Sat, 29 Nov 2008

Stop the moaning

Last week I attended the monthly Geek Dinner at AS220 in Providence, a regular get-together for anyone interested in Rhode Island's tech industry. I got there early enough to get a seat and sat at a table with a guy who runs a database business and who is thinking about a new venture that -- well it would be unkind to describe his business idea, since I was talking to him as a fellow geek, not as a reporter. But it was great, and I would buy it, so I hope he goes ahead with it.

The evening's speakers were from DandyID.org, and they have a proposal for unifying your online identities across different services, so that your Facebook identity matches you on Amazon and Twitter, too, along with about 150 others. This way, your friends on one service can find you on another, and you can save having to maintain all these separate identities. It's an interesting niche, but what caught my attention is the three partners just moved their company here from Boulder, Colorado, a place I'm more accustomed to hearing about moving companies to.

I spoke with Sara Czyzewicz, one of DandyID's three partners and she told me that Boulder is oversaturated with startups, which makes it hard to get actual employees, and it's quite expensive to get space. They toured places like Seattle and San Francisco last year, looking to move. They added Providence to their list, and were quite surprised when they got here. (Sara is originally from Pawtucket though her partners are not.) She said they were attracted by affordable office space, but also by events like the Geek Dinners, and efforts like RI Nexus which show off the active community of technologists and inventors they found here. Since arriving in August, they've settled down to their new routine, and have found themselves a new programmer, too.

Perhaps this isn't the kind of story you expected in the paper this week, now that unemployment rate is approaching 10%? I believe our problems are best solved by a frank assessment of the situation. I've written plenty already about how the state's budget fiasco was the completely avoidable result of bad policy choices. Honesty about this is important, but it's equally important to see the good, such as it is.

One of the astonishing features of politics in Rhode Island is the prevalence of what can only be called a sort of civic self-loathing. For reasons that elude me, many of my friends and neighbors, and many of the state's policy makers are perpetually ready to believe the worst about our state: it has the highest taxes, the most corruption, the highest costs, the worst economy. If you read the news, you know the drill.

Much of this, though, is silly. People who think we've cornered a market on corruption have obviously never heard of Queens. (Or seen Chinatown, Roman Polanski's masterpiece.) Or read the papers in places like Philadelphia, San Diego, or Anchorage. We had a corrupt governor go to jail? Well so did Connecticut.

The highest taxes? Please. New Hampshire is a tax haven, right? Some of it is, but if I were to move from my home here to a comparable house in Jaffrey, Keene, Peterborough, or any equally unfashionable town, my total taxes would increase even without a sales or income tax. Our state and local taxes are lower than the national average, according to the Tax Foundation rankings whose poor methodology actually exaggerates the impact of our income tax. (We rise to 10th in their rankings only when they add the taxes you and I pay to other states, I kid you not.) There are at least 27 other states with higher sales taxes for at least some of their counties than we have. We have high property taxes, yes, but can you fix that by level funding the cities and towns while piling on new mandates?

The worst economy? Yes, it's bad now, like everywhere. But here's some news: we're small and urban. If you compare us to less urban states, we look bad. If you compare our urban area to other urban areas, not so much. According to the Bureau of Labor Statistics, there are 42 urban areas in 12 states doing worse than we are. This is still pretty terrible, and unemployment is way too high for anyone to be complacent, but we've got to get it out of our heads that it's something unique to us.

The worst deficit in the country? OK, this one's right. But why is our deficit so bad? It's because so many policymakers have convinced themselves that our state is so hopeless the only thing they can do is lower our price. And so they cut taxes and cut and cut some more, way past the point of sustainability.

There's a bargain implicit in any government's relation with its citizens: we give taxes and get services. For years, Assembly leaders and Governors have tried to improve the bargain by focusing on only the first part of that equation.

This shortsighted perspective, and the determination to pursue it at all costs, has thoroughly ruined the service side of the equation, and given us the worst of both worlds: devastated services and higher state and local taxes. Bankrupting the state is not a route to prosperity.

We are a relatively poor state and proportionately very urban. We may not ever be able to be a low-cost state, but that doesn't mean we can't compete, as DandyID shows. We have other high cards: a beautiful state, a hip capital city, a fabulous art scene and more. What we don't have is policy makers willing to play them.

Oh, one more thing: DandyID.org is looking for a PR person who can really write and is habitual user of multiple social networking sites. If you have to ask how to contact them, this job isn't for you.

14:54 - 29 Nov 2008 [/y8/cols]

Mon, 24 Nov 2008

Crazy

I don't completely understand the details behind the idea that we are going to make $7.4 trillion available, but I understand a couple of things about it:

• There was no plan for the $700 billion, and so the half of it that was spent was essentially wasted. It allowed Wells Fargo to buy Wachovia on our dime (which may have contributed to Citigroup's stock price collapse), and it allowed some AIG executives to party on. What else? Where we did wind up owning things, we did it on terms that do not allow us any control.
• Not only is the crisis the result of having infantile ideologues mind the store — people who never saw a market they didn't want to deregulate — but they have completely screwed up the rescue effort, too.

What a country.

10:37 - 24 Nov 2008 [/y8/no]

Sat, 22 Nov 2008

Well well well

The state budget chickens are coming home to roost. After five years of self-inflicted fiscal crises, we finally have a real one, and your state is pretty much helpless. You might remember all the fuss last spring about closing a $400 million deficit in this year's budget. That was the manufactured crisis, created by years of ill-advised tax cuts, deferred maintenance and a refusal to raise enough money to pay our bills.

But now we face a real crisis. Last week the Revenue Estimator Conference met and agreed that we're going to be short around $233 million from what was estimated last May. We're also spending more, for nursing home care, RIte Care, DCYF and other services. The Governor's office says the overspending plus the shortfall totals $372 million, though I expect that number to change.

It's not as if we haven't been cutting. This fall saw a tidal wave of retirements as people who were eligible rushed to get out the door before their health benefits were lost. I've met lots of people in the last few months who weren't really ready to retire, but felt they had little choice. One retirement party I attended was more akin to a wake, really. The result of it all is that many more people retired than were anticipated. The Governor's budget predicted that about 1000 people would retire, and that we'd replace about 400 of them. In the event, more than 1700 people left state service, and so far we've only replaced about 150, according to the Governor's office. That means we've cut one employee in ten, across the whole state government.

Sounds good? Well, we've seen this dance before, under Ed DiPrete. Here's how it goes. First, enjoy the savings this year, because next year, the combination of a wave of retirements and a lousy year on the stock market is going to drive pension costs up through the state house dome. Woe to the cities and towns, too, whose teachers are in the same pension system.

Second, a lot of the savings are illusory. The administration continues to maintain that we are going to see no cut in services due to this exodus, but it's hard to see how this is possible, especially with further cuts coming. Every rock I turn over shows me another department running on fumes. I hope you don't expect any maintenance to be done this year on state facilities, or for your unemployment claims to be processed any quicker.

On the other hand, I hear (again from the Governor's office) that we've been running "Six Sigma" workshops for department managers all over the state, to teach them how to do more with less. Apparently we'll have Six Sigma "green belts" and "black belts" running the DMV and DOT. I'm sure that will help.

Meanwhile, over on the revenue side, it may interest you to know that if you earn more than $250,000, we are offering you as much as an 18% cut in your income tax over last year, due to the "flat tax" option. What's more, this spring we're going to borrow almost $300 million in order to pay off the rich people and companies who hold historic tax credits. About $60 million of that was never used for building renovations, but is pure profit for those people.

One thing to watch for is that over its first couple of years, the flat tax cost us less than anyone (including me) had anticipated. One reason was that the historic tax credit offered a bigger cut from many people's taxes, and the rules say taxpayers can't take both. But now that the historic tax credit is over (and some historic renovation projects may not be happening, either) watch for the cost of the flat tax to shoot up, though we won't really know until the tax returns start coming in.

There are no good choices ahead. One thing is clear, though. If you want your government to *do* something to help in the current crisis, tough luck. You wanted better bus service, heating assistance, improved roads, rebuilt schools? Would you like to see the state make a push to creating green jobs? Perhaps you might have hoped we could put some construction workers to work insulating houses, or find boatbuilders to build windmill blades? Check in again in a few years. Rather than be an aid to its citizens, your state government is perfectly positioned to drag the whole state down a little further.

Most of the tax cuts that put us in this terrible position were made in order to promote investment in our state. But the idea that we have a capital shortage here borders on the absurd. If you imagine capital is in short supply, then help me understand exactly what it was that caused the housing bubble. No, the evidence is that we have not a shortage but a glut of savings, but it's not allocated in a way that helps our economy grow. After all, finding good productive investments is hard.

Government could play a role here, not just in matchmaking, or trying to increase the supply of capital, but (for example) in actively trying to shape the investment market. We could be using taxes to discourage some kinds of investment in order to favor others. We could be facilitating the formation of capital pools for local investments. We could be finding ways to pressure the big interstate banks to service the credit needs of local businesses. But your state government isn't going to do any of that. On the other hand, for 95% of the people reading this, if all you really wanted was smaller government at about the same cost as the old one, this is your lucky year.

21:41 - 22 Nov 2008 [/y8/cols]

Fri, 21 Nov 2008

Tax Rankings

Did you know that our state taxes are below the national average? Did you know that this fun fact comes via the Tax Foundation, whose crazy methodology exaggerates the impact of our income tax? Don't believe me; check it out for yourself.

For once, I wish we could have a debate in this state about the reality of taxes, without getting all tangled up in the bizarre civic self-loathing our policy makers suffer from.

23:39 - 21 Nov 2008 [/y8/no]

Fri, 14 Nov 2008

So what happened?

In War and Peace, Leo Tolstoy created an absorbing story about how individual actors created the events that shaped European history, but how none of them were ever knew what was going on when they did. Napoleon won battles during which no one followed (or even received) his orders, and yet was credited with strategic genius for those victories. Weather and disease lost other battles (and the war) and Napoleon got the blame. In Tolstoy's view, the sweep of history is nothing more than the story of individuals blundering about, doing the best they can with their limited views of circumstances, and grand generalizations about it all are just hot air.

The opinion pages of our state's newspapers are routinely filled with exactly these kinds of grand generalizations, facile words describing how our state's politics can be explained because voters have "chosen" the status quo, or "refuse" change because they re-elected so many members of the General Assembly.

I'm with Tolstoy on this: it's silly to encase the individual acts of hundreds of thousands of people in some kind of frozen metaphor like "the people want..." It doesn't explain anything and besides, in our government, "the people" have no way to express "their" opinion. If you are reading this, you probably have opinions about how the state would be best served. When you were in the voting booth last week, did you feel that any of the choices on offer represented your opinions well? The fate of our state deserves at least an essay question, but elections are multiple choice tests. Actually, given how many candidates run unopposed, many elections are True/False tests, where you're not allowed to check "False."

So, given all that, can we learn anything from the state election results of last week? Studying the results, the best I could come up with was this: when given the option, voters often seemed to prefer new faces, but not Republicans. Where elections were about policy issues, progressive views seemed to prevail. Mostly.

That's not much of a lesson, really, but it does lead to some interesting questions about the Republicans, who lost almost half their General Assembly seats, bringing them down to four Senators and six Representatives, the lowest number in decades. For the most part, the new faces the state Republican party introduced to us were an unimpressive group of radicals, and most of them lost.

In other countries, this kind of electoral catastrophe brings about a realignment, as new parties form to fill the void left by political failure. Why not here? It's not as if people aren't trying. Businessman Ken Block has organized the "Moderate Party." Their name is more a sign of our times than an accurate description, since their platform is basic Republicanism, albeit of a generation ago. Robert Healey's Cool Moose party gave it a shot in the 1990's, too, but didn't get much traction, maybe only because he doesn't look like a Republican. But these are efforts to organize outside the Republican party. Efforts within haven't gone anywhere that I can tell.

But all is not bleak. There were two notable Republican winners, last week. You didn't hear about them? Baker Michael Pinga unseated Senator Stephen Alves of West Warwick and Ed O'Neill of Lincoln trounced Senate President Joseph Montalbano. You might have overlooked them because in order to win, they abandoned their party and ran as a Democrat and independent, respectively. And here's the real rub: Conservative as both of them are, they will find many compatible colleagues among the Democrats of the General Assembly.

The failure of the state Republican party is a failure to recognize that there is demand for a constructive and conservative party here. Sadly, state Republican leaders refuse to supply that demand. Governor Carcieri seems to relish spending his time bashing immigrants, unions and advocates for the poor on the radio even while candidates who concentrate on those issues lose. Meanwhile Pinga and O'Neill, who appear to approximate old-time yankee Republicanism, did just fine.

What can be done? Look to Minnesota, where there is no state Democratic Party. That state's affiliate of the national party is officially the "Democratic-Farmer-Labor" party, a linguistic vestige of a long-ago merger when moderates captured control of the Farmer-Labor party after electoral losses and merged it with the weaker state Democratic party. The Rhode Island Republican party could benefit from something similar. That is, someone needs to rescue it from the radicals currently in charge.

Here's my suggestion for those potential rescuers: Stop running on nonsensical solutions to hot-button social issues -- Throw all the immigrants out! End all abortions tomorrow! -- and the cartoon version of the legislature. Stop governing as if tax cuts are the answer to every single issue. Fiscal responsibility used to be a Republican virtue, and responsibility means paying your bills. (John Chafee sacrificed his governorship to pass the income tax.) Paint us a real picture of our state and offer real solutions. It is possible to do this from a conservative perspective, honest. Change your name to the "Yankee Republicans" and differentiate yourselves from the fanatic Republicans of the Southern and Western states. Offer us a real, sensible, choice in elections, and I predict that not only will voters appreciate it, but you'll be able to recruit better candidates, and maybe even turn some coats in the Assembly. I'm not the first to say our state would benefit from better choices on our ballots, but it now seems clear that we're not going to get them from this Republican Party.

23:24 - 14 Nov 2008 [/y8/cols]

Sat, 08 Nov 2008

Some good news from the front

I had to write this column last week, and my crystal ball was cloudy, so not a word about the election today, but in the spirit of changes afoot, I have a couple of pieces of good news worth sharing -- your government succeeding by doing interesting and creative things.

The first concerns the state bond sale of a couple of weeks ago. This was when Treasurer Frank Caprio arranged to sell bonds to the public. Here's what happened.

The state had to sell around $350 million in short-term bonds, paid off by next June. The professional bond buyers are all having heart palpitations these days, and when they're calm, they're quoting rates double and triple what the state has budgeted. Bond projects with discretionary time schedules are all being put off until things calm down. But these tax anticipation notes are all about cash flow. The state can't put them off and still make payroll.

On the other hand, a lot of the turmoil on Wall Street has no reasoning behind it. The State of Rhode Island, for all its flaws, is no more likely to go out of business and default on its bonds than it was last year or the year before. In other words, there is really no reason a bond buyer should demand a higher rate from Rhode Island, except if they're afraid they won't be able to sell them to someone else. It's a perception problem more than anything else.

Perceptions can be dealt with. First, the Treasurer's office arranged to sell bonds directly to the public on Monday. They were available through brokers, but also through a few Bank America branches. Second, they scheduled a bond auction in New York the same day, but held until lunchtime, and identified the likely bidders (and pestered them all weekend to make sure they showed up).

Then Monday morning came, and we sold around $25 million of bonds to retail customers, through bank branches and local brokers. The phone traffic was fairly heavy, and there were reports of decent-sized lines at some of the branches. So all morning the Treasurer's office duly sent notes to the potential bidders that hordes of buyers were clamoring for these bonds. (In a relative sense, of course, that was true.)

And what do you know? All those hard-headed Wall Street business types whose job it is to put emotions aside and make cold, calculating trading decisions completely lost their cool, breathed a sigh of relief and bid the price of the bonds higher than anyone expected (holding down the interest rate), thereby proving what you already knew: those business types may wear better suits than you, but that's about the only difference.

The other spot of good news? Riverwood Mental Health Services established a program called "Housing First" a couple of years ago. The idea was that about 15% of Rhode Island's homeless population is homeless because of mental health or substance abuse issues, but that providing services for those issues in shelters and while people are living under bridges is kind of a losing proposition. Treatment programs for this population think of 40% success rates as a distant goal, but the best will make do with 20% or less and call it a triumph.

Housing First takes a different approach, and provides subsidized housing for clients without strings. The housing comes with intensive drug treatment and mental health services, but it isn't forced on them. They can choose to avail themselves of the help, or not, but they don't get kicked out if they say no.

Lo and behold, few say no. After over a year of the pilot program, 90% of the clients are still in their housing, and most are participating in various forms of treatment. The clients had been homeless for an average of over 7 years, but are now finding their feet. The stories range from children reconciling with long-lost parents to folks just finding it possible to get back on their feet.

It's not just heart-warming stories, either. According to an independent study by Eric Hirsch and Irene Glasser, professors at Providence College and Roger Williams, respectively, the program is a less expensive way to deal with the chronically homeless. Compared to their own experiences in the previous year, the clients of the program were in the hospital fewer nights, in jail fewer nights, in treatment fewer nights and so on. Some will roll their eyes and talk about the "moral hazard" of giving things away to drug addicts, but the truth is that, per year, we spent almost $8,000 less money (per person) on these people by giving them homes than we did when they were left out on the street. The good news is that Riverwood was just awarded $2 million from the US Department of Health and Human Services to double the scope of the program. Riverwood was one of only twelve similar programs in the country to be recognized.

As I've said in the past, a hallmark of poor policy is the assumption that the "losers" need no attention. People with mental health issues or substance abuse problems do not evaporate just because we've averted our gaze. They stick around, and we pay for them, one way or another. You don't have to be soft-hearted to think that providing them with a home and services is a better way to deal with their problems than turning a blind eye.

10:09 - 08 Nov 2008 [/y8/cols]

Wed, 05 Nov 2008

Thank you

07:09 - 05 Nov 2008 [/y8/no]

Sat, 01 Nov 2008

The inside scoop

A friend passed along a fascinating perspective on the bailout by an executive at a big bank, here. See especially comment number 56, which is a rebuttal of a number of the comments, from the original emailer.

09:39 - 01 Nov 2008 [/y8/no]

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