Leadership Sacrificed to the Lionization of Milquetoast

Charlie Arlinghaus

April 15, 2015

As originally published in the New Hampshire Union Leader

If you’re serving in or hope to serve in high office, it would be best for you not to have opinions, show leadership, or otherwise do what might be considered your job. Leaders who lead are considered risky and bold. The political intelligentsia would advise you to be quiet, look ponderous, show grave concern, but avoid expressing too many actual opinions. Leave leadership to those in less responsible positions.

People who are old fashioned enough to believe in ideas are occasionally frustrated because nothing seems to happen. Similarly, politicians — who are rarely if ever confused with people who believe in anything — are sometimes befuddled by their inability to accomplish much. Surrounded by advisors constantly urging caution, too many putative leaders indulge themselves in regular hand-wringing about the dangers of having strong opinions.

We are used to the lionization of milquetoast on the local level and it promises to be on display regularly during the presidential campaign as well.

Anyone who has attended a speech by a would be president has noted a general trend toward platitudes and statements resplendent with bold nothingness. Carefully crafted statements of concern alternate with a call to do something — nothing specific mind you because specifics, we are told by the handlers and the suits, are a death knell. A candidate who resorts to gimmicks such as substance must have serious problems before he or she would consider such risks.

As a case in point, consider Chris Christie, current governor of New Jersey. I hold no brief for Mr. Christie but he was in New Hampshire yesterday and had the unmitigated gall to give a speech about entitlement reform. This is surely a sign, it is suggested, that he’s getting a little desperate.

A man who wants us to consider him to lead the country dares give a policy oriented speech on the single greatest economic problem facing our country. Sure, everyone knows that soon even the jellyfish lurking around Washington will have to do something about the problem they’ve been sweeping under the carpet for thirty years, but why would anyone want to talk about it?

I was mildly annoyed to read stories this week pretending that somehow a specific plan on reforming social security and other federal entitlements is bold or risky or some sort of desperate gamble that suggests a candidacy trying to right itself.

The truth is that we should demand these sorts of detailed policy speeches from candidates. It is a pathetic commentary on the lack of maturity of the American body politic that somehow substance has become a desperate Hail Mary pass.

I have no idea if I would vote for Christie or if I would endorse all the particulars of his plan. Nonetheless he should be praised for putting substance on the table again, for presenting a well thought out and responsible plan to deal with the biggest issue of the day. You needn’t support every particular to thank him for making leadership a compelling part of a campaign.

We should demand substance from pseudo-leaders at every level of government. In the process we may also be doing them a favor. Too often, people working on an issue will try to avoid talking in any detail. We are asked to appreciate the compromises and difficult decisions made with, say, a state budget without being told the details of what went into those decisions. Often we are fed vague headlines and asked to make our decision on that basis.

When details do come they run into a list of features, big and small, without any attempt to siphon through the big picture and explain why things look as they do. We are not thought of as adults who can be trusted with real information. Instead they hope we might latch on to one small thing that captures our imagination and ignore the rest.

I don’t expect to agree with political leaders. Neither I nor my fellow citizens, voters, and taxpayers will be horribly put off by some detail or another in a plan we didn’t craft. We expect to take the wheat with the chaff and decide what we think of a proposal on balance.

More than that, in a substance free political world filled with drivel-dribbling talking heads in nice ties, real leadership is remarkably unusual and unexpected. It has the effect of stunning our senses and breaking through the boredom and cynicism that numb us to political discourse.

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Stagnation Will be Permanent Unless We think Long Term

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Charlie Arlinghaus

March 18, 2014

As originally published in the New Hampshire Union Leader

All too often for politicians the big picture can get lost by paying too much attention to details. The state’s budget season is a poster child for not being able to see the forest for the trees. The difficulty for politicians is that we expect them to simultaneously focus on the big picture and to pay strict attention to the details that threaten to obscure the big picture. However, our future as a state depends less on the particular lines of a spreadsheet and more on long term changes that will affect our future.

The problems New Hampshire faces are well known though sometimes we don’t like to mention them. Once a thriving economy, New Hampshire has degenerated into stagnation. Our job growth has been flat not just since the recession but for the last fifteen years. Competitive states are thriving and adding lots of jobs. We are not.

One sign of our problem is migration. People have moved to New Hampshire for work for centuries. The large French-Canadian population of any mill town is a good example of this. We’ve reached the point where a majority of us are from away. New Hampshire is one of only eight states with a majority of its population born elsewhere and the only one in the Northeast.

For decades we had a significant migration of people coming here for jobs. That dried up and more people are leaving the state than coming here. We’ve seen people fleeing the state in six of the last seven years.

Our job market is and remains quite mediocre. According to the census, more than 106,000 New Hampshire workers commute out of state to their jobs. The lion’s share of them would much rather work in the same state in which they live but our stagnant economy offers them no such opportunity.

None of these trends are things that can be changed overnight. Nor does any one of them have an immediate effect on the budget. One tweak in law won’t reverse the floodgates and immediately create $23 million of budget breathing room.

Any long term change runs into naysayers who are focused only on the items right in front of them. The far-sighted politician wants to do more than just managed to get past the current budget discussion. He or she needs to ignore short term political gratification gains and focus on creating a competitive environment that brings back the jobs that will keep our children in state, change us from out-migration to in-migration, and give more residents the opportunity to work here rather than cross the border.

No politician can pick one item or make just one change to reverse a trend that has been building for more than a decade. There are at least a half dozen areas that hurt us. But let’s discuss the two most important to illustrate the trend.

Our business taxes are among the two or three highest in the country. When the corporate tax rate is 30% higher here than in the median state (Tennessee, which also has no income tax for those scoring at home), we struggle to convince relocating companies that we are a good, low tax state. Yet any tax change is castigated by the short-sighted.

A proposed change that would direct the natural economic increase into rate reductions finds objectors bemoaning the supposedly lost revenue. They would gladly sacrifice jobs in the long term for one or two percent more money in the short term. That’s precisely backwards. If we forsake competitiveness, no amount of money can stop us from degenerating into an economic backwater.

The energy sector is similar. Our electric rates are among the five highest in the country ensuring large electric users pay 40% more here for electricity than in an average state. This would be less of a problem if we didn’t want to attract the manufacturing and high tech companies that use a lot of electricity and pay their workers so well.

Yet the debate on electricity rarely focuses on how to lower rates or how to add more lower cost capacity into the market to put pressure on rates. Instead, most of the debate focus on objection after objection to building anything anywhere. If you want to live in a state with no jobs because no one wants to build anything, we have neighbor states who would welcome you. But for those of us who prefer employment, building things is necessary.

It’s easier to oppose change in the short term but that requires accepting stagnation. I’m not ready to give up yet.

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Price Controls are Still Bad

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Charlie Arlinghaus

March 4, 2014

As originally published in the New Hampshire Union Leader

Among politicians, price controls are a bad idea unless they’re your idea. In truth, the government setting prices is never the right solution to a problem.

Those who would have the state government set and control prices in the workers’ compensation part of health care should remind themselves that they were opposed to government price controls five years ago when it was then-Sen. Maggie Hassan’s idea for a hospital price fixing commission. They were right then. They should listen to their old selves now.

Employers looking for ways to reduce the cost of doing business in New Hampshire have looked to possible reforms in the workers’ compensation system. Workers’ compensation is the successor to Otto von Bismarck’s sickness and accident laws. It is a mandatory system of employer paid insurance to cover workers’ temporary and permanent disabilities.

Compensation costs are divided between a medical benefit and cash benefits for lost work time, known as indemnity. Many states looking to lower costs have merely dictated that medical benefits be reduced according to government price controls. In essence, a fee schedule for at least some costs is adopted at a lower rate than had been paid. New Hampshire is considering having the government set prices.

According to data compiled by the state of Oregon, New Hampshire’s costs are the 12th highest in the country (a slight improvement from ninth highest two years ago). The bad news may be that our costs are above average, but the good news is that we’re improving rapidly.

According to the National Academy for Social Insurance, which does an annual report on costs, from 2008-2012 (the latest data) New Hampshire saw workers’ compensation costs decline by 8.5 percent when the country as a whole increased by 5 percent. At a minimum, we’re doing something right.

What we’re doing right is not having price controls and having a robust system that allows timely access to care and dramatically reduces indemnity costs by getting people back to work faster. Nationally, benefits are half medical, half indemnity ($30.8 billion, $31 billion). In New Hampshire, indemnity or cash benefits are only 34 percent of total benefits ($77 million) with medical benefits making up $152 million, or 66 percent.Imposing government price controls on the medical side of benefits will increase indemnity costs. The University of Washington School of Public Health studied California’s expensive system and found that “access barriers increased the duration of compensated lost time by approximately 60 percent.”

We know that price controls will reduce access. In fact, the New Hampshire Medical Society found in an online survey that 96 percent of its responding members will opt out of workers’ compensation if price controls are adopted. The real number will be smaller, but access will be affected and indemnity costs will rise. We’ve seen this before in New Hampshire.

A plan 25 years ago to place artificial caps on prescription drugs in mental health led to a small decrease in drug costs and a huge increase in hospitalization. The drugs were reducing the need for more expensive hospitalization. I suspect that in workers’ compensation, access and competition are reducing indemnity costs.What can we do? We want to preserve what’s working well. New Hampshire was one of only 16 states to see costs decrease from 2010-2012. And as noted before, we’re down 8.5 percent when the country is up 5 percent. Those are good trends.

There are some medical outliers, though. The way to eliminate the high-cost outlier is through transparency. If we don’t know what providers charge, we can’t know who’s high and low. A database with all payers, including the self-insured and privately insured, will help insurers decide where to go. This again is something New Hampshire has experience with.

The state’s health care plan includes a tool called “Compass” that allows members to save themselves out-of-pocket costs and find more competitive providers for the same procedure. In the last four years, this program has saved millions of dollars and directly and indirectly forced other providers to become more competitive.

In workers’ compensation, this same level of transparency doesn’t exist. Because it is illegal to compare prices (collusion is an anti-trust violation), high-cost providers don’t know if they are particularly high. If a transparency site shows you that you’re an outlier and you know that customers can easily find out too, you will lower your costs to be competitive.

New Hampshire is one of the few states moving in the right direction. Instead of hurting that progress with government-mandated price controls, let’s try and improve competition.

– See more at: http://www.unionleader.com/article/20150304/OPINION02/150309679/0/SEARCH#sthash.ITgy4g06.dpuf

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New Hampshire Must Stop Living in the Past

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Charlie Arlinghaus

January 25, 2014

As originally published in the New Hampshire Union Leader

What you think of New Hampshire is almost certainly wrong. Most of us are living in the past and think of this as a vibrant and competitive state. It isn’t. The truth is that, economically speaking, we are increasingly a mediocre backwater stuck with a stagnant economy and lacking the political will or self-awareness to do anything much to make ourselves more competitive. The future belongs to the bold and we live in the land of the timid.

Too many people in New Hampshire live in the past. Many of us remember the huge economic booms of the 1970s and 1980s and think reality is unchanged from then. For a long time, New Hampshire boomed as Massachusetts stagnated. But that was then, this is now. Our economy is not growing, it’s stagnant. We’re not competitive, we’re mediocre.

As recently as fifteen years ago, economists described New Hampshire as “the envy of its neighbors.” It was a common truism to say that New Hampshire led the region out of the recession. Jobs lost elsewhere were reopened here. But that dynamic is now true in Texas not New Hampshire.

Prof. Mark Perry writes my favorite economic blog, Carpe Diem (doesn’t everyone have a favorite economic blog?). He published a startling chart I now steal for all my presentations. In the last seven years, the state of Texas has seen 13% employment growth or 1.4 million jobs. The rest of the country combined is still 275,000 jobs short of their pre-recession peak.

New Hampshire used to be as vibrant as Texas. Our growth in the 1970s, 1980s, and even 1990s was faster or equal to Texas. But our graph lines have diverged. They’ve grown 1.4 million jobs, we’re still down from pre-recession levels. They’re vibrant, we’re pathetic.

The last fourteen years, the new century, we’ve deteriorated into a flat line – not even a pale imitation of our former selves. In the 1980s jobs grew 27%. In the 1990s they grew 18%. In the decade and a half since 2000, we’ve grown by just 5% — not enough to keep up with the population or to keep people in state.

Even Massachusetts has left us behind. They aren’t exactly thriving but while we have yet to get back to our pre-recession jobs, they’ve grown by almost 4% in the last seven years. That’s better than our zero in the same period but pales by comparison to Texas’s 13% boom.

No wonder 106,000 people commute from New Hampshire every day to their out of state jobs. In a distressing signal, this is a 12% increase from 20 years ago.

The problem is that most politicians live in the past. They speak nonsensically about some vague and ill-defined “New Hampshire Advantage” – a term coined for political campaigns of the 1990s – and apply it to every aspect of political debate.

To be sure, the Tax Foundation still ranks us in the top 10 in overall tax burden but largely on the basis of having neither a sales nor income tax. Those advantages attract and keep some businesses here but by themselves they aren’t enough to keep us from being left behind in the fight for jobs.

The total cost of doing business in New Hampshire is too high. There is not one thing to change but rather everything. Anything that increases costs helps us lose.

To change, we need to do something or resign ourselves to a future where we look like Vermont and Maine and encourage our kids to all move to Texas where they might actually find a job.

Uncompetitive business taxes are something we can start addressing immediately. Massachusetts cut

Its highest marginal rate to 8% while ours languishes at 8.5%. I believe it should be unconstitutional for our tax rate to be higher than Taxachusetts in anything. The median state (Tennessee which also has no income tax) is 6.5. To be in the top 10 we’d need to be at 5. It’s time to start moving in that direction or give up. By the way Texas has no business profits tax.

Similarly as we increasingly fret about building any energy infrastructure anywhere, our electric rates are shockingly high. Our average rate of 18.08 cents is 43% higher than the national average and 74% higher than our no-income-tax friends in Tennessee. We’re also 50% higher than Texas.

None of this is a problem unless we want to attract jobs that use electricity like manufacturers or high tech companies.

It’s time for us to get over ourselves and stop living in the past. There is no question that we are becoming a stagnant backwater. The only question is whether or not we want to do something about it.

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Politicians in Concord Could Learn a Lot From Saturn

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Charlie Arlinghaus

January 21, 2014

As originally published in the New Hampshire Union Leader

Politicians often seem like they are from another planet but today I think a few people in Concord could learn a lot from Saturn. Politicians on both sides of the political spectrum are easily tempted to come up with pretend solutions that aren’t focused on the real problem but serve their own political purposes. The more complex a problem is, the greater the political temptation can be.

It is no secret that the greatest challenge facing New Hampshire’s future is economic development. A once proud and thriving state now languishes in the doldrums of economic stagnation. Oddly, politicians familiar with the problem nonetheless can’t see how it might affect other issues they fret over.

Politicians wonder why young people don’t stay here yet have trouble figuring out that the lack of jobs might have anything to do with it. It shouldn’t be that hard to figure that the very mobile younger adults of today might be more likely to locate where they can find work.

Similarly, the statewide angst over declining in-migration ought to be less of a mystery. There is no chicken-or-the-egg riddle here. People don’t move here and then figure out how to create jobs, quite the reverse. When we had one of the fastest growing economies in the country a lot of people moved here. When we declined into employment mediocrity people stopped moving here. Correlation is not the same thing as causation but this isn’t a mystery of human nature.

At this point, virtually everyone agrees that jobs are our first priority. The disagreement is about how to get there.

We can learn a lot from Saturn – not the planet with the icy rings but the General Motors project started in the 1980s and closed by the federal government in the bankruptcy/bailout recently.

GM went on a nationwide search in the mid-1980s for a location for a new plant for the just created Saturn division. It ruled out Detroit from the start although finalists included some old line auto hotbeds like Kalamazoo. New York offered huge subsidies to lure them but ultimately wasn’t close.

Ultimately a location near Nashville beat out Kalamazoo and Lexington. Prof. Timothy Bartik did a number of academic studies on the subject. His findings are interesting and worth more detail than I can get into here. But they support the conclusion that economic competition is not ruled by any one item.

To be sure, the three finalists had the three lowest tax costs of any location under consideration. But taxes as component of the cost per car were not the only consideration affecting the economic competitiveness of a particular location. The eventual winner had the lowest variable costs overall and the second lowest tax cost.

The costs of energy, housing, and general cost of living that determine wages made a big difference in Nashville’s favor. In addition the responsiveness and low key competence of Tennessee’s government made a big difference. The study also found that if New York – offering incentives greater than a billion dollars — had eliminated all taxes whatsoever they would still not have attracted Saturn.

The suggestion is, not surprisingly, that tax differentials matter but they aren’t the only thing that matter. States are and should be attracted to tax reductions to improve their economic climate because of their immediacy. Many measures, like location and access to railheads, can’t be changed. Other cost-of-living and cost of labor measures change slowly over time. Electric rates, for example, are quite uncompetitive but can’t be lowered in one fell swoop. Home and rental prices which drive cost of living and therefore labor costs can be changed but only slowly.

On the other hand non-competitive taxes can be changed right away. A tax cut, however, is not like a spigot turning on. Rather, it is a strong signal of business sensitivity and one immediate change to our climate. In that sense it affects both the competitiveness spreadsheet and also is a marketing message.

Similarly, the silliest thing we can do immediately is to raise taxes. One nonsensical proposal going nowhere this year would create a capital gains tax and send a signal to investors willing to risk capital that we would prefer they not do so here. Rather than seeking investment, we want to make it more difficult for you to invest in our state. I’m not sure that “please don’t invest in us” is an effective economic development slogan.

Over the next decade New Hampshire has to do short term and long term things to move us up the list in any economic development spreadsheet. It’s not one thing. It’s everything.

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For Better Policy, Check Your Confirmation Bias

Charlie Arlinghaus

January 7, 2014

As originally published in the New Hampshire Union Leader

Don’t believe everything you read. Present company excepted, of course. There are many things we think we know but don’t. All too often someone posts a pointed anecdote or tidbit on Facebook or Twitter. The stories often aren’t quite true, but no one bothers fact checking when it sounds true and it’s what we want to believe.

Confirmation bias is the tendency to accept, with little skepticism, things that confirm what you already believe. It’s something we all suffer from and have trouble correcting for. It is particularly endemic in the public policy process. The things I think are a good idea have no negative consequences. Statistics that show otherwise are misleading or overstate the magnitude of the problem.

Sometimes the problem comes from general perception. One good example is immigration. We know, or think we do, that Republicans are mean and want to deport everyone. Or perhaps we think that President Obama just doesn’t care about immigration laws and wants lots of immigrants, legal or illegal.Alex Nowrasteh at the Cato Institute has studied actual data. He separates deportations into interior and border deportations to measure intensity of immigration enforcement. He found that border deportations are up under President Obama compared to President Bush, and interior deportations are up a great deal. It is important to note that this is both in numbers and as a percentage of the estimated illegal or unauthorized population.For example, President Bush averaged 276,000 total deportations annually while President Obama has averaged 405,000. What this means for your worldview, I’m not sure. You can use it to attack or support the current or former President, depending to some extent on your view of immigration. Regardless of how you feel about those two people or that issue, I suspect the data are not precisely as your Facebook friends might have predicted.

In our world today, we tend to find an anecdote that supports our worldview and cease any further investigation. Anecdotes are fun and not generally used as a jumping off point for further investigation, but rather as an end in and of themselves.

I was in a meeting at the end of last year when someone decided to make a point by comparing New Hampshire to Detroit — Detroit in this case being a stand-in for the anarchical state of nature that returns when civilization collapses. I am, I’m sure, oversensitive to attacks on Detroit. I grew up and went to school in and around Detroit, still root for the Lions during their inevitable playoff losses, and like to read the Detroit News.

Nonetheless, Detroit is a useful whipping boy. We know, or think we know, that the city is a shell, a bankrupt shell, and the economy has collapsed. The city did become the largest of the 600 municipalities that have declared bankruptcy in the last 75 years. But the city restructured (that’s what bankruptcy is), eliminated $7 billion in unfunded liabilities it had no hope of ever paying, went through two years of emergency management, and has ended bankruptcy and restored normal government. The downtown is seeing billions in new investment, and visitors are impressed with the economic changes, at least downtown.

The moribund auto industry? Statistics from the Union Leader this week show that GM, the largest automaker in the world (and the lynchpin of the Detroit economy as well), had a 19 percent increase in sales, for its biggest December in seven years. Domestic auto sales are now back to pre-recession levels and 60 percent higher than the 2009 low — good for Detroit the city, great for “Detroit” the industry.

Understanding and accounting for confirmation bias in data analysis can improve the public policy debates in New Hampshire. There is broad agreement that our economy is stagnant. Job growth isn’t what it was in the 1970s, ’80s and ’90s. However, in a recent gathering of business and policy leaders, I noticed a general consensus but disagreements over specifics.

Everyone in the room agreed with about half of what everyone else said. Even businesses disagree about what businesses want; some care more about tax rates, some are obsessed with energy costs, some relocate easily, others can’t realistically move.

Controlling for your own bias will be important in solving the state’s problems. But human perception being what it is, you probably think confirmation bias is something everyone else has.

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Let’s Try to Ignore the Political Soap Opera

Charlie Arlinghaus

December 11, 2014

As originally published in the New Hampshire Union Leader

We all need to start ignoring political soap operas and focus on the real work of government. Sadly, the media is likely to report frequently and breathlessly about who likes who and who’s mad at who while ignoring most of the substantive policy discussions that help determine the strength of our economy and whether you have any hope of finding a job. Like celebrity gossip, the backroom personal dramas are fun to cover and more interesting to far too many people in our increasingly substance free polity.

No true political coverage can completely ignore process nor should we expect it to. The process of selecting policymakers (i.e. elections) is very important as it determines which policy prescriptions are likely and even possible. But between elections something happens other than just posturing for the next election. Governing in a free society is not an extended preseason for the next election, rather the opposite is true. In theory, an election is simply a prelude to the real decision making.

I worry that the next two years, however, will be dominated not by descriptions of the choices before government but by a constant speculation about backroom politics and who is or isn’t positioned well. Two dynamics, one legislative and the other gubernatorial, have already established this threat.

Governor Maggie Hassan is about to start her second term. I wonder what she will advocate in her budget, how she will propose dealing with reasonably large budget imbalances the state faces, and whether she proposes expanded gambling again and how it will differ from her proposal of two years ago. In addition, I presume she will have other initiatives to change the direction of the state.

People regularly ask me about the governor. Rarely do they ask about spending levels, tax policy, or economic incentives. Always they ask “do you think she’s running against Kelly?” Sen. Kelly Ayotte will run for re-election in 2016 (not quite two years from now) and Gov. Hassan is widely expected to challenge her or at least face national pressure to do so.

Every action and proposal is going to be judged not on its merits but on “whether or not this sets her up well for 2016.” Every statement will be parsed for its 2016 meaning. Every reaction to the governor will be colored in the 2016 light. It makes for an easy discussion that avoids anyone having to figure out anything substantive.

Instead of endless political speculation, can we take a moment and attack or praise proposals the governor makes simply on their merits? It is possible she will have some good ideas you’ll actually support but vote against her two years from now. Similarly, you are free to think she’s the bee’s knees but still part company on a proposal or two.

If gubernatorial-senatorial politics weren’t bad enough, the latest State House drama has far too many lawmakers ignoring substance themselves and degenerating into name calling and petulance. There are many issues of process and tradition built into the surprising drama last week when the expected Republican speaker lost narrowly to another Republican elected by an apparent coalition of Democrats and Republicans.

There are very strong feelings on both sides and I don’t want to minimize them. I’m sure there will be attempted coups and backroom shenanigans of all sorts. But I would prefer not to care. I would prefer that each and every legislator with sore or triumphal feelings keep his internal angst to himself. There’s a lot of work to do. Retributive justice can be served quietly while the rest of us think you’re doing your job.

The budget has more holes in it than Swiss cheese. Our pension is still among the worst funded in the country. Our job growth is mediocre at best. Energy prices are depressingly (in an economic sense) high, and the old competitive New Hampshire is a distant memory.

There is enough to work on to keep 424 people quite busy. I may have preferred this person or that person win the procedural vote to preside just as I may have preferred a person or two in the November elections. But what really matters is not which personality occupies which chair but what they each do and what policies end up imposed upon us.

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Stagnation Needn’t Be Our Destiny

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Charlie Arlinghaus

December 4, 2014

As originally published in the New Hampshire Union Leader

One of the problems for all of us is that we are living in the past. We think reality is the same as it was 15 years ago but in actuality we’ve been left behind and are in danger of becoming a museum piece. New Hampshire has been left behind and most politicians are reduced to talking about a previous reality that no longer exists except in their mind. Prosperity has been replaced by stagnation, dynamic growth by brackish backwater. This mediocrity is the problem of our time but too many don’t notice the problem or admit to the new rules we operate under.

The 1970s, 1980s, and 1990s were heady times of rapid job growth in New Hampshire. Each decade featured a dynamic economy, an extraordinary competitive advantage over our neighbors that made New Hampshire a haven of in-migration and led to New Hampshire being called an island of prosperity surrounded by a sea of socialism.

New Hampshire seemed to be a haven for entrepreneurs and high tech companies, a dynamic new economy remaking itself time and again in the midst of candlelit old economies wedded to the old stagnation we associated with yesterday’s socialism.

At the end of those thirty years, the Federal Reserve Bank of Boston, not a traditional cheerleader for New Hampshire, referred to our state as the envy of its neighbors. But that was then, this is now.

At the height of the envy-causing boom, New Hampshire had 28% job growth in five years (1983-1989). The last eight years saw complete job stagnation – the same number of jobs in 2013 as 2005. No single economic statistic is more important to public policy than this.

We are no longer an island of economic dynamism. We are merely one more pebble in a stagnant economic gravel pit.

Yet too many politicians continue to refer to what was once called the New Hampshire Advantage – the competitive economic advantage we once enjoyed over our neighbors that no longer exists.

Our tax picture is broadly better than most. The Tax Foundation ranks us seventh largely because we have no income tax. But subcategories are troubling. Our business taxes are among the worst in the country and business recruiters report that the first thing they are asked about is tax rates.

Unemployment taxes, workers comp rates, the cost of health insurance (labor costs) are all among the highest in the country. Most troubling, and the biggest roadblock we currently face, are our highest in the nation energy costs.

So much of business relocation is psychological, and the psychology of measure after measure after measure being so high and out of range is that places like Texas and North Carolina look more and more attractive.

In the midst of splashing around in this brackish backwater we are treated to politicians talking about preserving some non-existent advantage.

It’s time to face reality. We are not competitive. College graduates of today do not remember a time when New Hampshire was a great place to look for a job. Their whole life has existed while New Hampshire was a place to be escaped to find a brighter future.

I have seen this film before and I don’t like how it ends. Growing up in Detroit, newsstands stocked the Dallas Morning News so people could read the Sunday want ads. It was more useful to them in finding their next job than the local papers could be. I would hate to see people trade in their Union Leader subscription for the Chattanooga Times.

But our die has not been cast. We have not crossed a Rubicon. Instead we have sat still and stillness can be cured by action. We should not resign ourselves to business as usual and the fate of being the third pea in a Northern New England pod of stagnation.

The dynamism of the past may be gone but we can work to tear down walls to competitiveness. Admit that our advantage is gone and we can fight to get it back. We are still a small state and somewhat more nimble than many would be competitors. We have not gambled millions on giveaways and irreversible programs.

Every action taken in the next legislature should be judged by whether it raises or lowers the price of doing business in New Hampshire, whether it makes us more or less competitive. Stagnation needn’t be our destiny.

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Divided Government Keeps Bad Things From Happening

Charlie Arlinghaus

November 19, 2014

As originally published in the New Hampshire Union Leader

For the next two years small changes are possible but nothing big can happen because politics and money conspire against change. It’s not true that nothing important will happen but it is true that most major initiatives will flounder on the shoals of budget pressure and political competition.

If you are content with the status quo, divided government is a blessing. It is generally true that Democrats are predisposed to hate Republican ideas simply because they are Republican. Republican politicians, of course, have the same myopia about Democratic ideas. Therefore, in any sort of power sharing arrangement  — for example, the current Republican legislature and Democratic governor – it is a good bet that each side will quash most of the ideas of the other and little will happen.

William Niskanen, the late, former chairman of the Cato Institute, long preached the virtues of divided government. He said,” The United States prospers most when excesses are curbed, and, if the numbers from the past 50 years are any indication, divided government is what curbs them.”

He pointed out that federal government spending increased by an annual average of 1.73% during periods of divided government but 5.26% during periods of one party control. The only two periods of reasonable fiscal restraint occurred when Eisenhower had a Democratic Congress and Clinton had a Republican one.

The basic reason is that Republicans dislike Democratic ideas for spending but tend to love their own and vice versa. During one party control, those in charge tend to be bold. This is fine if they wish to be bold in ways I support but all too often they are incapable of reading my mind or yours. It may be best then to keep them restrained.

In New Hampshire, Republicans enjoy comfortable majorities but can’t come close to overriding a veto. This likely means that things we do today are locked in and nothing will be extended or added without broad compromise.

The second limiting factor this year is budget pressure. The two-year budget document adopted in the first year of the session is the controlling roadmap in New Hampshire. Nothing significant can happen without funding and initiative depends on available money.

Every two years, there is some sort of supposed budget crisis but they come in degrees. Some years, the gap between expected revenue and programs is quite minimal and requires only a modicum of tweaking – not so much a crisis as management. The other end of the spectrum is the huge $800 million shortfall between revenues and projected spending that existed in 2011. Those changes were consuming and affected every area of government.

We don’t have all the information we would like just yet but the budget process that has begun is about halfway between cataclysm and triviality. With the election past, more specific information will emerge. We do know that a $72.2 million surplus bequeathed to the last legislature and governor was spent down to $19.5 million – a spending deficit of $52 million in just the first year. The problem is big enough that the governor has asked half of state government to cut $30 million while the HHS half of government has to make cuts of around $45 million.

That was then but it means that the baseline going forward is quite shaky and unbalanced. To that must be added significant increases in Medicaid caseloads, other changes at HHS creating a projected two-year hole of almost $90 million, and the additional shortfall that we can’t calculate yet caused by necessary changes to the MET tax. All told, the problem won’t approach $800 million but there’s no reason to suppose it won’t be calculated in the hundreds.

The problem is manageable if it is a few hundred million in a two-year operating budget of $4.5 billion. But agencies or programs that want more money are likely to hit a wall in this environment of scarcity. Spending as whole must decline so individual increases will be very few and very far between.

The governor will propose gambling but a Republican House like the Democratic House before it will consider it separate from the budget process not within it. No other revenue increases are politically possible.

The governor and legislature will likely agree from the outset that they don’t like each other’s ideas. Agreement after that will be difficult. That’s good news for those of us who would like government to do less.

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The Election Meant Nothing

Charlie Arlinghaus

November 5, 2014

As originally published in the New Hampshire Union Leader

This too shall pass. If your people lost this election or won this election, my words of consolation and words of warning are identical. The election didn’t mean what you thought it did. This was not a sweeping denunciation of your way of life, your philosophical outlook, or your taste in personalities. This was an aberration.

One set of people has been given a chance to do a few things or not do a few things. We are not a lost people turning searching eyes to our last hope of leadership, begging him and her to show us the way, teach us to see the light, and find a new way of living.

Rather we are a weary and apathetic bunch who have to elect someone and chose this lot this year. We know we will be disappointed – at least to the extent that we even care. In truth most of us are so disengaged that we don’t have the energy to be apathetic.

Consider that in an election that set numerous spending records, that bombarded us with television advertising, that burdened our mailboxes with remarkably similar pieces of direct mail for and against someone or the other – in a year like that most of us didn’t bother to exercise our voting privilege. Roughly 60% of those eligible to vote didn’t bother to do so. They could have but chose not to.

Let me take the opportunity to quote to you my favorite author: me. In 2010, I warned the incoming horde of Republicans not to presume a revolution. The landslide was temporary; “Sweeping landslides of the sort we experienced this month are not unusual but rather a now commonplace feature of the voters’ general annoyance with their elected leadership.”

I think this fickleness is as it ought to be. The elected official is not our new best friend. We have not placed our trust and hopes permanently in that person. Rather, we have temporarily hired someone to do a temporary job. We fully expect them to disappoint us. And rarely have they failed to do so.

Too many politicians think about doing as little as possible after the election. They decide the importance of their service outweighs any need to actually act. The melodrama of the election gives them some inflated sense of how much the tired, worn down voter actually cares.

Statewide candidates will run around proclaiming “Nebraska is Jones country,” proving only that narcissism and complete cluelessness can coexist. Nebraska is Nebraska. The voters don’t cede control to some two bit politician. The majority of them care so little they skip the election. The rest are merely annoyed about the pollution of political paraphernalia.

A typical voter, overheard at the polls yesterday, said “thank God it’s over. I hope they stop calling now.” This is how disgusted and annoyed someone who actually voted is. He’s thinking about politicians not with passion but with the same resignation one shows the dog who has torn up the couch.

I don’t mean to imply there is no hope or that it is a waste of all our time. There are things that need doing. The state budget needs to be fixed (again). The federal government could stand to actually have a budget once in a while. Those things can and might actually happen.

Four years ago, a state representative asked me “what happens if we make all the difficult decisions to fix this thing but then get voted out because it was difficult.” He was speaking of an $800 million budget problem. I said, “You will have the satisfaction of knowing that you, unlike most politicians, actually did something.” That was good enough for him.

The state and the country face a lot of problems. None of them will be resolved to the satisfaction of everyone. There is another election coming up in just two years. But that’s not an excuse to stall for two years. Elections are aberrations and useless if politicians simply hold office and play a waiting game.

You got elected this time but you can and will be thrown out. Why not use the time you have to actually do something? Remember, nobody likes you. They are merely renting you and fully prepared to be disappointed. Surprise them.

 

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