38 Studio - The Blame game begins

I find it interesting but again not unpredictable that the blame game has begun. Having been in the position of being an interim director of several organizations in my life time -- the present situation seems all to familiar.

Gov. Chafee, like President Obama, will get the blame for the sins of their predecessor. The public and the press (media) operating on a short term memory basis will blame the individual who is closest to the victim when they (the media) arrive on the scene. That is, we were and are facing an economic crisis both here in Rhode Island and nationally. It is a crisis brought on by our own actions in the current culture of greed. Our elected leaders are showing their true courage and in some other cases their lack there of.

To be the Governor of ALL the people or President of ALL the people, is like a being a the first Trauma Doctor at the scene on 9/11. You have to jump in do your job the best you can and make choices about which victims to treat and which can wait. Regardless of what you do, somebody will blame you for those you did not treat.

Chafee was constrained in his role with the EDC and by the crony capitalist deal by the baseball player, the former Big Audit Governor (does anyone remember that campaign pledge) and the incompetent Leadership in the State House who love to pass those sweetheart deals. While Chafee opposed the deal before he was elected, he was saddled with it and the personnel who oversaw it. The Executive Director of EDC was in on the deal in the beginning with the former Governor. One would expect he would be most knowledgeable about the details and immediately responsible for monitoring and managing the loan guarantees on a day to day basis.

Governor Chafee came into office inheriting the credit rating cut, the pension problem, state and local revenue short falls, a Republican, --WHOOOPS!! I got the Congress and the State Legislature mixed up here -- a Democrat Legislature, and a Press fueled by the Tea Party mentality that would neven consider the revenue side of fixing these problems, etc. We all concentrated on the BIG issues and expected that those in-charge of the specific programs would do their job as PUBLIC SERVANTS in the tax payer's and citizens' interests.

I know from experience that when you find yourself in this situation you set priorities. Then you move ahead putting trust in the people you have inherited as well as those you hire. Some of the people you inherit turn out to be either incompetent and/or part of the problem. They will bale out the moment things get uncomfortable, leaving behind their own failures as well as the failure of those over whom you entrusted them to oversee or regulate. But haven't we seen this before in reference to Wall Street?

The point here is simple, Chafee's job from today forward is to try to solve the problem as best as he can and with the sincere help and support of those who care about the present and future interest of the State, the taxpayers, and the former employees of 38 Studios

38 Studio is a local case of the larger problem we face. It brings to mind Socrates' age old question, "Who will guard the Guardians?"

The Positive and the Negative -- Angus Davis vs Ed Achorn

 The Barrington Times carries a very timely and positive message in this week's edition. It is especially refreshing in these times of cynicism about the Rhode Island economy and politics. The Times introduces us to Angus Davis, a successful serial technology entrepreneur, who left the state fourteen years ago, to make his fortune by designing a voice recognition system which he eventually sold to Microsoft.. Mr. Davis has quietly moved back to Rhode Island and started a new venture in 2009 in the Jewelry District in Providence. Today, his venture, is described in the article, His latest startup rewards loyal customers with every ‘Swipe’.

 from the Barrington Times 5/4/2011:

Stuart Kiely (left), Swipely’s marketing director, goes over some figures with company founder Angus Davis at the Providence office last week.

 Davis' project and his past success are a sign that things are not all bad here and that there is a base for the high tech web-oriented research and development firms such a Swipe and even, 34 Studio, here in Rhode Island. But as Davis points out in companion piece in the Barrington Times, that  "Goal: closing the achievement gap" in the State's educational system is a critical and pressing issue. While others are complaining about the current system Davis has been an activist promoting change and asking hard questions.
  
On the other hand, the Projo Columnist Ed Achorn appears to be out with a personal vendetta against Lincoln Chafee. In his latest column, May 4th, Edward Achorn: Chafee’s anti-jobs agenda would speed R.I.’s decline,  he starts off with a straight forward observation about the level of the state's debt and what it means for the average Rhode Islander. Up to that point Achorn is adding to our knowledge and  information. He is helping, as he should be as a columnist, to educate the public about a problem albeit from a particular a point of view.

However, not all that far into the article he unleashes his personal attack on the Governor as the cause for all of the problems facing the state. This is not the first time Achorn has done this. In the process, he paints a sick view of the state and he certainly has nothing positive to contribute to debate that is now going on as ways to solve the state's long term financial and fiscal problems. He fails to recognize that 1. Rhode Island has a weak Governorship with most of the political power concentrated in the State Assembly. 2. The Governor only proposes the budget, it is the Assembly that disposes the budget.

Achorn's blame game is misplaced. It should be directed toward the Assembly and not as all blame - but with positive options - to the Governor's proposals. Instead he is being lazy and grabbed onto all the suggests of the opponents to the Governor's plan which he uses as his ammunition against Lincoln Chafee as a person.

He does so without subjecting these opinions to any critical analysis. For example, he suggests that the Governor accept the offer to"employ Ken Block and his computer technology to track down fraud." On the surface this sounds good, a free service to the people of Rhode Island. But it would be more honest to point out that Mr. Block was a candidate for Governor who lost the election to Mr. Chafee, and that. Mr. Block did not offer the service at the time he was running. If the offer were accepted today, how could his conclusion be trusted now that he is a declared partisan in the political debate and has much to gain from how he writes his conclusions. This is a point Mr Achorn fails to mention.

Mr. Davis offers positive hope and commitment to changing Rhode Island for the future both in terms of the personal invest of his entrepreneurial expertise and resources in a new company but also in his activism to bring about change in educational system. Mr. Davis is focusing on the future and even challenges the Barrington school system by pointing out the charter school serving minority community are showing progress that may out strip Barrington's status as one of the State's top performing school systems.

Achorn sees the lose of "Rhode Island’s non-Hispanic white population plummeted by 54,748, or 6.4 percent, between 2000 and 2010, says the U.S. Census Bureau" as proof of the State's decline.

Mr. Davis see something else a problem as bigger than Rhode Island. If only we re-frame the questions, he sees it as two issues:

“One is an international problem. We think of communities in Rhode Island like Bristol or Barrington or East Greenwich as being tops in school systems. But if you take our most advantaged kids and stack them up against other countries, we’re at a real disadvantage,” he said. “Other countries are out-educating us and that will ultimately threaten our way of life in America, which is driven by our competitive advantage of our economy.”

"Secondly, he said, the current public schools system is not designed to allow underprivileged, impoverished students to prosper, which Mr. Davis sees at nothing less than a civil rights issue".

.On the other hand, Mr. Achorn has given us a negative image of the future. His solution is committed to rolling back the clock to the Republican  past.when the special privileges and patronage all went to the rich white Yankee mill owners instead of the workers. . It is interesting that given this Republican bias, when Achorn says ....

"But here, we have a governor, elected by only 36 percent of the voters, who seems to be wrapped in a cocoon of wealth and indifference. Impervious to the bitter realities that most Rhode Islanders confront, he is eager to do only what the government unions that got him elected tell him to do."

 that he is essentially accusing Chafee as being an out of touch Yankee who does not care for his class interests.
 
Certainly since the Democrats overthrew of the Yankee establishment, the pendulum has swung too far in favor of labor; and the patronage has gone to the Democrats and the Unions. See the following self-serving justification for Democrat patronage, Dominick J. Ruggerio: Stephen Iannazzi is good news for R.I. taxpayers.

This imbalance needs to be corrected but not by a return to a long gone past. It needs innovative ideas that look to a realistic future, a serious and constructive debate and compromise, commitment to a goal and shared vision, a plan committed to the goals, consistency and honesty in the implementation and execution of the plan, an objective and transparent evaluation of the results of the plan, and finally, a realistic factual based modification of the plan as needed to achieve the agreed upon goals. This requires cooperation between all the branches of government and a proactive program to re-establish trust with the public that there is leadership committed to solving the real structural problems we face. Right now there is very little trust in any of the so-called leaders , elected or self appointed.. 

None of these ideas are evident in Mr. Achorn's solution. His solution is a new Governor. His solution is.to get rid of Lincoln Chafee. Mr. Achorn seems to feel that wasting the next three years obstructing any positive actions to address the State's real problems is the better solution. Reminds me of what we have seen coming out of the Washington Republicans. Maybe he is drinking the same tea. 

Mr. Davis may be a model for the type of leaders we need more of in this state. We need visionaries and not quitters. Mister Davis is the future and where I am placing my money for the future. As for Mr. Achorn, I hope he enjoys his retirement in Florida after he decides it is time to take his own advice. "Move out."

Now is the time for the press to check out why we have exemptions in the sales tax

Governor Chafee has proposed a "tax increase" in the way the sales tax is applied to attack the growing budget crisis facing Rhode Island and its 39 cities and towns. This has, as we might expect, drawn out all of the special interests in the State, as well as many of their Zoombies. These special interests are attacking the plan in order to defend their own special tax status and privileges they enjoy under the status quo. Of course that privilege, their exemption, is part of the problem. But they and the press won't admit it. It allows them to NOT pay for their fair share of the cost of government overhead services that they now enjoy for free.

A Typical Example??


In a lead article of the Providence Journal, "Chafee's proposed tax hikes add up for this Cranston family"  for example, we are given a list of added costs that a "typical" (whatever that means) middle class family these tax might mean. It assumes that they family did not have, and will not make choices about how they spend their money after the tax become applicable.

For example: Newspaper Subscriptions  $312  taxes $18.72.  The costs of the papers have been going up while the quality has been going down for quite some time. The outlets for public information have expanded significantly since the days when the newspaper was the only source of public information. So why do we still have an exemption for them today?

The imbalance of reporting in all media or "Why are newspapers excluded from the sales tax today anyway"

The article does not explain why these items were excluded in the first place. If we were to research each of these we might find that special interests lobbied the General Assembly at one time or another to get this special privilege. Once these privileges became law, everyone assumed it was a RIGHT. Nobody is going to question the right and the conditions that may have made it reasonable at the time it was passed into law.

 Those hidden exemption are subsidies

The general public is paying a hidden exemption to the sellers of those products and services  and to the buyers of those products and services .

The sales tax is called regressive by Liberals because it taxes the poor on the goods they buy while excluding the wealth for the services they buy. It is also made even more regressive by the special exemptions which, while intended to relieve some of the pain on the poor actually provide a higher dollar value relief to the wealth who purchase higher priced good in the same class. Take food for example:

A sales tax on a pound of bologna for example on sale for $1.50/lb would yield at a 2% sales tax an addition cost of $.03 cents for a pound that a poorer family might buy, while a pound of roast beef on sale at $5.00/lb would yield $.10 pound that a wealthier family might buy.   

The sales tax is called unfair by those small business sellers who have to charge a sales tax on the products and services they sell and by the buyers who buy those products. It imposes an administrative burden on the seller and gives an unfair advantage to their larger competitors who can spread the overhead cost over their  pricing of  larger volume and breath of their products. It also encourages those who can afford to drive to shop out of state for goods that are taxed at lower rate. This is seen every summer in the business from RI that goes to Massachusetts during Massachusetts' tax holiday sales.

Leveling the Playing Field

If all goods and services are taxed at a rate arrived at fairly AND removes the waste in the current tax system, then the tax payers would be better served.

First, because the tax cheats would be prosecuted or sued for their waste to the system ( lost revenue from the under the table deals), and  the tax avoiders would have a more difficult time finding true advantages in going out of state for minimal savings (price competition).

Second, removing the incentive to seek special exemption would  remove it as a political strategy (anti-competitive business practices) and the politicians in the General Assemble would have to publicly explain and justify why they are seeking such legislation and supporting such exemption (waste of public corruption).

Third, and Most important, is that spreading the total state debt and tax burden over the whole retail economy should result in a higher dollar return to the government for its services (distributing of government costs more fairly) and a lower competitive tax position for the state's tax payers relative to the two major competitors, Massachusetts and Connecticut (improving RI's competitive position in the region).

The Yes/BUT Media favors the Status-quo

While the newspapers are supposed to be balanced in their reporting, we can see in the discussion in the editorial pages and in the stories on the front pages that they are not. The full story is not being total, nor analyzed. Since the local TV media basically follows the newspaper story lines "how it is all unfair". This  makes the story line more believable to the public, even though its is incomplete and biased. Meanwhile, the other story line that the alleged cause for crisis blames the public worker and teacher unions and puts forth attacking these special interests is the solution to the problem.

Highlighting the Problem Does work


Don't get me wrong, the public workers and teachers union deserve the heat they are getting. They are being unfair to defend contracts that are unsustainable and unrealistic in the 21st century global economy. They are .being unfair to their members and the public who support them. Today's Projo also carried this story
 Providence union agrees to concessions. This shows that some  union leaders are beginning to see their responsibilities for the problem and are willing to take responsibility to become part of the solution.

But they are only one part of the special interests in the the General Assembly. The politician in the General Assemble are catering to many others as well. The Press should be looking at these special interests as well
 The press should  look into these special interests today as well as into the broader context of public tax policy.

As it is the Press is cutting the amount of hard news, rather than promoting their Yes/BUT PR propaganda.on limited space of the editorial pages and in the news sections. Instead, lets see some hard news about how these special interest tax exemption can about and why they should be continued.

The Yes/BUT have begun to raise their heads from their little tax shelters warrens. Now is the time for the press to check out these tax rabbit warrens and see what they are hiding in there.

Economic Development on the cheap

Rhode Island EDC has committed $75 million of RI Tax payer money to bring 38 Studio, a video game developer, to Rhode Island. In return 38 Studios is supposed to create 400 jobs for RI. The rationale is that the video game industry  is the next growth industry.  RI  needs the jobs and taxes these will generate. The video game industry needs a well educated, highly trained and skilled workforce made up of artists, musicians, artistically oriented engineers and technicians.

Yet, the educational resources we will need to train these worker are being cut back. Congress is cutting federal support for arts education, while Providence, the home of RISD and soon to be 38 Studios, is cutting its arts programs in the school system. So once again our big economic development ideas are in conflict. We are attracting an arts based business with a tax payer investment to a private enterprise while under-investing in the children of the same tax payers and underfunding the education system that is supposed to train a generation of students to staff the graphic arts,  musicians positions these companies will need. . Makes sense -- Rhode Island sense that is.

Meanwhile Borders books has filed for Chapter 11 bankruptcy, Borders has 3 stores in Rhode Island in Garden City, Providence Place mall and T.F. Green Airport –– were on the list to close. Today, it was announced that the Cranston (Garden City) store will not be closing. The jobs will be saved, the customers will still have access to their bookstore. A small gain in a sea of closures, bankruptcies and job losses. How did this happen? Did EDC jump in? Did Governor Chafee or Speaker Fox intervene?

No, it was done because the owners of Garden City, the Los Angeles County Employees Retirement Association, was willing to make a deal that satisfied everyone. These seems like a win, win situation. RI keeps the jobs and collects the taxes, Garden City keeps earning money with an occupied building and the L A County Employees Retirement Fund continues to get a return for its members. And Borders gets a break on its lease while continuing to earn money from the store..

Maybe more business to business cooperation is what we need. Note that with all the anti-public union talk from the Tea Party and its allies, it was a county employee retirement fund that help save the day, not a too big to fail Bank.. Maybe when cooler minds get together to solve a problem, small changes are possible. .

Maybe enough small steps can save enough jobs and businesses to compensate for one big gamble. Maybe by sharing the pain, these individual efforts will rebuild a sense of community to solve the problems. Economic development on the cheap -- just maybe it will trump the grand plans, big bets and the "if it wasn't my idea, it ain't worth doing" mentality that seems to dominate economic development thinking in Rhode Island.

R I Taxes -- Taking Responsibility

 As the election season heats up here in Rhode Island and the candidates stake out their positions and false promises, I find it interesting as each competes to become the new Wizard of OZ. They attempt to lull voters into their "vote" trap with the smoke of "political weed."  The smoke is the promises designed to cloud the mind of the voting public and to get their vote.


Of course, the average RI voter will take the promised bait and end up on the hook for the cost, one way or another. However, I think there is one candidate, Lincoln Chafee, who is being honest when he proposes how we might pay for those promises of jobs, etc. through a broader application of the sales tax, while at the same time lowernig the rate to 2%. At least, he has the courage to point out that "the king has no cloths." when it come to the annual budget deficit and is proposing a way to resolve the problem. 


A recent Projo a story, R.I. governor candidates trade promises at series of public forums, illustrates this point.


I have to agree with the Ethnographer's comment  that before you make promises, tell us how you will pay for it. Here is what Ethnographer had to say:

"Caprio will go out and get the money to repair the infrastructure. He is to be praised for focusing on infrastructure. Commerce in Rhode island is made expensive by the lack of good roads and dangerous/closed bridges. Commerce brings jobs. Go Frank.

However, how will he get the money? If there is no tax increase or tax restructuring to provide the money, are we going to borrow more?

Wouldn't the $75 million going to Studio 38 do more good fixing the Route 95 Pawtucket bridge rather than have business reroute their trucks around the bridge? This is a hidden tax on business and a deterrent to business coming into the state.

I'm glad to see Linc Chafee point out that you can't keep making promises and not pay for the promises. Linc is asking Rhode Islanders, all of us, to stop weaning and start thinking about the future of our children. That starts by addressing the problem of paying for our services as we go.

We (adults) made the problem by buying into the Democrat controlled GA mismanagement of the State budget. As responsible adults it is time to take personal responsibility and clean up the mess and not leave it to the next generation.

If taxes are too high, watch them go higher as we let the state's infrastructure rot away on empty promises."

When are Rhode Island voters going to overcome their denial? When are they going to recognize that there is a direct relation between the government services they demand and the taxes they need to pay to get them?


It is time for voters to give serious thought to the basic question: "What is the proper role of government?"  To answer this question they must answer three basic questions. "What do we need from government that we can agree upon? What can we afford? and, What are we willing to pay for (and what are we not willing to pay for) ?"


For example, is it fair to use public money to help the unemployed construction worker, who is a fellow citizens, by rebuilding our failing infrastructure; or is it better to invest $75 million in an outside private company with no product, no local employees and which could not convince private investors to fund it without a guarantee by the tax payers of RI?


Right now it seems Rhode Islanders want both, but Rhode Island can't afford both. The question before the local gubernatorial candidates is not "What can I promise you to get your vote?"


Rhode Island needs candidates who have the courage to explain honestly what choices Rhode Islanders face and what they will cost? Rhode Island needs candidates who are leaders with the courage to say "NO!" to ideas and practices that do not promote the common good. Rhode Island needs leaders who can help educate the public about the problems facing the State and explain what their real options are to solve these problems.


It is up to the voters to take responsibility and ask these questions of their candidates. If the voters don't or don't care, and if the media does not press the candidates for specifics, then Rhode Islanders will continue to get high on the political smoke  bleaching out of these want-a-be Wizards of Oz. And then the day after the election, the voters will wake up to the same old mismanaged reality they went to bed with..


The Rhode Island Voter should be asking themselves:

If I do not take responsibility or hold my elected representatives responsible for their promises, then WHO will?