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Sat, 31 May 2008
Investment, fine. But in what?
Last week, Governor Carcieri convened a meeting of the newly-reconstituted Economic Policy Council to ask the question, what's going on with our economy and how can we make it better? He was quoted in the Providence Journal this way:
The state is "making some real progress," he said, in making large investments in its infrastructure. He said that the relocation of Route 195, the rebuilding of the Washington Bridge, as well as other major projects amounts to a total investment of $5 billion to $6 billion over four to five years.
This is an impressive figure, but a bit less so when you consider that not a dime of it has gone to create new capacity.
00:32 - 31 May 2008 [/y8/cols] link
Fri, 23 May 2008
Asphalt vs. Milk? Which side are you on?
I'm writing this on the kitchen table, and as I look to my right, there's a carton of Rhody Fresh milk. My family drinks it because we like the idea of our food coming from as close to home as possible, and because we like to support local businesses if we can.
This isn't just a commercial plug; it's a serious story about agriculture. There are many fewer farms in our state than there used to be, and some of us think that's a problem deserving more attention than it gets. The way our towns levy taxes is putting farms out of business. As a farm, an acre of land is worth much less than it is as a house lot. Lots of towns have agricultural zoning, but few tax agricultural land at anything less than the value it would have if divided up into house lots.
The predictable result is the steady loss of farms in the state. Since World War II, we've lost about 80% of the land we had in agriculture, and most of it has been built on.
23:36 - 23 May 2008 [/y8/cols] link
Thu, 22 May 2008
The Governor convened his economic thinkers to talk about the state's economy. Here's how he was quoted in the Projo:
The state is "making some real progress," he said, in making large investments in its infrastructure. He said that the relocation of Route 195, the rebuilding of the Washington Bridge, as well as other major projects amounts to a total investment of $5 billion to $6 billion over four to five years.
The problem? Not a single dime of that "$5 billion to $6 billion" will actually increase the state's transportation capacity. All of it is to preserve the capacity of existing transportation links (e.g. the train tracks already existed, but changes in train schedules and practices forced the upgrade), or prevent their collapse. The changes to 195 and 95 are in lieu of maintenance, but won't significantly improve the speed of transportation or capacity of the roads. The changes to the Washington bridge will create fewer jams there, but it won't change the capacity of other stretches of that highway, so will likely just move the bottle neck to another spot. The Sakonnet River bridge is just a replacement, so the net economic effect of that will only be to put a few businesses out of business.
So the question is: exactly how are these infrastructure improvements going to improve the state's economy?
Economists talk of infrastructure improvements as important because when they're done, you can do stuff you couldn't do before. But when these improvements are done, we'll only be able to do the stuff we could do before, and no more. Expecting these to have an economic impact is magical thinking. Of course there is the impact of spending that much money in the state's economy, but we could have had those road crews digging and filling in holes for that.
11:27 - 22 May 2008 [/y8/my] link
Sat, 17 May 2008
Watching out for inflation, and for the CPI
Headlines the past couple of months have made it pretty clear that we're in for some interesting economic times ahead. But who needs headlines? Most of the important news is pretty clear on any trip to the grocery store. Food prices are up sharply, and since gas prices are mounted in foot-tall numbers on the side of the road, few of us have missed the portents there, either. Medical inflation is high, too.
Meanwhile, the Consumer Price Index (CPI) has been quite low for a number of years, and is only up to 4% now. It may not have much to do with the level of prices any more, though. The government modifies the index from time to time, but lately they've been making modifications that are convenient -- to them.
21:43 - 17 May 2008 [/y8/cols] link
Tue, 13 May 2008
An article here points out that a properly done cap-and-trade carbon policy would have a progressive (in the technical sense of tax policy) effect. It also points out that doing things John McCain's way might be as effective in the environmental sense, but have a regressive effect, and provide a windfall to electric producers and oil companies. More later.
10:37 - 13 May 2008 [/y8/my] link
Sat, 10 May 2008
I was reviewing some statistics about state tax revenues last week, and looked at business taxes. Along with the income tax and sales tax, business taxes were once the third important leg of funding state operations, but no longer. Between 1996 and 2006, income tax collections rose by 76%, sales tax collections by 97% and business taxes by -- wait for it -- 14%, far less than inflation over that decade.
Why have business tax revenue declined so much? The economy has suffered recently, but not for all of that decade. The biggest reason for the decline is a nearly endless stream of special tax breaks. We offer businesses several different investment tax credits, an R&D credit, a credit for wages paid in an Enterprise Zone, a jobs development credit, a job training credit, a biotechnology tax credit, an "innovation and growth" tax credit, and much more. Some of these are worth millions of dollars. For others, we simply don't know what the effect is on the state budget. But the result is that 94% of the businesses in our state pay the minimum corporate tax of $500.
16:40 - 10 May 2008 [/y8/cols] link
Highlights from the Supplemental Budget Follies
As expected, the supplemental budget passed the Senate last week, though it nearly ran off the rails in the Senate Finance Committee where a majority of the committee voted against it.
What's that? It lost in committee? Then how did it pass? Let's call it some extraordinary parliamentary maneuvering.
In an official sense, the Senate President and the Majority and Minority leaders sit on all the committees of the Senate, though they almost never attend or vote on committee matters. But last week, six of the ten Finance Committee members decided to vote against the budget, which forced all three of the ex officio members to interrupt whatever else they were doing, and show up at the Finance committee to cast their votes for the budget, in order to get the bill out of committee, 7-6.
The joke hiding here is not just that it took this much work to provide for a budget that slashes RIte Care, including for some legal immigrants, accelerates a few thousand retirement decisions among state employees, cuts money from all the cities and towns in the state for the current fiscal year, imposes a tax on bottled water, and cuts income taxes for the wealthiest taxpayers. The joke is also that it took two extra Democrats and one extra Republican to do it. The Republican was voting for his Governor's budget. What were the Democrats doing?
16:33 - 10 May 2008 [/y8/cols] link
Sun, 04 May 2008
The House of Representatives last week approved the Governor's supplemental budget for this current year. They approved of the plan to take back $12.5 million from all the cities and towns before the end of June, throwing 39 municipal budgets into chaos. This plan also cuts 2700 immigrant children from RIte Care -- including more than a thousand who are here legally -- and forces state employees to take six furlough days. There are some minor deviations from the Governor's original proposal, but they are nothing compared to the agreement.
My favorite: cutting $26 million from Rhode Island Housing. This agency gets its money from federal housing grants and from borrowing. Using their money to balance the budget means we are using either borrowed money or federal housing grants. I report, you decide which is worse.
The sad truth is that the Governor and the leadership of both houses of the Assembly are reading from the same script. The Assembly leadership team call themselves Democrats, but so what? They are for slashing pensions and health care for state and municipal workers and ending important (and cost-saving) social programs. All the while, they are cutting taxes for rich people, while the upward pressure on local property taxes remains as bad as ever. In what meaningful way is this a Democratic agenda? Maybe they mean that the program cuts cause them more pain than they cause Republicans.
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