The Fallacies of the New Economy

As Vermont’s economy continues down its relentless path toward the ashbin of history, at least, um, several Vermonters are advocating for a “new” economy.  What’s the under-pinning of this new economy?  Innovation?  A removal of existing regulatory overheads so high that the state won’t finish building a road it started three decades ago?  A restructuring of its tax burden to entice businesses to move to or invest in the state, to grow an economy that ranks 2nd worst in the country?  A job climate that doesn’t scare college graduates into leaving the state at one of the highest rates in the country?

Nope.  Instead of those things, a group of concerned Vermonters calling themselves “Vermonters for a New Economy” have decided that the primary answer to the problems above is a bank.

Yep.  A bank.  But not just any bank.  A state bank.  Meaning a bank that is funded, and backed, to one degree or another by public funds (the funding issue is just another one of those thorny details that no one really needs to think about, just yet).  Which means, of course, that any risk or liability falls directly upon the shoulders and wallets of those who pay taxes.

And what is their mission statement?  Their raison d’etre?  Here it is:

Vermonters for a New Economy is a coalition of organizations, businesses, and individuals working to create a new economy for Vermont. You can work with us to design and enjoy the new ways we are owning and operating businesses, banking, exchanging goods and services, financing projects, and earning income.  This work enables us to pursue regenerative economic activities that strengthen our food systems, build renewable energy, reuse and recycle byproducts, and foster creativity, culture, and healthy lifestyles.

I must have missed Banking 101, but I’m pretty sure the bank didn’t ask me about my healthy lifestyle choices when I applied for a mortgage.  They wanted some details around income, liabilities, etc., because they’re crazy like that.  But no mention of how their capital would foster my creativity.  Which is mildly disappointing.  It’s also fantastic that they’re allowing Vermonters to work with these New Economists as to how Vermonters earn their own incomes.

That’s generous of them.

But let’s let the New Economy Vermonters provide more of their own detail, in terms of why they think we need a state bank:

Our Planet —  a VT state bank can provide the game-changing, long-term, low-interest financing that will power a transition to a just and sustainable future

Students — to access low interest education loans.

Homeowners — to get mortgages and home loans from the bank.

Entrepreneurs — who need credit lines, loans, and other forms of finance to help their businesses succeed.

Municipalities – the bank can offer competitive interest on public deposits and lower cost financing for public works.

Taxpayers — who will benefit from both the profits the bank makes and the services the bank offers

Well, that’s quite a bit to digest, so let’s take it one at a time:

1.  Our Planet —  a VT state bank can provide the game-changing, long-term, low-interest financing that will power a transition to a just and sustainable future.
The planet.  So the planet needs a Bank?  How did the planet exist, then, before humans evolved?  Did Gaia patiently wait for first humans to evolve, then banking, in order to provide a high enough state of enlightenment before asking for funding?  Gaia’s patience here with us is considerable.
2.  Students — to access low interest education loans.
You mean like those low interest student loans current and former students enjoyed, courtesy of one of the biggest central banks in the world?  Loans that are at higher rates that mortgage rates, but worse, are also subsidized rates?
The last large effort to nationalize the student loan program fell afoul of the same issues around health care, and that plan has now been shelved.
So the federal government can’t do it, with virtually limitless resources, but Vermont can, now, because of one bank?
In fact, VSAC has said it’s “agnostic” on the idea of a state bank.  So why list student loans as a justification, when the one institution that has historically provided student loans doesn’t see the need?

When the CEO of VSAC says they don’t need additional access to capital, maybe you should remove that selling point from your website.

3.  Homeowners — to get mortgages and home loans from the bank.
You can already get loans from banks, easily – they’ll happily lend you money for a house, or equity loans.  It’s how they make money.  For FHA loans, you only need 3.5% down.  Rates for fixed 30-year FHA loans are well under 4%.  Do Vermonters not know how to apply for a loan, and the state bank will save them from their own ignorance?
And why the incentive to increase – via public funds – the number of mortgage lenders, increasing competition, when, in many cases, the same people who tout this state bank (like Bernie Sanders) want to decrease competition in other markets, like health care?  Why is it a good thing to increase competition in one place, but not the other?
4.  Entrepreneurs — who need credit lines, loans, and other forms of finance to help their businesses succeed.
They can get this already from existing banks and investors.  What would a state bank provide that does not already exist?  Other than offering riskier loans that will be backed by taxpayers?  There’s a federal Small Business Administration that offers many channels for funding.  What would this bank offer that’s not already available?
5.  Municipalities – the bank can offer competitive interest on public deposits and lower cost financing for public works.
Municipalities already have access to funding through banks and bonds.  Like the Vermont Municipal Bond Bank, which has been in place since 1970.  If municipalities already have access to low-interest funding source, why do they need another one?
6.  Taxpayers — who will benefit from both the profits the bank makes and the services the bank offers.
You mean like the benefits current federal taxpayers enjoy, like $20 trillion in debt?  The profit the bank makes is the interest on the loan, which, for the federal government, increases as a percentage of total spending, and if the rates increase, even a little bit, will start to crowd out all other discretionary spending.
Which is really the heart of the matter.  The supporters of the state bank are looking for a way to finance spending now that someone else will have to pay for later.  It’s like giving a college student a credit card with no limit.  Sooner or later that bill will come due, and the people who want to create and support that state bank will then be asking taxpayers to bail it out, just like some other large financial institutions, like Freddie and Fannie.  Which have become, more or less, nationalized.
But the worst of the justifications for the proposed bank’s existence are in its own supporting documents, which make a few claims of fact that aren’t supported by reality.  A few examples (page 6):

Assumptions made reality by simply writing them down.

Sub-prime mortgages are what Fannie and Freddie specialized in, and still continue to be the largest generators of these types of loans in the industry.  Taxpayers had to bail out their poor business practices and the fact that they were understating their sub-prime exposure; there is nothing in the call for a state bank that would prevent this from recurring.
Secondly, citing Vermont’s low unemployment rate as evidence of economic stability means they either a) willfully ignore the reality of Vermont’s declining workforce participation rate, or b) don’t understand what they’re talking about.  If they’re using this conclusion (below) as one of the underpinnings of the justification for the need for a state bank, they’re making a significant error:
 That Vermont’s housing prices didn’t tumble doesn’t mean anything about “integrity” of anything, and neither does unemployment.  As has been repeatedly shown, Vermont’s unemployment is low primarily because the workforce is shrinking, not because of new jobs created.  As the report’s earlier statements argue, correlation does not equal causation.

Well, it does when we argue that the state’s economy is in great shape based on unemployment data. Then it’s ok to make that correlation argument.

If anything, the state’s demographics and the general leveling off of already-high housing prices won’t require a state bank to support increased demand for mortgages.   In fact, the reason housing prices are (relatively) level is because demand isn’t increasing.  There are simply fewer Vermonters looking to buy homes:
Vermont’s economy, and its housing market, are clearly not divorced from national trends. But our housing market seems to be under performing the national housing market, which is worrisome. Over the last two years, Vermont’s housing market, at least measured by prices, has gone nowhere. Nationally, prices are up 7 percent over the same period—not great, but at least it’s a positive number.

One of the reasons for our weak housing market is our underlying demographics. First-time home buyers tend to be in their 30s and early 40s. That’s precisely the demographic that’s shrinking in Vermont. And if there are fewer first-time home buyers, people trying to sell their houses and trade up to more expensive homes can’t find buyers. That clogs up both sides of the home-buying and home-selling market, limiting both sales and price appreciation.

The New Economy site also encourages readers to read the study that justifies the new state bank.  Hilariously, the study recommends that the state not implement a state bank.  That the capital needs are already met.  That the current options available for financing are just fine.  From page 3:

So…we *don’t* need a state bank, then?  Oopsy!

Then what is the purpose of the New Economy site?  To ignore the realities of Vermont’s business climate, Vermonters’ incomes, the demographic changes, and historical policy overhangs that make the state a lousy place to do business?  Another bank won’t fix that.  Another bank can’t fix that.
Only Vermonters can fix Vermont, by dismantling the policies and governmental apparatus that have put them in the place they are today.  If that’s part of the New Vermont Economy, then maybe things will start to change.
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Squeals On Wheels

Recently, a small part of the Trump administration’s budget proposal generated a series of high-pitched squeals across the United States.  Said squeals which could mostly be found in such squeal-oriented places like Facebook, Twitter, and college campuses, where squeals propagate like hippies at a free lunch buffet, and where economic reality enjoys a permanent holiday.

And the root cause for the squealing?  A complete misunderstanding of the federal budget and how some non-profits are funded .  But the squeals of anguish were not rallies to the cause of federalism.  No.  Instead, they were cries of outrage that Trump was cutting the Meals on Wheels program.  A program that relies, so heavily, on government grants.

 

Oh, wait.  It doesn’t.  It’s 3% of their budget (page 18).

And…..it’s 3 percent.

As Reason has noted, the issue is much less about the individual programs that receive grants.  What Meals on Wheels does is a fantastic example of what local effort, and local control, can do to positively impact lives, and help people who need just a little bit of help, a meal, and even a wellness check, when no one is doing that for them.  It’s the vehicle that spends billions per year on administering and doling out dollars that is the source of the issue, and ultimately some level of corruption – the Community Development Block Grant Program.

What’s the result of lading a trough filled with pork in front of politicians eager to buy votes?  The quick appearance of dollar-guzzling politicians, seeing an opportunity to buy something (votes) with someone else’s money (yours and generations of unborn saddled with federal debt):

You don’t need to look far in the past to see this sort of corruption taking place. In June, the Department of Housing and Urban Development (HUD) sent a scathing letter to the Mayor of Honolulu Hawaii, calling on the city to return nearly $8 million in CDBG funds that it gave to Opportunities and Resources Inc. (ORI), a nonprofit redevelopment organization in central Oahu. The Aloha Gardens Wellness Center and Camp Pineapple 808 both were projects developed by ORI with federally issued CDBG money meant to serve elderly and disabled persons, but since completion, the projects haven’t exactly been used for their advertised purpose.

The HUD report claims ORI had been marketing the centers to the public as venues for weddings, parties, banquets, fundraisers, corporate retreats, conferences and family reunions. The city also lent ORI nearly $1.2 million in CDBG funds between 1989 and 1995, which it decided to forgive back in 2010. HUD found that this decision was made by city employees who were running for elected office while receiving campaign donations from ORI representatives.  The report states:

“ORI has maintained significant support over many years by the direct involvement of high ranking City and State officials…The direct involvement of the officials’ appears to have placed pressure on staff resulting in the City ignoring regulatory violations in favor of completing the project and satisfying ORI’s requests.”

In other words, the funding becomes the driving policy directive, not the service that the funding might itself provide.  The funding model subverts the local control because the dollars are critical to a political outcome, less so in addressing a local need.

Local control, and local accountability for dollars spent, should be the watchwords.  But because the federal government throws billions around, annually, in thousands of programs, it would be extremely difficult to say no to those funds if you’re sitting in a small municipal office, wondering how you’re going to affect some local change.  Which then creates the puppet strings that federal agencies, and ultimately politicians, use to buy votes, and influence voters.  Once the city or state becomes hooked on the federal dollars, they can no longer say no to them – and are adversely affected when funding for those programs becomes a political football.

The accretion of these programs, in the federal budget, is what has given rise to the outsized spending and record deficits seen during the last 8 years.  This growth isn’t directly attributable to one administration, but the Obama administration stomped down hard on entitlement spending, then tried to laughably claim that it reduced deficits – record deficits the administration itself had set in the years preceding its final year.

The result was a doubling of national debt in 8 years, a doubling of the debt that took over 200 years to first accumulate.  We have had 4 years of trillion-dollar deficits.  The first year the government started spending over a trillion dollars per year was 1987.  30 years later, we have deficits bigger than the total annual spend in 1987.  Today we’re borrowing more to fund an annual deficit than our total spend was 30 years ago.

I’m noticing a trend here.

 

Hey, what’s a trillion in borrowing, amongst friends?

The historical record doesn’t show any sign of slowing down in spending, which means a further erosion of local control, leave alone any kind of spending efficacy metric that would allow for decision-making regarding the growth or reduction of spending on a program.  Once a program is established, whether or not it’s doing something good or bad (if you can even quantify those outcomes), it will never, ever go away.  It’s too late now.

And any call to reduce spending is met with the squeals.  The self-agonized cries of those who believe, fervently, that it’s up to the federal government to fix local problems, address local needs, through taxation.  Which is, in a way, a tithe of the conscience – that one is off the hook to get off the couch on a Sunday to help someone else, because the government is doing it for them, through their income taxes.

Or, more to the point, through the taxes of those filthy, evil rich people.  The same people who pay 97% of all income taxes collected.  Which will never, ever be enough to pay for the programs that help politicians get elected, to grow the spending of government again next year.  When politicians have a credit card with a $1.5 trillion dollar limit on it, what’s their incentive to not spend more than we have?  For them, the downside to spending less is not getting re-elected.

Until those political incentives change, you’ll continue to see the growth in federal outlays, and a continuing reduction in incomes relative to that spending growth, as the weight of spending and borrowing drags the economy into a perpetually smaller cycle of growth.  It’s already happening.

Trump’s budget, while flawed (like every budget before his), is actually looking to address an issue around federalism, which is:  Why do you need a federal government to sink its controlling claws into a local effort to help those in need?  Why not just cut the check to your local charity of choice and avoid the federal middleman?

Why give more control to someone else over your own choices?  Hopefully the answer to that isn’t “Because then I don’t have to think about it”.

 

 

 

 

 

 

The 10-year Winter Of Vermont’s Employment Discontent

Vermont is currently enjoying one of the lowest rates of unemployment in the country.  Enjoying.  Yes, like most things in Vermont,

An economy so strong you can't stop it, you can only hope to contain it.

An economy so strong you can’t stop it, you can only hope to contain it.

“enjoying” comes with a bit of a caveat.  If by enjoying you mean “having a low unemployment rate with one of the weakest state economies in the country”, then yes, there is much to be enjoyed.

Yet even in the state’s own monthly statement on the labor market (November 2016), there seems to be some signs of reality slipping in.  Those signs only appear after the preamble, of course, because low unemployment is automatically great news for Vermonters:

The Vermont Department of Labor announced today that the seasonally-adjusted statewide unemployment rate for November was 3.2 percent. This reflects a decrease of one-tenth of one percentage point from the revised October rate (3.3 percent). The national rate in November was 4.6 percent. As of the prior month’s initial data, the Burlington-South Burlington Metropolitan NECTA was tied for the sixth lowest unemployment rate in the country for all metropolitan areas at 2.2 percent (not-seasonally-adjusted). Overall, Vermont’s unemployment rate was also tied for sixth lowest in the country for the same time period.

That must mean thousands of people are moving to Vermont to enjoy its robust economy and vast repositories of high-paying jobs just waiting to be filled by eager workers, right?  Right?

No.  The number is just a reflection of the declining size of Vermont’s labor force, not the number of unemployed.  In fact, the state’s lowest unemployment rate for the year was 3.1%, back in May 2016.

While the unemployment rate barely changed between May and November, the labor force shrunk by 1,200 people, and the total number of employed shrunk by 1,300 people, which results in a total unemployed number that’s barely changed.  Yet there are 1,300 fewer people employed between the state’s lowest unemployment rate month (May 2016) and last month (November 2016).

2016-labor

Telling Vermonters in a press release that Vermont’s unemployment rate is tied for sixth-lowest in the country is so meaningless (absent any context), it’s almost deceptive.  But the November press release goes on:

“The Vermont economy is more stable than the month-to-month data might suggest, as increases and declines are “ironed out” at the

Welcome to Vermont!

Welcome to Vermont!

conclusion of the year. What we can see is a slower rate of job gains this year than in recent years. Yet, with Vermont’s low unemployment rate, it’s still a tight labor market with recruitment and retention challenges for our employers; and a limited availability of workers can adversely impact economic expansion and growth.

Yes, it’s always going to be a tight labor market when the labor force is shrinking annually, and has been since its 40-year peak in April, 2009, at 361,200 Vermonters in the labor force.  In November, 2016, that number is 344,750.  That’s 16,000 fewer workers in the labor force in 7 years.  Vermont is featuring an annual worker reduction of more than 2,000 workers per year.

A couple of numbers from the state’s historical labor data that never seem to make it into the state’s semi-rosy press releases:

  • The average monthly number of workers in the labor force for 2016 is 345,000.  In 2006, this average is just shy of 357,000.  A reduction of 12,000 workers in the labor force.
  • The average monthly number of people employed in the labor force for 2016 is 334,000.  In 2006, this average is just shy of 344,000.  A reduction of 10,000 employed workers.

In fact, taking a look at a few of the lowest employment months in 2016, and comparing them to the historical high numbers in 3 cateogories – Labor Force, Employment, and Unemployment – and then compare them to the 2009 numbers, a certain trend becomes clear:

  • Vermont’s number of employed is relatively the same for the past 10 years.
  • Vermont’s labor force is shrinking dramatically, at a rate higher than the decline of unemployed – which creates a decreasing unemployment rate.  This decreasing unemployment rate masks the fact that there is little to no job growth in the state for the last 10 years.

The historical context is…painful.

But the state’s conclusion as to how to address this issue, the fix, is a howler that has to be read at least twice to understand the depth of the disconnect:

Vermont needs to effectively utilize every state and federal job-training dollar to get people into jobs, and we need to address issues that will help Vermont be more successful: promoting gender equity, workplace civility, bringing under-represented populations into the workforce, creating job training programs that guarantee employment at the conclusion, and resolving the “benefit cliff” so that anyone who wants to work can do so without suffering adverse economic impacts.

Oh, so that’s all it takes!  Gender equity will create high-paying manufacturing, technical, and financial jobs for all inequitably-gendered Vermonters to enjoy!  I’d gasp with pride but I’m too busy gasping in astonishment.

Let’s look at that State of Vermont sanctioned checklist to fix the economy a bit more closely:

  • Gender equity (I’m assuming this reflects how much you have invested in the value of your house based on gender?)
  • Workplace civility (remember, you have to have a job first before the workplace’s civility can be measured by the Vermont State Civility Department)
  • Bringing under-represented populations into the workforce (like actual Vermonters, I’m guessing here?)
  • Create job training programs (because decades of job training programs have resulted in the numbers above, so let’s double-down on that approach).
  • Resolve the benefit cliff (this from the state that tried to institute single-payer, a system that has failed in Vermont as well as nationally, and has created people taking more part-time jobs because Obamacare’s incentives are upside-down).

Here’s what’s not mentioned in the press release, so I offer these up as suggestions to the State of Vermont, if they’re not too busy creating gender civility or the like:

  • Lower taxes – on income and property.
  • Reduced regulation by a state that’s paying for advertising on the horrors of contractor workers being, y’know, employed.  As a
    I hear there's an opening at WalMart. I'm on it.

    I hear there’s an opening at WalMart. I’m all over it.

    contractor.  By agreeing to a contract.  For work.

  • By creating a business-friendly business environment.  When you’re ranked 46th out of 57 states, well, there’s some room to grow.
  • Stop electing governors who promise something for free but winds up costing $200 million to “cover” only a small fraction of Vermonters who were uninsured, but qualified for insurance of some kind regardless of Peter Shumlin’s flailing attempts at implementing single-payer, and, well, you’d get more businesses interested in investing and expanding in Vermont when they know their costs won’t swing on the whims of state politicians interested in national offices.  Like in DC.  (Ahem).
  • Stop electing governors who usurp the authority of the state’s Public Service Board (which is supposed to represent the peoples’ interest, not the governor’s) and shutter the cheapest and most reliable electricity in the state’s history – Vermont Yankee.
  • Stop electing governors who tout new ‘clean-energy’ jobs as part of the state’s job-growth numbers, while happily ignoring the fact that federal subsidies – funded by taxpayers – pay for the bulk of those new ‘jobs’.

That said, the first step for any corrective action is up to Vermonters, who, at least in the last election cycle, seemed to have grasped what works, and what does not work.  It’s time for the State of Vermont to catch up to its citizens.

 

 

 

 

 

 

 

The Ministry of Truth-Telling

Finally, at least one agency of the largest employer of the state – the state of Vermont – is telling the truth:  If you want to live in Vermont,

They misspelled "Progressive Party of Vermont" here.

They misspelled “Progressive Party of Vermont” here.

expect a lower standard of living than your parents enjoyed.  If you could use the word “enjoyed” in a state that boasts one of the highest aggregate tax rates and one of the highest costs of living and doing business in the country, and routinely ranks near the bottom of all national surveys on business climate.

The Department of Public “Service”, that same wonderful entity that helped bring about the shuttering of Vermont Yankee, which had the happy result of increasing electrical costs and dependency upon non-locally-generated power, now suggests, strongly, that Vermonters start moving into caves:

Giving up some rural landscapes for solar arrays, sharing cars and driving less, and generally using less cheap oil and gas are all in order if the state has any hope of achieving 90 percent renewable energy usage by 2050.

This was the message of the DPS at a public forum held at the Vermont College of Fine Arts on Tuesday morning. Included in the crowd of about 100 were some state legislators and energy professionals.

The forum allowed the public to provide input on the standards the DPS must create per Act 174 of 2016 for ensuring consistency of regional and municipal plans with state energy policy.

In other words, like with schools, you can create your own policy, as long as it conforms to what the state is going to tell you to do anyway.

To do this, the state’s finest in planning professionals (the same state that brought you Single-Payer Healthcare Planning Professionals Who Think Voters Are Stupid) are suggesting the following steps to get to the 90% renewables by 2050 target:

Not pictured: Shumlin

Not pictured: Shumlin

Director of the Planning and Energy Resources Division of the DPS Asa Hopkins led much of the initial presentation. He said that eventually communities should create maps that overlay what he categorized as primary and secondary constraints for alternative energy development.

Oooh!  Maps!  To where the buried energy treasure lies?  Oh, no, wait.  Not the fun kind of maps.  He means anything (more or less) found outside:

Some examples of primary constraints include vernal pools, river corridors, FEMA floodways, rare and irreplaceable natural areas, transportation infrastructure, federal wilderness areas and wetlands. Some secondary constraints include agricultural soils, conserved lands, deer wintering areas, hydric soils and habitat blocks.

So, in other words, you’re required to make renewables part of regional energy planning but you can only do so within the state’s proscribed box o’ places to site said energy sources, like solar, else the sky falls in and bad things will happen.  In the form of penalties.

Hopkins suggested a shift from oil and gas to renewables would mean, from an economic perspective, a shift away from operating costs (primarily fuel) into capital costs (infrastructure). He suggested the overall aggregate of energy costs should stay relatively the same, give or take about 5 percent.

Funny, that’s as much as the electric rates for Vermont Yankee went up (5%) when the Vermont legislature decided that it could decide whether or not Vermont Yankee could continue to operate, because as every Vermonter knows, all legislators are highly experienced energy professionals with decades of knowledge to back up their decision-making:

Vermont’s three largest utilities use about one million more MW/H of “system power” now than in 2011 (before the March 2012 expiration of Vermont’s utilities’ contract with Vermont Yankee which provided about one-third of the state’s power). System power is the term for electricity bought from the New England transmission grid, and is comprised mostly of fossil fuel power (especially natural gas), as well as some nuclear, hydro and renewable power. Green Mountain Power, Burlington Electric Dept., and Vermont Electric Coop use 1.8 million megawatt hours of “system power.” In 2011 the same three utilities used 847,000 Mw/h of system power, according to the “Utility Facts” study released in February, 2013 by the Vermont Department of Public Service.

Over the 12 months from December 2011 to December 2012, Vermont’s electricity prices rose 5.1 percent, according to the EIA. During the same time period, rates in New York and every other New England state (except Rhode Island) decreased.

In the same way that Vermonters are being told that they will a) adhere to the state’s incalculably stupid energy policy (which is really just a

The latest in Vermont's new hi-tech homesteads!

The latest in Vermont’s new hi-tech homesteads!  No power required!

vehicle for politicians to use to get elected), they’re also told that b) it really will only cost 5% more.

Just like when Vermonters were told their health care insurance costs wouldn’t go up much (in fact, they were told it would go down), it would be easier to enroll, and they would have more choices.  In that regard, it’s not so much as accepting the lie itself that the state is telling you, it’s that you get to choose which lie you want to believe in.  That’s classical market thinking, Progressive-style.

Not mentioned by the state’s Progressive Peoples’ Brigade are the hard and unyielding economic realities of cost:  When the cost of something goes up, less of it is demanded, and that rule goes for power, too.  Except for local businesses, which are small and depend upon the general economic vitality of Vermont to keep food on the table – and a booming travel industry – bigger businesses can and will move, to places that aren’t apparently out to shutter them.  While politicians like Peter “Thanks, I’ll Quit While I’m Barely Ahead” Shumlin tout the state as a “great” place for jobs, the hard smack of reality is that the bulk of job growth is in service jobs, which are not well-known for their high rates of pay.

Electricity is a cost in every economic activity, but especially manufacturing.  The price and reliability of electricity are critical factors in the manufacturing business model.  Even the Shumlin administration, which had previously worked to not cut IBM a break, finally decided that the rates were an issue in 2014 – well after IBM had already voiced its concerns.

Chris Recchia, commissioner of the Department of Public Service, said the rate freeze was particularly important this year for IBM.

“It is no secret that they are struggling,” Recchia said. “And a rate freeze for them was going be very helpful for additional planning in the coming years.” Though the freeze doesn’t prevent IBM from leaving the state, he said, “I think they would describe it as every little bit helps.”

No kidding.  You think so, Chris?

IBM said in testimony to the Public Service Board that electricity rates in New York are much lower than they are in Vermont. And New York has “made an aggressive push” to attract high-tech businesses like GlobalFoundries, the tech company rumored to be considering the purchase of IBM’s Essex plant.

“Competitors in other geographic areas are paying electric rates significantly lower than IBM Vermont’s rates,” said Nathan Fiske, an IBM site energy manager, in prefiled PSB testimony on May 30. “Our competitive disadvantage, as a result of the higher electric costs paid by IBM Vermont, is very substantial.”

Which is one of many many reasons why Fab 2000 is now sited in New York, not Williston, Vermont, providing jobs to New Yorkers instead of Vermonters (not including the Vermonters who moved there to find a new job in the new fab, part of Vermont’s economic exodus).

But now, finally, the state has come clean:  It wants a diminished future for Vermonters, mandated from a central planning agency.  How this

Not pictured: Chowderheads frantically dialing the power company when the rolling blackouts start. In January.

Not pictured: Chowderheads frantically dialing the power company when the rolling blackouts start. In January.

translates out to Vermonters in the real world, though, might not quite align so nicely with the Vermont Progressive Utopia:

A recurring theme in one of the discussion groups was “One-size-fits-all is a difficult standard to work with,” as Judith Jackson of Irasburg put it.

State Rep. Joseph Troiano, D-Stannard, reiterated as much. He said Stannard has of a population of only about 150 people, with no paved roads and certainly no public transportation. Residents are spread out and they go to work in different directions, so any notion of ride-sharing is pretty much off the table.

Vermont is in the bottom half of states for population density.  Add in the fact that for half the calendar year there’s the real possibility of snow and ice factoring into transportation decisions, and you’re not really likely to see someone from Buel’s Gore biking to work in South Burlington, and, well, this “plan” starts to seem irrationally optimistic.

Moving a weak and demographically shaky economy to one that has less predictability in access to electricity, with uncertainty in rates, does not equal a massive influx of speculative capital, in search of Vermont’s next big economic success story.  The Ministry of Truth, in the form of the DPS, is doing a painful disservice, again, to the people of Vermont, that it purports to represent.

In fact, what DPS says in its mission statement, and what it’s telling the public, are two different things:

We work to advance all Vermonters’ quality of life, economy and security through implementation of our statewide energy and telecommunications goals, using sound statewide energy and telecommunications planning, strong public advocacy of the public good, and through strong consumer protection advocacy for individuals.

So which is it?  A reduction in the standard of living to adhere to the bureaucracy’s latest 5-year plan, or working to advance all Vermonters’ quality of life?

Because it can’t be both.

Vermont GDP: Gross Disaster Product

Art Woolf, longtime economics professor at the University of Vermont, recently wrote about Vermont’s GDP being the lowest in the nation – even lower than a state with a smaller population than Vermont:

The best summary statistic we have to describe a state or nation’s economy is gross domestic product, the total dollar value of all goods and services produced within its borders.  Vermont’s GDP — $30.4 billion in 2015 — pales in comparison to the U.S. total of $17,800 billion.  That’s usually referenced as $17.8 trillion, but it’s hard enough for me to conceptualize a billion dollars, much less a trillion, and comparing Vermont’s GDP to the nation is best done using the same units of measure.  We could also say that Vermont’s GDP is $0.0304 trillion, but that’s even harder to conceptualize. At any rate, Vermont’s GDP is the smallest of any state in the nation, below even Wyoming, the only state with fewer people than Vermont.  At the other end of the list, California leads the nation with a GDP of $2.5 trillion.

As we’ve noted before, Vermont has been at the very tail end of economic growth as compared to the other 49 states (or 56 if you’re Obama, who really kills it at math).

But worse, even when comparing a barely anemic growth rate in GDP in Vermont to New Hampshire’s more robust rate, there is much more compelling economic evidence that the state is trending downward.  In a very critical category:  Income.

GDP goes up in both states, but incomes go down in Vermont. Shocking.

GDP goes up in both states, but incomes go down in Vermont. Shocking.

Vermont’s median household income has never been higher than New Hampshire’s, at least going as far back as 2000 (earliest year of the FRED data).  New Hampshire’s population is roughly twice that of Vermont’s, but on the median household income basis, that population factor is accounted for.

Why?  Why are Vermont incomes lower, and even trend negative starting in 2013?  If those trends are negative in 2013, why would Vermont’s sitting governor, Peter Shumlin, declare Vermont to be a “great” place for jobs in 2014?  How “great” can it be if incomes are going down?

Worse, the trend in Vermont is increasing spending and employee hiring in the public sector, while NH has been trimming the number of employees in the public sector.  Vermont’s answer to stagnation is to hire more employees; New Hampshire’s seems to be the opposite.

One of these trends is not like the other.

One of these trends is not like the other.

In fact, between the peak of government employees for both states in the January 2010 timeframe (above), until January 2016, here’s how NH and VT compare:

 

nh vt govt employee split

Incomes do not go up when state spending increases to hire more people.  The dollars spent on state employees come from the private sector, and the higher the private sector is taxed, the slower the economy will grow.  So how does VT and NH compare, in total taxes?  Vermont is ranked 12th in total taxes; New Hampshire is ranked 49th.

This is not a race you want to be first in.

This is not a race you want to be first in.

In other words, if you’re looking for growth prospects, higher incomes, and opportunity for yourself and your family, Vermont might not be the state you’re looking for.

obi meme

18 Trillion Oughta Do It

Bernie Sanders, a man whose entire existence has been funded by the earnings of people who work for a living, has famously proposed to spend even more of other peoples’ money, to the tune of $18 trillion or so, over the next 10 years.  This is in addition to what the USG is

In Bernie's mind, this is far too little spending. Wait. Did I say "mind"?

In Bernie’s mind, this is far too little spending. Wait. Did I say “mind”?

currently spending, which, as a percentage of GDP, is at WW2-era levels of spending, and last I saw, we weren’t driving Shermans through the Ardennes on the way to Berlin.  Call it an additional $1.8 trillion per year, over and above the 2015 benchmark spending level of $3.69 trillion per year.

A trillion here, a trillion there, pretty soon we’re talking serious money.

Well.  Where are all these massively underutilized dollars going to come from, anyway, so the federal government can correctly spend them for us?  Is $18 trillion sitting under a really large number of mattresses?

As it turns out, the answer to the mattress question is “No”, and even an economic simple Simon like Sanders (apologies to Simons everywhere, simple or otherwise, excluding an apology to Sanders) can look at the data and understand that, but he doesn’t want to.  Why?  Because he doesn’t have to, that’s why – he can easily peddle “free” to people who still believe in such things as, well, things not having a cost, to them or others, because there’s never a shortage of people who will line up for something they did not earn.

Bernie’s selling point is that The Rich ™ can and will pay for it, a canard that has been used by such other lovely humanitarians like Lenin and Mao, whose actions resulted in the deaths of tens of millions.  But instead of pointing out history to a reality denier like Sanders, let’s look at the actual income paid into the IRS at all income levels, and see what’s actually there to be taxed.  All data courtesy of the IRS.

In 2013, the modified taxable personal income total was $6.4 trillion.  Total taxes generated were $1.265 trillion.  But take a look at where the Taxable Incomes and taxes paid 2013 v2bulk of those tax revenues came from – they came directly from the middle class, not the “rich”.  Any plan of Sanders that involves increasing taxes to pay for additional spending will come directly out of middle-income pockets.

Why?  Because the “rich” often don’t earn a salary, they earn income off investments, which is taxed at a different rate, and is money actually risked in the economy.  Secondly, if someone has a million dollar home, they might be considered rich in assets, but you can’t install an ATM on the side of your house to give you cash from the asset on your way to the supermarket.  That asset can be converted to dollars (through a loan against the asset) or sold, but it’s not income that can be taxed.

In fact as a percentage of total taxes paid, the $100,000 to $200,000 bracket bears the biggest federal income tax smack of anybody.  Now, in Sanders’ world, $200,000 might sound like a “rich” person, but a married couple earning $75,000 apiece, for $150,000 in total household income, would probably not be perceived as rich by anyone who knows what a mortgage payment on a simple $200,000 home is, and if a child comes along, well, those incomes start looking even smaller.

The income brackets from $50,000 through $500,000 constitute 66% of all income taxes collected.  These brackets are the ones that are currently the hardest hit in terms of tax burden.  It’s where the potential income is to be taxed in the first place.

Soak the middle! Er, the rich!

Soak the middle! Er, the rich!

So anything Sanders proposes in terms of new taxes will be disproportionately burdened on the very families he preaches he’s going to take care of.

Where would Sanders get that additional $1.8 trillion of annual spending?  In order to generate that additional $1.8 from the $50K-$500K brackets, he would have to double the effective income tax rate.  Double it.  Raise your hand if you’ve seen Bernie mention doubling the middle-class income tax rates.

Now, Bernie wants a blend of additional tax increases and revenues, so it would not fall entirely on the middle-class, but since income taxes constitute about half the USG’s tax revenues, that’s where the biggest hit will have to come from.  It’s not a choice.

But to make it worse, half the country pays no net income taxes.  Yet they get to vote in the economic duferati like Bernie Sanders, who has promised to give that half something for nothing, again, and has ridden that mantra all the way through Iowa.  Greed sells, it seems, but only Bernie seems to think it’s corporations that are greedy.  When the people who are apparently not too busy to be working at an actual job rush out to see him on the campaign

Or the true cost of dependency, but go Bernie!

Or the true cost of dependency, but go Bernie!

trail, waving “Free College!” signs, it’s fair to ask:  Who’s the greedy one here?

Health Care In Vermont: The Overruns Strike Back

Several years ago, when Peter Shumlin and a crowd of adoring sycophants raised their tiny, shrill voices in a chorus of acclaim for single-payer in Vermont, a few people were raising their hands and asking questions about how to pay for it, regardless of the merits of a single-payer system itself.  Those people who had the temerity to ask impertinent questions were routinely shouted down, and found themselves in

Not only are we shoving you off a cliff, we're going to incur a couple of hundred million bucks in costs for nothing! Ha ha ha! Ahem.

Not only are we shoving you off a cliff, we’re going to incur a couple of hundred million bucks in costs for nothing! Ha ha ha! Ahem.

league with those awful people who wanted to shove Grandma off a cliff.

As the reality of the single-payer implementation materialized, even Shumlin had to finally concede that there was, indeed, no way to pay for it.  He delayed his plan to finance single-payer, and only released the plan after his last election, which he won by only a few thousand votes, over a last-minute challenger who had little to no campaign funding and support behind him.  Then, well past the November election, Shumlin announced single-payer was dead in December 2014, and finally presented his financing plan as evidence of its death, almost 2 years after he was mandated to do so.

So what’s happening now with Vermont’s defective “single” payer website?  The administrative costs are ongoing, and going up, well beyond the scope of what was originally promised to not cost Vermonters anything.  From VT Digger:

The Shumlin administration has placed a partial dollar amount on state staff costs stemming from manual processes and workarounds associated with Vermont Health Connect’s messy open enrollment period earlier this year.

The amount? $800,000 per month. That’s for the costs incurred for “staff augmentation” needed to process renewals manually “this winter and spring,” according to Vermont Health Connect spokesman Sean Sheehan.

The renewal and open enrollment period was from November 2014 to March 2015, which would mean the state paid at least $4 million to work around the incomplete IT system.

“Staff augmentation” is code for “additional unanticipated payroll spending for a website that was promised to work easily for all Vermonters at no additional cost to Vermonters, because it would be paid for by federal monies.”  As it turns out, implementing your own version of an exchange website is expensive, will incur costs not anticipated in the original scope, and will impact Vermont’s overall state budget negatively when it’s already operating on razor-thin margins.

So another $4 million is paid out of pocket to process routine, standard, run-of-the-mill changes made to health care plans that used to be done entirely outside of the state’s control.  Now, in order to provide health care to Vermonters, these changes are now being ably handled by the same people who once said it wouldn’t increase the budget by a dime, and would, in fact, save money.

This is a failed project, by any project management standard.  The scope, cost and schedule have all slipped, multiple times, and there is no

What do you mean this isn't an effective way to cut hospital costs?

What do you mean this isn’t an effective way to cut hospital costs?

solid date in place for recovery, nor any kind of a finalized recovery plan.  In fact, a large-scale IT project that switches software vendors in the middle of the project is an air-horn klaxon-esque indicator that the requisite requirements work was not done up front, which is what any project manager knows is critical to success.  The state cannot escape the triple constraint any more than it can escape the reality of gravity, or, apparently, the reality of Vermont’s politics.

Vermont Health Connect’s implementation was a political vehicle for Shumlin, not a project to actually provide health care.  Even if you issued every Vermonter an insurance card, magically, insurance that was paid for out of a unicorn’s lockbox of gold coins hidden deep in a cave in Buel’s Gore, that in itself does not provide one second’s worth of health care to any Vermonter.  It is access to health care, not an insurance card, that should determine whether or not Vermonters have what Peter Shumlin has called a “right” to health care.

Vermonters have access to health care.  They had it before the state decided to spend several hundred million dollars failing to create a website.  The mix of payers was available to every Vermonter, regardless of income level – commercial insurance, Medicare, Medicaid, VHAP, etc – every Vermonter had access to one of the payers, and had access to care.

The website itself is meaningless.  It’s just an enrollment vehicle, and even in that it fails.  It also fails because it’s not integrated with Medicare, or military health plans, and can’t handle plan changes without laying out hundreds of thousands of dollars in additional spending, monthly, to process the changes manually.

Would health care costs decrease if the dollars spent to implement a website were spent on care instead?  If we spend $200 million on a website, and the state’s largest hospital’s budget is $1 billion (in net patient revenues), then Shumlin threw 1/5 of a year’s worth of budget away on an unneeded failure.

As Shumlin’s own website states, he’s “determined” to get tough things done:

As Governor, Peter is determined to get tough things done. Since his inauguration, he has been working hard to create jobs for those who need them and raise incomes for those who have jobs, control skyrocketing health care costs, expand broadband and cell service to every corner of the state, reduce recidivism, invest in quality education opportunities, and rebuild our roads and bridges. Taken together,

Nope. We're gonna need a bigger rope. Or a global budget?

Nope. We’re gonna need a bigger rope. Or a global budget?

these and other key goals represent an ambitious agenda to create a brighter economic future for Vermonters.

I guess Shumlin’s definition of “control” means something entirely different to him than it does for the rest of us.  If anything, Shumlin increased the cost of health care, by:

  1. By deciding to create a Vermont version of a health care enrollment website when the federal version was available, he’s incurring millions in additional costs in the creation, maintenance, and manual support required to keep the site operational.
  2. Increased the financial reporting and regulatory compliance burdens on all the state’s hospitals, which in part means additional staff hours required to maintain unique budget reporting to the Green Mountain Health Care Board.

Not one of the things done by the Shumlin administration has provided care to a Vermonter that needs it.  Not one thing.  And instead of getting tough things done, Shumlin is now quitting the office, and the Vermonters he was so “determined” to help.  While the Green Mountain Care Board awarded Blue Cross/Blue Shield a 5.9% increase, this was lower than the request rate increase of 8.6%, which will mean that there may or may not be monies available for reimbursement at the lower, approved rate.  Kind of like how Medicare only reimburses a certain dollar amount for any procedure, regardless of actual hospital costs.

It turns out that helping himself to a several governorships was Shumlin’s most successful achievement, considering that all of his determination has not changed the reality on the ground that hospitals, insurers, and patients have to live with, on a daily basis.

Back In Black

Recently, the State of Vermont published a revised revenue forecast for 2016 that puts the state

Laughter is the best medicine.

Laughter is the best medicine.

budget, finally, back in the black.  Is this financial wonder due to strong economic growth, a “snapback” from the Great Recession?

No.  As the report itself states, on Page 1 (h/t to Vermont Digger):

The slowest economic recovery in post-WW2 history will likely continue in FY16 and FY17, with some acceleration bringing slightly above-average revenue gains, though very close to previous expectations. Virtually all of the current changes in General Fund revenues relative to the prior January forecast, per the below chart, are the product of statutory changes made in the last legislative session, and represent about $30 million in new tax revenues.

So the budgetary forecast wasn’t “fixed” based on significant reductions in YOY spending, nor by accelerated economic growth.  The General Fund revenue growth is all based on new taxes.

These tax changes primarily impact the General Fund, with the largest tax changes affecting personal income and sales taxes. Without these new tax revenues, the General Fund would have increased by about $9 million in FY16 and declined by about $1 million in FY17, relative to January projections.

But even this outlook has its caveats, as indicated near the end of the report, specifically regarding the General Fund (the largest revenue source in the budget), on Page 15 (1st paragraph):

As illustrated in these tables, and consistent with past projections, longer term revenue growth from the mix and structure of the taxes in the three funds analyzed herein is unlikely to keep pace with recent levels of expenditure growth (emphasis added).

In other words, tax revenue growth rates do not match expenditure rates, which means the state is still consistently budgeting to spend more than it takes in.

But the real impact of Vermont policies is being felt where it’s always felt – in the lives and pockets of working Vermonters.  The forecast cites the low unemployment rate Vermont is “enjoying”, as if that constitutes evidence of some kind of recovery:

Vermont employment growth has also strengthened in recent months, with year over year growth in the past 12 months accelerating to 1.4%, vs. 0.7% in the preceding 12 month period. This has pushed the State unemployment rate to 3.6%, the lowest in New England and the fourth lowest in the U.S. 

Vermont employment has increased in recent months, but compared to historical employment levels the state is still an employment trainwreck.  The number of employed Vermonters, what the state’s forecast calls “employment growth” has increased from prior months, to 336,550 in June 2015.  In January 2015, that number was 334,550, so clearly some hiring is occurring.

2015 Unemployment snag

But to put this in a larger perspective, the last time Vermont had 336,550 employed, it was October 2012.  In other words, it’s taken Vermont 2.5 years just to climb back to 2012 levels of employment.

To give it more of a historical perspective:  What was Vermont’s highest employment level in the last 10 years?  344,150, in April 2006.  Which means Vermont now has roughly 8,000 or so fewer people employed now than 10 years ago.

2006 Unemployment snap

Vermont’s labor force – the number of people available and willing to work – has shrunk in almost direct correlation to the decrease in employment numbers.  The labor force in April 2006 was 356,700.  In June 2015, the labor force is 348,950, a difference of -7,750.  This is why Vermont’s unemployment rate in April, 2006, of 3.5%, looks so much like June 2015’s unemployment rate of 3.6%, even though we have about 8,000 fewer people employed.

To put this a bit more painfully, Vermont has lost an average of 800 jobs every year for the last 10 years.

So while the state’s latest forecast loudly touts the low unemployment rate, it neglects to mention that a) the total number of Vermonters employed is at historical lows, and b) the labor force itself has shrunk.

A shrinking labor force is not an indication of economic health.  It’s an indication that there are fewer opportunities for employment in the state.

Oddly, the report also discusses income inequality (page 7 of the report), as if a more equal distribution of wealth is a desired goal, and discusses the “owners of capital” as if it’s straight out of the Marx/Engels reader.  But as more and more people drop out of the labor force, it’s entirely unsurprising that incomes are reduced.  In fact, since the state’s own long-term labor forecast calls for the largest job growth sectors to be in the service industry, whatever policies the state has been putting into place to improve the economy, and thereby the incomes of Vermonters, is not working.

By the state’s own admission, its economic policies are having the opposite of the desired effect:

Vermont's economic policies in a nutshell.

Incomes are down in the recession – so let’s fix that by raising taxes!

The report goes on to state:

Income growth has become increasingly concentrated among the highest income groups over the past 30 years and this has continued during the current economic recovery. past 30 years and this has continued during the current economic recovery.  Between 2009 and 2012, recent studies estimate that virtually all real U.S. income growth accrued to the highest 1% of all income tax filers.  These same analyses, however, suggest that in Vermont, income inequality has not been quite as pronounced, with income growth among the top 1% during this same period of 21.8% vs. growth among the bottom 99% of about 4.6%. They also suggest that longer term income inequality, though growing from lows in the late 1970’s to levels in 2012 not seen since the late 1920’s, are similarly less pronounced in Vermont than in the nation as a whole.

So income growth is only good if it’s at the lowest income groups?  Considering that the highest income groups pay the vast majority of income taxes collected, is the state arguing for reduced incomes at the highest levels so things are less “unequal”?  How will budget gaps be filled when the rich are no longer quite so rich?  Since half the country pays no net income taxes, how, exactly, would increased state expenditures be paid for if the 1% didn’t have increased incomes?

As the report says on Page 11:

The increasing volatility in revenues due to a growing reliance on Personal Income,

Deep thoughts for a Vermont legislature.

Deep thoughts for a Vermont legislature.

Corporate and Estate taxes, was on full display in both FY14 and FY15. In FY04, these three tax categories comprised 50.6% of Available General Fund tax revenues. In FY15, they represented 60.9% of revenues, and are expected to exceed 62% within the next five years.

So while bemoaning inequality, the report also states Vermont has become and is increasingly becoming reliant on personal incomes to constitute the bulk of General Fund revenues.  Shouldn’t the state, then, be celebrating wage inequality?  Who else is going to fund the General Fund?

The state’s forecast now shows that the anticipated budget will be in the black, but so did the prior years’ budgets, which sometimes required a budget recission one month after the budget was passed. When the legislature scrambles to find yet another tax, this time in the form of one on sugary drinks, one which places both an additional cost of compliance on the backs of business owners and increases the aggregate tax burden on Vermonters, and then counts itself as a fiscal hero for doing so, the environment is created that assumes that this is the way budgeting and the state’s economy blame shiftshould work.  In other words, Vermont will see these same steps taken again and again.

What’s really happening is that the state is patching holes in a sinking ship, and is running out of things to patch it with.  What doesn’t help is the state’s continuing demonization of those who pay the majority of the bills in the state, and who will share an ever-increasing burden of doing so.

 

 

 

Bottom Feeding

CNBC recently ranked states by their overall competitiveness, including categories like cost of doing business, education, quality of life, workforce, access to capital, etc.  As CNBC describes it:  42nd place

We score all 50 states on more than 60 measures of competitiveness, developed with input from a broad and diverse array of business and policy experts, official government sources, the CNBC Global CFO Council and the states themselves. States receive points based on their rankings in each metric. Then we separate those metrics into 10 broad categories, weighted based on how frequently each is used as a selling point in state economic development marketing materials. That way, our study ranks the states based on the criteria they use to sell themselves. This year some states were tied. Learn more about our categories and methodology.

So where did that rank Vermont, the state whose governor routinely touts as a great place to live in, work, and do business in?

42nd.

Just to be a bit more helpful to Peter Shumlin’s staff, that’s the bottom quintile.  Vermont is in the worst bracket.  The good news?  Vermont ranks highly in quality of life, in 2nd place.

As most Vermonters know, you can’t eat or live in a quality of life.  What it looks like in the CNBC rankings, though, is that Vermont would be ranked even lower if it weren’t for the Quality of Life metric, and Education – and Education is high based on per-pupil spending.

Below is the ranking sorted by lowest-ranked, the Worst 10 States.  What’s interesting is that Vermont’s workforce is ranked so low, yet Shumlin has frequently said that companies have jobs, but have trouble hiring qualified candidates.  Well, there’s a reason – because even if some firms are looking to hire better-qualified candidates, it’s very likely that those candidates are already working in another state, for the other factors shown below.  They choose not to live in Vermont, so you won’t see their applications coming in.

Vermont's worse than Mississippi?

Vermont’s worse than Mississippi?

Since Vermont is ranked 34th in average income (based on 2012 Dept of Labor info), why would, say, an engineer decide to take a pay cut to live in a state with a higher cost of living than other states?  It’s like getting hit twice – first, in taking a lower-paying job, and second, in taking on higher costs of living.  It’s not like other states don’t have lakes, skiing, and foliage.

Speaking of the cost of living, last year Vermont was ranked 40th, and now it’s ranked 41st in 2015 – so it’s heading in the wrong direction:

I'll bet that small shed on the right can be rented out for $850/month.

I’ll bet that small shed on the right can be rented out for $850/month.

What do the top 10 states look like, in terms of attributes?  The short answer is:  Nothing like Vermont.

A top ten list where VT cannot be found.

A top ten list where VT cannot be found.

Minnesota has essentially the same rating that Vermont does in terms of Quality of Life and Education, but Minnesota is ranked 1st, and Vermont is 42nd.  So if you’re looking to say that at least Vermont has high ratings in those categories – and those would be the only two highly-ranked categories for Vermont – then you’re fresh out of reasons to stay in Vermont, if you want to make a living, own your own home, and have something, someday, to pass onto those children.  As it turns out, you can have a high rating for Quality of Life, and a high rating for Education, and not get slammed with a huge tax burden, and get paid a decent wage.

As an example of why Vermont is perceived to be, well, less than friendly toward business, I give you (courtesy of Vermont Digger):  People Complaining About Natural Gas – and the new pipeline that will bring this cheap and plentiful energy source into Vermont:

Witnesses who testified against Vermont Gas said cold climate heat pumps are an efficient alternative heating source, home heating oil prices are low, and NG Advantage can send natural gas on tractor-trailer trucks to industrial customers who still want the gas.

Well, let’s see if I can help here by asking a few questions:

How many homes have cold climate heat pumps in Vermont?  What would it cost to install them in a few hundred thousand homes?

Heating oil prices are low now.  Is that going to continue indefinitely?  What’s been the incentive for people to switch to domestically-produced natural gas?  Was it historically low and unchanging oil prices?

Tractor-trailer trucks run on, what, sunshine and rainbows?  How about the roads they run on?  Are they also made of rainbows, or are those made of unicorns?  If your argument is that natural gas will create additional greenhouse gases, what comes out of the exhaust pipes of tractor-trailers?

Lastly, let’s look at Cold-climate heat pumps – Even Efficiency Vermont states that you’ll need traditional backup for these heat sources:

As outdoor temperatures drop, so does the efficiency and heat output of an air-source heat pump (one

One assumes this sign wasn't raised when Vermont Yankee's petition for an extension was denied.

One assumes this sign wasn’t raised when Vermont Yankee’s petition for an extension was denied.

challenge of using this technology in a cold climate). Selecting one of the qualifying models will help with this. A back-up heat source will be needed when the temperature drops below zero.

So, the answer to heating your home in a state that’s pretty well-known for cold winter temperatures is a system whose efficiency drops the colder it gets?  And that you’ll still need your traditional heat sources to stay warm in the winter?

These are the arguments being used to stop construction on a natural gas pipeline?  I hate to break it to those opposed, but your arguments actually bolster the case for construction of the natural gas pipeline.

But don’t worry, Rutland Area Climate Coalition.  Help is on its way to argue your cause for you in the form of…..Jim Dumont?

Jim Dumont, who represents AARP and Kristin Lyons, pressed the Public Service Department on several points.

Natural gas distribution, Dumont argued, has only about a 25 percent cost advantage over a cold-climate heat pump.  Dumont argued that cold-climate heat pumps are cost-effective for homeowners as compared to natural gas. Further, he said that industrial customers don’t need natural gas through a pipe because they can trucked in by NG Advantage.

So let me get this part straight – natural gas distribution is only 25 percent better than a cold-climate heat pump?  Only 25%?  Gee, I don’t know, maybe if were only 83% better, Dumont would have me convinced.

Call me crazy, but 25% better seems a lot better than 0% better.  Arguing that industrial customers don’t need

Only in VT can we argue that increased trucking is good for the environment.  And good for snarky t-shirts.

Only in VT can we argue that increased trucking is good for the environment. And good for snarky t-shirts.

gas through a pipe because they can have it trucked in is a laughable, side-splitting argument to make.  They could have it parachuted in, too, so they don’t need it through a pipe.  But considering that they can have it through a pipe, and it’s cheaper and more efficient to have it piped in, well, perhaps the industrial customers can build one less natural gas truck loading dock and roll around in a big pile of their saved dollars.

But as it’s become pretty clear, based on the CNBC rating, that these circling-the-drain arguments about whether or not a gas pipeline is better for Vermont is another perfect example of why Vermont’s business climate is continually ranked at the bottom of the barrel.  When Vermonters wonder aloud why they can’t find better-paying jobs, or a job at all, look no further than their fellow Vermonters who populate such groups as the Rutland Area Climate Coalition.

 

A Quitter’s Work Is Never Done: The Shumlin Short-Timer

The Putney Powerhouse, Peter Shumlin, is quitting – and as an odd comparison to what it’s like to quit in the private sector, he gave himself a

Peter looks great in yellow.  It's definitely his color.

Peter looks great in yellow. It’s definitely his color.

year and a half’s worth of down time before he hangs up his spikes.  Or his gubernatorial epaulets.

This is somewhat in contrast with Peter’s prior exhortations for Vermonters not to quit, on such things near and dear to his heart like single payer.

“What I would argue strongly is don’t quit before we start,” said Shumlin. “Don’t quit before we start.”

I guess it’s OK to quit after you start, if you’ve got the steely backbone of a Peter Shumlin.

But, since he’s decided to become Sir-Quits-A-Lot, Peter’s now going to be laying out his laurels for all Vermonters (and potential future US Senate voters) to coo over, lovingly, while he puts his feet up in his office as a short-timer, and tells us “we” have a lot left to do:

“Now we have a lot left to do; let’s get back to work,” he said, according to the Free Press.

Shumlin cited his work to reduce unemployment rates and expand high-speed Internet access and preschool education, the Free Press reported. He also touted various laws he’d signed, including one requiring that genetically modified foods be labeled, another raising the state’s minimum wage and a third offering free meals in schools.

Let’s tackle Peter’s accomplishments one by one, since he’s so helpfully listed them for us:

Unemployment:  As has been shown elsewhere, Vermont’s low unemployment number is essentially meaningless, and based largely on the reduction in active labor force, not an increase in the number of employed.

In fact, in 2014, the total labor for shrunk from 349,400 (Jan 2014) to 348,400 (Dec 2014), a reduction of 600.  The unemployed number for

Great news!  More people are unemployed!

Great news! More people are unemployed!

those two same date ranges increased by 150, from 14,300 to 14,450, but the unemployment rate stayed the same – because the number of people who dropped out of the labor force exceeded the number who became unemployed.

Remember – Peter’s claiming this as an accomplishment.

The state’s own short-term labor outlook shows that 9 of the top 10 growth jobs in Vermont do not require a college degree. What kinds of salaries are generally available if you don’t have a degree?  How easy is it to live in Vermont with one of the highest aggregate tax burdens in the country?

Vermont’s total personal income, as measured by the BEA?  Ranked 50th out of 57 states.  That’s as far from first place as you can get, and Shumlin is touting his economic record here?

Oh, and Vermont’s ranked the 43rd best state for business by Forbes.  So Peter’s also got that legacy working for him.

Expanding High-Speed Internet:  Well, that’s a feather in your cap, if you think using federal grant money to extend fiber or wireless down the last miles of Vermont’s roads is a critical piece of infrastructure-building.  It might very well be, but the market drives those

I can see Peter's 2014 election results right here in the corn field!

I can see Peter’s 2014 election results right here in the corn field!

demands, not the state – unless, of course, there are federal dollars involved and one can make some hay claiming that this infrastructure will help bring jobs to Vermont.  If the expansion of access has been so successful, why aren’t we seeing job growth?  And why aren’t we seeing new office buildings go up on those scenic Vermont roads, all over the state, where a data pipe is now available?

Why is it you find dockworkers located near docks?  That’s where the work is.  If there were more work available in Vermont, you would see the demand for data infrastructure increase, and it would already have been built out in those areas where the demand is.  That the smallest ends of the demand curve for internet access sit on the last few miles of Vermont roads, out in the sticks, does not mean that providing data to those locations will salve the economic wounds inflicted by decades of anti-business deeds, and rhetoric.

GMOs:  Just a quick note to politicians:  Every foodstuff is genetically modified.  That there are newer ways of doing this does not erase

Look at those evil, GMO-tainted seedless grapes!

Look at those evil, GMO-tainted seedless grapes!

millenia of modifications, it just makes those changes occur faster.  Labeling on the package isn’t going to change anything, in the same way that labeling cigarettes as being dangerous to your health doesn’t change the fact that smokers will buy them.

This is an accomplishment?  It’s like saying labeling the weight of the package in the product is an accomplishment.

Minimum Wage:  As has been repeatedly and tiresomely noted, raising the minimum wage increases unemployment.  The CBO estimated that an increase to $10.10 would decrease employment by 500,000 workers nationally.  Again, this is an accomplishment?  Raising the cost of anything involving the production of a good or a service means the price goes up, which means (generally) that demand for that product or service will go down.  Which means that there will be less demand, or need, for the labor to provide that product or service.

Offering “free” meals in schools:  Maybe Peter needs to go back to school himself, because TANSTAAFL says otherwise.  Touting something as free does not make it so; those meals are paid for by tax revenues, not a magically free meal-delivery system.  Oh, and how are

MmmmMMMMMmmm!  You first, Peter.

MmmmMMMMMmmm! You first, Peter.

those meals looking, by the way?

But what’s really driving Peter’s self-imposed exile is the massive and unmitigated failure of single-payer, his “signature” piece of legislation.  A failure so large that Peter decided he would only detail how big the failure is until after his last election in November 2014, an election that was so close it had to get tossed to the Vermont legislature to decide.

Only after he was safely back in office in December 2014 did Shumlin decide to acknowledge publicly what everyone else has known for a year or more:  That his version of single-payer was a mismanaged hack job that spent hundreds of millions of tax dollars on a website that still doesn’t work, years later, and so, he bailed on it:

Shumlin had missed two earlier financing deadlines but finally released his proposal. But he immediately cast it as “detrimental to Vermonters.” The model called for businesses to take on a double-digit payroll tax, while individuals would face up to a 9.5 percent premium assessment. Big businesses, in particular, didn’t want to pay for Shumlin’s plan while maintaining their own employee health plans.

He didn’t “miss” them – he purposefully chose not to release his proposal due to political considerations, because there was no way that implementing single-payer wouldn’t raise taxes by an enormous amount.  The estimated cost was $2.2 billion and the state’s total budget is already $5 billion.  That’s roughly a 50% increase in taxes.

“These are simply not tax rates that I can responsibly support or urge the Legislature to pass,” the governor said. “In my judgment, the potential economic disruption and risks would be too great to small businesses, working families and the state’s economy.”

Note that implementing single-payer would not guarantee any additional access to care.  It would just give everyone an insurance card.  There’s an enormous difference between covering everyone under one insurance plan, or even 50 plans, and the insured actually being able to see a doctor.  Ask Canadians.

And that was for a plan that would not be truly single payer. Large companies with self-insured plans regulated by ERISA would have been exempt. And Medicare also would have operated separately, unless the state got a waiver, which was a long shot.

Again, since the state’s demographics mean that MediCare spending gobbles up massive chunks of the state’s budget, it also means that

This does not look like a soft landing.

This does not look like a soft landing.

single-payer wouldn’t address the primary cause for commercial insurance rate increases – the Medicare cost-shift.  His proposal ignores it entirely.

In short, even Peter can read the writing on the wall.  Considering his near-defeat last fall, even in a state as politically progressive as Vermont’s, another Shumlin term was rapidly becoming a pipe dream for the Man With A Questionable Plan from Putney.