Watch: Chafee’s economic development guru shares his ideas
October 12th, 2012 at 5:00 am by Ted Nesi under Nesi's Notes, On the Main Site
When Governor Chafee convened a group of business leaders on Thursday to discuss his approach to economic development, one of the documents he gave them was a 2010 study [pdf] on the subject by Jeffrey Thompson, an economist at UMass Amherst’s Political Economy Research Institute.
Back when the study was first published, Thompson gave an interview about it to The Real News Network, a left-leaning alternative media outlet that broadcasts online. This video will help you understanding the economic thinking of the man who has the ear of Rhode Island’s governor:
• Related: Chafee sees progress, sets guidelines for fixing RI economy (Oct. 11)
Tags: economic development, jeffrey thompson, lincoln chafee, political economy research institute, riedc, umass
Nesi's Notes covers politics and the economy in and around Rhode Island for WPRI.com. (Twitter: 
Not very encouraging. There is no reason to tie increased infrastructure spending to increasing taxes on the “affluent,” except that the two ideas are supported by politically aligned interest groups. The best solution would be a hefty increase in the gas tax (and a little congestion pricing in Providence wouldn’t hurt), which would address the cause of the infrastructure decline, target the costs on the people and companies that benefit the most, and have a positive impact on the environment to boot. It would also have the added benefit of harnessing the power of democracy to keep the costs and benefits of the program in line, whereas the taxation of ugly people (which is what the suggested program, like cigarette taxes, amounts to) exploits the baser instincts of the majority to further political ends.
Also, the worst reason to increase infrastructure spending is its potential to boost jobs. We should aim to maintain an adequate infrastructure with smooth year-to-year maintenance costs (there could be a good argument to increase spending when costs are low, but let’s ignore that for now). To use an economic downturn as an impetus for a flood of new spending is to invite disaster: all of the new infrastructure would need the same type of maintenance at the same time, creating waves of high & low spending years instead of more predictable costs (not to mention feast/famine cycles in construction jobs).
Plus, even if you decided that it was a good idea to use the state’s capital budget as a jobs program, you have to look at real resource constraints (materials & people) before you could commit to any of this. Spending twice as much won’t get us twice as much unless all of the needed resources are sitting around unused. In the best-case scenario we would be bidding against private construction — raising costs for both — and creating the possibility that some private projects are delayed or even cancelled, which doesn’t seem like an attractive outcome in terms of economic development.
Finally someone up there is listening to someone besides the Tax Foundation – the organization that was spawned to derail FDR’s highly successful Keynesian recover. Supply side/trickle down has proven again and again to be an abject policy failure.
The Tax Foundation critical in convincing the leadership of the state to make permanent failed trickle down theory. Tax Foundation was even quoted in the press release trumpeting making the failed flat tax permanent:
“…House Finance Chairman Steven M. Costantino (D-Dist. 8, Providence), who was pivotal in crafting the legislation, also spoke at the bill signing.
According to the Tax Foundation, Rhode Island’s tax competitiveness standing has continued to steadily improve since 2002, when the state was ranked 49th in the country. With these new reforms, the Tax Foundation ranks Rhode Island 41st.
Today, Rhode Island has a new and compelling story to tell. While many other states have increased taxes to make up for revenue shortfalls, we have rejected that approach. Seizing the opportunity to stand out from the rest, we are reducing our tax rates and sending a clear message to our citizens, businesses, and neighbors that we are serious about improving our tax competitiveness,” said Governor Carcieri as he signed the bill today, joined by legislative and business leaders, taxpayers and members of the Governor’s Tax Policy Strategy Workgroup. “By enacting this historic legislation to overhaul and simplify Rhode Island’s personal income tax structure and reduce taxes for most of our taxpayers – particularly our hard-working middle class – we are making progress in putting our state on a more even playing field with others in our region.”
I agree with Mario, but not IHeartWellstone. If any state should reduce its tax burden it is RI. Our unemployment rate is so high because the cost of doing business in this state is so high. The cost of doing business in this state is so high because our public-employee-union-controled lawmakers enact one bill after another that increases the cost of doing business in this state. Latest example–the new increase in the RI minimum wage which is now one of the highest in the country. This high minimum wage results in reduced job opportunities for teenagers (no wonder they join gangs). RI has very high job injury compensation insurance rates compared to other states. RI has the 3rd highest # of firefighters per capita and the 2nd highest firefighter cost per capita. You can see this for yourselves if you examine Bureau of Labor Statistics and US Census data. Why, because our lawmakers have given firefighters and police officers binding arbitration rights, and now they want to give teachers these same arbitration rights even though our K-12 per pupil expenditure in RI is the second highest in the country (see the NEA Report Rankings & Estimates). Give teachers binding arbitration and our per pupil cost will be the highest in the country. Why do our lawmakers favor public employee unions much more than they favor the state’s taxpayers? Because the biggest contributor to lawmaker re-election campaigns this year is the National Education Association (NEA) political action committee. The influence of public employee unions in RI will not change unless non-union voters get off their butts and vote in legislators who will make the taxpayer their highest priority.