Rhode Island Policy Reporter

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A look at the lousy situation Rhode Island is in, how we got here, and how we might be able to get out.

Budget Demystification!
Fiscal Derring-Do!
Economic Jiggery-Pokery!

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RIPR is a (paper) newsletter and a weekly column appearing in ten of Rhode Island's finer newspapers. The goal is to look at local, state and federal policy issues that affect life here in the Ocean State, concentrating on action, not intentions or talk.

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whole site RIPR back issues

Available Back Issues:

  • Aug 09 (38) - How your government's economic policies have worked against you. What a fake nineteenth century nun can teach us about the tea party protests.
  • Jun 09 (37) - Statistics of optimism, the real cost of your government. Judith Reilly on renewable tax credits. Review of Akerlof and Shiller on behavioral economics.
  • Apr 09 (36) - Cap and trade, the truth behind the card check controversy, review of Governor's tax policy workgroup final report.
  • Feb 09 (35) - The many varieties of market failures, and what classic economics has to say about them, review of Nixonland by Rick Perlstein.
  • Dec 08 (34) - Can "Housing First" end homelessness? The perils of TIF. Review of You Can't Be President by John MacArthur.
  • Oct 08 (33) - Wage stagnation, financial innovation and deregulation: creating the financial crisis, the political rhetoric of the Medicaid waiver.
  • Jul 08 (32) - Where has the money gone? Could suburban sprawl be part of our fiscal problem? Review of Bad Money by Kevin Phillips, news trivia or trivial news.
  • Apr 08 (31) - Understanding homelessness in RI, by Eric Hirsch, market segmentation and the housing market, the economics of irrationality.
  • Feb 08 (30) - IRS migration data, and what it says about RI, a close look at "entitlements", historic credit taxonomy, an investment banking sub-primer.
  • Dec 07 (29) - A look at the state's underinsured, economic geography with IRS data.
  • Oct 07 (28) - Choosing the most expensive ways to fight crime, bait and switch tax cuts, review of Against Prediction, about the perils of using statistics to fight crime.
  • Aug 07 (27) - Sub-prime mortgages fall heaviest on some neighborhoods, biotech patents in decline, no photo IDs for voting, review of Al Gore's Against Reason
  • Jun 07 (26) - Education funding, budget secrecy, book review of Boomsday and the Social Security Trustees' Report
  • May 07 (25) - Municipal finance: could citizen mobility cause high property taxes? What some Depression-era economists had to say on investment, and why it's relevant today, again.
  • Mar 07 (24) - The state budget disaster and how we got here. Structural deficit, health care, borrowing, unfunded liabilities, the works.
  • Jan 07 (23) - The impact of real estate speculation on housing prices, reshaping the electoral college. Book review of Blocking the Courthouse Door on tort "reform."
  • Dec 06 (22) - State deficit: What's so responsible about this? DOT bonding madness, Quonset, again, Massachusetts budget comparison.
  • Oct 06 (21) - Book review: Out of Iraq by Geo. McGovern and William Polk, New rules about supervisors undercut unions, New Hampshire comparisons, and November referenda guide.
  • Aug 06 (20) - Measuring teacher quality, anti-planning referenda and the conspiracy to promote them, affordable housing in the suburbs, union elections v. card checks.
  • Jun 06 (19) - Education report, Do tax cut really shrink government?, Casinos and constitutions, State historic tax credit: who uses it.
  • May 06 (18) - Distribution analysis of property taxes by town, critique of RIEDC statistics, how to reform health care, and how not to.
  • Mar 06 (17) - Critique of commonly used statistics: RI/MA rich people disparity, median income, etc. Our economic dependence on high health care spending. Review of Crashing the Gate
  • Feb 06 (16) - Unnecessary accounting changes mean disaster ahead for state and towns, reforming property tax assessment, random state budget notes.
  • Jan 06 (15) - Educational equity, estimating the amount of real estate speculation in Rhode Island, interview with Thom Deller, Providence's chief planner.
  • Nov 05 (14) - The distribution of affordable houses and people who need them, a look at RI's affordable housing laws.
  • Sep 05 (13) - A solution to pension strife, review of J.K. Galbraith biography and why we should care.
  • Jul 05 (12) - Kelo v. New London: Eminent Domain, and what's between the lines in New London.
  • Jun 05 (11) - Teacher salaries, Veterinarian salaries and the minimum wage. Book review: Confessions of an Economic Hit Man
  • Apr 05 (10) - Choosing a crisis: Tax fairness and school funding, suggestions for reform. Book review: business location and tax incentives.
  • Feb 05 (9) - State and teacher pension costs kept artificially high. Miscellaneous tax suggestions for balancing the state budget.
  • Dec 04 (8) - Welfare applications and the iconography of welfare department logos. The reality of the Social Security trust fund.
  • Oct 04 (7) - RIPTA and DOT, who's really in crisis?
  • Aug 04 (6) - MTBE and well pollution, Mathematical problems with property taxes
  • May 04 (5) - A look at food-safety issues: mad cows, genetic engineering, disappearing farmland.
  • Mar 04 (4) - FY05 RI State Budget Critique.
  • Feb 04 (3) - A close look at the Blue Cross of RI annual statement.
  • Oct 03 (2) - Taxing matters, a historical overview of tax burdens in Rhode Island
  • Oct 03 Appendix - Methodology notes and sources for October issue
  • Apr 03 (1) - FY04 RI State Budget critique
Issues are issued in paper. They are archived irregularly here.

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The Rhode Island Policy Reporter is an independent news source that specializes in the technical issues of public policy that matter so much to all our lives, but that also tend not to be reported very well or even at all. The publication is owned and operated by Tom Sgouros, who has written all the text you'll find on this site, except for the articles with actual bylines.


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Mon, 31 Jan 2005

Hubble bound for early demise

The Hubble space telescope, already the source of more scientific discoveries than almost any other space program ever, is doomed, in need of repairs and without an active shuttle fleet to service it. There's talk of using robots to fix it, but apparently the administration has other plans, and its budget is slated for serious slashing, according to the Congressional Quarterly.

And "airline security fees"—which presumably we're supposed to regard as "not-taxes"— are to go up by $5-$8 per ticket under the President's budget. Shall we be the first to say the President will be lying about taxes if he says they won't go up on his watch? Ok.

21:54 - 31 Jan 2005 [/y5/ja]

Cost-effectiveness of welfare

Tom Coyne, the proprietor of www.ripolicyanalysis.org, had a column in yesterday's journal. The gist of it was that RI is generous, but we get little for it. Over here, he'll get agreement that, compared to other states, RI is generous towards the poor. But his analysis is a bit funny.

Tom Coyne: R.I.: Lots for poor, to little effect

THE STATE of Rhode Island spends much of its general-revenue budget on helping the needy -- more, in fact, than the federal government mandates.

For fiscal 2006, the governor's proposed budget for human services is $1.2 billion. This covers spending by the departments of Children, Youth and Families; Elderly Affairs; Health; Human Services; and Mental Health, Retardation and Hospitals. An analysis by the Barrington School Department estimated that in fiscal 2003, Rhode Island school systems spent an additional $362 million on special education. We thus appear to be spending roughly $1.6 billion a year to help Rhode Island's neediest.

Special education is not aid to the poor. There is a correlation between special ed and poverty: poor communities have lots of special ed students. But there are plenty of special ed children whose parents are not poor. I count a few among my neighbors here in a perfectly "nice" neighborhood.

The rest of the column is equally confusing. For example, he complains that our high welfare spending goes with a high level of teen pregnancy. Our response is just confusion. Perhaps he maintains that generous welfare benefits cause teen pregnancy. Some have. The ones who do typically subscribe to the economists' view of human motivation. Very roughly, they see free benefits as an incentive to pregnancy. But this view of human nature is pretty bizarre, and most economists only use it because there isn't anything systematic to replace it yet. Ask yourself how many of the things you've done in the past (especially in matters of sex) were done because of the cost-benefit calculations you made.

Logically, this raises two questions: How much is Rhode Island spending in comparison with other states, and how effective is this spending?

It's fine to ask these questions, but the fact is (or should I say "logically") that people disagree about how to measure the effectiveness of welfare spending. Over here, we believe (all of us) that the effectiveness of a welfare program should be measured by the quality of life of the people it is meant to help. Less poverty equals more effective.

Mr. Coyne claims, as do many others, that the measure of a successful program is the number of people who are no longer on the welfare rolls. But this is a warped definition of success. It's fine to be guardedly pleased when the demand for welfare goes down, but to use the decline in rolls as the important measure of the program's success is to overlook the many other reasons that the rolls might decline.

What a lot of policy analysts don't realize is that for almost everyone on it, going on welfare is a choice: you can always eat dog food. The point of welfare is to preserve some dignity and quality of life even for the people who have no money, and to help those people through a difficult time in their lives. That's what the program is for. To the extent that people who need it can't use it, it is a failure. It is conceivable that Rhode Island can't afford a successful program. This is a testable proposition, and might be true for all I know, but I'm not aware that it's really been tested. But measuring the success of the program by the number of people it doesn't serve is a strange choice.

There are a million Rhode Islanders, leading a million different lives via a million different paths. Many of those paths take people down into unpleasant circumstances, some for bad reasons, others not. Unfortunately, the people who craft our social policy tend toward limited imaginations, so our welfare policies tend to have only a few solutions. Too bad one size doesn't always fit all.

11:17 - 31 Jan 2005 [/y5/ja]

Sat, 29 Jan 2005

Attorney General Alarm, pt 2

It appears RIPR is not alone in our distaste for the Attorney-General-designate and his contribution to making torture an official policy of the US government. Click on the first link to see all the blogs who agree. So call your Senator, again.

14:00 - 29 Jan 2005 [/y5/ja]

Fri, 28 Jan 2005


We're going to save most of our budget analysis for the print newsletter, but this couldn't pass without comment. The Governor's FY06 budget proposes to save $2.1 million with welfare rules changes, such as halving the time FIP recipients have to find work, and making work plans a requirement to receive the first check.

It's one thing to promote welfare rules change because you think this is a better way to run such a program. We can debate that, and debate the purpose of the program and how best to run it and so on. It's an entirely different thing to tighten rules because you need to balance the budget. There are two reasons for this:

  1. It makes it abundantly clear who loses when the budget gets tight. That Carcieri refuses to ask for another dime from his economic peers is appalling when he takes it out on the people so poor they have to be on welfare.
  2. The rules he's talking about are there to change people's behavior. Either they change, in which case the dollar figure estimates are no good, or they don't, in which case, the rules are simply punitive, and no good comes of them.
Saving $2.1 million in this fashion is taking real money from people who badly need it. Is that the best we can do?

13:10 - 28 Jan 2005 [/y5/ja]

FY06 Budget

The FY2006 budget is out, as of yesterday. The Governor deserves some praise for addressing at least one of the important problems facing towns: rising pension costs. On the other hand, the way he chose to address it isn't so terribly wonderful, but it's better than neglect he offers to the rest of their woes. It's not too harsh to complain that the biggest problems the state and the towns face are the rising cost of health insurance and the distribution of the tax burden for all our public services. Not everyone agrees with RIPR about the second one, but you can confirm the first by asking any town administrator what's their biggest budget problem. On these counts, there seems to be virtually no word from the Governor. (But it's a big budget and our analysts are still reading. Maybe he'll surprise us on page 423.)

Our prediction, which is sort of like predicting some more cold weather before spring: if this budget passes, expect big property tax increases. So far, the Governor seems to think all he need do is give the towns less money and command them to lower their expenses. The previous two Governors thought so, too, and it didn't work. What makes Carcieri think they'll listen to him? Does it cross his mind that they might love to do what he's asking, but can't? Can he really think all 39 towns are run by incompetents or con artists?

Editorial note: Our management should have been following this more carefully, but wasn't. The budget date has advanced from previous years, when it was introduced in February. We're rearranging the articles planned, so the next issue will be the budget issue. Why not subscribe now?

12:32 - 28 Jan 2005 [/y5/ja]

Thu, 27 Jan 2005

Hidden parts of the federal budget

From the Congressional Quarterly:

Bush wants to extend to all federal agencies personnel rules similar to those recently developed for Homeland Security and Defense, OMB announced yesterday. Those rules give the government greater flexibility, which Deputy Director for Management Clay Johnson III told reporters improves employee management and helps attract skilled workers.

But federal employee unions have called such rules an affront to employee rights. National Treasury Employees Union (NTEU) President Colleen M. Kelley said OMB's proposal to go government-wide was "appalling" considering the new DHS and DOD rules have yet to be implemented. In fact, DHS announced its final rules yesterday, and the NTEU promptly announced it would sue to block them.

You can find a brief of the issues here. In a nutshell, the Homeland Security employees have been given the appearance of collective bargaining rights (per the bill establishing the department), but little of the reality. HS employees are to be subject to firings at will, without hearings of evidence against them, a pay system separate from the GS system used by everyone else, the denial of a union representative at administrative proceedings where an employee's job might be at risk. Location and assignments of work and subcontracting are specifically exempted from collective bargaining, and the director retains the right to override pretty much all of it with agency-wide directives.

These rules are now proposed for everyone else.

10:58 - 27 Jan 2005 [/y5/ja]

Wed, 26 Jan 2005

Open Government

Over the past several years, I've spent a lot of time on the phone to government agencies around the country, and it's interesting how consistent my experiences have been with certain states. When I call governments in the South, I inevitably wind up talking to a woman who won't let me hang up until she's sure I've got the information I need. When I ask, publications come flying my way in the mail, usually for free. When I call the Pacific Northwest states, I almost always wind up talking to a guy who's been involved in some innovative planning project or recycling program, and who makes me feel like I'm from some distant and backward planet. Then he sends me some fabulous report filled with all the information I needed.

But when I call people in Rhode Island, to ask for public information, the inevitable response is first, "Who are you?" Once they're satisfied that I've properly identified myself, they say "You'll have to check with the public relations department." (Or legal counsel, depending on the department.) About half the time, that department makes me put the request in writing. This is simply a matter of course: the way that routine questions about public records are handled. The questions involved have been about such high-security information as the state unemployment rate, traffic accident statistics and pollution data.

Some departments are better than others, and are less likely to seem so tight with public information. Labor and Transportation are bad, Human Services is good. Education is good, Economic Development horrible. But the variations are around the same theme: the information is ours, and we want to control where it goes. This is simply the way it works here.

People around here have come to expect this, and suppose it to be the way government works everywhere. But I'd like to report from my own experience, that ours is the only state where this kind of thing happens at all, and it happens routinely here. Open government laws are one thing, but changing the culture of the state government would help much more.

23:21 - 26 Jan 2005 [/y5/ja]

Governor's pension proposals

More e-news from the Governor:

Governor Carcieri today proposed a pension reform plan which will help avert a crisis if it is enacted this year. It will save Rhode Island taxpayers a total of $256 million over the next five years and, in the next fiscal year alone, it will save the state and local communities $44 million.

You can often find harsh words here for the Governor. So the room filled with pleasant surprise as the staff learned that the plan proposed is not substituting a defined-contribution pension system for the state's current defined-benefit pension plan for state employees. (There is no word about whether this is what the Governor really wants, or if this is what he thinks he can get, but mind-reading is poor practice, and what is actually done is what's really important.)

The four prongs of the Governor's plan struck us as harsh, but honest, unlike a lot of snake-oil pension reform. There's plenty to criticize. There will be an article about the state pension system in the next issue (why not subscribe now?), and I expect there will be plenty to criticize. I suppose it's a sign of the times when proposals as harsh as these seem like cause for relief, but these are the times in which we live.

13:00 - 26 Jan 2005 [/y5/ja]

Tue, 25 Jan 2005

Attorney general alarm

This publication tries to be specifically about policy, rather than politics. We're most interested in what government does rather than the usual inane speculations about how this or that "will play." Further, most of my expertise is about matters of domestic affairs, and my inclination is not to go where I don't have experience. Property taxes, land use, clean water, food safety are the stock in trade around here, not religious strife, throw weights, supply chains and body armor.

But it doesn't seem like much of a stretch to say that I am appalled that our country has, to all appearances, officially sanctioned torture. I don't mean that we have spokesmen out there claiming that torture is a good thing. There don't seem to be any of those. But official spokesmen are just as often covering for official policy as they are explaining it. Perhaps more so.

By now we do have an assembly of evidence (here's some), including legal opinions and memos, official reports about torture and the prisons we've set up in Cuba, Afghanistan, Iraq and who knows where else. Not to mention those pictures. What's in that evidence shows that the US has effectively condoned torture and prisoner abuse, operates secret prisons whose locations we don't know, with occupants whose names we don't know charged with crimes we don't know.

The breadth of the evidence makes it embarrassing that Specialist Charles Graner has been prosecuted for atrocities and yet no one above him seems likely to suffer even a subpoena, let alone an indictment. We have a country where criminals aren't just walking free; they aren't even regarded as criminals by the people we expect to enforce the law. Which brings up the final point: It is astonishing that anyone involved with the formulation of these terrible policies could ascend to become the nation's chief law enforcement officer. It's even more astonishing that any of our nation's Senators wouldn't consider a vote on Alberto Gonzales to be a vote of conscience rather than strategy. Call yours now.

Update: Gonzales's response to the Foreign Affiars Committee indicates that his understanding is "cruel, inhuman and degrading" interrogation tactics are legally justified both by our constitution and by international law (e.g. Geneva conventions against torture). (Link to story here.)

23:47 - 25 Jan 2005 [/y5/ja]

An ad

The ad at the right is a link to thereisnocrisis.com, an organization devoted to refuting the conventional view that there is a funding crisis in Social Security. We haven't done ads yet, but there's a first time for everything. This one is unpaid, though we hope others won't be. RIPR exists to provide a counter to the conventional "wisdom" and so, it seems does thereisnocrisis.com.

From the site:

America promises that those who work hard and play by the rules deserve a secure retirement. For 70 years, Social Security has made sure we kept that promise. Social Security is in a healthier financial situation now than it has been for most of its history. Even the most pessemistic of economists agree it will remain solvent for decades. There is no crisis.
The current RIPR issue has an article explaining how some can claim that Social Security will go broke in a few years while the Social Security trustees think there won't be a crisis for decades. Why not subscribe?

15:16 - 25 Jan 2005 [/y5/ja]

Governor raised, child care providers call

In a press release last April, Governor Carcieri said:

Let me reiterate that our appeal has nothing to do with child care providers, or their right to unionize. I respect the important work that they do, as well as their right to organize. This case is about one thing: the Labor Board's breathtaking and unprecedented decision to unilaterally create 1,300 new state workers.

According to organizers at SEIU 1199, legislation has been prepared for introduction that will provide recognition of the state's day care providers right to organize, though will not call them state employees. Grace Diaz in the House and Juan Pichardo in the Senate are planning to introduce it.

With the Governor presumably behind it, doubtless the legislation will have no trouble passing.

14:17 - 25 Jan 2005 [/y5/ja]

Mon, 24 Jan 2005

Dollar woes: We're giving away our security

Here's a story in the Financial Times about how Asian central banks are now central to the US administration's fiscal policy. That is, the vast majority of bonds we sell don't go to individual investors, they go to central banks in other countries.

In 2003, the most recent year with full international statistics, central banks financed 83 per cent of the US current account deficit, with Asian central banks accounting for 86 per cent of flows.

A similar picture is emerging for 2004. Despite a good start to the year, when the private sector was a large net purchaser of dollar assets, central banks came to the rescue again. The People's Bank of China has let it be known that China increased dollar reserves by $207bn (€159bn) in 2004, financing nearly a third of the US current account deficit, estimated at $650bn.

There's a saying that if you owe the bank $100,000, then the bank owns you, but if you owe the bank $100 million, then you own the bank. The Asian banks holding our bonds can't sell it all without tragic consequences to their own economies, and one could justifiably suspect that this is what keeps our own fiscal engineers from lying awake at night. But the article goes on:

Self-interest has supported much of this flow of cash. The US has lapped up cheap finance to fund its unquenchable appetite to spend. Asian governments have until now been keen to oblige, in order to keep their currencies from appreciating. But all investors have their limits and they may start worrying about their degree of exposure.

Once Asian central banks begin to question why they hold so much US debt, who else will buy it? To be quite clear: you can only run a deficit if someone is willing to loan you money. The article goes on to note that the Bank of Thailand plans to lower its dollar holdings, as do bankers in Russia and OPEC countries.

Which would be another fine reason not to punt on the debt to the Social Security trust fund, as appears to be the assumption of the Bush administration. At the rate we're going, pretty soon we'll have no market for US bonds, except for the Social Security trust fund.

23:48 - 24 Jan 2005 [/y5/ja]

Wed, 19 Jan 2005

The Governor's state of the state, translated. Pt I

The Governor:

To do that, I am developing a five-year tax reduction plan. This plan will be broad-based, benefiting as many Rhode Islanders as possible.

I will also propose that new lottery revenues be dedicated to direct property tax relief.

Translation: we will see no property tax relief, though we might see a modest increase in state aid to towns this year.

But we might see an income tax cut, which is what he means by "broad-based." A 10% income tax cut will provide a family who earns $50,000 a year a cut of around $125. A 7% property tax cut, which would be about the same amount of money statewide, would probably net that same family around $525: four times as much. A property tax cut is harder to do, since it requires changing the relationship between the states and the towns in a fundamental way. But a property tax cut is worth much more, and we continue to wonder why he doesn't care to take it on.

11:09 - 19 Jan 2005 [/y5/ja]

Mon, 17 Jan 2005

If there are winners and losers, what do we do with the losers?

From a column in the Economists' Voice:

However, a privatized system has another contingent public liability that is often not discussed: the need to ensure minimum retirement benefits. In Chile, which shifted over to fully funded individual retirement accounts in 1981, the government has had to guarantee a minimum pension to those workers whose lifetime savings in the new system do not allow them to earn a minimum pension income. These expenditures now come out of general government revenue. They are already beginning to be significant and are expected to grow very substantially in the future.

This is from Manuel Agosin, an economist with the Inter-American Development Bank and the University of Chile.

What he's saying is that it's all fine to allow people to have private accounts whose investment they control. But in such a system there will unavoidably be winners and losers. Apparently the political pressure to protect the losers was too great for the government of Chile to realize the savings from allowing old people to starve.

Needless to say, the proposals from the "Reform Social Security" crowd don't account for that. Somehow they imagine that the losers will disappear beyond the pale of right-thinking people And presumably they will, in one sense, until a latter-day Walker Evans shows up with a camera.

15:36 - 17 Jan 2005 [/y5/ja]

Fri, 14 Jan 2005

Property tax caps fail in Massachusetts

Barbara Anderson is the executive director of Citizens for Limited Taxation, the group in Massachusetts responsible for Proposition 2½, the property-tax limit measure that, 25 years ago, became one of the symbols of the anti-tax "revolution". She has written a fascinating editorial about the conditions in Massachusetts today. Her conclusion: Prop 2½ didn't do what it was supposed to. Property taxes are still high, and still rising. Worse, as she points out, the tax on a property bears no relation to the ability of the owner to pay.

She identifies the usual culprits: spendthrift town officials, powerful municipal unions, and unthinking neighbors, who vote to raise their own taxes.

It's a puzzle all right. But what's really a puzzle is why she refuses to consider what seems over here to be an important point. If we think of Prop 2½ as a 25-year experiment in simple-minded tax caps, isn't the evidence fairly compelling that the experiment was a failure? Maybe tax caps simply cannot do the job? What if tax caps are not the best way to control taxes?

Most anti-tax crusaders start from the premise that spendthrift town officials and powerful municipal unions are the problem. But you don't learn anything from someone's premises. That's where the investigation starts. You learn from the conclusions derived from premises, whether the derivation is logical or empirical, and by comparing those conclusions to your observations. If science worked the way most anti-tax crusaders work, we'd still be plowing fields with sticks.

22:40 - 14 Jan 2005 [/y5/ja]

Biggest tax cutting states in 1990s did worst in downturn.

What a surprise. Read the release and report here.

13:00 - 14 Jan 2005 [/y5/ja]

Health insurance in the news

Two stories were right next to each other in this morning's paper. In one, it was reported that Blue Cross will pay $17.5 million to Rhode Islanders for not passing along to customers the steep discounts it was getting from drugstores and drug companies. This was a settlement, not a judgement, so Blue Cross, typically, said this:

Fraser said that in reaching settlement, "in no way does Blue Cross admit to any wrongdoing or any violation of any law or contract provision."

But my favorite quote was this one:

Also, Fraser said the health insurer will not have to dip into reserves or raise rates or premiums to pay for the settlement. "Since the case has been ongoing since 1996, we have anticipated it would end at some point, so we have been setting aside money in case of a settlement or a lost judgment," he said.

In other words, Blue Cross is paying this settlement with money extracted from premiums. To put it plainly, the penalty they're paying for setting premiums too high is being paid with premiums that were set too high. While it's great to see wrongs righted, it's not 100% clear over here at RIPR HQ how this settlement constitutes progress towards keeping health care affordable. The people responsible for these bad decisions aren't paying this settlement, we are.

Insurance accounting is a hall of mirrors, with special rules and definitions that often seem to make little sense. From the point of view of an insurance regulator looking after for-profit insurers trying to make a buck off their customers, the rules have a certain amount of logic to them. They are for ensuring that insurers don't go bust, leaving their customers high and dry. But for the problem of running a public-trust insurer, like the non-profit BC/BS, the rules are dumb, and force the insurer to do things against the public interest. There's plenty more about this in last February's issue, which looked at the Blue Cross annual report.

The other story was about the new appointment of Chris Koller, the widely respected former head of Neighborhood Health Plan (the RIte Care health plan), as the state's new Health Insurance Commissioner. His job will be to oversee the state's health insurers. He will have his hands full. But the prediction around here is that he won't be able to do what we hope, unless the structure of the market — including the rules that regulate that market — is changed.

11:17 - 14 Jan 2005 [/y5/ja]

Thu, 13 Jan 2005

The principles to which we pledge allegiance

A friend has put out a video about the principles that motivated the American revolution. He decided to test them by attending a re-enactment of the Boston Tea Party, and, well here's part of the pamphlet he printed for the occasion:

Tyranny and Despotism sound like old words describing old phenomena. Nope. there's plenty to go around today. The Boston Tea Party triggered a revolution that started a whole new country. But something's gone wrong because now multinational corporations have really gained the upper hand — just like the East India Company did back in 1773. Mr. Adams, in breeches and waistcoat, is a Reenactivist determined to add his voice to the rabble.

What would you throw in Boston Harbor today?

The video is cool for attempting to point out that many of the principles on which this country was founded are mostly honored in the breach today.

We hear plenty about the right to bear arms, and the right to free speech. But what about the enlightenment principle that truth is to be sought through honest investigation of evidence? Does our President adhere to that? What about the unjust oppression of the minority, whose dangers were so carefully outlined in the Federalist papers? Do our leaders in Congress adhere to that? How about the value of democracy, where every vote (or here) is counted? Not to mention — as the video points out — the right to self-determination, now given away to distant bureaucrats and multinational corporations. Could the founders' struggles on behalf of this principle have been any clearer? Too bad they didn't think to write it into the Constitution. They probably thought it was obvious or something.

We don't hear that much about these principles, lately. Which is another way of saying that Jefferson was at least partly right: if you make a list of rights, people will think that's all there are.

The video is also cool because you don't see many videos filmed secretly from a mini-camera hidden in the front of a tri-corner hat.

09:44 - 13 Jan 2005 [/y5/ja]

Tue, 11 Jan 2005

Dirty clean stuff

This rolled into the mailbox today:

Thanks to the soaring sales of its hip iPods, Apple and Steve Jobs are set to make a bundle of cash in 2005. Amidst all the celebration and excitement about the iPods, Jobs isn't revealing his dirty little secret about them. The sleek music players contain poisonous lead and other highly toxic materials that can cause damage to our brains and reproductive and nervous systems. Once the little music machines become obsolete, they are dumped into landfills or shipped overseas as electronic scrap. Their toxins leach into our air, land, and water and send poisons into our communities. Especially vulnerable are the children in developing countries who pick through the wastes to find parts to sell.

Steve Jobs should do more than celebrate his profits. He should live up to his good reputation and take responsibility for Apple's iWaste. He should harness the company's resources to produce toxic-free iPods and to recycle the millions of obsolete Apple computers that can poison our communities with over 36 million pounds of lead. Up to now, Jobs has chosen another course. His company has no effective program to recycle discarded computers or iPods nor has it eliminated many toxins in its products. It opposes legislation to recycle electronic waste and produce cleaner machines. Batteries for iPods that fizzle out after a year or two and which are difficult and expensive to replace are Apple's most recent addition to the growing toxic iWaste mass. It's time for Jobs to take another approach.

For more, see here.

Clean Water Action/RI introduced a bill last year whose intent was to get manufacturers of computer equipment to take responsibility for its disposal. The bill didn't go anywhere interesting, but it will be introduced again in the coming weeks of the new session.

21:13 - 11 Jan 2005 [/y5/ja]

SS Benefit cuts in disguise

One of the features of the President's plan* for Social Security is the idea that the benefits should rise over time with the consumer price inflation rather than wage inflation, which is usually somewhat faster.

There are two important aspects to that proposal. One is the obvious: it's a pretty stiff benefit cut, and it cuts people who are young now much harder than older ones. The other is that this cut alone would solve the Social Security "crisis," according to the Center on Budget and Policy Priorities. This leaves one to wonder what is the point of pushing the private accounts business. It couldn't be just the vast fees that will go to Wall Street brokers, could it?

One also wonders why the option of raising the ceiling on SS taxes (currently you don't pay any SS tax on income over $90,000) isn't a part of the mix. But then one heaves a deep sigh and remembers that our nation seems to be allergic to sensible discussions that involve taxes.

*Not that he has actually presented a plan, but there seems to be a vague consensus from conservative editorialists and thinktankers of such a plan's details, so criticism must be directed at that.

10:42 - 11 Jan 2005 [/y5/ja]

Mon, 10 Jan 2005

Housing on Block Island

I've been browsing through the Comprehensive Plan for New Shoreham, otherwise known as Block Island. The housing section is telling:

To a far greater extent than elsewhere [in Rhode Island], non-resident demand for summer homes results in housing prices on Block Island inflated to levels difficult for year-round residents to afford. Recent estimates indicate that the annual income needed to purchase the average priced home on Block Island was $150,000, but the Block Island median household income was only $50,000... This reflects the special problem of a dual housing market, with wealthy visitors from elsewhere bidding values up high relative to year-round residents' ability to pay

What's interesting is that this is going on all over the state. Little Compton is not far behind Block Island, and most of South County is rapidly becoming unaffordable, too. Nor is it just beaches: there are plenty of places in Rhode Island that are no longer affordable to people who grew up there.

Its isolation and small size (not to mention its beauty) make the housing crunch on Block Island more spectacular than in the rest of the state, but the same pressures that created it are working on the rest of us mainlanders, too. In Cumberland, Lincoln, Pawtucket and on Providence's East Side, you see commuters to Boston fleeing that expensive market to find what, to them, are bargains. In South County you have New Yorkers buying houses in residential neighborhoods for vacation homes. Everywhere you look, people from away, and rich locals are bidding up property beyond the reach of the very people who make those communities good places.

And it's not as if the less-desirable parts of the state avoid the crunch. That's where the refugees from the high-priced spots move to.

We are in the middle of a housing crisis, as has been documented here (click on "Cities, Towns and Urban Policy"), here or even here. To people who have housing, the crisis is perhaps hard to detect. They feel it in their property tax bill, thanks to an out-of-control revaluation system (see issue 2 or issue 4). But if you rent, the crisis is hard at hand.

As has been said here before, if you go by what our state does instead of what our state leaders say, we emphatically do not trust the free market. That is, we don't trust it for taxicabs, tow trucks, architects, electricians, and haircuts. We regulate all those markets, either by controlling prices, or by limiting entry to the field. But why not housing and land? I'm certain there's some clever rhetorical way to tie in the roof over our heads and the haircuts on them, but I'm not poet enough to do it. But skip that and just ask yourself the question: why do we regulate the less important things, and leave the really important ones to market forces. Market forces that have been demonstrated time and again to have absolutely nothing to do with the health of the places we live.

The year-round community of Block Island is strangling, with long-term residents emigrating to cheaper places, teachers and police finding it difficult to find housing, and no room for the town's children. We can learn from their example, or we can just wait for it to happen here on the mainland.

00:48 - 10 Jan 2005 [/y5/ja]

Fri, 07 Jan 2005

The Gordian Knot

A press release from the Governor's office:

Governor Carcieri Rallies Business Support

Today Governor Carcieri told the Chamber of Commerce Coalition, that great strides have been made in job creation and economic development in the past year. He cited the G-Tech relocation in Providence , the decision by Brooks Pharmacy to locate their headquarters in East Greenwich , job creation by both Bank of America and Citizens Bank and the Senesco boat yard at Quonset Point.


Then he addressed the challenges facing Rhode Island today.
At last, we can get to the real challenges! Presumably these would include skyrocketing property taxes and health insurance costs for Rhode Island's citizens and the state's public schools. Or the housing crisis? How about the land development pressures on Narragansett Bay? Our disappearing open space? Mercury poisoning of our children? Lead paint pollution in our cities? The increased demand at food kitchens?
"Now we have to build upon the momentum we've gained," Carcieri said. "One way to do that is to make our state more competitive. As you know, I would like to develop a plan to reduce the income tax and bring it in line with Massachusetts. I have asked the Economic Policy Council and the Rhode Island Public Expenditure Council to study this issue and create a plan to reduce broad-based taxes."

But no, it's our income tax.

No one would mistake Rhode Island for a tax haven, but the idea that we are a high-tax state is only partly true. There are places in 27 other states where the sales tax is higher, and our income tax is among the lowest in the nation on middle and low-income people. If you don't count property taxes, we are down around number 44 in tax burden on people with median income and below. (You might enjoy issue 4 on the subject.) For higher income people, the rank is substantially higher, since our income tax is progressive.

But the point is that this is only if you ignore property taxes. If you include them, the picture is very different. It's still not as dire for most of the state as the Governor would like you to believe, but it's not pretty.

So here's the problem: the Governor's plan will only make things worse. Without fundamentally altering the relationship between the state and the towns, the Governor will only make worse what has been happening for the past 20 years. He will cut the towns' education money, while at the same time making a big stink about whatever schools are deemed "underperforming," he will cut the PILOT payments while at the same time demanding that towns increase their fire safety inspections; and he will cut the other local aid while at the same time demanding that towns beef up their first response systems and increase the number of DUI traffic stops.

To the towns, the Governor talks out of both sides of his mouth. He says they should cut their budgets, but he says they've got to do more at the same time. Our Governor has a lot of management experience, but he's never been on a town council, and tried to do what he tells them to do. Until he decides it's time to fix the broken relationship between the towns and the state, his attempts to lower Rhode Island's overall tax burden are doomed to failure. Towns will be forced to hike taxes, even the ones ruled by anti-tax councils, as mine currently is.

Curiously, Governor Carcieri's approach to cutting property taxes is very similar to Governor Almond's before him. And Governor Sundlun's before him. It didn't work for either of them, and it's not going to work for him.

The fact is that most Rhode Islanders pay many times more property tax than income tax. Two-thirds of the state pays twice as much property tax as income tax. Only at the very top of the income distribution is the situation reversed. An income tax cut will favor the very rich. A property tax cut favors many more people. Figuring out how to do it won't be simple; it will be solving the Gordian knot. But that's been done before, and the guy who did it found it well worth the effort.

23:12 - 07 Jan 2005 [/y5/ja]

Thu, 06 Jan 2005

How many environmental agencies do we need?

The Governor is making waves by naming people to seats on the Coastal Resources Management Commission (CRMC). These seats are the ones currently filled by legislators or legislative appointees, whose status has presumably changed due to the separation of powers amendment passed in November.

Said the Governor, "Everybody wants to see these boards continue to operate." Well, not everybody. There are those of us who think it odd that Rhode Island has two independent environmental agencies, and wonder why we can't take the opportunity to change that situation. Between DEM and CRMC, there's overlap in authority and in function. It's not clear if there would be much of a fiscal impact to changing CRMC into a Coastal division of DEM, but there would probably be some, and it would make policy on some issues, like coastal land management and septic systems, clearer.

CRMC was invented to be a creature of the legislature, to make policy opposed to the Governor's DEM. If DEM had been doing what the legislature wanted it to, they wouldn't have created it. I'm not saying that's necessarily a bad thing, but that's what it was. (I suspect a detailed history of CRMC might show it was a bad thing, but that's just my suspicion, and it's not the point.) CRMC provides some useful functions: they are a forum for policy and that's a good thing. But there are other aspects of Rhode Island's environmental management that deserve a forum, too.

Rhode Island still has a state planning council, whose job it should be (and once was) to provide just such a forum, for coastal issues, and other environmental issues, as well as roads and social services. Many of the important policy issues facing the state are connected (if only because all the money comes from the same pot) and it does us no good service to keep them separate.

11:41 - 06 Jan 2005 [/y5/ja]

Wed, 05 Jan 2005

The uses of eminent domain

Froma Harrop has a nice piece in today's Projo about eminent domain. She writes about the abuse of the power of eminent domain to serve the public interest with "economic development" projects. Like Wal-Marts. But she does it as if things like that never happen around here.

In 1997, the DeCotis family was evicted from their land in Smithfield to make way for the landscaping for the Fidelity building to be built there. The building was already completed before they were successfully evicted. In other words, the power of eminent domain was used on behalf of Fidelity's shrubbery.

Let's not forget all the businesses and homes obliterated by the highway to Quonset Point, either. Seventeen homes and half a dozen businesses, including a big gravel works, were deemed less important than a highway built parallel to an existing road (that has no traffic lights). Given that people travel around 50 on that road, and that it is about 5 miles long, truck traffic will save approximately one minute per trip. What's more, the road is being built to serve businesses that do not yet exist, and may never exist.

There's more: what about the homes and businesses in the way of the new Sakonnet River Bridge? These are doomed because it was deemed not cost-effective to repair the existing bridge, due to years of neglect. So the public purpose behind this exercise of eminent domain was... what? To excuse neglect by DOT? To set a precedent rewarding negligence? To keep bridge designers at DOT employed?

09:43 - 05 Jan 2005 [/y5/ja]

Tue, 04 Jan 2005

Finally some decent reporting about Social Security

But it happens on the editorial page of the New York Times. Editorialists are the only journalists allowed to express their opinion. Everyone else apparently has instructions simply to reprint what they're told. Read it here.

11:56 - 04 Jan 2005 [/y5/ja]

Mon, 03 Jan 2005

Fodder for voting thoughts

Are you troubled by the feeling that maybe all the talk of trumped up election results is just a lot of internet noise, signifying nothing?

Read this. Then call your Senator. ASAP.

14:43 - 03 Jan 2005 [/y5/ja]

Managed care doesn't control costs, really

An article in the May/June issue of Health Affairs looked at the long-term cost effects of managed care. Remember managed care? Was supposed to hold costs down. But oddly enough, lots and lots of us are in managed care now and what do you know? We still have a health-care crisis.

In the United States the impact on health spending of managed care and managed competition had been controversial from the start. Skeptics argued that these tools might yield a one-time savings, spread over a few years, but that by themselves they would be unlikely to slow the long-term growth in health spending thereafter. It now appears that these analysts were right. In retrospect, and taking a longer-run view, the cost control of the early and mid-1990s merely represents an abnormal period in the history of U.S. health care.

The article looks at health care costs here in relation to where they are in the rest of the industrial world. The results are pretty much what you'd expect: we pay more, get less than most everyone else. But we have a solution. For example, our trade representatives have been leaning on Australia to "water down its system for negotiating the prices it pays for prescription drugs." (According to the International Herald Tribune.)

There article has an interesting table (here) that tells you what you already knew: our costs are half again as high as the nearest industrial competitor, Switzerland.

The article goes on to make the point that the fragmented nature of the US health care market is partially at fault for the prices. They point out that health care buyers in the US are not organized, and therefore cannot exert pressure on the sellers. The market power here is all in the hands of the sellers.

In a way, this agrees with the prescription that says that health care costs will not be controlled without action on the demand side. This is probably true. But is it more appropriate to try to condition health care consumers with co-pays and co-premiums, or might it work better to give the buyers market power by ending our employer-sponsored system and going with a single payer system? Free-market theorists will tell us that lowering demand should lower the prices, but in the context of a doctor's office here in America—all fixed costs like salaries and, um, health care premiums—it's hard to see the mechanism that will push down the prices. Which is to say that encouraging people to go to the doctor less often won't make those prices go down, except in free-market fairy land.

00:38 - 03 Jan 2005 [/y5/ja]

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