Charlie Arlinghaus

June 25, 2014

As originally published in the New Hampshire Union Leader

When did New Hampshire stop being New Hampshire? Whether one describes New Hampshire’s economy as mediocre, stagnant, or lackluster there is no denying that the latest economic news shows that we are no longer leading any economic charges but instead content to hope some crumbs drop from the tables of others. Once the envy of our neighbors, we may now be stuck as an economic backwater, another nondescript pea in the New England pod.

A terrific piece from Ben Leubsdorf in the Wall Street Journal this week speaks of the uneven recovery. The country as a whole has technically recovered: total jobs have come back to where they were prior to the recession. But recoveries are uneven with some winner states and many loser states.

That economic reality is familiar to Granite Staters. We count on it. New Hampshire is typically said to lead the region out of the recession. We mean that when jobs return, they return here first and we end up with a growing economy at the expense of more lackluster states. But that’s the old reality.

Today, we are comfortably mediocre. Five years after the recession technically ended, jobs have finally reached their pre-recession level again. But in 17 winner states, jobs are actually much higher while in 33 mediocre and stagnant states jobs are still down from their peak. New Hampshire is a loser – not an aggressive job exporter like Michigan but lackluster and definitely in the loser category.

States like Texas are scooping up jobs – Texas didn’t just recover, they’re up about 900,000 jobs higher than their pre-recession peak. They recovered strongly at the expense of states like Michigan (down 566,000), Ohio (down 155,000), and New Jersey (down 157,000). This represents a long term transfer of people, energy, and economic wealth from loser states to winner states.

This competitive dynamic used to be our friend. Post-recession expansions grew New Hampshire and confirmed our economic strength and power. Now, we don’t even outpace our mediocre neighbors. New England as a whole is about even but the power has shifted in our region. Massachusetts is now up about 80,000 jobs from its pre-recession peak while the other five New England states are all still below  their pre-recession peaks by a combined total of about 80,000 jobs.

What a weird and wacky world we live in when Massachusetts thrives at our expense.

I think part of the problem is that New Hampshire has become complacent. It is part of the mythology of our state that we are competitive and that businesses will naturally want to come here. If we think that – and most policymakers do – real competition passes us by.

There are two paths to competitiveness. One is to try and buy friends: to use incentives and gimmicks to induce companies to locate here. This strategy is often pursued by the largest states. They create incentive packages which usually grant the new arrival special treatment or tax relief that is not available to other companies who have the misfortune to actually like our state and locate without the bribe. The theory is that special incentives will lead to so many jobs it is worth the cost and disparity.

We read about this every time an auto manufacturer wants to build a new plant and Georgia and North Carolina start falling all over themselves to shower BMW or whichever company with state largesse.

New Hampshire can not and should not compete this way. First, we can’t afford it. The largest state economies are 20 and 30 times our size. If we enter a bidding war, we’ll lose. In addition, such special treatment violates a long standing tradition of fair play – we treat all taxpayers the same regardless of whether the current government is particularly fond of them.

We have to acknowledge that we are a very tiny piece of the American economy. Companies must compete in giant markets like California and Texas. Even Massachusetts is the 12th largest state economy. Tiny little New Hampshire may be twice as large as Vermont (the nation’s tiniest economy) but we are less than one-half of 1% of the country’s economy. No one has to be here.

We are increasingly uncompetitive in multiple areas of tax policy (notably three categories of business taxation) with high health, labor, and energy costs. There are worse states but our goal shouldn’t be “not as bad as some.” No policy is half as important as admitting our failings and trying to again become the growth engine we were in the 1980s and 1990s.

Charlie Arlinghaus

June 18, 2014

As originally published in the New Hampshire Union Leader

The return of warm weather to our state seems the right time for me to wax poetic about Canada again. To the chagrin of many, I hold up “the true North proud and free” as an example to be emulated south of the border. Bear with me and see if you don’t agree that the United States should be more like Canada.

Let me begin by saying that I don’t suggest for a minute that everything Canadian is superior to everything American. Those of you familiar with the English language will understand that. But invariably on this topic some yahoo writes me a long diatribe about “socialized medicine” despite my disclaimer about not preferring their health model. In that yahoo’s defense, this column will run a good 750 words and it’s a lot to expect a reader to make it through all of them.

So let’s begin with the disclaimer: I’m not a fan of the Canadian healthcare decisions undertaken over the last 60 years. I suggest merely that we emulate their sense of fiscal responsibility. Also, I like curling. I want to further suggest that if the Canadians can accomplish restraint, we could too if only the will existed here (which it plainly does not).

Canada in the mid-1990s was a fiscal basket case on the same order as the current United States. Debt had risen to 70% of GDP which was considered intolerable (by contrast most denizens of our Congress are unworried about debt and quite content to let it skyrocket). The Liberal Party, a center-left party and long the dominant party in Canada, decided to do something about it.

They decided to stop spending money they didn’t have. In the two years from 95-97 they actually cut spending. This is weird, goofy, and unheard of in Washington but Canadian spending declined by 5%  — they actually spent fewer dollars not an adjustment to some potential growth rate.

Coupled with the cuts, restrained growth over the next few years meant spending declined as a percentage of the economy — from 53% to 39% in about a decade. As a result, their burdensome debt shrunk from a scary 70% of the economy to a more manageable 32%.

American politicians believe that what the Canadians did is not actually possible. I think some of them don’t understand that Canada is a real country and not a made up kingdom like Ruritania.

Interestingly, our Congress has done something of a reverse Canada. After bottoming out at 31% of GDP in 2001 (when the budget was last balanced), The US public debt has skyrocketed to about 74% of the economy with total debt now over 100% (which I don’t need to tell you is insane).

Worse, current congressional plans are to try and make things as bad as possible. Rather than be alarmed by total debt over 100% of our economy (think the happy thought: hey, we’re like Greece), we’re going to double down.

If nothing changes, we will spend $48.2 trillion over 10 years and add another $7.6 trillion to our debt. But why can’t we be more like Canada?

Canada had to impose an actual spending cut to reach discipline. We just have to let up on the throttle. Current plans for the next decade would increase spending by 5.3% each year – from $3,523 billion to $5,920 billion. If we still increased spending each and every year but merely reduced the rate to 3.4% we would balance the budget in 10 years.

This sort of modest restraint is referred to in Washington as draconian spending cuts or an austerity program. Yet, does anyone really believe that asking government to merely slow its pace a bit is draconian?

Opponents object that “austerity” is bad for the economy and will inhibit growth. While that may be true of massive cuts of 20 and 30%, in Canada even a 5% reduction was coupled with 3.2% GDP growth. In the US, we’re not talking about cuts or even a freeze but rather significant growth of 3.4% each year. It’s hard to believe that 5% spending growth is great but 3% growth is cataclysmic.

What’s more likely is that politicians who don’t have to balance a budget today don’t want to make decisions. It is much easier to turn on the auto pilot rather than having to say no once in a while. I don’t think Canadian politicians of the 1990s were any more noble than the lot we’re stuck with but they chose to act like adults. I wish we could be more Canadian.

Charlie Arlinghaus

May 28, 2014

As originally published in the New Hampshire Union Leader

The most annoying and disheartening time of the legislative year is upon us – the time when transparency and honest debate are sacrificed on the altar of hidden agendas in pursuit of that elusive legislative pot of gold, “a deal.” Committees of conference are legislative mini-summits where the romanticized version of a smoke filled room creates comparisons to sausage making that do a distinct dishonor the noble smoked meats.

In a legislature of two houses – a Senate and a House of Representatives – disagreements are common. This year, with opposite parties controlling each body, disagreements are plentiful.

When one body merely rejects the bill that passed the other, nothing happens. Yet, quite often, each body will pass a different version of the same bill. In such cases, negotiators are appointed and a committee of conference meets to find common ground.

Finding areas of agreement seems straightforward enough but the all too human machinations in pursuit of “a deal” are what gave rise to the legislative sausage making metaphor.

That metaphor’s history is a bit like the process itself. In 1869, John Godfrey Saxe found legislative machinations as convoluted then as now and wrote “Laws, like sausages, cease to inspire respect in proportion as we know how they are made.”

The quote was memorable but Mr. Saxe was not, so one textbook writer in the 1930s started his description of legislative shenanigans with, “I think it was Bismarck who said….” For decades no one bothered to check the writer’s uncertainty and so we incorrectly attribute the thought to Germany’s Iron Chancellor Otto von Bismarck.

Much of the legislative process is transparent and merely involves two sides disagreeing. The slightly distasteful committee of conference process has rules but so many of them aren’t what they seem.

In theory, the two sides negotiate and all must agree – this helps prevent a small clique from seizing power from a majority. In practice, the Senate President or Speaker can and does remove and replace anyone not toeing the line.

In theory, everything agreed to should have been part of one bill or the other – after all we are supposedly just ironing out details of difference between similar bills. But the rules are slightly different. They allow anything in the final product that was is simply the subject of either version. If the subject is interpreted broadly – and it is when useful – this allows pretty near anything to come back to life.

There are roughly eighty conference committees hashing out agreements. That doesn’t mean there are eighty disagreements. Sometimes, the building blocks of deals are tacked on to other bills at the end of the regular session to preserve negotiating power.

For example, an innocuous bill to create a voluntary fund for robotics education had a liquor sample bill tacked on the end of it. The message is “we don’t disagree but if you want this passed, you have to give us something in return.”

Small potatoes horse trading, to mix a few metaphors, isn’t of much concern to anyone. But on large complex bills new ideas can be introduced that no one has had a chance to consider, that have had no public hearing, and yet need to be voted on almost immediately by legislators who have had little or no chance to consider them.

At the end of the Great War, Woodrow Wilson called for “Open covenants of peace, openly arrived at, after which there shall be no private understandings of any kind but diplomacy shall proceed always frankly and in the public view.” The same frustration might be expressed about legislators.

Too often, the open public meeting is a sham. Very brief, uninformative, and highly choreographed meetings are a theatrical production. The meetings are rare and short while the recesses are long and hidden. In fact, agreements are arrived at behind closed doors during what is ostensibly a recess. Diplomacy occurs out of the public view and we’re never quite sure what happened.

In Wilson’s time, professional diplomats relished the intrigue and gamesmanship of old fashioned secret diplomacy. Today, a subset of legislators and staff romanticize the “sausage-making.” Playing the game and the art of the deal create a sense of separation from the rest of us who aren’t “in the know.”

Wilson may have been naïve about international diplomacy but we all have cause to be a little wary of backroom deals. I like knowing what’s in my sausage.

Charlie Arlinghaus

February 5, 2014

As originally published in the New Hampshire Union Leader

Proposals at the state and national level to increase the minimum wage will hurt the job market, decrease the number of jobs available, and hurt the people advocates are trying to help. Specifically, the higher wage will make it more expensive to hire entry level workers and reduce opportunities for lower skill workers trying to build job experience.

The current federal and state minimum wage is $7.25 per hour. It is a minimum that affects few employees. Nationally, only 2.7% of all wage and salary workers earn the minimum or less (1.2% of workers are at the minimum while 1.5% have jobs that can legally pay less than the minimum like golf caddies, outside sales, or farm labor).

Economists are paraded about by both sides to advocate for and against and to discuss the effects. A 2007 National Bureau of Economic Research paper reviewing the literature found “a lack of consensus about the overall effects on low-wage employment.” But lest you think the research is completely up in the air, the authors noted “the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups.”

This evidence is not hard to understand. The minimum wage is not a wage people expect to make for the rest of their lives. It is not a permanent wage. In fact, two-thirds of minimum wage workers earn a raise within a year, the majority of them seeing wages increase by 24% or more.

Two-thirds of minimum wage workers are part-time and the majority are young, under the age of 25. In fact, most of us started in a minimum wage job. Data shows 55% of American workers started at or near the minimum wage. Your own experience is probably similar. My early jobs were below minimum age and at the minimum wage.

Supporters suggest that an increase in the minimum would not reduce or affect the jobs available. Common sense, and the preponderance of research, suggests this isn’t true.

We would all agree that doubling or tripling the minimum wage would naturally reduce the number of jobs available. A company that can afford a small number of employees at $7.25 will have fewer employees for fewer hours if we make them pay $15 or $21. Companies, already reluctant to add jobs because of economic uncertainty, will add fewer jobs, cut back hours.

Mandated minimums can be thought of as the price of hiring. If you make the price for an employer of hiring labor higher, he will hire less of it than he otherwise would. A smaller increase will have a smaller effect but it will have an effect.

The people most affected are people entering the job market. For most of us, our first entry into the market is through a minimum wage job – that first job through which we gain the valuable experience of having a job, getting a start doing something, being supervised, working specific hours at someone else’s direction. That entry is invaluable.

Raising the price of entry means there will be fewer opportunities. Remember that 21% of teenagers paid hourly earn the minimum wage but only 3% of hourly workers 25 and over. Obviously, the minimum wage is best thought of, for most workers, as the entry gate into the labor market.

Thought of this way, raising the minimum wage hurts the people advocates most want to help. We want more workers having an opportunity to enter the market and start building the experience needed to get their second job. We want more workers to start the process of having a beginning job, moving to an intermediate job, and then to a more advanced job.

Increasing the price of entry level jobs will reduce the number of them. For a worker whose job isn’t downsized, he or she will see more money initially. But for many more workers and potential workers their potential position won’t be created, their hours reduced, or their jobs eliminated.

At the end of the day, New Hampshire needs more jobs not fewer. Entry-level workers need greater opportunities. Raising the minimum wage will satisfy politicians who don’t understand economics but will hurt the very people they are pretending to help.

 

Charlie Arlinghaus

January 31, 2014

As originally published in the New Hampshire Union Leader

New Hampshire is complacent. As a state we seem to have accepted stagnation as a way of life and are just trying to figure out how to adapt to it. The vision of New Hampshire as an island of prosperity is receding as policymakers increasingly decide they must adopt rather than fight economic mediocrity.

In the not too distant past, New Hampshire was a beacon of economic growth and opportunity. We spent decades as one of the fastest growing states in the country. More people and more jobs went hand in hand.

Part of the growth came from Boston sprawl, high cost of housing in North Shore suburbs, and the spread of the exurbs across the state line. But much of the growth and in-migration came from explosive job growth. The number of people employed in New Hampshire grew by 30% in the 1980s and another 17% in the 1990s.

We experienced recessions but we responded to them by assuming growth was still possible. The recession of the early 1980s was in many ways as bad as the most recent recession. New Hampshire’s budget crisis at the time was just as bad as it was recently.

But we were still a people at the time who thought of New Hampshire as different and competitive. Policy leaders decided job growth was essential. Our Business Profits Tax, then only a dozen years old had gotten out f hand and was the among the highest in the country. Then-governor John Sununu, himself a tax refugee from Massachusetts, signed a gradual reduction of the BPT. It was cut three times reducing the rate by 16%.

State economies don’t run counter to economic tides but they can slow them or enhance them. We led other states out of the recession and jobs grew by 25% in five years. There was a significant migration into the state, a large business tax cut, and a large job increase. Different policymakers will assign different factors as the cause. I suspect that the economy was ready to grow, the tax cuts sent a strong message to businesses pre-disposed to like New Hampshire’s then-reputation anyway and the jobs led to the migration.

The next recession in the early 1990s was in many ways the worst recession this state has ever faced. Jobs had actually declined three years in a row. The new governor, Steve Merrill, talked about jobs almost exclusively. He had a jobs plan and pursued significant workers compensation reform. But the centerpiece of his plan was to send a message about business taxes.

Merrill’s business tax reform was revenue neutral but coupled a new very small Business Enterprise Tax (one-quarter of 1%) with two pro-growth cuts in the BPT, a 12.5% rate decrease. Again New Hampshire took advantage of the coming recovery and led the region out of its worst recession. The next five years saw a 12% increase in jobs, the last time the state has seen job growth anywhere close to that rate.

Again, cutting the key business growth oriented tax led to the jobs being added landing disproportionately in New Hampshire.

Since that time, we’ve been in stagnation. Over the last thirteen years, jobs have risen a bit and fallen a bit but have averaged annual growth of just three-tenths of 1%. Our lost decade is now thirteen years and counting.

Some will blame the stagnation on a lack of migration into New Hampshire but I suspect that is a symptom rather than a cause.

It is also worth noting that at the beginning of this stagnation the state increased the Business Profits Tax twice, a 21.4% rate increase. Policymakers also tripled the smaller Business Enterprise Tax which may have had a lesser effect on decision making but certainly sent a psychological message.

Sometimes the stagnation of our last years is presented as a new reality which must be accepted and processed. But the truth is New Hampshire is still a nimble state and can easily begin adopting pro-growth initiatives.

Economic stagnation is not a new reality. It is the most important problem that no one is doing anything about.

Thirty years ago and twenty years ago, policy leaders made a job-attracting climate a priority and jobs and people followed. Fifteen years ago, we reversed course and did almost exactly the opposite. It had almost exactly the opposite effect.

Charlie Arlinghaus

March 26, 2014

As originally published in the New Hampshire Union Leader

The great economic principle of our time comes not from an economist or a banker but from the great Mr. Micawber, a somewhat comic character created by Charles Dickens.  Wilkins Micawber had figured out the central organizing fact of modern life when he suggested to young David Copperfield, “Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the God of day goes down upon the weary scene, and  – and in short you are for ever floored.”

The importance of spending just sixpence less than you earn is of course just as true for the individual as it is for lawmakers. Sadly, neither individuals nor lawmakers have any intention of listening to Mr. Micawber. I don’t think they object to Mr. Micawber’s use of an archaic, non-decimal monetary system nor do they have objection to the fundamental wisdom within.

Instead, the modern citizen and the modern lawmaker object for the same reason – it’s inconvenient. It is far easier for each of us, enabled by the modern temptation of easy credit, to spend more than we know we should. Certainly many of us will quite rationally buy a house or a car on time. It becomes simple to extend that rationalization of capital expenses to a giant television, a vacation, or even a shirt and a pair of socks. We shouldn’t buy the socks on time but we can’t help ourselves.

Government is the same way. It’s like a small child on a grand scale but without any of the counterbalances and disciplines even the least responsible child is subject to. On the contrary, the incentive structure in modern political life rewards the politician for dismissing Mr. Micawber as an amusing but irrelevant artifact of another time. Instead we reward them for acting like small children.

The classic example of bad behavior is debt. There is nothing inherently wrong with government debt. Governments like the rest of us might sometimes buy a thing or two over time. At the state level, we have an entire separate budget for such things. We pay for some office building, large highway projects like bridges, and other capital expenditures over a 20 year debt cycle. We make payments from the regular budget to pay for the loans in the capital budget.

But even our generally restrained locals can’t resist adding on. In economic downturns we pile on. Remember when we took out a loan to pay for debt payments? Or we borrowed the money to pay for things we used to pay out of the operating budget? This was simply an attempt to avoid Mr. Micawber’s truth.

He risked debtor’s prison if he overspent. We just add debt to be paid off at a future date. I suppose that we avoid his predicted result of misery by sending that misery forward to our children and grandchildren. In bad economic times, debt even in New Hampshire ratchets up. But it is in fact a ratchet. It never comes back down.  Flat debt for ten years is followed by a four year explosion of 43% which is then followed by a flat period. We don’t slowly bring debt back down, we create a new normal.

The nightmare in Washington DC is often described and perhaps too depressing to mention here. I think we best not even mention Mr. Micawber to them lest they try to tax him or name a bridge after him.

But  we should blame ourselves not the poor feeble minded politicians. They merely behave following our example and our incentives. We reward them by getting excited when they do something big and bold – a new bridge or a new program. Politicians talk during elections about all of our money they spent because it makes us happy.  No one wants to talk about the borrowing that produced the funny money nor does anyone ask a question about the debt we’re passing to our grandchildren (our kids are tapped out at this point).

Would you even listen if a politician told you about realigning priorities so we can do maintenance on the assets we currently have? Do you care about the Micawberian analysis? No, you want a nice shiny new bridge, you don’t want to pay for upkeep on the old one. Paving is boring, rainy day funds don’t earn votes. We can’t pay to keep up the things we already have but let’s build new ones anyway.

Wilkins Micawber first emerged in print in 1849. He is long gone and long forgotten. That’s a shame.

 

March 2014

Josh Elliott-Traficante

Household Survey:

  • Unemployment rolls increased 233,000
  • Unemployment rate increased slightly to 6.7%, from 6.6% in January
  • Those “not in the labor force” fell by 93,000
  • Participation Rate held steady at 63.0%

Establishment Survey:

  • 175,000 payroll jobs were added
  • 162,000 were private sector positions
  • Small growth seen across most industries, with a few exceptions
    • Food Service and Temp jobs saw large gains
    • Biggest losses seen among Couriers, Movie/Record Production, and Retail Sales at electronics stores.

So, what does this all mean? Oddly enough, if a full-fledged recovery were underway, the unemployment rate would actually start to increase. Given the anemic job growth since the recession officially ‘ended’, many job seekers gave up looking for work entirely and dropped out of the labor force. The current method of calculating the unemployment does not count those people as unemployed, leaving roughly 1,500,000 million people out of the equation.

As these people feel the hiring market is getting better, they will re-enter the pool and start looking for work again. Once they start looking, they are considered ‘unemployed’ again, driving the unemployment rate up. While the critical Participation Rate held steady this month, (an indicator of people leaving or entering the workforce) it is still fluctuating at 36 year lows.

The upshot is that while it is not bad news in the sense that jobs situation is getting worse; it also does not seem to be getting better. However the leveling off of those ‘not in the labor force’ and the gradual decline of “those not in the labor force, but would like a job” are encouraging signs.

Turning to the Establishment Survey, 175,000 new jobs is a decent number, but not a great one, though it is still ahead of estimate. However, at that rate of job creation, it would take roughly 12 years to get back to full employment.

It is encouraging that the industries experiencing losses are very narrow (say as opposed to construction or durable goods), which indicates problems within the specific industry rather than the economy as a whole.

Looking at the 175,000 new jobs, it is troubling that the 45,600 of them were either at Temp Agencies, or in the Food Service industry. Temp Agency hiring is indicative that companies need capacity, but are unwilling to bring on full time employees permanently, usually due to uncertainty about future economic growth. Food Service on the other hand, tend to be lower paying, non-benefit providing jobs.

Charlie Arlinghaus

December 18, 2013

As originally published in the New Hampshire Union Leader

This week, New Hampshire achieved the dubious distinction of being put of the “Judicial Hellholes” watch list. New Hampshire’s economic competitiveness depends on more than taxes and on being something slightly more compelling than “better than New Jersey.”

The phrase New Hampshire Advantage is bandied about so often that it has become a foggy description for politicians to use as a generic aspiration. In reality, the phrase is meant to acknowledge that economic development is a contest for jobs in which states seek a competitive advantage over other states.

New Hampshire’s has long enjoyed a tax advantage over other states. But our advantages go beyond that. There is a general perception – and perceptions matter a great deal in the competition for jobs – that New Hampshire is not overregulated and puts up fewer obstacles to business operation than other states.

In recent years, business look more and more to some other measures as a sign of whether a state is a good location. Worrisome trends don’t threaten all at once. Instead they slowly eat away at your advantage and you gain fewer jobs than you might have. The difference between slow growth and strong  growth is never dramatic. Rather it’s cumulative over time.

The American Tort Reform Association this week released its annual list of judicial hellholes. Fortunately, New Hampshire doesn’t join the likes of West Virginia in this avoid-at-all-costs group. However, depressingly, we’ve been added the watch list as a sign that things aren’t going well and people who care about this things may want to tread cautiously with regard to New Hampshire.

The concern for policymakers is that the phrase people-who-care-about-these-things describes a demographic that includes not a few random cranks but instead most business leaders and economic development professionals. When your reputation gets out of your control, you become, well, New Jersey.

Consider that New Hampshire, despite being on the ATRA watch list still manages a slightly better than mediocre rating from the most important legal climate report – The U.S. Chamber of Commerce’s Legal Climate Rankings. New Hampshire is 21st in the country. Unfortunately, over the last five years we’ve slipped gradually from 6th in the country.

Trends mater and ours isn’t good. We’ve fallen behind Delaware and Maine and Vermont and Massachusetts and New York. The good news for us: we still get to claim “better than New Jersey” and hold that basket case out as a cautionary tale.

New Jersey is 32nd in the nation and an example for us of what might happen if we aren’t careful. While we hit the watch list this year, New Jersey and Atlantic City in particular regularly shows up of the Judicial Hellhole poster list. More important, their status hurts jobs.

In New Hampshire, according to the National Center for State Courts we have about 4000 civil cases per 100,000 people. New Jersey almost triples that at 11,000. The impact of that litigation frenzy is predictable.

At one time, New Jersey was a very competitive state. Their tax and business climate attracted jobs from their neighbors like New Hampshire has done in recent decades. Today, the last vestige of that is low gas prices.

At one time, the pharmaceutical was centered in New Jersey making it the envy of states in the region and around the country. But litigation is at the core of that industry fleeing. Although 20% of all Pharma jobs used to be in New Jersey, that number has been declining for years.

There is a clear market signal that indicates why. Over 90% of all tort plaintiffs in pharmaceutical cases are from out of state. Plaintiffs who are venue shopping and then decide to choose your state is a message to companies to get out and getting out they’ve been doing. New Jersey isn’t doing much about it except losing jobs that have to go somewhere.

Historically, New Hampshire looks for just this sort of opportunity. Something that makes business flee a state that can’t get its act together should be food for our development. Unfortunately, we’re moving in the wrong direction. Sliding from 6th to 21st sends almost as bad a market signal as New Jersey and encourages companies to seek other pastures.

Any economic development plan can look to New Jersey as a wonderful example – of what not to do. But we should do more. It’s all well and good to be “better than New Jersey” but sometimes better than a pathetic basket case isn’t quite enough.

Josh Elliott-Traficante

December 19, 2013

The aerospace giant Boeing is shopping around for a new location to produce one of its new wide body jets, the 777X. Rather than a design a new plane from scratch, Boeing has opted to reinvent and update its popular 777 model; hence the ‘X’. The company is running into trouble with its unions at its major plant in Everett, Washington, over a host of issues but largely over a switch from a traditional pension to a 401(k) style plan for retirement.

These difficulties have led the company to start looking at other states and locations to either build major components or the entire plane. It has already sent out requests for proposals to between 12 and 15 states. Included is a list of what Boeing is looking for in a location, such as an airport with a 9,000 foot runway, as well as easy road, highway, rail, and port access. These are requirements that one would expect most large manufacturing companies to look for when looking to relocate.

Where it gets interesting is what Boeing expects each state to offer as sweeteners (read bribes) to get the 777X plant. Among other ‘desired incentives’ (again, read bribes) is a “(s)ite and facilities at no or very low cost and infrastructure improvements provided by the location.” The company anticipates that the cost of upgrading existing facilities and machinery alone to run about $10 billion. Basically Boeing wants a state to pay all, or most of the costs for building and equipping a new production line.

As if that were not enough, once built, the company also wants preferential tax treatment with all relevant tax liabilities being “significantly reduced.”

Over the top as these requests are, states are actually submitting proposals. Washington State recently passed a package consisting of $8.7 billion in tax breaks for Boeing over 16 years; Missouri is offering $1.7 billion. Due to the confidential nature, most of the dollar figures for proposals from the other states responding is largely unknown.

While it is understandable that many states would be eager to entice a major manufacturer to relocate, these onetime perks not only often become permanent, but it encourages companies to come back asking for more.

Take Washington State for example, Boeing already has a massive facility there and the state is offering nearly $9 billion just for the company to stay put. Illinois in particular is littered with examples. After an income tax hike in 2011, Caterpillar, Sears, and John Deere all announced they were considering moving their headquarters to states with a more favorable tax environment. In response, Illinois passed nearly $300 million in incentives for the companies to remain in the state.

These types of policies not only encourages other companies to do the same but emboldens those that did get breaks to ask for more the next time around. If you give a mouse a cookie….

Beyond the sticker shock and poor policy behind these tax payer financed incentives is an issue of fairness. By offering incentives, the state picks winners and losers in the market, with the large and well-connected companies getting the reward. The result: a tax and regulatory system that favors a select group of companies, chosen by the government. Smaller companies on the other hand, are not only left without support but have to pay higher taxes and abide by stricter regulations as well. One of the key tenants of a free market is that there is one set of rules that all players abide by.

Thankfully, New Hampshire has, for the most part, resisted the temptation of offering these bribes to relocate here, instead relying on the New Hampshire Advantage to encourage companies to set up shop.

Are there changes that states can make to improve the state’s business climate to not only keep existing businesses but draw new ones as well? Absolutely. Low taxes, educated workforces, low energy prices, and common sense regulatory burdens are just a few of the qualities that companies look for when choosing where to open a new facility.

These types of reforms help all of the businesses in the state, not just the chosen few. Just say no to crony capitalism.

Grant D. Bosse

As Originally Published in the Concord Monitor

I don’t think I would have done well in 1621. I haven’t been hiking or camping in years. My shooting skills are limited to paper silhouettes. And the only fires I’ve lit recently have been in a barbecue grill or a wood pellet stove. I don’t even want to think about going through the day without hot and cold running water.

The Pilgrims of Plymouth who survived two months at sea and a brutal New England winter celebrated their first harvest in the autumn of 1621, inviting the nearby Wampanoag tribe for a feast of thanksgiving. The Pilgrims likely went out “fowling” for local ducks, while the Wampanoag brought several deer. The meals would have likely included squash, onions, cabbage, shellfish and a mashed corn porridge known as samp. Following the feast, the Detroit Lions began an annual tradition by losing by three touchdowns.

In a letter back to England, future colonial governor Edward Winslow described the abundance of the New World:

“For fish and fowl, we have great abundance. Fresh cod in the summer is but coarse meat with us. Our bay is full of lobsters all the summer, and affords a variety of other fish. In September we can take a hogshead of eels in a night, with small labor, and can dig them out of their beds all the winter. We have mussels and others at our doors. Oysters we have none near, but we can have them brought by the Indians when we will. All the springtime the earth sends forth naturally very good salad herbs. Here are grapes, white and red, and very sweet and strong also; strawberries, gooseberries, raspberries, etc.; plums of three sorts, white, black, and red, being almost as good as a damson; abundance of roses, white, red and damask; single, but very sweet indeed.”

Winslow lost his wife over the first winter. He soon married Susannah White, who had just been widowed as well. Yet his letter proclaims the bounty and opportunity of his new home, and gives advice for the “industrious men” who would join them.

We laud the resilience of this small band of religious refugees, seeking freedom of worship across the ocean from civilization.

Yet we should not glorify the harsh conditions that they survived. Self-sufficiency is a path to abject poverty. I’m thankful I can rely on strangers for my daily needs, and don’t have to worry about where I’m getting my food, water and firewood as the days become shorter and the nights colder.

I have no idea who installed the plumbing in my house, or who designed the two-in-one showerhead that helps clear the cobwebs out of my brain each morning. No one at Crest or Oral B went to work out of altruistic concern for my dental hygiene. I didn’t promise anyone I’d go get a coffee and a bagel this morning, but both were conveniently available on command.

We owe our current prosperity, literally unthinkable in 1621, not to self-sufficiency or charity, but through the self-interested actions of people we’ll never meet. The tremendous efficiencies unleashed through trade and specialization are the true American cornucopia.

Living standards are higher for everyone, and so are our standards for what is acceptable.

Fortunately, the wealth created through the free market affords us the opportunity to help those less fortunate. Capitalism is not incompatible with charity, or with safety-net programs funded through government taxation. But it is voluntary private action that creates the resources we would like to redirect to the poor.

The lesson I take from that first Thanksgiving was the cooperation between two very different tribes. The Pilgrims and the Wampanoag helped each other survive, enriching both groups. We have fallen tragically short of that standard so often in the past 400 years, and not only with our treatment of Native American tribes. Our mercantile shortsightedness has led to wars, and slowed the growth in our prosperity.

Civilizations advanced before the spread of economic and political freedom, and we’ll keep moving forward even with an oversized government stifling innovation. But the pace of progress quickens only through trade. Free exchange of goods, services, and most importantly ideas, drives economic expansion. The self-organizing economy vastly outperforms the command economy, as it relies of the diffuse talent and drive of millions, rather than the limited knowledge of a few well-meaning elites. And that’s before we account for the inevitable corruption of central planning.

The Pilgrims would have starved without trade. When I rail against government interference in markets, whether it’s through excessive regulation, protectionism or favoritism toward unions and incumbents firms, it’s not really because I object to the short-term costs of these bad policies. And it’s not because of the corporate conspiracy theories that obsess the modern left. It’s because I don’t want to sacrifice the invisible possibilities of free market progress.

Where we’ll be in 100, or 400 years, is as incomprehensible to me as it would be for Edward Winslow walking into Market Basket. I’m thankful to be living in his unimaginable future, and for what’s next.

If you’ll excuse me, I have to plant some rye seeds if I want to have any bread next spring. Happy Thanksgiving.

– See more at: http://newhampshire.watchdog.org/12292/thankful-to-be-living-in-the-future/#sthash.q9Cgl5dT.dpuf