Policy Reform: Enact Changes to Civil Justice Laws

Legal Sharks in the Ocean State

Do state laws attract shark activity in the Ocean State?

An important part of creating a better and less risky business climate in Rhode Island is to lessen the threat of litigation for legitimate business practices. Doing so would lower the cost of liability insurance for most businesses, reduce consumer costs for many products and services, and free up businesses to become more creative and innovative in developing new concepts.

Specific Recommendations:

 A) Medical malpractice and product liability reform: Enact laws that limit the amount of non-economic and punitive damages that judges and juries may award to injured people (policy brief TBD).

 B) Implement “criminal intent” provision: Enact a law that protects citizens against prosecution for non-criminal or non-intentional activities … as dozens of other states have done.

See ‘Criminal Intent’ policy brief here …







Employment Consequences of Kid-Brother Economics

Commentary: Rhode Island’s Follower Plan

Throughout the Great Recession, Rhode Island’s leadership has had the air of helpless wisdom about the predicament of their state’s economy.

“We’re traditionally first into a recession and last out,” Governor Lincoln Chafee (Ind.) told David Klepper of the Associated Press, in December 2011. A few weeks later, RI House Speaker Gordon Fox, arguably the most powerful politician in the state, told WPRI’s Newsmaker interviewers the same thing, almost verbatim.

Nobody in office would say so directly, but general acceptance of that trend has been evident in the priorities and areas of inaction in both the executive and the legislative branches. And when the economic plan is simply to wait for a national recovery to pull the state forward — call it “kid-brother economics” — all that remains is to gloss over the numbers in the meantime.

The Policy Brief

Click here for a PDF of the Policy Brief of RI’s employment trends or read below

See the Media Release at the bottom of this post

The Ocean State’s Unique Status

Rhode Island is suffering through an employment crisis and a jobs outlook more severe than any other state in the country. Residents, hoping to assume more control over their families’ future through some sense of job and wage security, unfortunately, face deteriorating prospects.

No other state in the nation ranks as poorly as Rhode Island in employment when viewed across so many angles. Among all U.S. states:

  1. RI has the second highest unemployment rate in the nation and is one of only three states with unemployment above 10% (NV, RI, and CA). Of them, only RI has a smaller total labor force as compared with prerecession levels.
  2. RI’s unemployment rate would be significantly higher if workers hadn’t given up hope. With its February 2010 labor force, RI’s rate would now be 13.4%; with its January 2007 labor force, it would be 14.2%. Applying the same calculations nationwide, the bottom three would be RI, NV, and AZ in the first case and MI, RI, and IN in the second.
  3. RI is one of only two states significantly below the national norm in measuring current employment versus prerecession peak employment (MI and RI). Of these two, only RI’s trend continues to worsen.
  4. RI is one of only three states that have continued to shed employment since the national employment loss trend ended in February 2010 (RI, AZ, and NY).

When viewed from each of these perspectives, Rhode Island ranks in the bottom two in all four categories. No other state appears more than twice.

Unemployment Is Relative

When it announced the state’s employment results for July, the RI Dept. of Labor and Training (DLT) emphasized the fact that the unemployment rate has been on a slow downward trend. The state’s…

… seasonally adjusted unemployment rate for July 2012 dropped to 10.8 percent, down one-tenth of a percentage point from the June 2012 rate and six-tenths of a percentage point from the previous July. This is the third consecutive monthly decrease in the unemployment rate, and represents the lowest unemployment rate in Rhode Island since May 2009.

While Rhode Islanders are surely in the mood for whatever good news they can get, this may not fill even that modest requirement. That 10.8% does look better than June’s 10.9% and May’s 11.0%, but it still leaves Rhode Island as the runner-up in high unemployment rates, second only to Nevada.

Worse, RI is now one of only three states with unemployment above ten percent, and the others have been exhibiting better trends overall (see Chart 1). Both California and Nevada passed the Ocean State in early 2009, but as 2013 approaches, they’re on pace to drift below, as CA already has.

CA, NV, and RI Monthly Unemployment Rates, 2007-2012

The federal Bureau of Labor Statistics (BLS) which compiles employment data for the nation and the states also tracks alternate measures of unemployment. In these cases, the trends are tracked quarterly (every three months), and the number represents the average over four quarters.

The BLS collects its data through a regular Current Population Survey (CPS), which asks respondents a number of questions related to their employment situations. All of the rates shown are percentages of different totals for the “civilian labor force.”

The most common (as represented in Chart 1) is the U-3 measure, which tracks people who are not working, but who want to do so and have looked for jobs within the past four weeks. The denominator for this rate (i.e., the labor force, or 100%) is the total number of people who say they are either employed or looking for work.

Chart 2 shows trends for the U-1 unemployment rate, which traces the number of people who have been unemployed for fifteen weeks or more.

CA, NV, and RI Long-Term Unemployment Rate (15+ Weeks), Rolling Four-Quarter Average, 4Q03-2Q12

Broadening the length of time that residents have been unemployed is one way to adjust the data. Broadening the definition of “unemployed” is another. The BLS digs deeper with survey respondents who are not looking for work by asking when they last did so and why they stopped.

Those who have looked for work within the past year, but stopped no less than four weeks before the survey because they had given up hope of ever finding jobs, are “discouraged.” Broader still is the category for “marginally attached workers,” who followed the same pattern as discouraged workers, but without regard to their reasons for stopping their searches (U-5).

Unemployment trends by this measure are shown in Chart 3. The denominator for the percentage is the labor force defined above plus all marginally attached workers. In this case, Rhode Island still — just barely — has the third worst rate.

CA, NV, and RI Unemployment Rate, Including Marginally Attached Workers, Rolling Four-Quarter Average, 4Q03-2Q12

The broadest measure of unemployment that the BLS tracks is the U-6, which adds people who are working part time because they cannot find full-time jobs. Comparing Chart 4 with the first three suggests that, when Rhode Islanders find work, it is more likely to be full-time work, in comparison with California and Nevada.

CA, NV, and RI Unemployment Rate, Including Marginally Attached and Forced Part-Time Workers, Rolling Four-Quarter Average, 4Q03-2Q12

Still, with a current rate of 18.9%, that silver lining does not offer much comfort, especially considering that RI’s stagnation remains incontrast with improvement in the other two states.

An Even Gloomier Picture

Unfortunately, even the dispiriting picture of the unemployment rate is overly sunny for Rhode Island. The multiple parts of the unemployment rate equation actually disguise just how badly the recession has hit in the Ocean State. Chart 5 shows what Rhode Island’s unemployment rate would be if its labor force had remained the size it was in January 2007 (at the start of the recession) and in February 2010 (when employment losses receded at the national level).

RI Unemployment Rate Under Different Labor Force Scenarios, January 2006 to July 2012

An analysis of total labor force statistics — the actual number of residents working or looking for work — shows that both California and Nevada have seen substantial increases since January 2007, while Rhode Island has seen a substantial decrease. In fact, under the January 2007 labor force scenario shown in Chart 5, both California and Nevada would have unemployment rates below 8%.

In both of those other states with official unemployment currently over 10%, more people wanted to work than before the recession, driving up the unemployment rate. Indeed, the big jump that Nevada experienced in July 2012 (refer back to Chart 1) was amplified by the fact that nearly 2,000 more people were looking for work.

In contrast, so many people stopped looking for work in RI that the unemployment rate could have stayed low even if the economy didn’t create a single job. Employment fell so rapidly that people couldn’t quit the job market fast enough to com-pensate. The two western states had the much more positive task of creating new jobs for new workers.

An Employment Spiral

The fact that the unemployment rate can be misleading, in this way, raises the question of what other measures might give a more accurate picture of the state’s employment trends. One excellent indicator is the number of people employed.

The same BLS survey estimates the number of residents of each state who say that they are working. Chart 6 shows the July 2012 employment number in all fifty states as a percentage of each state’s peak before the housing bust and financial crisis turned its employment growth negative.

United States July 2012 Employment Percentage of Pre-Crisis Peak by State

Eight states have already surpassed their peaks, and most of the rest are within five percentage points, including California and Nevada. At the bottom of the chart are two outliers that are still around ten percentage points away from their prior level of employment: Michigan and Rhode Island.

Another important question is whether a state’s employment picture is improving. RI’s is not.

Just as Rhode Island has the second worst unemployment rate, it also has the second worst deficit from its peak employment. And just as Nevada is gaining ground on Rhode Island by the first measure, Michigan is gaining ground by the second. That realization, in turn, leads to a final observation of the Ocean State’s condition.

Two years of disappearing jobs in the United States came to an end in February 2010, after which both the number of jobs available and the number of people working began to increase (albeit, slowly and unsteadily). Since then, only three states have continued to shed employment. As Chart 7 shows, not only is Rhode Island once again on that short, undesirable list, but it is dead last… by quite a bit.

United States Employment Growth by State, February 2010 to July 2012

One Discrepancy

Given the negative trends apparent in this data, it’s important to explain that the employment/unemployment measure is different from the jobs numbers that Governor Lincoln Chafee recently authorized the DLT to release. This brief addresses the number of Rhode Islanders who say that they are employed; the DLT data is based on surveys and tax information from employers regarding the number of employees that they have.

In the latter case, local analysts dispute the BLS’s employer-based statistics, which find a decrease in jobs over the past year. The RI DLT claims an increase of 4,800 jobs from March 2011 to March 2012, while the U.S. BLS claims a decrease of 2,200 over that period.

One potential explanation for at least some of that discrepancy has to do with seasonality. The BLS updates its official employer-based jobs count annually, benchmarking to tax forms. Small-scale surveys suffice for real-time trends.

The RI DLT has broken with this methodology mainly by reviewing unemployment insurance tax data as it becomes available and assuming that the prior year’s seasonal adjustments still apply. Those numbers may require a significant adjustment when the final data is collected if any months were notably different than the same month in the past.

Whichever employer-based jobs number is correct, the data in these seven charts need not be affected. If, for example, people who were already working took additional jobs, the official job growth would have less effect on employment.

Probably more significant is the possibility that Rhode Island employers hired people who do not live in the Ocean State, or that people working in Rhode Island emigrated across the border. In those cases, the number of jobs could go up even as the state’s employment goes down.

An analysis from the Center’s news division, the Ocean State Current, found that the number of people living in the counties right over the border in Connecticut and Massachusetts who are employed increased by almost 11,000 from May 2011 to May 2012, more than twice RI’s new jobs.

Summary Table
Percentage National Rank
Chart 1, U-3 unemployment, July 2012


10.7 48


12.0 50

Rhode Island

10.8 49
Chart 2, U-1 unemployment 15+ weeks, 2Q12


6.7 48


7.9 50

Rhode Island

7.0 49
Chart 3, U-5 unemployment incl. marginally attached, 2Q12


13.0 49


14.9 50

Rhode Island

12.7 48
Chart 4, U-6 unemployment incl. marginally attached and involuntary part time, 2Q12


20.3 49


22.1 50

Rhode Island

18.9 48
Chart 5, unemployment with January 2007 labor force, July 2012


10.7 48


16.4 50

Rhode Island

14.2 49
Chart 5, unemployment with February 2010 labor force, July 2012


11.8 48


12.9 49

Rhode Island

13.4 50
Chart 6, distance from prerecession employment peak, July 2012


-6.7 48


-10.5 50

Rhode Island

-9.8 49
Chart 7, employment growth since February 2010, July 2012


-1.1 49

New York

-0.7 48

Rhode Island

-1.7 50


Time to Take Responsibility

Overall, Rhode Island’s picture is what one would expect when the officials who control the overly burdensome threads of government place the status quo above progress. The state’s economy has been stagnant and drifting downwards, as Rhode Islanders for whom stagnation is not good enough make other plans.

The kid brother who never takes responsibility or initiative for himself will tend to trail behind, much as Gov. Chafee and Speaker Fox passively describe their state’s economy. That should not be accepted; too many Rhode Islanders are being harmed and finding their aspirations put on hold.


Media Release

FOR IMMEDIATE RELEASE:  September 4, 2012

RI Uniquely Suffers Bleak Employment Outlook

Governor Chafee Should Consider Facts Before Speaking to National Audience from Charlotte

As Rhode Island Governor Chafee prepares to speak to a national audience from the DNC Convention one day after Labor Day, he should consider that his state suffers from the bleakest labor outlook of any state in the nation, according to a report issued today by the RI Center for Freedom & Prosperity. The state-based think tank also criticized the governor and other state leaders for their inaction and announced plans to release its own set of recommended policy reforms.

The report shows that Rhode Island is alone in ranking in the bottom two states in the nation with regard to its unemployment rate, its continuing workforce and employment degradation, and its overall employment loss since both the recession and the recovery. The state is unique in its poor standing across all of these important job measurement categories.

“As we have been saying for months, absolutely nothing is being done to improve our alarming jobs slump,” said Mike Stenhouse, CEO for the Center. “Why are we not having a special session of the General Assembly this fall?” he inquired.

“We’re traditionally first into a recession and last out,” Gov. Chafee told David Klepper of the Associated press, in December 2011.1 A few weeks later, RI House Speaker Gordon Fox, arguably the most powerful politician in the state, told WPRI’s Newsmaker interviewers the same thing, almost verbatim. This general attitude has translated into inaction in both the executive and the legislative branches. “It is not a viable economic plan to simply to wait for a national recovery to pull the state forward,” added Stenhouse.

Citing today’s report as irrefutable evidence of the need for immediate and bold reforms to provide Ocean State residents with renewed opportunities and long-term financial security for their families, the RI Center for Freedom & Prosperity also announced that it will offer its own solutions to address one of the biggest challenges in the state’s history.

“We have the second highest unemployment rate in the nation… and our General Assembly does nothing. We are one of only three states that has lost employment since February 2010… and this administration does nothing. We have the worst business climate in the nation… and our business and political leaders do nothing! Our jobs crisis has resulted in a decade-long loss of taxpayers to other states… and the political class does nothing,” continued Stenhouse. “The inaction of our do-nothing politicians has cost our state jobs because of their politics-as-usual approach. Our Center does not cave to special interests and we are not afraid to act. We will provide a positive vision for our state, along with a well-researched set of policy reforms to solve our dismal jobs problem.”

In filling part of the leadership void in the state, the Center plans to publish tomorrow its Prosperity Agenda for Rhode Island, which will recommend a dozen significant policy reforms. “Hopefully, our Center’s employment report today and our suggested policy reforms tomorrow will spur the debate that Rhode Island must have now! We encourage voters and candidates to reject the political class’s approach of doing nothing and, instead, to raise awareness of this vital problem and openly discuss all legitimate solutions during the upcoming campaign season,” concluded Stenhouse.

The Rhode Island Center for Freedom and Prosperity, a non-partisan public policy think tank, is the state’s leading free-enterprise advocacy organization. With a credo that freedom is indispensable to citizens’ well-being and prosperity, the Center’s mission is to stimulate a rigorous exchange of ideas with the goal of restoring competitiveness to Rhode Island through the advancement of market-based reform solutions.

Policy Reform: Reform Renewable Energy Mandates

Laws maneating that a certain portion of our energy must be derived from renewable sources actually force households and businesses to pay higher energy costs, creating another drag on our already failing state economy. These laws are based on false assumptions. The cronyism and rate-payer funding of related special-interest projects are examples of corruption that are needlessly encouraged by such laws.

Rhode Island’s energy prices are among the highest in the nation. During these difficult economic times, we must do everything we can, no matter how small, to enhance our business climate and to reduce the cost of living for everyone. To this end, renewable energy mandates must be repealed or reformed.

Further, there is a new energy reality in America, with less of the perceived green benefit that inspired these laws in the first place. Most of these mandates were ushered into law during a period when many original assumptions, which have since proven to be false, were the mainstream thinking. Almost a decade later, there is a new energy reality that we must consider.

FALSE ENERGY ASSUMPTIONS that were a basis of RI’s renewable energy mandate laws:
  • Global warming would be great danger to our Earth: Whether global warming exists or whether the contribution of human beings to climate change and the ability of tolerable behavioral changes to make a decisive difference are now in open dispute, with conflicting data recently surfacing and increasing questions about original data.
  • Fossil fuel sources would become scarce in the near future: New natural gas, shale, and crude discoveries throughout the world have debunked this concern for the foreseeable future.
  • Fossil fuels would become increasingly expensive: Coal and natural gas continue to be the least expensive sources of electricity and will continue to be the most cost-efficient sources of energy in the coming decades.
  • Renewable energy would be abundantly plentiful: The inconsistency of wind and solar sources means that additional fossil-fuel plants must often be built as a “backup” systems.
  • Renewable energy would be more cost-efficient: Renewable energy costs remain significantly higher than conventional sources, and there are few near-term expectations that this will change.
  • Renewable energy would spur a boom in green jobs: There has been no such boom; many once-promising green companies have gone out of business because of low market demand. Some European countries that invested heavily in the green revolution suffered through more job losses than gains.
  • Renewable energy is better for the environment: Maybe not. The need for backup power plants decreases environmental efficiency. Better air quality can be achieved via natural gas, which is significantly cleaner than coal.  “Energy sprawl” is a popular term among environmentalists to describe the massive amount of land or sea area required for wind or solar farms, considered eye-pollution, and the miles of transmission lines required that often cut through pristine landscapes. Further, windmills are a danger to birds and bats.


 Reform or repeal of these mandates would save money for every family and business and would no longer be a drag on our state’s economy.

Specific Recommendations:

In light of the new energy reality, our state must enact reforms that would allow utilities, and thereby consumers, to better adapt to next-generation energy technologies:

  1. Review all renewable energy mandate laws to determine their viability
  2. Repeal the most unreasonable mandates
  3. Broaden the standards in some laws to include all next-generation energy technologies including nuclear, combined cycle natural gas, geothermal, etc.
  4. Adjust the compliance schedule to provide greater flexibility through altering deadlines or percentage targets
  5. Make the program voluntary and waive all noncompliance penalties

Policy Brief by the Center to be posted in the near future …

Related Studies:

Manhattan Institute study demonstrates that Renewable Power Mandates Drives Up Electricity Prices

New survey disputes “consensus” claims about man-made climate changes

Policy Reform: Eliminate Corporate Welfare



View our “End Corporate Welfare” policy brief here … 


38 Studios-style cronyism is not capitalism … and it must end!

When political insiders secure special funding or bailouts for themselves, funded by your taxpayer dollars, it creates an unfair playing field, upsetting the competitive landscape. Wasteful spending by incompetent bureaucrats and legislators and flat-out special-interest favoritism are parts of the corruption that must be curtailed in the Ocean State.

Specific Recommendations:

 A) Formally end the practice of corporate welfare in Rhode Island government.

 B) Defund the capacity of the Economic Development Corp. (EDC) to put taxpayer dollars at risk by financially supporting private business endeavors.

View our “End Corporate Welfare” policy brief here … 








Policy Reform: School Choice, Special-Needs Scholarships, and School Grading System


Closing The Gap

“Bright Today” education reforms

Every child deserves not just a bright future, but also a bright today. Students will only be young once and cannot wait for long-term education reforms to take hold. Families must have choices in education, and we must close educational gaps now!

Options and Accountability

The State of Florida has blazed a new path for education reform, and Rhode Island should pay attention. Increasing parental choice as well as administrative and teacher accountability in multiple ways has rocketed the Sunshine State closer or beyond the Ocean State by multiple metrics. Florida’s gains among minorities, the disadvantaged, and the disabled cannot be ignored.

Go to our “Closing The Gap” education study home page here …


“Bright Today” Scholarship Program for Special-Needs Students:

No student should be condemned to attend a failed school, especially the most vulnerable among us. The best way to serve the needs of a diverse population is to give families the freedom to choose the schools — public, private, or charter — that best fit their children’s needs.

Our Center’s school voucher recommendation for special-needs students is a good place to start in providing choice to Rhode Island families.

Read about our “Bright Today Scholarship Program” here …


Straightforward Grading of Schools:

However extensive their access to options, parents need a straightforward grading system to determine how their schools compare with others. This increased level of transparency will provide educators, legislators, and families with greater insight into school performance.


Related Information:

Does the RI Dep’t of Education’s School Report Card process give extra credit to schools that don’t have significant minority or special needs student subgroups?  See The Ocean State Current blog here … 

Policy Reform: add market-based reforms to Health Benefits Exchange

Highly Burdensome Federal Healthcare Regulations

Provide more options for more people for affordable, quality, healthcare services!

The expansion of complex government and special-interest control over our highly personal healthcare decisions will not give Americans what they want. Rhode Islanders want access to quality care and the freedom to choose the best plans for their families!
As part of the Affordable Care Act and its Health Benefits Exchange, the state of Rhode Island, its health care providers, civic and community groups, and private citizens should embrace market- and patient-driven solutions to these challenges as part of a “Health Care Freedom Act“, including:
  1. Increase the availability of care for both newly insured and the remaining uninsured by eliminating regulatory obstacles to new, innovative providers of health care services including the “Certificate of Need” law that blocks competition for medical facilities and regulations that stifle ‘retail health clinics’ such as MinuteClinic.
  2. Expand the availability of health care financing to those left out of the Affordable Care Act by allowing consumers to purchase low-cost ‘mandate-free’ policies and insurance regulated in other states, as well as promoting the availability of non-insurance alternatives such as ‘Health Sharing Ministries’ and critical-illness policies.
  3. Build on the Affordable Care Act’s pricing and transparency reforms by adopting and utilizing ‘bundled’ or ‘packaged’ prices for episodes of care and embracing real ‘cash’ prices for consumers purchasing their own health care services from physicians and hospitals.
  4. Transform health care for government workers by embracing consumer-driven plans that lower costs while continuing to deliver high-quality, accessible care.
  5. Renew the state’s innovative Medicaid waiver and modernize it to provide beneficiaries with health care funding mechanisms similar to Health Savings Account for appropriate populations.
  6. Prohibit automatic enrollment in other social service programs via the health benefits portal

The result of embracing these and other market- and consumer-driven policies in health care can make Rhode Island the national leader in delivering high-quality, accessible, and affordable care to its people, helping to create prosperity by relieving the taxpayers and the private sector of the high burden of health care costs.

Read about the Center’s “Healthcare Freedom Act” here …

Go to our Healthcare home page here … 

Read how gov’t bureaucrats are planning to transform the “health benefits portal” into a DEPENDENCY PORTAL …

How RI is creating an Expressway to Dependency



Policy Reform: Give Rhode Islanders a “Right to Work”

Right To Work = Worker Freedom

Right to Work = FREEDOM for Ocean State workers!

All workers want full freedom to pursue a career of their choice.  Freedom of Association is a core American liberty that should be extended to all Rhode Islanders looking to negotiate their own workplace rules, have full incentives to perform at a high level, and determine whether or not pay union dues is in their best interests.

Enacting Right-To-Work (RTW) policies would give Rhode Island a major advantage over its neighbors by making it the only New England state with RTW protections for its workers — without costing the state a dime in budget expense.

Read our Center’s Right-To-Work policy brief here …



Policy Reform: Eliminate the Sales Tax

Rhode Islanders want more financial security and control over their own lives. Increased job opportunities, higher wages, and enhanced job security can all be achieved in a robust economy.

Phase out or immediately eliminate the sales tax. This tax reform policy will produce an immediate boost to the RI economy and will produce more jobs than any other solution on the table, creating 20,000+ new jobs in the Ocean State!

Imagine the renewed sense of security you and your children will feel, knowing that there are more career opportunities to choose from and knowing that your employer is more likely to remain in business, as well as the opportunity to earn higher wages in a more competitive economy.

View the Zero.Zero report here …

Visit the Zero.Zero home page here …

75-38-400  or  68-0.0-5000 ?

Consider the $75 million the state wasted on 38 Studios, chasing after just 400 jobs. Compare that with first year budget cuts of $68 million to pay for Zero.Zero, producing 5,000 jobs that year alone!













R.I. Creating an Expressway to Dependency

The Issue. Rhode Island is leading the nation in the advancement of a larger entitlement culture via its planned expansion of social services through a health benefits exchange, a component of the controversial federal healthcare law. When collecting detailed personal financial and household information from individuals seeking health insurance support, the state intends to proactively enroll participants in other state programs for which they are eligible. Will this create and expanded culture of dependency?

Statement from CEO, Mike Stenhouse. “This is an extreme case of misguided public policy. The expansion of government and special interest control over our personal healthcare decisions, along with the culture of dependency being freely advocated by this administration, should be viewed as an assault on our deeply held American value of self-reliance.

“Imagine turning to the RI health benefits portal because your employer cancelled your insurance and finding yourself on a government-created expressway to a life of dependency. Wouldn’t we all be better off, instead, if the state encouraged residents to become independent, productive members of society?”

Related LinksMike Stenhouse discusses the ‘Dependency Portal’ on the Helen Glover radio show … click hereDependency Portal Pieces in Place;

What the Center is calling a “dependency portal.”  The dependency portal is a not-so-hidden goal of Rhode Island’s version of the health benefits exchanges described in the Patient Protection and Affordable Care Act (PPACA, commonly known as ObamaCare).

Although the final design has not been developed in specific detail, the idea of the exchanges is to enable healthcare consumers to use a government Web site to review their available options for insurance and to determine their eligibility for public subsidies.  Most likely, a series of Web-based forms will ask the user for a variety of highly personal information regarding health, income, and family circumstances in order to determine what health plans and public assistance amounts he or she is eligible for.

Whether such information will be requested of all residents who seek to use the site or only of those explicitly seeking subsidies remains an open question.

The exchange will become a dependency portal when other forms of public assistance — from food stamps to cash-payment welfare to child-care subsidies — are integrated into the system and promoted to the exchange user based on information that he or she provides while seeking health coverage — perhaps automatically enrolling people with the merest expression of consent.

At a recent press conference, Rhode Island Health and Human Services Secretary Steven Costantino referred to this “hidden element” of the exchanges as “one-stop shopping.”

Why is that bad? As a free market think tank, the Center is certainly not opposed to practices that encourage efficiency and the use of technology to improve the access that customers and clients have to services. Information technology, in particular, has empowered individuals to accomplish easily and inexpensively tasks that once required expert consultants.

From a business perspective, the Internet and the proliferating technologies that use it, now including smartphones and tablets, smooth the path from a potential customer’s initial interest all the way to final purchase.  Technology enhances businesses’ ability to market and sell their products and services, and they seek to accomplish those ends in order to grow their revenue and expand their market share.

That model is not appropriate to government in dispensing taxpayer-funded services.

In the private sector, bundling of services has become commonplace, and it is easy to understand why companies would pursue the strategy.  Think of the merging technologies of television, Internet, and telephone; it makes sense for a company with an advantage in, say, television, to use various marketing techniques, such as reduced-price packages, cross advertising, and one-stop shopping, to gain an edge in other markets.

However, the public clearly has a sense that these methods can go too far.  Indeed, at the turn of the millennium, the federal government sued Microsoft on the grounds that it was hindering competition by using its operating system dominance (with Windows) to gain an insurmountable advantage in the Web browser market (with Internet Explorer).

In the case of government, all of the same incentives exist for the organization to expand its reach.  The difference is that government has three inherent competitive advantages:

  1. In its ability to simply confiscate money to pay for, or at least subsidize, its services
  2. In the fact that the people whom it entices to its services are not paying their full cost
  3. In its control of the marketplace by means of regulation

Over time, government programs are therefore less and less “public services” that taxpayers agree to support through the people whom they elect and more and more bureaucratic offerings that use the enrollment of some citizens as justification for claiming more authority and confiscating more money from others.

One can see evidence of this intention in the process by which Rhode Island’s exchange was initiated.  In the face of (to be mild) public uncertainty about the PPACA, the Democrat president and Congress pushed it through.  It creates financial incentive for states to build the exchanges (by making taxpayers from other states pay for it), and it hands an astonishing amount of policy discretion to the unelected Secretary of Health and Human Services.

In Rhode Island, Governor Lincoln Chafee broke with common understanding of separation of powers in order to create the exchange by means of executive order, committing the state to pay for the site’s maintenance once it is operational.  Similarly, the state executive branch has simply determined to agree to a related Medicaid waiver, expanding free healthcare services in the state and adding to its expenses.  No legislative input; no public hearings; in short, no public statement of agreement with the programs being developed in the people’s name.

As the government exchanges claim increasing shares of the market nationally, unelected state and federal officers will be authorized to determine everything from minimum benefits to price controls to payment schedules.  The board that Governor Chafee appointed to initiate the exchange illustrates that special interests will have an outsized role, as well.

With the addition of other welfare programs to the mix, it will be even more difficult for the people of the state to change course.

What it means for you. Losing control of activities done in the public’s name may not be the most dire consequence of the dependency portal approach.  Rather, the fatal part of the trap is the fast lane to a culture of universal reliance on government and a pervasive sense of entitlement.

Whenever the topic of welfare arises, conversation turns toward those who “know how to work the system” and thus become the fabled “welfare queens.”  For them, incentives toward good behavior have been reduced or reversed, and democracy has devolved into an exchange of political power for handouts.

The real danger of the dependency portal is that it sets up a chute so that previously self-reliant Rhode Islanders will increasingly fall into an entitlement existence.  Why else would the exchanges offer health care subsidies to a family of four with income of $92,200?

Just as technology has simplified tasks that once required expert consultants, the dependency portal will make “working the system” a simple matter of clicking a few buttons.

Tracing the progress of the portal in Rhode Island. RI Health & Human Services Secretary Steven Costantino, Health Benefits Exchange Director Christine Ferguson, and Lt. Governor Elizabeth Roberts describe Rhode Island’s nation-leading steps toward the dependency portal (June 28, 2012):


Elaboration on why Rhode Island and the United States should resist the pull toward dependency portals:

RI Center for Freedom & Prosperity first identifies the dependency-portal dynamic as one reason to reject the health benefit exchange and the Medicaid expansion:

The pieces needed to turn the exchange into a dependency portal are being put into place:

RI officials acknowledge intention to implement Medicaid expansion, without any indication of legislative or public input:

Documents related to the dependency portal begin to reveal the direct connection between those pushing the concept and those involved with Rhode Island’s health benefits exchange:

The dependency portal in concert with eliminated work requirements for welfare may mark the return of the “welfare queen” and a “majority coalition” for big-government activists:

Documents. The federal government and national non-profits describe the dependency portal and the related “express lane eligibility”:

Rhode Islanders must act if they want better life

Do we want to be an Entitlement State or a State of Prosperity?

OpEd by Mike Stenhouse; as published in the Providence Journal (7-29-12)

What kind of state do Rhode Islanders really want? Who will provide the vision and leadership that will lead to renewed opportunities and prosperity for our citizens?

Rhode Island has the second highest unemployment rate in the nation, yet our political leaders do nothing about it.

Ours is the worst ranked state in terms of business climate, yet our business leaders do not cry out.

We have one of the highest state and local tax burdens in the country, yet citizens remain silent.

We have dangerously high unfunded pension and benefit liabilities, yet the political class does nothing to help our municipalities.

We are losing population and wealth to neighboring states and throughout the country, yet the defenders of the status quo stick their heads in the sand and say “it isn’t so.”

We have the most burdensome level of health-insurance mandates in the nation, yet the Chafee administration is pushing us towards even more government control of our personal health-care decisions.

We have the highest sales tax in New England, yet our political class actually voted to expand the tax, even to some of the poorest among us.

Soon, research from our center will show that Rhode Island is uniquely positioned in the nation as a failing economic state, yet most members of the local media do not raise awareness or seek accountability from our public officials.

The list could go on and on, but the real question is whether Rhode Islanders really want to continue down the same path that has failed our state so miserably or if we can find the willpower to tear down the barriers that have prevented us from increasing our quality of life.

Do we as a people want to live in an entitlement state or in a state of prosperity? One could reasonably assume, based on the above pattern of apathy, that we collectively want the former. But I doubt that.

So what is a concerned citizen to do? Especially when there is no leadership coming from policy-makers?

With the 2012 election rapidly approaching full campaign mode, the choice cannot be clearer for voters. There are two starkly different visions for our state: one that defends a status quo that tries to centrally engineer our society; and one that promotes bold reforms that restore individual control of our lives and a positive sense of self-determination to our citizens.

Whether you are an average Joe (or Joe-Ann), a business owner or a student, it is important that you understand your duty as a vigilant citizen and that you are empowered to make a difference. First, you can think about and develop a core set of political principles that will guide you. Second, you can become educated about the issues and encourage discussion and debate within your various circles of friends, family and colleagues. Third, you can become actively engaged by supporting organizations, campaigns, or policy initiatives that are consistent with your core principles.

This summer and fall, you can stand up where others have fallen down. Demand of candidates who knock on your door, call your home, or conduct town-hall-type meetings to clearly tell you whether they will defend the status quo or whether they will openly support the bold reform initiatives that our state so desperately needs.

Reforms like: lowering sales, income and corporate taxes; like providing school choice for students condemned to a failing school; like implementing patient-centered health-care reforms vs. government-centered; like constructive collective bargaining reform for government workers.

As a state we can choose to perpetuate our downward spiral by allowing to stand the government regulations that infringe upon our freedoms and limit our capacity to thrive; or, we can choose to begin to rebuild our economy by unleashing the great potential within each of us. The choice is indeed yours — and ours — to make; especially when most everyone else is afraid or incapable of leading!

Mike Stenhouse is the chief executive of the Rhode Island Center for Freedom and Prosperity, a conservative think tank.

Related Commentary: 2013 Budget Fails to be Bold