RI Needs to Wake Up and Fight Central Planning to Improve Economy: Katz
Guest MINDSETTER™ Justin Katz
RI Needs to Wake Up and Fight Central Planning to Improve Economy: Katz
In his vision, policymakers (like the governor and legislature) advised by experts (like economics professors) stand before the complex machine of our economy and turn dials as they seek the optimum operation.
They identify some “key industries” that tend to have desirable qualities, such as high pay, and use “targeted interventions” to ease the burdens for businesses in those industries. Without easing the pressure under which everybody else operates, they back it off a bit for select organizations so that they can grow.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTNext, they look to the employment needs of these “key industries” and notice that they aren’t a match for the people who actually live here. So, they conclude that the government must change the population to be suitable for the work. Sometimes this involves giving residents “the skills needed to succeed,” as Tebaldi puts it, and sometimes it involves displacing residents with other people who already have those skills.
Finally, they prescribe massive new spending to make up for obvious shortcomings, such as deteriorating bridges. This they do without reference to the source of the funds, so naturally new taxes and fees are implied instead of than reordered priorities.
An alternative vision would treat Rhode Island’s economy more as a landscape in which valuable fruits cannot grow because opportunistic weeds are draining the substance of the soil and blocking out the sun. The people who live here have roots and should not be forced to tear them out, but government makes it too difficult for them to flourish, so they wither instead. In this view, the Ocean State and its residents already have everything they need to innovate and advance the economy, and anything that’s missing, they can figure out and procure. They just need space and freedom.
The biggest flaw in the centrally planned approach Tebaldi implicitly prefers — putting aside moral questions of rights and self-determination — is that it requires an accurate and objective analysis that political reality does not allow.
One can see the problem even in Tebaldi’s use of statistics. He notes the drop in the official unemployment rate and the increase in jobs based in the state over the prior year. He claims that “real average wages” are growing “slightly faster” in Rhode Island than across the United States. Finally, he notes that 2018 “was the first year over the last 12 in which the percentage of the population in the labor force increased, and he attempts to short circuit the typical objections by citing a statistic that the Ocean State has fewer “discouraged workers” than the national average.
Every point in Tebaldi’s case must be challenged. Rhode Island’s unemployment rate is only falling because so many people are leaving the labor force. The number of jobs in the state (which includes part-time jobs, by the way) has been increasing very slowly since the Great Recession hit bottom, and its pace has been conspicuously slower since Democrat Governor Gina Raimondo took office and began implementing the policies that Tebaldi supports.
Meanwhile, the latest data from the Bureau of Economic Analysis shows that, during recent quarters, Rhode Islanders’ earnings from wages and salaries have been increasing much more slowly than the nation as a whole. In fact, from the fourth quarter of 2018 to the first quarter of 2019, they went down slightly, compared with a 3% increase nationwide. And contrary to Tebaldi’s insinuations, the strongest increase was in retail trade, not supposedly desirable industries like information and finance and insurance.
As for the increase in the percentage of the population in the labor force, the numbers that the Bureau of Labor Statistics tracks show that we lost whatever gains we made in 2018 and then some. In fact, a smaller percentage of Rhode Islanders are in the labor force than at any time since 1979. In that light, we have to remember something: By the definition of “discouraged workers,” the number could go down if people who cannot find work move away or become so used to unemployment that they stop saying that they even want a job.
The reference to 1979 casts our memories back to an era that is very relevant to the decision that Rhode Islanders have to make. With the election of President Ronald Reagan in 1980, who brought “morning in America” with reform of taxes and regulations, the stagnation of the 1970s gave way to an economic boom. That’s what Rhode Island needs, now: A philosophy that encourages us to wake up and forge our own lives, not one that lulls us back to sleep so that the central planners can have their way.
Justin Katz is Research Director for the RI Center for Freedom & Prosperity and Managing Editor of OceanStateCurrent.com.
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