Picking Winners and Losers in the Exchange

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Charlie Arlinghaus

September 26, 2013

As originally published in the New Hampshire Union Leader

The government-sponsored insurance plan offered through the Obamacare exchange has come under fire this week for leaving behind some of the hospitals in the state to provide a competitive advantage to the others. People naturally bristle at the government picking winners and losers through its plan, but the situation is more complicated than it first appeared.

Under the new federal health care law, every state must have an “exchange” to offer subsidized health insurance. The latest public relations spin would change the name of these exchanges to “marketplaces” but recent events have revealed they aren’t marketplaces and aren’t subject to market forces.

In New Hampshire, only one company signed up to offer the policies to be subsidized through the exchange. That company, Anthem, is the dominant player in the regular market, issuing 56 percent of policies.

Some had hoped for competition in the new federal exchange, but there would be none. To make matters worse, the new plan, with its additional mandates and required coverages, would manage to find affordability only by limiting access to certain providers. If your doctor or hospital is in, you’re happy. But nearly half of the hospitals (and the doctors they own — most doctor’s practices are owned by hospitals) are left behind.

Let’s start by saying that limited networks are a perfectly reasonable way to save some money. Providers are limited as a way to get them to accept below-market prices. Even so, rates will increase for most consumers. Anecdotally, one consumer I know will see his rates double even with none of his doctors in the plan any longer. On the other hand, he’ll get new coverage he doesn’t want, but still has to pay for.

We’re told by Anthem that despite the increased costs over your old plan, the new, limited plan has costs that are 25 percent lower — not lower than what they were but than what they would have otherwise been.

So Anthem chose to offer a plan with limited providers who have all agreed to accept a much lower payment than they would currently receive for private insurance. Currently, Medicaid pays roughly 1/3 of the price charged to regular consumers. The new plan would be closer to Medicaid than regular insurance.

Why would a hospital accept lower payments? First of all, because if the new health care law is unchanged, the exchange will occupy a greater and greater share of the insurance market each year. It’s easier to be in from the beginning than to be left behind and try to claw your way in from the outside. Second, by leaving so many providers behind, those favored by the government-sponsored plan will get a greater share. A hospital can make less money on each patient if it has more of them and its regional competitors start to wither away.

There would be much less consternation about this plan if there were an alternative in the exchange. If one competitor chose to offer a limited network, consumers with such an interest could instead move to a perhaps more expensive but less-limited network. But consumers have no such choice. There is one company offering plans that vary slightly by deductible size. There are no alternatives, no choices, no competition.

At first, public reports seemed to indicate that the hospital left behind had opted out themselves because they chose not to accept lower rates. Instead, we learn that the opposite is true. Hospitals perfectly willing to accept lower rates were nonetheless not allowed in.

Last weekend on Josh McElveen’s public affairs show on WMUR-TV, we saw the head of the hospital in Rochester (New Hampshire’s sixth-largest community) tell Anthem’s CEO he was willing to accept her rates and ask to be allowed onto the list. She pointedly ducked the question, but the answer is clearly no.

The hospitals cut out of the plan are left with two choices: hope the new system fails miserably and is repealed, or quietly go out of business. Consumers like you and me can look forward to higher insurance rates and only hope that our providers make it onto the government approved list.

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Wanted: grown-ups in N.H. politics

By Grant Bosse

September 22, 2013

As orginally published in the Concord Monitor

In my grouchier moments, I often complain about how the New Hampshire Legislature wastes so much time and energy debating do-nothing resolutions, like designating the Official State Vegetable or Official State Color. These bills often stem from requests from Cub Scouts or elementary school classes, and I bemoan the fact that fourth-graders are in charge at the State House.

I’m beginning to think fourth-graders would be an improvement.

The immaturity and irresponsibility that passes for politics today is staggering. I’ve got nothing against snarky comments and the occasional stunt to draw attention to an issue. But it’s gotten to the point that we just can’t take politicians seriously.

Take for instance the false outrage when health care expert Avik Roy proposed a low-cost, high-deductible plan as an alternative to expanding current Medicaid benefits to higher-income people. Roy presented the broad outlines of such a plan before the Commission to Study the Expansion of Medicaid Eligibility, which you would think would be interested in studying the costs and benefits of various way to expand Medicaid eligibility.

Apparently not. Roy’s testimony hadn’t stop echoing through the halls of the Legislative Office Building before the high-pitched shrieks of Democrats drowned it out.

I’m not saying they have to agree with Roy’s ideas. They clearly prefer massive increases in federal entitlements to any consumer-based approach to lowering health care costs, and that’s okay. But people purporting to study such a complex subject should avoid instantaneous demonization of new ideas, unless they don’t care about their own credibility.

Perhaps the most juvenile political spat of the last week broke out following the announcement that Maryland Gov. Martin O’Malley would headline the New Hampshire Democratic Party’s Jefferson-Jackson Dinner in November. The Republican State Committee sniped that Democrats were bringing in a liberal income-tax supporter and “third-tier presidential candidate.” Democratic Party Chairman Ray Buckley responded by mocking a GOP fundraiser with former Massachusetts governor Mitt Romney. I wish they would both go to their rooms so the grown-ups could finish talking.

First of all, New Hampshire loves third-tier presidential candidates. They keep our hotels and political hacks in business. Second, O’Malley served as inspiration for The Wire’s Tommy Carcetti, one of the best television characters ever created. The smart, ambitious and casually corrupt Carcetti illustrated the failure of political institutions on a show dedicated to the failure of institutions. And finally, I don’t care enough about party heads bickering about ticket sales to have a third point.

Of course, the grandstanding isn’t confined to New Hampshire. In Washington, Sen. Ted Cruz is attempting to set the international indoor record. The Texas Republican has jumped out in front of the defund ObamaCare effort and promises to block any bill that keeps government running unless it also strips funding for the health care law.

Cruz has spent the past month building himself up as a champion of conservative principles beset by a herd of RINOs. But now he admits that he doesn’t have the votes to prevent Harry Reid and his Democratic colleagues from restoring ObamaCare funding to the continuing resolution passed by the House this week.

Lots of people have been trying to tell this to Cruz, but he wasn’t listening. Faced with certain defeat on the Senate floor, Cruz now insists that his doomed plan can work. If the House and Senate end up shutting down the government, Cruz thinks the public will blame President Obama for refusing a sign a bill that never made it to his desk.

Cruz is making it harder to get rid of a law that’s reached Michael Bay levels of disaster. ObamaCare should be defunded, delayed and eventually repealed. I don’t disagree with his goal. But his “hold my breath until I turn blue” parliamentary tactics discredit that position.

But even Cruz hasn’t been acting as childishly as our own Sen. Jeanne Shaheen. As former state senator Jim Rubens announced his campaign to challenge Shaheen next year, the Democrat’s camp was shamelessly peddling a groundless smear that Rubens blamed working women for a rise in mass shootings.

Rubens, a hardcore policy wonk known for his expertise on electric rates, school choice and gambling, wrote a book a few years ago called OverSuccess. It includes a chapter arguing that men face greater social pressure to succeed, and increased failure has contributed to increased male violence, among other social ills. I’m not persuaded by Rubens’s conclusions, but it’s a thoroughly researched, thoughtfully presented attempt to tackle real problems.

Shaheen’s camp responded by calling Rubens a sexist pig. Clearly, she’d prefer to be running against Todd Akin. She should be ashamed. But this is the same candidate who once – in a flap about legislation to ban “crush” videos – accused Sen. John E. Sununu of supporting kitten killing. Maybe she just doesn’t expect anyone to take her seriously.

– See more at: http://newhampshire.watchdog.org/12272/wanted-grown-ups-in-n-h-politics/#sthash.ddeljQHA.dpuf

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We Need to End Our Love Affair With Elections

Charlie Arlinghaus

September 18, 2013

As originally published in the New Hampshire Union Leader

Political reporters, like the rest of us, tend to be schizophrenic and our actions often belie our words. We pretend to hate the perpetual campaign cycle, profess a longing for the days of shorter campaigns, but we don’t really mean it. What we actually want is a never ending campaign and endless stories about political horse races to ensure that no one ever discusses public policy in any meaningful way again.

It is conceivable that I am guilty of a modicum of exaggeration here. But you’ll forgive me if I take a break from boring you with tirades about policy this week and instead attempt to make a case for trying to delay as long as possible a discussion of who’s running for what.

For decades we’ve heard stories about the perpetual campaign. It is supposed to be bad for democracy that campaigns never seem to end. The day after the last election, we start to speculate who will run in the one that is only 730 days away. Presidential exploratory forays for 2016 begin before the 2012 election results have been validated by the Electoral College.

Wouldn’t it be better, we’re asked, if the United States followed some European model where an election campaign is announced for a precise and very short period? The British election campaign in 2012 lasted precisely 30 days from when the writ was dropped (a wonderful, archaic expression) to election day. Never mind that the speculation and shadow campaign had been going on for years.

In state elections, so many political reporters (and perhaps also some policy wonks) express some degree of hope that electoral politics won’t interfere in the debates over budgets and gambling and other issues of the day.

Yet our actions suggest we don’t really mean it. No one wants to engage in substantive discussion. It’s boring and, if taken out of context, might be misunderstood and used against people in the next election. Instead, even here in New Hampshire where we pompously consider ourselves among the most noble of civic beasts, we speculate endlessly about elections and who’s running for what.

The next election is more than a year away but already one of the political parties is whispered about as being pathetic and disoriented because it doesn’t seem to possess announced challengers to major office incumbents, at least not ones who are household names.

We say we want the campaign to last a few months instead of more than a year yet we are already antsy when well known and well funded candidates aren’t running around and giving speeches 14 months before election day.

Yet campaigns don’t have to be long and drawn out affairs. In 1996, nothing much was happening until Steve Merrill announced in April that he wouldn’t run for re-election. It took a couple months for other politicians to sort themselves out, talk to staff and organize campaigns. No started hiring, raising money, or setting up shop much before June — a bare five months before the general election.

It was wonderful. We were spared a year of insider speculation, jockeying, and shadow boxing. Yet here we are nine months before that time period and there are many hands being wrung in despair all around the political world. No one has declared for governor. Familiar faces that are apparently considering running for Senate or Congress have yet to decide. None has hired staff or is running an active campaign.

Can you color me happy about this revolting development? I like to gossip as much as the next pathetic political junkie about who might run or not but I’m not proud of it. It is much too early to obsess about polls, elections, and horse races. Elections are not about the race and the winner. They are about what happens next or ought to be.

When I worked in electoral politics, I became enormously frustrated when a very effective and successful colleague said “I don’t care what these people do once they get elected, I just want the win.” It was maddening because I believe the only reason to care about elections is because they affect policy choices. I don’t want you to win unless it matters.

Yet the general public seems to have little potential for showing any interest in what exactly the government is doing. That seems unlikely to change anytime before we make Miley Cyrus commissioner of Health and Human Services.

None of the major election day races has taken shape yet. Huzzah. I hope you’ll join me in rooting for longer delays and shorter races.

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New Hampshire’s gloomy August jobs report

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Josh Elliott-Traficante

September, 2013

While the unemployment rate in New Hampshire dropped to 5.0% in August, the decline was not caused by an increase in employment, but by a decrease in the size of the workforce. According to the Household Survey, the number of employed residents dropped by 120, the number of unemployed residents dropped by 650, while the labor force as a whole shrank by 770.

The August data continues a trend, seen in the New Hampshire labor market over the last few months, of declining unemployment coupled with a shrinking labor force. This is not unique to the state however; this trend is seen in the national data as well.

This means that discouraged workers are still dropping out of the labor force largely accounting for recent “improvements” in the unemployment rate.

Turning to the Establishment Survey Data, the state had a net loss of 1,000 jobs. The total number of private sector jobs declined by 3,200 and the public sector grew by 2,200.  Areas seeing the biggest losses were Construction (-500), Professional and Business Services (-1,100) and Leisure and Hospitality (-1,100). Sectors seeing the most growth were Local Government (+2,400) and Wholesale Trade (+300).

The Manchester area saw no change in employment in the month of August, while Nashua added 700 jobs, Rochester-Dover: 200 and Portsmouth lost 700.

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Unemployment Drops in August for all the wrong reasons…..again

By Josh Elliott-Traficante

September 6, 2013

The August jobs report seemed rosy on the surface; unemployment dropped from 7.4% to 7.3%, and 169,000 jobs were added. Looking closer at the data we see that this is anything but good news.

While unemployment did drop by just shy of 200,000, the size of the labor force also contracted by 300,000 resulting in more than 500,000 people no longer seeking work. As detailed in earlier posts on the subject, all of the attempts to chalk up this decline to baby boomers retiring, or some other, non-economic phenomena can easily disproved by the data. In fact, most baby boomers are delaying retirement, resulting in an above average labor force participation ratio for that age band. So rather than dragging down the national ratio, they are helping to increase it.

The Labor Force Participation Rate, the measure of how many non-institutionalized, non-enlisted Americans are in the workforce, hit a record low of 63.2%. The last time the rate was this low was August of 1978. At the time, the rate was surging to new highs as many women entered the workforce for the first time. In 2013 on the other hand, the rate has been hovering at near, or hitting in the case of August, record lows. Some decent improvement had been made in the first half of the year; however, all of the gains made for the year have been given up and then some.

Turning to the alternative measures of unemployment, the U-4 rate decreased from 8.0% to 7.8%, U-5 from 8.8% to 8.7% and the U-6 from 14.0% to 13.7%

Oddly enough, the number of people “out of the labor force, but would like a job” actually dropped by roughly 335,000. Why this is the case is not clear. There are some indicators that suggest that it could be a ‘back to school’ effect, but the data is mixed.

The Establishment Survey showed that 169,000 jobs were created in August, of which 152,000 were private sector positions. Industries showing the biggest gains were Retail Trade (+44,000), Healthcare (+38,200), and Food Services (+21,200). Sectors seeing the largest losses were Information (-18,000) and Non-Durable Goods Manufacturing (-8,000). This continues the trend of small numbers of layoffs, combined with low levels of hiring. If the job growth seen in August continued uniformly, to return to 5% unemployment and a pre-recession labor force participation rate, it would take roughly 13 years.

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On economic stimulus, Sweden sets a good example

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Charlie Arlinghaus

August 21, 2013

As originally published in the New Hampshire Union Leader

Both the state and the country can better focus their efforts on budgets and economic development by following the example and the reasoning of that bastion of conservative economics called Sweden.

In the face of economic crisis, advocates of what they call “stimulus” suggest it is the only alternative to the horrible-sounding “austerity” — as if our only two choices are to give ourselves completely to bureaucrats and administrators to spend as they wish or to subsist on bread and water.

The finance minister of Sweden chose to reject both choices. Anders Borg of Sweden’s right-of-center Moderate Party looks like American magician Penn Jilette, complete with ponytail and earring. But he sounds like Milton Friedman (to be fair, on economics, so does the libertarian-minded Jilette).

While most of Southern Europe got into trouble following the advice of professional advice-givers like the International Monetary Fund, Sweden chose to focus on jobs. According to Borg, “we can see that very little of the stimulus went to the economy. But they are stuck with the debt.” Sweden chose to permanently cut taxes to bring its economy back. Their goal was to create a climate to attract business owners and entrepreneurs.

“Ownership is a production factor. Entrepreneurs are a production factor,” Borg noted. “It is problematic if you drive out entrepreneurs from your country because they are the source of job creation.”

Sweden cut taxes four times (and has proposed a fifth cut this week). After a 20 percent cut in its corporate tax rates, Sweden’s top rate is about half of ours.

The results are worth noting. Sweden’s economic growth has been dramatically higher than the rest of the Euro region’s despite labor costs that, while lower than the European average, are 20 percent higher than in Germany and 40 percent higher than in the United States. In the last two years, the Swedish Kroner has gained 35 percent compared to the Euro.

Borg doesn’t see growth and tax cuts as inconsistent with fighting deficits. His advice to “keep dealing with the deficit because deficits destroy everything else” is consistent with their experience. Swedish debt has declined by 50 percent as a share of the economy during a time when U.S. debt has more than doubled by the same measure.

This idea is neither new nor exclusively Swedish. After the relatively anemic growth of the 1950s and early 1960s, President Kennedy proposed a permanent cut to income tax and corporate tax rates in the United States. Kennedy said “every dollar that is released from taxation that is spent or invested will help create a new job and a new salary. And these new jobs and new salaries can create other jobs and other salaries and more growth for an expanding American economy.”

Kennedy specifically touted his 25 percent cut to the top rate as a means to turn budgetary deficits into budgetary surpluses. In fact, income tax collections went up by 85 percent in the first five years after the cuts came into effect. Real economic growth was twice the post-war average during the nine-year boom that followed.

What the Democratic Party’s Kennedy and the Moderate Party’s Borg have in common is a focus on job growth. More jobs for more people is a better stimulus than any plan to give this department or that commission some spending that was denied in the last budget debate.
At the federal level, this means taxes should go down, not up. At the state level, it means fewer programs and fewer regulations. The most innovative program is one that reduces barriers to entrepreneurs and job creators investing their own money here instead of somewhere else.

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New Hampshire Unemployment Remains at 5.1% in July

Underlying Weaknesses Remain

Josh Elliott-Traficante

The unemployment rate for New Hampshire was 5.1% for the month of July, remaining unchanged from June. According to the Household Survey, the number of employed residents fell by 390, the number of unemployed fell by 460, while the labor force has contracted by 850. This contraction in the labor force is represented in the .1 percentage point drop in the labor force participation rate to 65.7% from 65.8% the month prior.

The recent decline in the size of the labor force, as well as the labor force participation ratio in New Hampshire over the past several months has appeared in the national data as well.

A shrinking labor force is troubling because it indicates that people are discouraged at their prospects and have given up looking for work. While the state is doing better than it had been in the depths of the recession, the retreat is disconcerting.

The Establishment Survey showed the loss of 3,200 jobs across the state, reflecting the weaknesses seen in the Household Survey data. These jobs losses were largely concentrated in Retail Trade (-1,000) and Local Government (-4,100). Sectors seeing growth included Education (+900), Financial Activities (+500) and Construction (+400).

It is worth noting that the recent closures of all of the state’s Stop and Shop locations as well as the closing of 6 Shaw’s stores are not represented in this data. Due to the timing of layoffs, they will appear in subsequent jobs numbers.

Turning to the cities, Rochester-Dover gained 500 jobs, while Manchester and Portsmouth each added 400 jobs. Nashua on the other hand lost 300.

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No One Really Gets His or Her News From The Internet

Charlie Arlinghaus

August 7, 2013

As originally published in the New Hampshire Union Leader

In the spirit of carrying coals to Newcastle, I write a newspaper column today on the importance of newspapers to the public square. More specifically, I fear the effect on public policy and the public debate of the continuing decline of newspapers. For all the bluff and bluster so many of us have about new media and technology, the skeletal underpinning of almost all news today is news gathering that comes from the old fashioned, grandfatherly, dead tree, black and white broadsheets we love to ridicule.

As newspapers began to flourish in the 1800s, they became a historical archive of who we are. The history of almost any single event, trend, or period of development can be traced by simply researching the records scratched out on a daily basis in papers right and left, high-brow and low-brow, sensational, and staid.

As radio and, particularly, television became more important people became immersed in media sources that added sound and pictures to the less exciting printed word. Some of that change was reflected in language. The words journalism (which describes a written periodical) and press (the means of producing those written words) began to be replaced by media (which is simply a plural of mediums of communication).

Through the changes and the excitement of television anchors with nice hair, though, much of the underlying work, the more detailed background work that might inform a shorter visual piece, came from an industry that relied on humans gathering information, sifting through it, and explaining it in longer form printed pieces that still managed to encompass a historical record.

I had the interesting experience five or six years ago of sitting in a radio studio, waiting to go on the air, and reading a local newspaper sitting on the desk. About two-thirds of the front page was highlighted and I noticed that the pre-taped news report was taken word for word from the page without credit. The listener thought he got his news from the radio but it was gathered by the newspaper.

Through the rise of broadcast media, newspapers continued to thrive. For many years, a typical newspaper was supported by about 80% advertising revenue and 20% circulation revenue. For more than a half century revenues kept rising from about $20 billion nationally in 1950 to a peak of $65 billion fifty years later.

Then the bottom fell out with modest decline and a collapse during the recession. Today revenues are about what they were in 1950 ($22 billion in 2012). The last few years have seen very small declines in revenue so perhaps things are stabilizing. Certainly things are changing. Online revenues are now 15% of ad revenues. One major paper, The New York Times, has changed its payer mix to 50% ads/50% circulation though that model may be unique to that product.

What is still true is that newspapers remain the most important part of our public square with no obvious replacement available. Many people are quick to tell you that they get all their news from the internet and so have no use for papers. But they’re wrong.

Most blogs, facebook aficionados, and other new media opinion leaders take news gathered by someone else and recast or interpret it. The person who gathered the news you reposted, respun, or re-reported was employed, in most cases, by the supposedly archaic newspaper. Few internet opinion influencers of either right or left go to the hearing, the council meeting, file the public information request, or interview the newsmaker directly. So, perhaps 80-90% of the information being used to form opinions come from the fewer and fewer newsroom employees who remain.

It’s all well and good to claim “I get my news from twitter” but there are few events which your twitter feed covers and even then there are some limitations to capturing nuance and detail in 140 characters.

It is natural for me to fret about the loss of opinion collection and news gathering. I write down my thoughts on a weekly basis for “old media” and re-pontificate those scribblings regularly over the airwaves and the newfangled intertubes. But you should worry too.

The blogger you like to read and your favorite twitter smart aleck needs the information that he or she can react to or battle wits against. Bloviating politicians get windier when no one is there to listen to and report on their more ridiculous output. Think of the mischief they can get into if no one is watching.

Worst of all, without some poor guy just out of journalism school to take our place, we might have to attend all those meetings or read the state’s financial reports ourselves.

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Unemployment drops in July…for all the wrong reasons

Josh Elliott-Traficante

August 2013

According to the data released by the Bureau of Labor Statistics, the unemployment rate dropped by .2 percentage points, to 7.4%. The Establishment Survey Data showed the creation of 161,000 non-farm pay roll jobs. On the surface it looks like a fairly decent report: unemployment down and job growth, while not stellar, is enough to keep up with natural population growth.

Digging into the data however, what once may have been a mediocre report quickly turns gloomy. The drop in unemployment was not the result of people getting jobs; rather, they gave up looking for work and left the workforce entirely. The number of unemployed decreased by 263,000 while the number of those no longer in the labor force increased by 240,000.

This decline was reflected in the .1 percentage point drop in the critical labor force participation rate to 63.4. The labor force participation rate has been hovering close to record lows for the better part of the last year. The rate had climbed .3 points over the last several months, showing some, albeit minor, improvement. Whether the drop in July is just a temporary setback from the improving trend of the last few months, or a return to just ‘skipping along the bottom’ remains to be seen.

The other measures of unemployment saw drops in their rates, [U-4: 8.2% to 8.0%]  [U-5: 9.1% to 8.8%]  [U-6: 14.3% to 14.0%] however, these too can be attributed to the contraction of the labor force, not economic growth.

Since those no longer in the workforce do not count towards the unemployment rate, what would the rate look like if they were? If they were counted as unemployed and taking into account historical norms, the unemployment rate for July would be 8.5%. (Follow the link for an explanation of the methodology http://www.jbartlett.org/what-is-the-real-unemployment-rate)

Looking at the Establishment Survey Data, the areas seeing the biggest growth were Retail Trade (+ 46,800) and Food and Drink Services (+38,400). While job growth is always a good thing and hiring in these sectors are indicative of growing consumer confidence, jobs in these sector are largely part time positions. Job losses were minor and scattered over several, non-related sectors, indicative of issues within certain sectors and not of the economy at large.

Despite the optimistic appearance of a .2 percentage point drop in the unemployment rate, the drop is a sign of economic weakness, not strength.

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Our Future Depends On Rewarding the Boring

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Charlie Arlinghaus

July 24, 2013

As originally published in the New Hampshire Union Leader

The hardest thing for any government to do is to pay attention to the long term. The system creates incentives for politicians to focus on short term solutions and ignore long term outlooks. The inability to look beyond this morning’s political fight defines the dysfunctional entity that passes for a federal government but has also crept into our state politics as well.

Policy is made by elected officials, usually in two year increments. Whether the particular elected official serves for just two years or longer, he or she is nonetheless focused on the next biennial election. Things that will turn out beneficial five or six years from now are of less interest.

The federal budget is case study in short term thinking. Every federally elected official believes that the United States should balance its budget. But there is no actual requirement to balance the budget so they don’t. As a result the country’s debt has grown every year since 1957 — growing from $5.8 trillion to $16.9 trillion just in the last twelve years.

Automatic spending reductions were enacted because no elected officials could possibly withstand the electoral onslaught of any reduction in the growth of spending. Mind you, the reduced increases (or automatic cuts depending on your perspective) wouldn’t come anywhere close to balancing the budget. Nonetheless they were portrayed as draconian austerity which no politician could withstand.

The benefits of balancing the budget would accrue over time as they kept us from a fate similar to some European nations whose fiscal house has collapsed. That sort of benefit is long term and subtle. The pain of even the smallest reductions is considered too much to openly advocate. So an automatic reduction is crafted that politicians can all be annoyed with but that does their job for them.

At the state level, we don’t have any such option. The federal politicians are incapable of balancing the budget because they don’t have to. At the state level, we have to. We may not shrug our shoulders and run a deficit. The budget must balance. But even in that construct, some decisions are passed off.

An example of what we can’t avoid was the 2011 state budget. One elected official explained to me “we spent every dime had. We just didn’t spend any we didn’t have.”

Whatever cuts were made, were dictated not by a policy choice but budget necessity. There was an argument over whether revenue projections were set high enough (the final budget was as close to spot on as they come). However, once that number was determined every dime was spent and no more.

Previous budgets had been at higher levels through the introduction of borrowing and two federal bailout programs for state budgets. Those sources were gone and the budget had to come back to reality. Many politicians knew they would be politically attacked for it and they were. But the new balance formed the basis of the next budget too.

There are two areas, though, were the incentives don’t align: state debt and infrastructure.

The state’s debt skyrocketed in the period from 2007-2011 after having been steady for more than a decade under governors of both parties. The debt explosion saw the state’s debt climb from $654 million to $939 million in just four years. New Hampshire’s debt is still good by national standards and the growth has slowed since. But it was easier for some politicians to borrow money than to not spend it. New Hampshire should guard against that Washington mentality.

Transportation spending is also an incentive problem. In general terms, we don’t raise enough money to pay for maintaining the current system of roads. Pavement conditions deteriorate more and more each year (replacing costs a lot more than maintaining) and our bridges were rated 41st worst in the country by the libertarian Reason Foundation.

Gas tax receipts are almost identical to what they were 10 years ago before adjusting for inflation even though spending increased 72%. Gimmicks have made up the difference – the turnpike paid $100 million to the highway fund for a few miles of highway and accelerated the payments over a few years. In addition, a temporary and regressive motor vehicle surcharge plus a one-time federal stimulus grant plugged holes temporarily.

The difficulty is that bridges last 75 to 100 years and no one can campaign on “we completed routine maintenance that will extend the bridge’s life to 2040.” It benefits some guy running 30 years from now but does nothing for me.

Sound fiscal management is boring and boring doesn’t win elections. I wish it did.

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