… but never any easy questions to complex problems. I recalled that bit of wisdom when I read today’s news that Rhode Island evidently has won the economic race to the bottom. Rhode Island, it is reported, has a worst in the nation business climate.
To those who read from the gospels of Hayek and Friedman, the answer is simple. In the Field of Dreams school of economics, all we need do is lower taxes on corporations and “job creators” (e.g. the upper 1 percent), reduce those pesky government regulations, and all will fall into place. The sun will shine, birds will sing, children will laugh, and all will be right with the world. Except…it won’t work. How do we know? Because it never has.
Now I know that I’m opening myself up to an attack on this last point but that’s an issue for another day. What’s important is that our business and governmental “leaders,” along with those groups and advocates with vested interests in promoting this policy of trickle-down voodoo economics are advancing a single variable approach to a multi-variable problem. As anyone who has made an even passing study of public policy design knows, this approach leads to disaster. Ignoring this simple truth has led to some of this country’s epic policy disasters such as Viet Nam, our current policy in the middle east, and the economic decisions that led to the financial meltdown that resulted in the Great Recession to name only a few.
So let’s take a look at some facts: income inequality in Rhode Island is a fact. According to the Economic Policy Institute, the average annual income for those in the top 1% is $884,609, or 18.6 times the average annual income of the remaining 99 percent. If this appalls you, then a little good news – Rhode Island is not as bad as the rest of the country as a whole, although that is a small consolation.
Add to this imbalance is the fact that in 2015 CEO compensation was 276 times the compensation of the average worker. Put into another context, from 1978-2015, CEO compensation grew by 940.9 percent, adjusted for inflation. This growth rate is 76 times more than the growth rate of the stock market (think about that when you get your next 401k statement) and dwarfs the 10.3% growth rate of the average worker’s income over the same time frame.
You don’t need an advanced degree in economics or study at the feet of Thomas Piketty to know that there’s something wrong here. That said, it certainly begs the question about why we feel the need to lavish scarce public financial resources, at the expense of vital public goods (you know, those roads and schools and public parks that we used to care about) that we once valued and all supported, on those who don’t need the enticement to relocate in our state. It would seem that the upper 1% and their supporters have forgotten, or are just ignoring, the old adage, “pigs eat, hogs get slaughtered.”
And we haven’t even mentioned wealth inequality. This is the part of Jeopardy where the scores can really double. But I digress…
Compare that to the rate of poverty in Rhode Island, which sat at 14.3% in 2014. There’s always a dispute about the accuracy of that number derived from census data, and in full disclosure I’m one who thinks the number is too low, but let’s assume that it’s dead on accurate. This number means that there are 143,000 Rhode Islanders living at or below 100% of the federal poverty level (FPL). Additionally, again according to the same census data, there are 60,000 Rhode Islanders living at or below 50% FPL, in “extreme” poverty.
These numbers don’t reflect the number of “near” poor who live between 100% and 200% of FPL, for if we did include this group, the number of Rhode Islanders living at or below 200% FPL would number somewhere around 280,000 people. Anyway you slice it, this is a significant drag on economic activity, and is something that needs to be factored into any economic development effort in Rhode Island.
There is no question that we didn’t get into this fix overnight, and that we won’t get out of it in a day, or a year, or one or two terms, or one or two decades. But that is a political truth that our elected “leaders” don’t want to speak, and one that most of us don’t want to hear. However, elected officials need to speak truth to us and we, as a body politic, need to respond. Happy political talk and pie-in-the-sky discredited economic fantasies will no longer suffice. We must recall the rule that when you find yourself in a hole, stop digging.
The policies proposed by the governor, with the complicit support of the legislature, will ensure that we will continue digging. Blithely ignored are the realities of economically distressed communities, poor public schools, the fact that too many people still do not have easy access to even modest health care, insanely expensive housing, low unmarketable job skills in the new global “knowledge” economy, and the one economic development principle that is ignored by all who formulate our policies and impact our futures – economic development must first focus on those who live in the community and not on those who are targeted by enticements to relocate to our state.
If we are to right this ship of State, we will need to make focused and sustained investments in areas that need to be strengthened. But this will call for a comprehensive approach to deal with the multi-variable problem that threatens to take many of us down. Such an approach will make for boring and risky politics for those who seek office. But on the plus side, such a long overdue comprehensive approach may just ensure a better life for our children and grandchildren.
I have a few suggestions if anyone’s interested….