New Hampshire Must Stop Living in the Past

,

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.

/by

Politicians in Concord Could Learn a Lot From Saturn

,

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.

/1 Comment/by

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.

/by

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.

/by

Stagnation Needn’t Be Our Destiny

, ,

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.

/by

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.

/by

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.

 

/by

Don’t do Something, Just Get Out of The Way

, ,

October 22, 2014

As originally published in the New Hampshire Union Leader

To help create jobs, politicians regular have to decide whether to do something or get out of the way. New Hampshire can do more by doing less and try to stay out of the way of people who know what they’re doing. We can’t compete with big states in an expensive and unfair bidding war to lure jobs to the state. Our best strategy is to create a climate in which job creators can flourish and avoid the managers looking for handouts and subsidies.

Regularly we read about some large auto company or other concern who gets states to bid millions of dollars in handouts of money and soon-to-be “forgiven” loans – money those politicians take from other taxpayers in their state in the hope of landing some high profile press release factory.

New Hampshire’s history is to avoid such politically driven games. We don’t enter bidding wars with money taken from other taxpayers to transfer to a chosen few.

The state’s long standing philosophy was summed up quite well by one of the government’s most senior economic development professionals. Michael Bergeron of the state’s Division of Economic Development talked to Sarah Palermo of the Concord Monitor about jobs that moved from Concord to Connecticut.

Connecticut had offered a million dollars of “loan forgiveness” (which sounds better than a cash handout which is what it really is) and New Hampshire had no similar program of cash handouts.

Bergeron said “a lot of companies will shop around to find the best deal. Some states will give away the bank. The law of physics says the money comes from somewhere, and it’s the taxpayers.”

This lesson is often forgotten when people think “the government should do more.” Any subsidies that we hand out to lure businesses to the state are paid for with dollars taken from other businesses – businesses already here and creating jobs, employment, revenue, and economic activity. In essence we would be taxing existing business to transfer their money to the relocating business. We would penalize a company for being here already and being a good corporate citizen.

Bergeron went on to summarize our less controlling philosophy: “instead of taking money away from you and giving some of it back some of the time, why don’t you keep it and use it as you see fit for your company.”

Without question, New Hampshire’s strategy makes us unable to compete for those companies that demand handouts before they ever expand. Yet, no one business development plan will attract 100% of all companies. We choose not to try and pursue those companies who demand greater and more expensive handouts. That allows us, however, to compete for those companies that have a philosophy more suited to our own.

Many companies are not interested in the gamesmanship of new programs. Instead they want a climate like the one Bergeron describes. They want a stable climate where government is not constantly picking winners and losers. They don’t want to compete to be this year’s favorite of the current crop of government planners. Instead they want to run a business in the way think makes most sense, the way that provides the greatest number of jobs and return on investment.

In Bergeron’s terms, they aren’t seeking to pay into a kitty and try and get the government to pick them as this week’s winner. They want to keep the money and use it as they see fit for their companies.

This is New Hampshire’s traditional philosophy. We compete on climate not unusual events.

Unfortunately, our climate needs some work. Our business taxes are the highest in the country. In an historical oddity that would have seemed impossible years ago, our Business Profits Tax is higher than even Massachusetts. That and a series of smaller taxes must become more competitive.

If we aren’t competing through government handouts – and we shouldn’t be – we have to do everything we can to create a very competitive environment not just kind of competitive.

Activist politicians often speak of “investing” in this program or that. But lowering our highest in the region tax rates is a better investment. We don’t rely on hoping that government planners have managed to see the right trends. We get out of the way and let entrepreneurs risk their own capital to fail and succeed.

Our government’s best action is to do less and get out of the way more.

 

/by

How the Cult of Celebrity Destroys Our Political Culture

Charlie Arlinghaus

October 29, 2014

As originally published in the New Hampshire Union Leader

Our political culture is being destroyed by a cult of celebrity. Slowly but surely any meaningful discussion of ideas is being crowded out by personalities and the occasional meaningless poll number. Campaigns will never really become a battle of philosophies and spreadsheet but our state’s obsession with famous figures ensures that politics and policy resembles Entertainment Tonight more than the Nightly Business Report.

New Hampshire has the misfortune to be home to the first Presidential Primary. It has unfortunately turned us into political creatures who worship political celebrity, preferring the allure and supposed glamour of nationally famous politicians (at least famous to cable news groupies) to any real attempt to get to know local politicians and understand what new ideas they would each inflict on us.

The activist base of both parties is fascinated by political celebrity. Hold a candidate forum and a handful of people or perhaps a dozen will show up to hear those who would represent us tell us what they stand for. On the other hand, Bill Clinton shows up and hordes turn out to hear him. Technically, he’s there to push the politicians seeking office but crowds in this presidential primary state are reliving the supposed good old days.

That same fascination and political star gazing extends to much of the political media. Clinton explaining a federal candidate’s positions would be meaningful but it’s disappointing to hear reporters gushing “The Comeback Kid is Back in New Hampshire!” Clinton’s fame in the primary chronicles was that he turned a second place finish here into a quasi-victory by saying “New Hampshire, tonight, has made Bill Clinton the Comeback Kid.”

Arguably, those reporters who pride themselves on writing the first, rough draft of history should be interested – to at least some degree – in explaining the substance of that history. Perhaps we can forgive the star struck giddiness when faced with a famously charismatic former president of these United States. But surely that giddiness ought not to extend to every politician from away who happens to visit like Elizabeth Warren, Chris Christie, or George Pataki.

Charlie Perkins, long time New Hampshire journalist and former editor of this paper, commented recently “Every time a key NH political reporter covers a surrogate’s rally, one issue-focused story doesn’t get written or broadcast. Just say no.”

Perkins is quite correct and has put his finger on a problem with both modern campaigning and reporting. Celebrity has a tendency to crowd out substance. We cover extra personalities at the expense of message. For candidates, the coverage of the supposedly larger personality may offer reflected stature but it tends to overshadow any ability to deliver a campaign theme or message.

But, in an era of fewer and fewer outlets for coverage, the celebrity is an easier way to make it into the newspapers or onto the airwaves. Nonetheless, it comes with a price.

Watch the coverage lately. To be sure, the major candidates in each party are touring this restaurant or that pharmacy with a known national figure. Occasionally, they even hold an old fashioned rally with the celebrity. The coverage focuses on the fact of the appearance – “McCain and Havenstein greet voters in local restaurant.”  Or “Warren holds rally with Shaheen.”

Is this persuasive? It certainly shouldn’t be: one famous officeholder endorses the candidate of his or her own party. Who’s surprised here? On another level, it is particularly unhelpful to the would-be future officeholder.  The appearance overshadows your ability to tell me what you believe and how it differs from my other choice in the election. If all you want me to know is that you are a party member in good standing then I suppose this works. But I learn nothing much about what you want to do.

The celebrity is useful for the reporter too. Rather than sift through a hodge-podge of inarticulate prose to find the newsworthy proposal, the famous person provides drama and a story. Readers and listeners are, after all, not particularly interested in substance so why not give them the political version of Entertainment Tonight?

Perhaps no one is to blame.  The political celebrity has an ego boost from campaigning in the first presidential primary state. The candidate is happy to be covered and doesn’t have to get into too much detail.  Readers and watchers get an easy story with pretty pictures.  In the end, perhaps, we get what we deserve.

/by

The Importance of Dispersed Bits of Incomplete Knowledge

Charlie Arlinghaus

October 1, 2014

As originally published in the New Hampshire Union Leader

Politicians suffer from both too much information and not enough information at the same time. The result is that we need to ask them to have fewer ideas and try their best not to come up with any plans for the future. When one of them unveils his or her grand scheme, the best thing to do is ignore them or tell them to go away.

We are bombarded with information today perhaps because some pundit chose to try and call this era “the information age.” But we’ve always had too much information or perhaps I mean more information than we can process and synthesize. This is not an insight but one of the most important theses of Friedrich Hayek.

Hayek famously wrote about the problem of knowledge: “the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.”

Hayek’s discussion of “The Use of Knowledge in Society” is seen primarily as a critique of centralized planning and of the planned economy so widely accepted before he wrote in 1945. It is also a cautionary tale to those who would solve the problems of society and the public sphere.

Too much information is accessible to us – too much to fully research and fully assimilate. At the same time, no one person, committee, or commission can gather as much information as they need to construct the perfect scenario or scheme to fix the problem they hope to address. What they can do is admit that the dispersed bits of knowledge which all the separate individuals possess are what might solve the problem.

In the modern, overly jargonistic speech we might call this crowd sourcing. The unassembled multitude has greater collective wisdom than any one of us. No single person this side of Samuel Johnson could write an encyclopedia but the collected multitude could produce something like Wikipedia by each person contributing his own dispersed bit of knowledge.

It is similarly jargonistic to say “let the market fix this problem.” Yet what the market proponent really means is that no government official, however wise, is likely to come up with a solution on his own because the knowledge of which he must make use does not exist in a concentrated and integrated form. Better to use all the dispersed bits of information possessed by individuals and massaged, synthesized, and implemented – however imperfectly – in that uncontrolled but organic mechanism we think of as rational economic order.

Steve Jobs left the government advice they might well take. Jobs spoke eloquently about the imperfections of backward looking research: “you can’t just ask customers what they want and then give it to them. By the time you get it built, they’ll want something new.” Research is hampered by imperfect knowledge and the whims of the individual.

One of the best comments about a potential government controlled gas pipeline mirrors Jobs. Once the government has decided to finance, design, collect taxes or rates for, and build a pipeline, you can be sure that it’s no longer a good idea. The government’s best skill is not figuring out markets in a timely manner. Better to let others risk their capital and either fail or reap a reward.

Analysis of static systems is easier. It’s easier to figure out how to build a Model T more efficiently if you can presume that no one will ever want to move on to a Model A – which they will love even if they haven’t heard it yet.

Steve Jobs’s most famous comment about the imperfectability of research and knowledge is “people don’t know what they want until you show it to them.” Why, for example, would anyone ever want to turn their cell phone into a computer when they have a nicer one on their desktop? How much market could there possibly be for putting that computer on your lap? Or for some silly device that pretends to be a computer even though it’s the same size as your mousepad?

Government can and should get out of the way. I don’t mean that in a slighting way. It can figure out the ways in which it is not merely policing the playing field but has turned into an obstacle. Let’s allow the freer flow of dispersed bits of individual knowledge.

 

/by