It is the Debt Stupid!

 In a recent oped piece entitled,  No compassion for you if you’re in R.I.’s private sector,  Projo columnist Edward Achorn bemoans the fact that Governor Chafee has asked the General Assembly to enact new taxes on a range of products, and some services, previously exempt. As has been the case in the past Mr. Achorn argues a popular point based on a flawed analysis of the problem.

The problem is not the budget or the taxes -- it is the State's debt.

 

We have had a party. We have borrowed big time from the future. We have borrowed to pay for the present without regard for the future. As a result, until we repay the future, there will be no future for Rhode Island.

 Government's job is to serve the public interest by providing the goods and services that the voters and public determine they need. It does this by generating income from taxes and related fees.

Cutting expenses diminishes the goods and services you can consume. Some of that  is waste; some luxuries that we can do without; and some is real belt tightening by forgoing things that are needed such as roads and bridges

and public health and safety.

 
How are Government finances any different from your finances?

Can you get rid of your debt by lowering your personal income? What happens if you lose your job?

Look at your own credit card behavior, for example. Waste would be buying your Big Mac with your credit card rather with the cash in your pocket or balance in checking/debit card account. A luxury would be to buy that sales item using your credit card rather than cash or debit card just because it was on sale, even through you did not need it. Belt tightening is like paying your mortgage with your credit card, borrowing more at a higher interest rate, to make a payment on a debt at a lower interest rate. In each case, your are increasing your borrowing simple to buy time and hoping to put off your eventual default.

Do tax cuts and budget cutting reduce debt?

Spending cuts do not effect the interest cost on the public debt. What cuts the interest cost is paying down the principle. And this can only be done by shifting the savings from cost cutting to principle payments. That means either no tax cuts, or raising additional income through tax increases (i.e. taking a second job). In either case, the proceeds from savings and/or the new job should be dedicated to pay down the debt.


Those, like Mr. Achorn, who complain about their taxes being too high, or the waste in government, should look to their own credit card debt. How good a job are you doing to manage your debt?

Who pays for drinks?


Rhode Islanders have been having a party. They have become drunk on quick fixes. It seems that those who would have us ignore the debt and focus only on taxes, really want us to look the other way. They want us to pay for the drinks while they can skip out of the state. They would leave the tab for the rest of us and our children to pay, or default on the debt.

Maybe it is time to stopping drinking single malt scotch and switch to beer

 Sharing the wealth also means sharing the risk and burden.


Everyone in the state has benefited in some way from the debt. Each of us shares responsibility for letting it happen. This includes the tax payers, the unions, and politicians who have created the debt arising from the unofficial borrowing caused by underfunding or postponing payments into the pension funds.


Everyone in the state should share in the cost of retiring this debt. Tax cuts for the wealthiest without demanding they pay their fair share on the principle first, is like letting them take you to lunch and then allowing them to leave you with the tab. In my experience they often will do this, if you let them.

The Hidden Cost of Debt

The same is true for politicians. Letting politicians postpone paying for current earned pension obligations and deferring them for the future, is like being treated to lunch and then be told that they left their wallet at home. They will promise,

"We can use your credit card to pay the bill. I promise to repay you when we get back to the office." Of course, when you get back to the office, they have disappeared.

What about all those businesses and union members who cash in their chips before paying their share of the debt, and then move to Florida? Aren't they doing the same thing?  

After all, aren't they feeding off of us, just to leave the rest of us with their share of the tab!

One more desparate attempt to sell off RI Assets

From Projo.com Breaking News  3/9/2011

PROVIDENCE, R.I. -- Rep. Charlene Lima, D-Cranston, is proposing a Nov. 6, 2012, statewide vote on a suggested change to the state Constitution to allow a privately owned and run casino in Rhode Island in exchange for a $100 million one-time licensing fee. Similar to a bill introduced at least once in the past, the bill envisions a competitive bidding process. But it also suggests possible locations for the state's first full-scale casino.

 In my opinion:
     
     The gambling tradition and short sight legislature once again is asking us to sell off a state assets at a bargain rate price. If a casino is a major source of state revenue, why is  it being offered as one time license and a fixed price? The license should, if we go in this direction, be subject a periodic renewal date and be awarded on the basis of an open competitive bidding process.

     The licensing authority belongs to the tax payers of RI, and the legislature should be acting as the fiduciary agent of the tax payer. Such a duty requires stewardship and acting in our interests, not some backroom deal.

     And Should the State's Constitution be used as the vehicle for such a decision? 
     Is our Constitution that petty that we seal business deals in constitution amendments?

What do you think about it?

If you became Governor - what would you do?

A poll published online May 10, 2010 by The Providence Business News asks the question

What should be the new governor’s top priority upon taking office in January 2011?

Readers are asked to select from 5 options.

1. Balancing state and local budgets 12 votes (33%)

2. Economic development/job creation 15 votes (42%)

3. Improving elementary, secondary and post-secondary education 3 votes (8%)

4. Improving the state's tax environment 5 votes (14%)

5. Implementing a robust energy and environmental protection policy 1 vote (3%)


These are very early and preliminary votes but it does suggest what the mind of the public expect from a governor. and their ignorance of what a governor in Rhode Island can be expected to do.

1. Balancing the budget

Given the Rhode Island Constitution and despite the long overdue separations of powers act, balancing the state budget is a legislative function. The most the Governor can be expected to do is:

a. to recommend a balanced budget to the legislature,
b. to manage, after the fact, a budget that the legislature approves, and
c. to do so as effectively and efficiently as circumstances and the law allow.

As for the local budgets, these are up to the local legislative bodies (town councils, boards of education, etc.)to determine and beyond the Governor's control.

So while it might be desirable to have strong leadership in the Governor's office, institutionally there is little real power here to achieve this goal without a commitment of cooperation from the General Assembly.


2. Economic development/job creation

Rhode Island is a small state that tries to behave like a big state. Localities compete as aggressively with one another for new businesses and jobs as Rhode Island does with other states. The Governor can lead here by setting some clear priorities and goals for development and by promoting the state to out of state employers. But the governor can only sell what the state has to offer and what the General Assembly will fund. These two are not always in synch.

In "Meeting the Challenge of the New Economy", the 1997 Annual report from the Rhode Island Economic Development Council, the Council listed 8 myths about Rhode Island's economy. Myth # 5 is

"by creating jobs, state and local government employment helps the economy."

The report continues,

"The Reality: The right number of state and local employees allows government to accomplish the tasks it needs to ( e.g. maintain the roads, police protection). More than we need, however, eliminates even more jobs in the moderate term by removing purchasing power from consumers and raising taxes."

This is even truer today than back in 1997, yet little has changed in terms of the Governor's ability to change labor contracts and renegotiate the long term commitments to public employees. Management, the Governor's Office, requires the legal tools to enable it to make the management decisions that creates and maintains the right number of highly trained, skilled and experience government workers to do the tasks it needs to do.

The governor does not create jobs, nor should he/she. Instead, the Governor should help create a climate that fosters private sector employment opportunities. Here again, cooperation between the GA and the Governor will be required.

3. Improving elementary, secondary and post-post secondary education.

The Governor is the public's elected CEO. Here is where the Governor can have a real impact and where real change can be brought about. Education is the most critical step in an economic and social policy. Economic development does not occur overnight, anymore than educating a child to become a productive worker does. Both are long term processes. Changing the educational environment is a leadership and policy issue. Setting that policy, especially strategic policy, is the job of even a weak Governor.

a. The first step in building and supporting a viable and adaptable system to meet the needs of students, parents, communities and employers would be to set middle and long range goals and objectives for the state's educational system. These would be based on realistic assessments of the changing workforce needs, regional and global economic trends and local and state capacity to respond to these needs would be.

b. Next would be to create and carry through a realistic plan to achieve such goals. For the next Governor it would be follow through on the work done by Dr. Gist and those involved in planning and seeking federal support through the Race to the Top grant competition.

c. Next is to build on our strengths beginning with the best talent we have. The new Governor should avoid the temptation to replace the team now in place solely to reward friends and cronies. We have seen enough of this in recent years and even recent days in the state.

d. Support for individual teachers efforts to use and share their best practices even when these are contrary to arbitrary and/or out-modded contractual work rules or administrative policies is critical. By promoting and rewarding professionalism through public recognition and professional advancement for outstanding performance would demonstrate to all the state's commitment to quality education and a quality workforce.

e. Support for the state's post secondary institutions including the technical as well as professional post secondary education at a level competitive with the rest of the region and the world would put action behind the claim that we have the well trained workforce employers are seeking

f. The Governor should also push for full funding for the plan at all levels and through all available means and would re-enforce that commitment.

4. Improving the State's Tax environment.

I realize this may go against a lot of people's gut reaction but here goes. The State's tax environment is not, nor should it be, based simple on "pricing" considerations. By this I mean, it should be based on the true cost/benefit to me to live and work here, not on my tax bill. It should be based on the real or "true" value I receive for the taxes I pay.

For example, policies which focus on "lowering my tax bill" by not fixing the bridges and roads that support my business; or provide me with workers who can not read, write, do math or think critically; or impose inconsistent and onerous laws, regulations, processes that impede my ability to conduct my business competitively; or make it impossible for me respond to a new business opportunity in a timely and competitive manner, are the hidden taxes which really create a bad tax environment.

By the same token, the value of a reliable and efficient public works department, a dependable and accessible government permitting service, a clean and safe water supply, etc. should be considered when evaluating the value you receive from paying your tax bill. For example, what is the value of the state's response during the recent floods worth to you? Or, What is the value of the life that fireman saved? These are examples of the positive value we receive for the tax bills we pay. They would be sorely missed if they weren't there.

Here is where the Governor can have a impact. He should direct the administration's efforts to address the hidden taxes imposed by the General Assembly, especially when they fail to address these issues. One way to attack this problem is to change the dialogue from "government waste" to "government value." Former seeks only to cut costs without reference to quality. The latter exposes the "hidden taxes" of government uneffectiveness and inefficiency and shifts the focus to discovering the potential the value of government services deliver by those taxes.

A policy of greater transparency, i.e. "the good, the bad, and the ugly" should be the Governor's position. The new governor should use the bully pulpit of the office to expose the smoke and mirrors of backroom deals and magical thinking that we find in the GA.

The goal is to address Myth #4 from the 1997 report.

"If it is good for business (or labor) it has to be bad for labor (or business)."

The adversarial period of 20th century business/labor relations must end. If we are to improve the tax environment for everyone in the state and compete in a 21st century global economy, we need to change the way we think about who We and They are. Here the moral leadership of the Governor's Office must come into play.


5. Implementing a robust energy and environmental protection policy

In order to implement such policies, they must be sustainable and realistic in terms of overall needs and resources available to the State and localities. The Governor can provide guidance in balancing the state's economic, and social needs as reflected in the state's energy production and consumption practices weighed against the long term hidden tax of poor or inadequate environmental regulation and enforcement. Here the Governor can provide leadership to bring competing interests together for find solutions that serve the best interests of all and not the best interest of "favored" interests.

The job of the next Governor is to create a political climate where all parties feel that they have been dealt with in fairness. This will go a long way in creating a physical, economic, social and political environment that supports the public's and State's immediate and long terms interests.

Where is the Value and Who benefits?

Many problems arise when people loose sight of the purpose and goal of the things they do. They are quick to define problems in terms of short term discomfort, forgetting that the problem is the result of long term neglect,mistakes,or ignorance. Therefore they are prone to seek short term solutions.

Rhode island's budget crisis is not the acute problem that it has been portrayed in the legislature and public. It is chronic and worsening. We are taking cold medicine to treat a cough that is but a symptom of our lung cancer. This institutional and public denial lead to squandering opportunities for long term solutions to achieve short term fixes. The tobacco settlement money, unfunded mandates, unfunded pension obligation, borrowing for major projects just to capture federal matching funds, and forgoing routine maintenance on critical infrastructure are all examples of short term thinking with long term negative consequences.

Yesterday's Providence Journal carries the follow story:

"Dig uncovers significant historical site in Narragansett"

The outcome of the lawsuit and performance of the quasi-state agencies which currently control the destiny of the site will have a long term impact on the state, the local communities and the people of Rhode Island. Hopefully, our leaders may have gained some wisdom from past mistakes and take time to weigh the long term cost/benefits against the short term fix this discovery might make available.

Here are the options:

There is a opportunity to build some 20 homes in a prime piece of property in a desirable location in the state. Building this development will create some short term employment and sale of goods and services that would help the economy for a few months. The sale of the houses will generate some fees for local government, commissions for a few realtors, and sales to the new residence. In the longer term it will generate property taxes. The short term gains.

In the long term the public services to support the development will include new roads, utility lines, education and public safety costs for the new residents, and annual maintenance of the improvements. What will be the cost to the developer, to the community and who will be paying for this long after the developers have moved on?

On the other hand, South county RI is a tourist center and tourism is a major economic driver of the region. In turn tourism contributes significantly to the state's economy and general revenue. The site, as described in the story, is unique in the northeast and only one of two such sites on the Atlantic Coast. Isn't there value here?

There is certainly archaeological, cultural, historic, and scientific value to the site for both the Narragansett Indians and for the general public. But more than that, there is economic value with both a short term and long term payoff for all.

Archaeology is a labor intensive activity. Excavating the site will create jobs and need for supplies just as the construction of the homes would. The preservation of the site and its development into a historic tourist venue should produce jobs and income for the community well beyond the initial excavation and construction period.

The site is part of the history of the region which brings thousands of tourist into the area annually. Tourists buy gasoline, cigarettes,liquor, hotel rooms, meals, and other services and goods that produce tax revenues. And when it comes from out of state, it is new money added to the state's economy.

We complain about the lose of manufacturing jobs to offshore manufacturing plants. The United States is NOT a manufacturing economy anymore. It is a service and experience economy. This is where the growth is. Tourism is part of that economy.

Many people don't see that tourism, conducted here in the state, is really exporting entertainment and leisure services to other states and foreign countries. That is, people have to come here in order to consume our "experience" products. They have to come here and buy that experience and spend money here.

This archeological site is a one time opportunity for Rhode Island to capture the economic value of the site. Once it is dug up either for housing or a tourist attraction it's potential and value will be lost or radically changed.

Isn't it time we stop looking for the loose change found in the sofa for our next fix, and instead use it to start looking for a real job that will pay the bills and help pay off our debt?

WIRELESS Electricity : Can RI think systematically and innovationally about the future?

What would you do if you could walk into your home or office and automatically recharge your electric appliances with out plugging into the wall sockets? Park your electric car in the garage overnight and it recharges automatically? Move your HDTV from room to room without a bunch wires? Or even drive along the highway on free energy?

WHAT IF ALL YOU NEEDED WAS ONE DEVICE IN YOUR HOME TO PLUG INTO AND IT WOULD GENERATE ALL OF THE ELECTRICITY YOU NEEDED AT NO ADDITIONAL COST?

This could be the future here in RI, if only we had a creative and forward thinking legislature and state government.

Gov. Carcieri has been pushing for an off-shore wind farm to help the state overcome its energy dependency. But simply generating more electricity is not the solution to the energy or economic problems. We need to move further and faster if we are ever to catch up with the future. That future is wireless electricity.

And you ask, What the heck is that? And how does it apply to RI?

Check out this article by Paul Hochman at FastCompany.com


Wireless Electricity Is Here (Seriously)



Once we produce electricity from our wind farm, what are we going to do with it?
Sell it to National Grid to sell where ever it wants at whatever price?

What if instead, we sell to homes, buildings, and municipalities to power their wireless electricity generators (inductive devices mentioned in the article). These would recharge batteries on mobile devices and create electricity on any wireless equipment within the immediate range of the generator. For example, have an induction device implanted in your garage and on your electric car and recharge the batteries at night without plugging in. Wild thought but it is possible.

Just up the road in Massachusetts, people are already working on the basic engineering. Is anyone in Rhode Island thinking or planning along these lines?

Check out this video




Once Rhode Island was the manufacturing capital of the United States because we took advantage of the tremendous resource of water power on the Blackstone River. Samuel Slater changed forever the textile industry in America when he captured the power of the river. He changed the nature of energy production and use in his industry by replacing animal and people power with water power to spin thread and weave cloth. The use of water power was extended to a wide range of industries thereafter and served as the basis for Rhode Island's manufacturing industry in the early 19th century.


Today we are exploring the possibility of producing electric energy based on our wind resources. But the money and jobs are not to be made in the harvesting of the wind. The money and jobs will be found in transforming that free energy into electricity, it will be made producing products and systems that people can easily use and in more cost effective energy products.


Wireless electricity has the same potential of radically altering the nature of the commercial use of electricity and competing with traditional generating technologies.

As we ponder the bankruptcy of the state in the short term, are we going to forgo the future and long term? Here is an area which offers potential and is directly related to our needs for generating a new economic base.

Give it some thought and let me know what you think. It might bring back the Lively Experiment that has been RI.

Bangkok West? - Rhode Island Sex trade policy

The sex industry is a lucrative, pervasive and corrupting reality in the world today. Sex tourism is industrial policy and a major source of revenue for such "developing" nations as Thailand, Viet Nam, Philippines, Mexico, and Rhode Island.

What? Rhode Island?

Yes, there is a long and questionable history of a sex industry in Rhode Island. By intent or neglect, it thrives today. In today's Providence Journal there are two stories which point to the connection between the state's third world political culture and its sex industry.

First, on the Editorial page, focuses on the continuing debate about criminalizing prostitution. The question of sexual exploitation is a key element in the debate. But this is also an industrial policy question for the legislature. Private clubs and spas that can offer sexual services, albeit not "openly," but as long as it is done behind closed doors, are a major draw to the darker side of the Rhode Island tourist trade and economy.

In an OpEd piece: David Segal/Edith Ajello: Don’t turn prostitutes into criminals

01:00 AM EDT on Tuesday, July 21, 2009

Rhode Island state representatives David Segal and Edith Ajello write:

"...Many writers on these pages believe that many women who sell sex in Rhode Island do so against their will, that they are trafficked to Rhode Island by contemptible international syndicates. Somehow, they say, these women would be better off were we to empower police to arrest them, and the courts to imprison them.

We think that idea runs counter to the ideals and very purpose of our criminal-justice system: Since when do we arrest and punish the victims of crimes? Human trafficking is obviously a despicable practice; its magnitude in Rhode Island remains in question. "

While Segal and Ajello present the argument for and against criminalizing prostitution, they state that their primary concern is that criminalization would not help the victims of trafficking. This is a fair position if they had an answer. But the only way to solve the problem, according to them, is to wait.

Their conclusion is,

So, rather than enact legislation that will only make matters worse, let’s heed the advice of the experts. The Urban Justice Center’s Sex Worker Project put it succinctly. The solution to the human-trafficking problem “is more effective and vigorous enforcement of federal anti-trafficking legislation and passage of strengthened state anti-trafficking legislation, not the wholesale criminalization of the very persons you seek to help.

Their solution, if I read them correctly, is that it is too complicated for us -- "let the federal government solve the problem."

The second story raises questions about why our legislator and city councils are unable to solve the school funding issue. Is it because keeping kids in school might hurt the tourism industry?

Minors in R.I. can be strippers

01:00 AM EDT on Tuesday, July 21, 2009

By Amanda Milkovits, Journal Staff Writer

PROVIDENCE –– Rhode Island teens under 18 can’t work with power saws or bang nails up on roofs.

But dance at strip clubs? Sure. Just as long as the teens submit work permits, and are off the stripper’s pole by 11:30 on school nights.

According to the article

"State law says that anyone who employs a person under 18 for prostitution or for “any other lewd or indecent act” faces up to 20 years in prison and up to $20,000 in fines. But that isn’t enough to prevent underage girls from working in strip clubs, said senior assistant city solicitor Kevin McHugh, who researched the issue a dozen years ago when a teenage dancer was found at a raided strip club."

So why was this issue not addressed 12 years ago?

The article goes on

"When questioned about Rhode Island’s law, Michael J. Healey, a spokesman for the attorney general’s office, offered a copy of the current state law but did not comment for this article."

Nevada which has build itself on silver, sex and gambling has a more child friendly law than Rhode Island.

Again from the article,

Nevada, meanwhile, doesn’t let anyone under 18 work in casinos or in public dance halls where there is alcohol — and there are no strip clubs in Nevada without one or the other, or both, said Cartwright, of the attorney general’s office. Minors aren’t even allowed to deliver mail to brothels.

So, 12 years ago our political and justice administrative leaders learned that children were stripping for money in clubs which serve alcohol. Their solution was to do nothing, as they probably will do again. And now our legislators are proposing we do the same for those who, may drop out of school, and instead may graduate from dancing to the more lucrative profession of prostitution, willingly or as victims. And where is the line between child pornography and legitimate artistic expression.

There is a third world sex industry in Rhode Island which should and must be regulated -- through prohibition and/or strict regulation.

What do you think about the Governor's Report on the Economic Development Council?

Shakeup sought for economic agency

09:07 AM EDT on Wednesday, April 22, 2009

By Benjamin N. Gedan

Journal Staff Writer

PROVIDENCE –– A panel reviewing the state’s economic development agency issued a blistering report Tuesday, criticizing its performance as “fragmented, disjointed and without focus.”

http://www.projo.com/news/content/BZ_EDC_REORGANIZATION_04-22-09_UTE41U3_v188.39431fc.html

My take on the subject:

I am a RI native-born who left the area after college and spent 20 years plus living outside the region and working nationally and internationally. When I came back here 20 years later, I realized just how much potential there is here. I am still waiting for the folks who I left behind when I left to see that potential.

EDC was created shortly before I came back.There have been a number of initiatives, plans, reorganizations, leaders, and development philosophies. The comments in the article are, from my perspective, soft compared to what might have been said.

I share the feelings of many natives who have returned to RI after time away, and the newcomers who see the beauty and potential of the Ocean State.

Many want to roll up their sleeves and do something.

Back in the early to mid 1990s, I was part of group -- Vision Rhode Island -- that evolved out a series of public meetings initiated by citizens and professional planners. Our goal was to stir things up and shake the power that be out of their narrow, boxed in short term thinking. We want to promote a We survived for about four years until the energy ran out. We ran into a lot of inertia and passive aggression from the powers that be.

There are some very dedicated people working at EDC but they are handicapped by the lack of leadership and consistency from the top and political interference of an incompetent legislature. All the talk about economic development turns out to be code for short term survival. (My opinion).

There is a definite need for a grass roots effort to bring change and to bring together a coalition of interests that are willing to take the long view and commit to it. Whether that is possible, I am getting to an age where I still hope but expect not in my lifetime.

The very strength of RI -- its strong sense of individualism and minimalism (39 cities and towns in what anywhere else would be an average size county) is also its greatest weakness.

What do you see as the major obstacle to turning RI's economy around?

I attended a SBANE breakfast meeting this morning where Mike Saul, the new Director of the Rhode Island Economic Development Corporation spoke. He hit on several key points: (1) a need for regional (within RI and with RI's neighbors) planning and development; (2) a full range of options for capital financing from start-ups through attracting businesses to relocate into the state and every step in between; (3) streamlining and rationalizing the regulatory environment to reduce the costs of doing or keeping business in RI.

One member of the audience raised a question about RIEDC's role and ability to lead. Mr Saul observed that there have been 29 Directors in 39 years. While the early Directors laid out the basic economic development strategy for growth, over the years the agency's authority and responsibilities have been diluted as these have been shifted to new agencies and power centers.


My feelings are that Rhode Island as a state has tremendous potential. As a community, however, it is too insular and provincial to make the sacrifices and compromises necessary for the common interest. And in this class and a territorial warfare, waste and inefficiencies are the rampant way to maintain the petty warlords in the legislature. As long as we look at Rhode Island as a zero sum game, it will trail behind its immediate competitors Massachusetts and Conneticutt.