Charlie Arlinghaus

May 6, 2015

As originally published in the New Hampshire Union Leader

Are you a Banana? New Hampshire has too many bananas and is suffering because of it. The world is populated with millions of us who seek to live in the modern world when we want to enjoy its conveniences and then turn on our back on that same world and hope that someone else with pay attention to the details that make that convenience possible.

There is a common aspect of human nature that infects so many decisions about the infrastructure that surrounds us. Most of us are familiar with the acronym NIMBY — an abbreviation for Not In My Back Yard. You picture someone saying “that’s a great idea, we should have one of those but not in my back yard. It would better in yours. Big giant compost heap in your yard and we can use mine to sip lemonade.

New Hampshire’s response to infrastructure has always had a bit of a NIMBY element to it. But lately we seem to have graduated to tropical fruit. Our best acronym now is BANANA — Build Absolutely Nothing Anywhere Near Anything. Every new project is opposed for some reason or another, often for any reason at all. There seems to be an active and vocal group traipsing from one meeting to another seeking to stop anything new from happening.

The problem with these banana people that the status quo is a bad thing and needs to be changed not preserved. The state has spent decades pretending everything is fine with its electricity markets and that nothing needs to happen. and it’s killing us.

Slowly but surely the dynamism that used to be our job market has turned to stagnation. Mediocre job growth means people don’t move here much, younger people can’t stay even if they want to, and too many Granite Staters have to work in Boston or some other place at the end of a horrific commute

And the biggest hole in our competitive armor is electricity.

The fight for jobs needs to be fought on as many fronts as possible but on the electricty cost front we’re not just losing but getting routed.

Last week, new data was released about just how bad we are and how much worse we’re getting. Then again, a glance at your own electric bill probably told you everything is not fine.

In February, New Hampshire’s electric rates were 68% higher than the national average. This is even worse than a year ago when we were an already too high 54% above average. To add insult to injury, we are least competitive in the area we need to be most competitive: the industrial sector. The grotesque 86% above average rates of a year ago for industrial users have ballooned to 105% above average.

This is not a minor expense. It amounts to hundreds of millions of dollars of costly drag on our economic competitiveness.

Think about it this way: the companies that create the best paying jobs in the high tech and manufacturing sectors — the areas we would give our eye teeth to attract — would see double the electric bill if they had the misfortune to locate here. And your banana friends think that’s fine.

If you believe a banana, life is grand and all those people worried about jobs are just being silly. Actually, if we’re being fair most of them don’t care. Their analysis has only gone as far don’t build it. They presume the juice for their iPhone and electric car will materialize some other way. Exactly how is someone else’s problem.

The someone else is us. It’s our problem. We can read the numbers and realize that New Hampshire is on the verge of becoming a backwater. The dynamic state we once were is now limping along, sore and bedraggled.

Stagnation and electric costs are not two different things. Reducing the cost of electricity requires having more of it. Having more of it requires building things — the infrastructure necessary to create a modern life, to power the machinery and technology that are part of well paying jobs.

No one would suggest we build everything anyone wants but we have a big problem and it will require living in a modern world (I live a few hundred feet from a power line). We are going to have to allow more building and fewer bananas.

Charlie Arlinghaus

April 22, 2015

As originally published in the New Hampshire Union Leader

The political process often obscures truth and inhibits agreement. Too often each of us believes he or she knows what’s important but that the things you think are important are trivial and your insistence upon them is a sign of perfidy or cognitive dysfunction. On very rare occasions there is substantial agreement on a problem. This is good only because it allows us to attack someone else’s solution as near-sighted or disingenuous. It is inconceivable that an opponent might have a well intentioned idea that we simply think is a lower priority or might not work as well.

Increasingly politicians are realizing that there is no longer such thing as the grand mythological New Hampshire Advantage. Instead we live in the midst of economic stagnation that rarely hints at the former economic dynamism of our state. To their credit, most politicians fret every once in a while over this depressing economic reality. Most of them aren’t quite sure what to do but are pretty sure that what the other guy wants is wrong.

If you have the bad habit of reading this space with anything approaching regularity you know that I am continually harping on the remarkable growth of the 1980s and 1990s compared to the pathetic stagnation of the last fifteen years. The data are consistent across measurement categories but consider this one dramatic snapshot: Over the same number of months, the recovery of the 1980s created 118,000 jobs compared to 21,000 in the current recovery. This is not, as the poet says, your father’s Oldsmobile. Our economy used to hum and now it coughs.

Everyone tends to be critical of everyone else’s idea but at least people of all stripes and spots are now admitting that the status quo isn’t good enough. That, however, is where the agreement ends.

In general, I believe that anything that lowers the cost of doing business makes New Hampshire a more attractive state. That has traditionally been the way we do business. Some states (New York might be an example) amass large treasure chests and hand out loans and special tax statuses. This has not been New Hampshire’s way for two reasons. First, we can’t compete with the giant states in amassing war chests. New York has more tax burden to forgive and more coins in their fiscal couch than we tend to raise.

Second, we have had a historical preference for not picking winners and losers — which the government of any state tends to do poorly. If we have a program, we create criteria and allow any business which meets the criteria to apply. A notable current exception is the attempt to create programs and policies that apply only to one development in Dixville Notch. But that’s an exception based on romantic nostalgia that causes some to consider a proposal they would reject on principle were it located anywhere else.

Otherwise, job creation strategy falls into two camps. One group rejects that notion that businesses care about the cost of doing business and proposes instead to spend more government money. Their theory is that government “investment” is the key to stimulate our moribund economy. It would be wrong to say that all government spending has no effect but taking more in tax dollars and then doling them out does seem to presume that legislators have some superior knowledge base — a supposition somewhat short on evidence.

Others worry every time I suggest reducing our highest corporate tax rate. To them a quite modest cut isn’t enough to offset the beneficial results of increased government largesse. They’re quite right that the reduction is too small to have a dramatic effect but we’ll never lower the rate at all if we don’t start a little bit at a time.

One potential source of common ground is electricity. Some worry about high electric rates a little, others a lot. In January 2015, New Hampshire’s electric rates for all users were 65% higher than the national average. Much worse, for industrial users New Hampshire was 94% higher.

There is no worse signal we can send companies that use a lot of electricity like the high tech industry or manufacturers. With rates that ridiculous, if you tried to move your company to New Hampshire your board of directors can and should fire you for dereliction of duty.

At this point, electricity seems like more than a passing fad. Maybe we can agree 94% higher than the national average isn’t quite the right place to be.

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.

Josh Elliott-Traficante

Earlier this week, President Obama announced a series of proposed rules that would reduce the amount of carbon dioxide (CO2) emitted by fossil fuel fired power plants. The goal nationally is to reduce emissions by 30% below 2005 levels. Each state has its own reduction goal, reached through a complex calculation based on current energy production sources and possible policy choices. For New Hampshire to comply with these rules, the state would need to reduce emissions from fossil fuel fired plants by more than 46% by 2030.

The Environmental Protection Agency, the body charged with drafting and implementing these rules, calculated that in 2012, fossil fuel fired power plants in New Hampshire released 1119 lbs of CO2 per megawatt hour (lbs/MWh) [i] of electricity produced. With some nuclear capacity figured in, this rate drops to 905 lbs/MWh, which the Agency used as the starting point for reduction calculations.

The EPA’s goal for New Hampshire is for the state to reduce the emissions rate to 486 lbs/MWh by 2030, a cut of 46.3%.The calculations[ii] used to arrive at that figure use four methods to reduce emissions. The first is improving heat efficiency at power stations, which the formula projects would yield a reduction of 18 lbs/MWh. Increasing the utilization of Natural Gas fired plants (thereby displacing coal) is calculated to reduce the rate by 177 lbs/MWh. Additional renewable generation would drop a further 178 lbs/MWh, while efficiency measures would reduce the rate by 46 lbs/MWh. These combined yield a total decrease of 419 lbs/MWh.

Should New Hampshire decided to follow the formula exactly when it comes to renewable energy, it would require an increase in production[iii] from 7% of all electricity produced to 25% by 2030. In comparison, the state’s current Renewable Portfolio Standards requires 23.3% of electricity to come from renewable sources by 2025.

Compared to other states, New Hampshire’s burden is particularly heavy. The required cut of 46% is the 5th highest reduction nationally, percentage wise. This is despite the state currently having the 7th lowest rate of pounds of CO2 per megawatt hour produced. In contrast, other states, like West Virginia are only required to reduce emissions by 20%, while still emitting more than 3.25 times as much per megawatt hour as New Hampshire does.

While the Environmental Protection Agency (EPA) drafted the guidelines and the goals, how those goals are met are left entirely to the states.

[i] The EPA, in quantifying current output and reduction targets uses pounds of CO2 per megawatt hour (lbs/MWh) as a unit of measure.

[ii] For the brave, the technical document detailing each step of the calculation:

[iii] In the EPA’s calculations of renewable energy, power from hydro power is not included. To make an apples to apples comparison possible, the figures for the state’s Renewable Portfolio Standards does not include hydro.