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.

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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.


Creative Commons License Tom Sgouros

Thu, 28 Feb 2008

The Roberts plan: Taking on health care?

Apart from the foolish tax cuts I write about so often, most of the budget ills afflicting our state and municipal budgets can be traced to exploding health care costs of one kind or another, whether it be health benefits for employees or Medicaid expenses. It's been fairly pleasant, therefore, to hear the noise that Lt. Governor Elizabeth Roberts has been making about health care reform over the past several months.

During the fall and winter, amid a fair amount of publicity, Roberts convened a "working group" of people to speak and brainstorm about what health care reform in Rhode Island should look like. A couple of weeks ago, we saw the fruits of the effort, and she announced the introduction of the "Healthy Rhode Island Reform Act of 2008."

The plan consists of several parts. There is a requirement that people who earn more than four times the poverty line buy health insurance. There is another provision that creates a "Hub", a non-profit organization to offer health plans to individuals and small businesses, with a modest subsidy provided by assessing a fee on businesses that don't provide health care for their employees ($1,000 per uncovered employee). The plan also proposes to increase competition among health insurance companies by allowing insurers licensed in Massachusetts or Connecticut to do business in Rhode Island, and there are some attempts to gather cost information about health care and insurance, too.

So, what will the Roberts plan do for a small business owner who already buys his own insurance? (I'm thinking of me here.) Pretty much nothing. Mandates in the plan only require that I do what I already do. I'm not looking for a handout, but there's a lot to fix. The Roberts plan doesn't even promise that costs will be kept under control, only that mechanisms will be established that some future government might use as a small part of a scheme to control costs. Pardon me for not jumping with joy.

The truth is that this is not a plan to reduce the cost of health care, nor is it a plan to provide health care to anyone at all. This is only a plan about health insurance. Essentially, the plan is to encourage competition, force purchasers into the market, provide more information and hope that all this makes the costs lower. It's all about making the "market" work better; call it a Republican plan. That won't be a bad thing to people who believe that a lack of competition, too many people opting out of the market, and a lack of transparency are what bedevil the health insurance market.

But here's a question for those who believe that: Why do you believe it? Is it your pet economic theory or actual evidence? As I reported last year in the RI Policy Reporter (#24), health insurance premiums in Rhode Island, though higher than the national average, are lower than anywhere in the northeast for certain classes of buyers, according to the US Department of Health and Human Services Medical Expenditure Panel Survey. For other classes, they're quite high. There's plenty of competition in many other states. Can the lack of competition in Rhode Island explain both the low premiums for some folks and the high premiums for others?

Maybe you believe that lots of uninsured people are the problem? It may interest you to know that Rhode Island has one of the lowest rates of uninsured people in the nation. Shouldn't that mean our rates would be low? Maybe you believe that group purchasing for health insurance will bring costs down? Of course it can, but this is old news. Some Chambers of Commerce and the Good Neighbor Alliance have been doing it for years. Their rates are decent, but they're not an obvious bargain, and I left them years ago when I found a better deal. In other words, the argument that these reforms will help is hardly self-evident, so long as we're talking about the real world, and not the world of economic abstractions where increased competition always helps.

Alternatively, while we're discussing markets, you might believe that high health care costs are largely a result of markets doing what markets will do: setting prices that "clear". This is economist-speak for the situation where all the sellers can find buyers. It doesn't say anything about buyers who are inevitably priced out of the market, nor does it speak to the market power of sellers, nor to the fact that sellers -- doctors, hospitals, drug companies -- know a whole lot more about the products they're selling than the buyers (i.e. you) ever can.

And I haven't yet mentioned the dumbest problem of all. Because most people get health insurance with their jobs, one of the big cost drivers in the health care industry is -- wait for it -- health insurance. A hike in Blue Cross premiums means RI Hospital employee benefit costs go up, so that their rates have to go up, so Blue Cross has to raise their premiums again the next year. Part of the increasing cost of health insurance is to pay for the increasing cost of health insurance.

None of this has anything to do with the amount of competition in the various markets, so the market "reforms" in the Roberts plan won't address them at all. But these are all problems that governments are in a position to do something about.

Unfortunately, our governments won't do anything about them so long as we are led by people for whom economic theories overrule observations and data from the real world. My fear is that this plan shows Roberts to be just one more of those.

21:03 - 28 Feb 2008 [/y8/cols]

Mon, 25 Feb 2008

Data surprise

Did you know that health insurance in Rhode Island is a bargain for some people? And quite expensive for some others. Check out tables VIII.C.1 and VIII.D.1 in the 2005 federal HHS Medical Expenditure Panel Survey. Compare Rhode Island's average expenditures in various wage classes with other states that have more competition, and then tell me again how increasing competition among insurers in Rhode Island will help lower our costs.

Why is this relevant? Well, Elizabeth Roberts health plan is really mostly about increasing competition among insurers to lower costs. There aren't any other controls envisioned, even though there are provisions made that might make it easier to establish controls at some future date. But I think the evidence that a lack of competition is what ails us is pretty thin, making it pretty unlikely that enhancing competition is going to be very effective "reform."

13:05 - 25 Feb 2008 [/y8/fe]

Mon, 18 Feb 2008

Issue 30

Took a long time, but it's at the printer. Watch your mailbox:

  • Did you know the IRS publishes migration data? Did you know it has something to say about who's leaving and who's arriving and how much they earn?
  • Medicaid: what are the components. Probably not what you think.
  • Judith Reilly: Confusing the state's two historic tax credit programs. Please don't.
  • A Wall Street Sub-primer.

Plus a special bonus on the battle flag of the First Rhode Island Regiment.

Didn't you mean to subscribe?

12:53 - 18 Feb 2008 [/y8/fe]

Random references for issue 30

Sound good? Didn't you mean to subscribe already?

12:52 - 18 Feb 2008 [/y8/fe]

Mon, 11 Feb 2008

Government as a car

For the upcoming issue of RIPR (out Wednesday), and for this week's column, I spent a little time revisiting the unholy mess that is our system of applying for welfare. Do you know that the state employs around 160 people whose job it is to help people fill out the application forms? These are the "Eligibility Technicians" or "ETs".

The reason they exist is because the rules for all the different programs are so maddeningly incompatible and restrictive that it takes a year of intense study to figure them out, thereby making the program more expensive to run, less able to help, more unwieldy and less flexible.

Anyway, today Atrios reminded me of this perfect description of how we got into situations like this.

If the Goverment is a car setting out to give every one a ride to work, then for 40 years the Republicans have been puncturing the tires, pouring sand in the gas tank, stealing the distributer cap, and, whenever they can get their hands on the wheel, driving it straight into the nearest ditch and then, pointing to the wreckage as the tow truck backs up to it, saying, See, this proves that people were meant to walk.

And they do this so that they don't have to chip in on gas.

Around here, there are plenty of people who call themselves Democrats who fall into the same category. Let's not pretend that the social services provided by our government were designed by Democrats. They were largely designed by Democrats trying to cooperate with people determined to make them fail.

08:38 - 11 Feb 2008 [/y8/fe]

Fri, 08 Feb 2008

Movie madness

I got this in today's email:


Legislative leaders to announce plan to bring movie studio to Rhode Island

STATE HOUSE - House Speaker William J. Murphy and President of the Senate Joseph A. Montalbano will hold a news conference this afternoon to announce a plan to bring a major film production studio to Rhode Island, generating jobs and economic benefits.

This will probably kill any hope of reining in the movie tax credit this year. But let's be real here. The movie tax credit cost us about $12 million by the most recent online. The credit is for 25% of production costs, for productions exceeding $300,000. So a million-dollar production, which is chump change in that world, really, will get a $250,000 tax credit. If all of that million dollars is spent on salaries of Rhode Island citizens, the state will recoup about $50,000 in tax money. But this isn't realistic. More likely would be a $5 million production, of which half a million is spent on in-state salaries. Given the base of expertise and staff in the state, even this is pretty optimistic.

A production like that will cost the state $1.25 million, and bring in about $25,000 in new taxes. If you count the "multiplier", maybe we're talking about another half-million spent in state. So the result is that we'll spend $1.25 million in state money, in exchange for around $50,000 in new tax revenue and almost a million dollars in economic benefit to the state. What a bargain.

This is not economic development. This is a combination of desperation and intoxication. Desperation that no one in a position of power has any better ideas, and intoxication with something as glamorous as movies. Feh.

Update: Rhode Island's Twelfth has looked deeper into this.

13:06 - 08 Feb 2008 [/y8/fe]

Tue, 05 Feb 2008

Congress Surrenders

While we're all watching the presidential primaries, our President continues to demonstrate that he's in power, and Congress is irrelevant. In his latest signing statement, Bush has proclaimed that Congress has no power over what he spends. Congress, predictably, is silent. What, one wonders, will it take for that august body to act to defend its relevance? Why, exactly, should any future president pay attention to what Congress does or says? What, exactly, is meant by the phrase, "A government of laws, not of men?"

Read here.

This is, of course, the least of it. The President's budget does not actually contain all of the spending he is planning on. (Much of the spending on the war, for example, is MIA.) That's already a $3.1 trillion budget, with record-breaking deficits, and it's not even a complete accounting of the spending. But none of this even merits a mention?

13:54 - 05 Feb 2008 [/y8/fe]

Sat, 02 Feb 2008

Released budget?

The Governor released his budget last Thursday, a couple of weeks after the deadline. But did he? What's posted is only the executive summary, the personnel report and the technical appendix. The capital budget is missing, the overall budget document is missing, and the parts that are there are missing important pieces. For example, the executive summaries always contain five-year projections of costs and revenue. This is where the "structural deficit" is reported. That section is missing entirely from the executive summary. So when do we get the rest of the budget?

18:11 - 02 Feb 2008 [/y8/fe]

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