Negotiating Points in the Pension Proposal

/in , , /by

Underlying the policy complexities of the pension issue is the background give and take of financial interests and political careers. General Treasurer Gina Raimondo, for example, is free to propose pretty much anything and let the General Assembly take the heat for actual changes. As long as she stays off the unions’ “not with a 10-foot pole” list, she can run for higher office as the stern-chinned pragmatist.

Similarly, Governor Lincoln Chafee can seek to burnish his “fiscal conservative” bona fides by publicly endorsing a plan more generally seen as Raimondo’s handiwork. For their part, legislative leaders can play off the treasurer’s supposedly objective calculations and the governor’s veto power. What the public is seeing and what elected officials are planning can be two very different policies.

An October 10 Providence Journal op-ed by National Education Association Rhode Island Executive Director Robert Walsh fits neatly into that interpretation:

The only equitable option presented to the pension advisory group was to make current retirees subject to the “Plan B Cost-of-Living Adjustment.” The Plan B COLA, already in place for current teachers and state employees, bases the COLA on the lesser of the rise in the Consumer Price Index or 3 percent, and it is further capped at the first $35,000 in pension earnings, which is also indexed to inflation. (The CPI is also used to calculate Social Security increases.) When combined with a more modest 25-year reamortization of the pension fund, the Plan B COLA option for retirees solves a significant part of the pension dilemma, unless the courts rule otherwise.

General Treasurer Gina Raimondo, to her credit, has allayed some fears already by strongly stating that no earned benefits would be cut, and that the debate regarding retirees would focus on the COLA. She has also wisely shown more openness to reamortization as part of a comprehensive solution to the pension issue.

Obviously, Treasurer Raimondo’s proposal (onto which the union-backed Governor Lincoln Chafee has signed) goes a bit farther than that, mainly in that it completely suspends COLAs pending the pension system’s healthy recovery, it introduces a hybrid defined-benefit/defined-contribution plan, and it adjusts the retirement age upwards to Social Security standards.  (Keep in mind, by the way, that various categories of employees — teachers, public safety, and so on — receive differing treatment.)

Several components of the proposal are subject to basic mathematical negotiation, meaning that the sides will trade dollar amounts in order to secure principles that they want to protect. It’s useful, therefore, to consider COLAs, retirement age, and amortization in this context.

The “Plan B” COLA calculation to which Walsh refers follows the Consumer Price Index and is capped at 3%; it also applies only to $35,000 of the pension benefit (although that number adjusts upwards every year by CPI-to-3%, as well).  Raimondo’s proposal replaces the CPI with the pension’s annual net return (over a five-year average), with the cap at a 4% increase.  In terms of the actuarial calculations, the upshot is that this move reduces the predicted annual COLA from 2.35% to 2%.  The sticking point is that the new proposal would withhold COLAs in any year that the system is less than 80% funded, which could mean a decade or more of no increases.

That aspect of the proposal, along with the increase in retirement age, are likely to be hotly contested.  And since Raimondo has crossed the Rubicon of reamortization (thus extending the number of annual state budgets until the plan is fully funded, reducing the hit each year, but also reducing investment returns), it will appear more reasonable to extend the amortization period even farther in order to “buy back” reduced benefits.  So, for example, advocates for retirees might accept the later retirement age but insist that the COLA pinch be eased, with the difference in costs made up with a few more years of amortization.

But this is all a numbers game.  The interesting wild card is the hybrid plan, which reformers rightfully like as a means of shifting market risk away from taxpayers and toward retirees, but which contains details that ought to make them wary.  Given the complexity of that topic, I’ll take it up in a separate post.

Bank of America Debit Card Tax: a Result of Bad Legislation?

/in , , /by

In mis-understanding their role to ‘regulate’ commerce, federal officials have once again taken a bite out of the pockets and liberties of US consumers and businesses.

The consequences are apparently over-whelmingly negative for Bank of America after they announced a new $5 debit card monthly usage fee.  In trying to login to their website, it was down, citing slower than usual operations. Whether this is because the Bank is trying to stop protesting customers from withdrawing their funds online … or whether it’s the work of angry hackers … the real question is:

Should Bank of America take all the blame for this highly unpopular, anti-consumer new fee?

The Heritage Foundation says “No”. That this is is simply another example of federal government regulations interfering with (as opposed to regulating) normal free-market activity.

It is a gross mis-understanding of our US Constitution for the federal government to believe it has the duty to intervene in commerce via the levy of unnecessary restrictions and costly regulations.

Article I, Section 8 of the Constitution gives Congress the power to regulate commerce, so as to ensure that commerce among the states would take place under clear and predictable rules. According to Georgetown law professor Randy Barnett, our framers granted Congress the power to regulate domestic commerce in order “to make commerce regular.” Today, far too many public officials mistake the term “regulate”  to mean “intervene”.  And the results are predicatably bad for consumer freedom.

In the Bank of America debit card case, the Bank is imposing the new fee in anticipation of a $2 billion annual loss brought about by the “Durbin Amendment” — a provision of last year’s Dodd-Frank Wall Street financial reform bill. The measure was intended to protect America from another financial meltdown, but in reality it placed a boatload of new burdens on financial institutions and their customers. The results? Increased risks to the financial system, increased regulations, and in this case, increased costs to anyone who uses a debit card.

This fee would not likely have occured if Congress had not interevned where it does not belong.

Read the full Heritage post here …

 

Selfishness as the means to Restore Prosperity?

/in , , /by

I attended a very interesting and thought provoking lecture at Brown University Wednesday evening (9/28/11) , featuring Dr. Yaron Brook, President of the Ayn Rand Institute. Dr. Brook, a free-market activist, provided a 30-40 minute lecture, entitled “Capitalism Without Guilt”, then took questions from the over 100 or so people in attendance, with a fair portion of them being students from Brown and other local colleges.

Here, based on my notes and personal paraphrasing, is a synopsis.

Initiating the discussion, Yaron Brook, rhetorically thanked President Obama for his plan to “fundamentally change America”. Obama’s resulting policies, he claims, have kicked off a vigorous national debate about the proper role of government, how to best create jobs, and what are free-markets and capitalism, in reality? He believes the debate will end up benefittng our country.

Brook talked about how our country is currently struggling with jobs and who creates them – the government or the private sector? He states that this issue was settled over 60 years ago; that “consumption” (as the liberals wants us to believe) is not the root of economic growth, but rather that it’s “production” and “investment”. Government stimulus programs, he says, are geared to stimulate consumption … and says this is the reason why they have never worked … anywhere, anytime for anyone. He cites the recent failed US stimulus programs that resulted in fewer jobs, and pointed to Japan, where the government re-distributed massive amounts of wealth, with the result being predictably disastrous for that once proud country.

Most stimulus created government jobs mean only in increased consumption.  They are paid for by taking money away from potential investors where the money otherwise could be used to create production as well as privae sector jobs that would also result in consumption. The beaurocracy also bleeds off its share when redistributing money. Dr. Brook claims that 2-4 private may be lost for every 1 stimulus job.

Brook then spoke about the philosophy of “free” markets … that this means, barring force or fraud, that they are  free to conduct business without excessive government regulation and that the matching of products and services with consumer demand is the best way to ensure a quality product at the lowest possible price, and to provide for steady economic activity and growth.

Excessive regulations and taxes, he claims, destroy free-markets and are the reason certain industry sectors can fail. He cited the 3 major sectors that collapsed in the US leading up to the 2009 recession – housing, banking, and automobiles. The common mantra was “See, capitalism failed, so government must step into to lend a helping hand”. WRONG says, Brook.

He asked: ‘What are the 3 most regulated industries and sectors in the US economy’? His answer: housing, banking, and automobiles. That it was because of over-regulation and government intervention that these industries failed. Fannie Mae (a government created, semi-private entity), he said, experienced the largest financial collapse of any entity in the history of the United States.

Each of these 3 industries, he stated, have their very own governmental Regulatory Agencies … proof positive that these sectors were not “free market” sectors; that it wasn’t the free-market (or capitalism) that failed, but rather government regulated markets that failed.

Government intervention interferes with normal market forces, by messing with the supply & demand mechanism, and more importantly, by removing the “risk” factor that is so important in regulating normal market activity. The risk of failure and loss of capital is a major incentive to behave prudently. With the current bailout/stimulus mentality, it is only natural that companies and industries would take on more risk than they normally would, knowing that the government will come to their rescue. This leads to economic bubbles, and then, economic collapse when these excessive risks begin to fail.

Brook then spoke about the creation of wealth as the primary measure of a successful economy. He asked us to think about the economic contrast of East vs West Berlin; or China (decades ago) vs Hong Kong … dramatic instances where capitalistic vs socialistic forces were at play, and the economic results were so dramatically opposite.

He then moved into the main theme of his lecture, the morality of capitalism. We have to overcome a psychological and emotional hurdle if we want to have a successful economy again.

GET OVER IT … BE SELFISH. He avers that markets exist for people to enhance their lives, meaning some people will make money – lots of it – and consumers will receive, in return, products and services that will make their lives better. He offers this as the definition of “selfishness” … a natural , self-preserving kind of attitude vs the evil connotation that we too often place on the term. That this is a human thing … a good thing. That in a true free-market, mutual selfishness and mutual profit transaction we choose to make. Even that “naked selfishness” is in everyone’s best self-interests.

Dr. Brook then stated what I felt was the crux of his provocative lecture: that our evolved and perverse sense of morality is what is destroying the American free-enterprise system. That in being politically correct, that people are viewed in positive way only when they put others first, instead of prioritizing their own rational self-interests. That philanthropists, for example, hold a much higher esteem in today’s society, than the wealthy. That the only way the wealthy, like Bill Gates for example, can obtain a positive public image is by giving away their money … not for risking their own capital, conceiving and producing a product that consumers demand, hiring lots of people, and yes, making a ton of money. That Bill Gates was initially derided publicly for being a successful businessman (the scorned capitalist), but is now more loved and accepted because of his Foundation (the beloved philanthropist). That if he gave up ALL of his fortune, and lived in a hut, we might even consider him a saint.

This standard of judgment, Brook says, is far too high a bar if we want free-markets to work effectively. That we must accept being “rationally selfish” and encourage risk and success for the greater public benefit.

What about Bernie Madoff? Wasn’t that selfishness? NO, says Brook. How could it possibly be in his long-term self interest to rip off his family, his friends, and many others, knowing all along that he would be caught someday? Brook referred to Madoff’s Ponzi-scheme as more of a delusional kind of near-term emotionally driven action vs a well thought-out plan to pursue self-happiness. It is this latter kind of selfishness that Brook promotes.

That pursuit of one’s own self-interests, or happiness, via mutually beneficial transactions, is a positive and necessary economic stimulus on its own. Conversely, what many believe as selfishness “at the expense” of others … is a very different thing.

He then asked us to consider the uniqueness and individuality of every single person. In what environment would a person with some wealth best be able to invest and prosper even more? In what environment could underprivileged people best find a way to climb out of the morass and pursue whatever might make them happy? A government controlled environment, where everyone is considered homogenous, and incentivized against acting on their own best judgment; or a free environment where people can determine their own futures based on their own unique dreams and capabilities?

Free-markets, Brook strongly contends, are the only way for each person to achieve their highest level of self-interest, or happiness. Happiness is not purely materialistic; it’s whatever rationally chosen goal we want it to be.

That this pursuit of self-interest is NOT immoral. That “sacrifice” is not the only way to be moral, as our society now seems to believe.

That our nation’s founding fathers wrote about pursuit of individual happiness: They did not write about sacrifice or being responsible to others; that charity is an individual choice, and that it should not be the role of our government to legislate economic equality, or even to have a position on whether or not that is a good thing.

That sacrifice, can actually be a bad thing, especially when government mandates it, by taking wealth or property from one person and giving it to another.

What is sacrifice, he asks? The act of sacrifice is giving something (time or money, for example) and getting something less in return; a win-lose scenario.

Alternatively, free-markets encourage win-win scenarios. People trade for something that has equal or greater value than what they give up. When we buy a car for $20,000, we get a car we believe has more than that much value. The car-dealer gives up a product that cost him less than that much to sell. Both sides win.

Why would our society value win-lose propositions over win-win propositions?

At this point, Dr. Brook ended his lecture and accepted questions from the crowd. Most of the questions, especially from the student attendees, challenged many of Brook’s premises with the expected angles: Why are the top-7 rated cities in terms of standard of living based in what Brook would call ‘socialist’ Europe, not the US? Didn’t the founding fathers allow slavery? Isn’t sacrifice a good thing, for instance, for our children? Didn’t the founders talk about equality for all? What about individual property rights, shouldn’t there be more of collective, common ownership? Doesn’t industry and pollution infringe on another person’s property and rights? What about the Christian values of loving your neighbor as yourself … vs Dr. Brooks’ selfishness philosophy? What about welfare, don’t we have an obligation to help the disadvantaged?

While Brook struggled for responses to only one or two very pointed questions, he provided fascinating responses to most of these queries.

Europe, he said, is a dying region. That what the economic crisis there now will only get worse as more and more of the unsustainable promises that have been made to too many workers and retirees grows in the coming years. While he questioned the standards by which those cities were rated, he also admitted that America, in his view, is no longer a true free-market economy, and that our cities and national standard of living is slowly being destroyed by the big government, anti capitalistic economy. He does not understand why many look at Europe with such admiration. It’s the past, he says, full of rich history – yes, but a doomed society. Asian economies (even China to some extent) are the future, where certain capitalistic principles have been embraced and where wealth is growing in enormous strides. America must choose which way to go.

Regarding slavery, he stated that it was the way of the world 250 years ago. That America was not alone, that the slave trade thrived in Africa, that Europe had serfs, etc

He argued THAT IS WAS INDEED THE VERY PRINCIPLES OF ‘FREEDOM’ IN OUR OWN U.S. FOUNDING DOCUMENTS THAT INVITABLY LED TO THE ABOLITION OF SLAVERY IN AMERICA! That our founders were not always perfect in practice, but they were much more so in theory.

Regarding sacrifice, Brook, said that he doesn’t sacrifice for his children. That staying home with his kids, instead of going out with his friends, is not a sacrifice, but rather, a free-market choice that enhances both him and his kids by spending time together, worth more to him (and to them) than spending time apart. Providing money or material goods to his kids is not considered a sacrifice either, any more than buying a car is a sacrifice. Why would we call something a sacrifice if we invest in our kids (with their well-being as what we receive in return), yet not consider investing in a car a sacrifice?

On the constitutional question of equality, Dr. Brook states that equality was intended only in terms of the law. That in the eyes of the law, unlike in Europe, from whence our forefathers fled, that everyone would be treated equally. That it wouldn’t matter what your race, creed, gender, status, or wealth was … that the law would treat everyone the same. This has nothing to do with equal outcomes among citizens.

Protecting individual property rights, he said is a critical component of a free-economy. That via a just court-system, that disputes and infringements of rights would be settled in a natural and moral kind of way. That contingency legal fees were created so that the poor could also have a way to bring suit if they were wronged. That the proper role of government is not to create massive amounts of new regulations in an attempt to restrict property rights so as to not potentially harm someone else or some fuzzy common good, but rather to protect property rights, and institute only those few common-sense laws that serve this purpose.

Regarding pollution of common items such as water or air, Brook gave perhaps his most provocative response: that POLLUTION SHOULD BE CELEBRATED! Pollution is a by-product of industrial progress, that it is a necessary cost to moving a society forward. He posed this scenario: think of London in the 1800’s and the huge particles of ash that most citizens inhaled from coal-powered factories. That if we applied today’s conventional solutions to that problem, we would have shut down those factories … and the INDUSTRIAL REVOLUTION WOULD NEVER HAVE OCCURRED! All of the advances in transportation and construction would never have happened.

Pollution, once industry advances and becomes wealthy enough and technologically capable of dealing with it, can be solved. Then, the next technological innovation produces a new pollution concern, which should be tolerated for a while before being solved … repeating this cycle which goes on and on. This is merely progress. And, society only improves with each cycle. He asked us, with all of our talk of pollution ruining our planet and our lives, to think about life expectancy progress: In the 1800’s, humans were expected to live not much past their forties-fifties. In the 1900’s it was sixties-seventies. Now it is seventies-eighties.

Continuing with the pollution issue, he said, people decide where to live and work, and that it’s their personal choice whether or not to put up with pollution, traffic, or any other problem in any given area. Look how many millions choose to live in LA, despite these issues. He talked about Simi Valley, right outside of LA. Before the hi-tech industry, it was nothing, just land. But because of the great job opportunities created, thousands migrated there from all over the country, putting up with LA smog and traffic, because overall, it offered them a better chance at life than where they came from. The free-market at work.

Finishing up the pollution issue, Brook asked us to think about Cambodia, for example, a country he had visited in recent years. Most of their citizens live in abject poverty, in huts in swamp areas. Brook proclaimed that the only way that Cambodia could raise itself into prosperity would be to bring on industry, and yes, the pollution that goes with it. That pollution in this case should be welcomed, if not celebrated … as a necessary transitional phase and as a sign of progress!

He dismissed the so-asked premise of Christian love for thy neighbor as thyself. He said this is unrealistic, that everyone loves themselves and their own families more than thy neighbor, and that it is nothing more than religions trying to impose “guilt” on people, as a way to have them conform with the impossible goal of ‘equal outcomes’ for everyone. He said none of us should feel guilt for loving ourselves more than our neighbors; that this kind of selfishness is natural and healthy for humans and for our economic well-being. I would personally add, that individuals freely choosing to help their neighbors, is a noble thing … but that government forcing people to help others is nothing short of tyranny.

The final session I participated in, dealt with welfare – a kind of an extension of the love thy neighbor theme. It was discussed that the way taxes and subsidies work in the real world is not a matter of debate. Laws of economics dictate that when we tax something, we get less of it (the premise behind taxing cigarettes, because society believes it is a bad thing to smoke, so therefore we should craft tax policies that discourage the activity). Conversely, when we subsidize something, we get more of it, like tax-deductions for buying a home (a good thing, society says). So, if this is the case, why do we tax work and investments when it means we will get less of each? … while at the same time we subsidize unemployment and idleness, which means we will get more of each of those?

Dr. Brook went on to claim that the biggest victims of the big government, forced responsibility for thy neighbor mentality, are the very people that the policies portend to serve. Only true freedom – to pursue their own dreams – can allow them to prosper. Welfare and other entitlement type programs condemn them to dependence and low expectations; in a way, institutionalizing them. This is not the America our founders envisioned.

In fact, Brook claims, it is IMMORAL to consider the poor as a homogeneous lot that is incapable of raising itself out of whatever morass they may be in. IT IS INSULTING!  He went on to say that all people, including the underprivileged, will be more content when they achieve something based on their own merit and work …that selfishness and the resulting self-esteem is the true measure of happiness … and the only way to achieve prosperity!

***

This was a fascinating 90-minute program, which continued after I had to leave. A few of the students were appalled at some of Dr. Brook’s assertions, while many of the adults were part of the choir. No matter your views, the issues discussed are indeed at the core of the critical debate now underway throughout our nation.

I encourage every single American to take the time and effort to think through these issues, with the goal of arriving at some economic/political philosophy that rings true to you, whether or not you agree with Mr. Brook. Then remain vigilant, stay involved, speak out, support whatever cause you believe in, and adjust your views, as necessary.

“The price of freedom is eternal vigilance” … Thomas Jefferson

Citizens vigilance is the only way our uniquely American form of government can best protect the freedoms of our citizens and allow us to pursue our own idea of happiness and to achieve prosperity.

Mike Stenhouse is the CEO for the Rhode Island Center for Freedom, the leading free-enterprise think-tank in Rhode Island.

Gio Cicione on Newsmakers (Ch-12 & Ch-11) this past Sunday

/in , , /by

Our senior policy advisor, Gio Cicione, appeared this past Sunday, 9/25, on Channel-12. Tim White and co. reviewed our Center’r recent Policy Brief on the legal authority to adjust state pensions as well as our recommendation that the General Assembly clarify the law with legislation that states this intent due to a critical “public purpose”. Check back soon for a link to the video.

The Rich are NOT taxed less than Secretaries (AP)

/in , /by

When the government mis-states facts in order to push a political agenda, this is another example of big government threatening the liberties of we, the citizens. Read the Associated Press article here on Yahoo News …

Governor Should Tread Slowly on Health Care Exchanges

/in , /by

(see the ProJo OpEd version here)

The Governor’s office should exercise caution and search for answers to important questions before rubber-stamping the health insurance exchange ‘executive order’ recommended by a special panel. President Obama’s controversial Patient Protection and Affordable Care Act (PPACA) “Exchanges” may simply be too risky for RI.

We encourage a serious public debate on this very important issue before bypassing the normal legislative process, which failed to pass related legislation. The debate should focus on whether or not now is the appropriate time to move forward with a PPACA exchange, especially considering the high associated risks and potential alternative paths. Our state has time, and should take the time to act prudently.

The PPACA federal law is unstable, politically and legally. In August, the 11th Circuit Court of Appeals ruled that PPACA exchanges, which would create an individual mandate to purchase health insurance, is unconstitutional. Also, one implication of the recent national debt-ceiling debate may mean that millions or even billions of dollars designated to support PPACA would be at risk if the debt super-committee can’t come up with the required spending cuts.

There are many arguments and questions about why RI should not rush into implementing this controversial system at this time:

  • Federal policy is in a precarious state of flux: The President announced that he favored significant changes to his health care reform, providing even more uncertainty about future changes from Washington. PPACA is also under attack by Congress, with open threats to deny funding or repeal it. There is concern that if RI implements a PPACA exchange that the federal government, would not be able to provide the federal funds that we may anticipate. What happens if PPACA is ruled unconstitutional and we create an exchange, does RI have to assume these cost commitments?
  • Federal health care legislation may be unconstitutional:  PPACA has been ruled unconstitutional by federal courts in Florida and Virginia as well as by the 11th Circuit. This legal uncertainty underscores the danger of RI risking the time, expense, and potential that PPACA could be thrown out as unconstitutional. The US Supreme Court is expected to hear and rule on this case by June of 2012. Also, if a new administration were to be elected later in 2012, it is certain that it would spell doom for PPACA. Recent polls suggest that a 2nd Obama term is anything but guaranteed. Is it sound public policy to push ahead with the Exchange when we don’t know if we can legally require everyone to participate?
  • Impact on businesses. Have we evaluated how businesses will react? I have spoken with many business owners who believe that PPACA will increase premium costs to the point where it may be more prudent for them to dump health coverage for their employees and pay the federal fine. How would this make RI a more competitive state for business?
  • Federal Strings. RI is again chasing federal funds, which bring along a multitude of federal mandates, which, in turn, are highly likely to change … unpredictably so. Just recently PPACA was changed to mandate that all “exchange” insurance policies must now cover birth control contraceptives. And, as recently as April 5, 2011 Congress passed changes that rewrote the way health exchange subsidies will be paid for. Already, the law’s foundation is crumbling among other states: in August, Kansas returned a large federal grant wanting out of the law and its mandates. Why should we race to put RI in the same position?
  • Our state cannot afford to waste time and money on this risky endeavor. With all of the problems our state confronts and the multitude of other reforms we must enact; and when PPACA federal funding may never be provided, and while there is so much legal uncertainty why should we risk wasting critical resources on this issue?
  • Government vs Free Market: the very idea of a government controlled exchange is antithetical to our nation’s historical free-market principles, which is the only proven way to consistently deliver a quality service at the lowest possible rate. A true free-market “is” an exchange in itself! Do we even know if RI’s small risk pool can effectively support an exchange? State’s rights issues also come into play.

Since states are not required to implement an exchange until 2014, why shouldn’t we hold off making these decisions until after the uncertainty around PPACA has played itself out? Dozens of other states have held off.

We all want lower prices for good health insurance. Instead of conforming to a federally controlled system, Rhode Island should consider regional Health Insurance Compacts and expanded Health Savings Accounts, which would allow free-market competition to reduce prices and to provide consumers with more choices. Such compacts would authorize out-of-state insurers to compete for business, in much the same way that we purchase auto and property insurance. These free-market models would create larger markets, more competition, more choices, and lower prices.

Right now, PPACA is a major headache for the Obama administration. Why should we make it Rhode Island’s headache as well?

Mike Stenhouse is CEO of the RI Center for Freedom and Prosperity.

Feds Pick A Loser in Solyndra

/in /by

We talk often about how it is an infringement on our liberties when government gets in the business of picking “winners”, in other words, spending our tax dollars to assist specific businesses or industries that are friendly to the politicians doling out the money. We call this “crony capitalism” … government helping their corporate friends, at the expense of taxpayers and upsetting the natural competitiveness of the free-market landscape.

In the case of Solyndra, a solar panel maker, which was billed by the President as the shining example of the great potential of the “green” industry, and which was picked to receive $527 MILLION in federal stimulus loans, it appears the government picked a LOSER to be one of its winners. Like many government intiatives … it failed, and is further proof of the failure of the concept of government spending as a potential cure for a struggling economy.

Solyndra has since filed for bankruptcy, shut down its plant, and has laid off 1100 workers. Worse, the FBI has initiated an investigation:

“The FBI raid further underscores that Solyndra was a bad bet from the beginning and put taxpayers at unnecessary risk,” said Reps. Fred Upton (R., Mich.) and Cliff Stearns (R., Fla.) of the House Energy and Commerce Commitee.

Government should not pick winners and losers because the whole practice is a losing proposition and antithetical to free-market principles. When politics interferes with the free-enterprise system, as it did with the mortgage bubble catastrophe, not only our tax-dollars, but our liberties are put at risk.

See Wall Street Journal article …

 

State Pension Reform – RI has a way to go to catch up with other states

/in , /by

In 2010 and 2011 (39) US states enacted some form of public pension reform. Rhode Island is one of those states, but we acted in only one of the measured categories in this report.

Restoring Competitiveness to Rhode Island

/in /by

Our RI Center for Freedom & Prosperity has a bold, new vision to restore greatness to the Ocean State by making it the most dramatic turn-around state in the nation. In the coming months, our Center for Freedom will release a detailed “Prosperity Agenda” for Rhode Island: a game-changing, new agenda that will return competitiveness to our economic and educational institutions, backed by insightful research.

Commentary by Mike Stenhouse

Rhode Island is a last place team. Remember earlier this year when the Red Sox were in the cellar? In Rhode Island many of our citizens are resigned to doom. In contrast, Red Sox nation was outraged.

If only RI citizens were like Red Sox fans.In the competition for people, wealth and business, our Ocean State simply is not competitive with other states. Yet we find little leadership from our public officials to try to improve our lot and far too few jeers from the public. Many reform advocates debate less important issues. Nobody seems to be focused on winning!

With the recent budget debate and with the current pension debate, we can clearly see why RI never improves its standing.

The recently passed state budget and the pension solutions currently being discussed will only serve to make Rhode Island LESS competitive. We debated balancing our budget and how to raise enough revenues to do so. Now we are debating how to raise enough revenues to pay off our massive unfunded pension liabilities. We debate the merits of trading this tax for that tax. We debate how to keep funding our past promises or how to pass on costs to this group or that group. We keep debating each issue as a one-off item, yet no one is talking about improving our state’s competitiveness, and actually winning again.

And, predictably, we always seem to end up in the same place … last place. Yet there are many who defend the status quo and resist reform.

WE NEED A WINNING STRATEGY. For Rhode Island, that strategy must include a dramatic reduction in taxes along with dramatic reductions in spending. There is no other way to remain competitive.

We all know that RI ranks at or near the bottom in far too many areas when it comes to education and the economy. Our perpetually poor rankings prove the utter failure of the status quo. Yet, we cling to what we know, we put the same players back on the field with the same rules, and we seem pleased with ourselves if we can just figure out how not to appear to worsen the situation.

But we are indeed worsening the situation. We know now that our current oppressive tax and regulatory structure is driving people and wealth out of our state. Recent headlines about our education are equally disturbing. To build a sustainable economy, we need educated, productive citizens and capital. To successfully compete with other states, we need more of both. Maintaining the status quo only means we will continue to hemorrhage even more of these valuable resources.

How would raising taxes on the rich, or on property owners, as many suggest, grow our struggling economy?

Even the Governor half-agreed, stating that raising taxes on the wealthy would cause them to move. True. But we also know that middle-class Rhode Islanders will also migrate to other states if they are over taxed. It’s the same, I would guess, with businesses and consumer purchasing.

Raising taxes – any taxes – in order to balance our budget or pay off unfunded debts will only serve to make us LESS competitive! We will continue to lose citizens and money; and we will squander yet another opportunity to improve our chance of winning. Balancing the budget and paying off debt is the wrong game.

THE GAME SHOULD BE ABOUT HOW TO IMPROVE OUR STATE’S COMPETIVENESS AND HOW TO WIN BACK PEOPLE AND WEALTH!

Were Red Sox fans silent when their team was in last place? Would they be mollified if the team bragged that it balanced its books? Would they really care how much players were paid? Would they be satisfied if we merely shuffled the same old lineup? Would they accept increased ticket prices for a perpetual last place team? These wouldn’t matter much if the team was winning. But this is exactly what our public officials want us to accept … pay more money to remain in the cellar.

In RI, little else should matter unless we grow the economy and reform education for the prosperity of our citizens and the future of our children. The primary standard should be whether or not we are improving our competiveness with other states … not balancing the budget.

As long as we continue to play by rules that decrease our competitiveness and without a clear winning vision from our leadership, RI will continue to be a cellar-dweller. Even if our economy recovers to some small degree, it is likely that other states’ economies will improve even more.

In the sports world, where competition and free market principles mainly prevail, a last place team will embark on a “rebuilding” strategy, where it’s “out with the old” and “in with the new”. This may mean a few years of potential struggle while the “new” strategy takes hold, but when it does, if the plan is designed properly, the situation will improve dramatically.

Trouble is, in Rhode Island, we don’t seem to have many strategic thinkers with the courage to admit that long term reform can only happen with some near term pain. And you won’t hear much from our state’s fans (we the citizens). Nor do we find cutting commentary from the media demanding a better team or an improved standing. Imagine the Boston Globe endorsing a perennial last place Red Sox team that refused make wholesale changes.

Red Sox nation demanded a winner and the Red Sox successfully broke its “curse” by winning two world championships! It took the vision of a young and talented GM. The state of RI must do the same … but we are left to wonder where we will find that kind leadership and that kind of public outrage.

If only we could bring out the Red Sox fan inside each of us!

Our RI Center for Freedom and Prosperity is a “fan” of the state of Rhode Island. We hope you will join in us in refusing to remain silent. Not only do we demand a bold, new ‘winning’ strategy for our state, but we intend to map out the initial cornerstone reforms that should be part of that strategy.

A Tale of Two Shale States

/in /by

A case study of one state – PA – embracing economic opportunity and providing economic opportunity for its citizens;, while another state – NY – has let environmental politics trump development and job growth, thus taking another byte out of economic liberties for its citizens.

Read the Wall Street Journal article here …