrats feel good about themselves, again, when they hand out welfare benefits.

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Why Did RI Fail to Detect Food Stamp Fraud at One Store for Six Long Years?

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The Valley Breeze reports that

Sami Almuhtaseb, 45, of Smithfield, owner of Oasis Market, a convenience store located in Providence, pleaded guilty in federal court on April 15 to defrauding the Supplemental Nutrition Assistance Program, SNAP, of more than $1.1 million.

Almuhtaseb was able to rack up a cool $1.1 million haul because the fraud took place over six years. Six long, lucrative (for the store owner) years. SNAP, or food stamps, involves both state and federal tax dollars. If the State of Rhode Island (or the feds) had detected this fraud much sooner rather than letting it go on for six years, the tax dollars stolen and squandered would have been far lower. It is unacceptable that our elected officials appear to hold our hard earned tax dollars in such low regard.

This store owner is certainly not the only one to have committed SNAP fraud, nor is SNAP the only social program that is the target of fraud. It is imperative that our elected officials get serious about detecting and preventing this fraud both because it is the right thing to do and because of the impact on government’s image. A continued casual attitude towards the unnecessary squandering of tax dollars will only contribute to the public’s dislike and distrust of everything that government is doing or proposes to do — not to mention (self-preservation consideration) a negative impact at the voting both.

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Minimum Wage and the Left’s Willingness to Change Its Story

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Noah Rothman has noticed that progressives in and around government are perfectly happy to switch their claims about what a policy will do depending on the circumstances:

Covert was hardly alone. The CBO’s assessment of the negative impact on employment was “fuzzy and unreliable,” while it probably underestimated the positive impacts of the minimum wage, declared National Memo’s Joe Conason. Even the president and the government he leads got in on the act. “There’s no solid evidence that a higher minimum wage costs jobs,” Barack Obama declared. Over at the Department of Labor, a web page dedicated to serving as a minimum wage “myth buster” soon appeared, which echoed the president’s sentiments. “Myth: Increasing the minimum wage will cause people to lose their jobs,” the Labor Department truth-seekers averred. “Not true.” They cited a letter to the president signed by 600 economists who insisted that a minimum wage hike had “little or no negative effect on the employment of minimum-wage workers.”

It was perhaps with these appeals to authority in mind that the nation’s most liberally governed states embarked on a brave journey into the unknown. This week, New York and California’s legislatures both approved minimum wage increases, not to the $10.10 per hour, for which President Barack Obama advocated and approved for federal contractors, but to $15 per hour. Despite both states having higher unemployment rates than the national average, their respective governors are expected to sign those measures. Their advocacy campaign successful and complete, the left is now shifting from denying that there will be any adverse effects on employment as a result of the minimum wage hike to admitting that those effects will materialize and lead to a kind of desirable economic Darwinism.

For well-meaning progressives, a public policy isn’t about its likely effects.  It’s about faith in the intention.  For whatever reason, they believe it’s the right thing to do to force employers to find a way to pay their employees more than the market suggests their labor is worth.  Satisfying this mandate for justice outweighs determining whether it will result in an overall happier population.

For the self-serving progressives who manipulate the others, neither the intention nor the likely effect is very important.  They’re looking for means of buying votes and gathering unto themselves power.  This is a likely effect — actually, an inevitable one — of adopting a political philosophy built on empowering a small group of politicians to take control of the economy and all of society.  Unfortunately, the faith in the intention of making the world fair and friendly is powerful, having been inflated with fluff for a century.

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Attention, Governor Raimondo: Corporate Welfare is Not Economic Development

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The Providence Journal reports today that the state Economic Development Corporation, now skulking around under the moniker of the Commerce Corporation, last night handed out over $14,000,000 in taxpayer dollars under the guise of economic development.

But on a busy night with a meeting that drew an overflow crowd interested in the unveiling of the state’s new tourism campaign, that vote was just one of many initiatives intended to help Rhode Island’s economy.The board approved three development projects for up to $12.8 million in Rebuild Rhode Island tax credits: Prospect Heights redevelopment, 560 Prospect St., Pawtucket, up to $3.7 million in credits; Union Trust Company Building, 170 Westminster St., Providence, up to about $3 million in credits; and 78 Fountain St., Providence, up to about $6.1 million in credits.

Targeted tax handouts do nothing to address the underlying cause of the state’s economic malaise, which is an excess of burdensome regulations, taxes and fees. If the General Assembly is wise, they will cut way back on these chunks of corporate welfare that lard the Governor’s budget and politely request that she do the right thing for the entire state by coming up with a plan for broad-based tax and reg reform.

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