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RI Must Start Acting "Out of Character"

The Providence Journal,, Commentary Page
June 2014

The great debate continues - should Rhode Island default on its moral obligation bonds? This is certainly an important debate, one we need to have. However, absent from this discussion is the fact that what we are debating is not the problem, but a symptom of the problem facing Rhode Island. What is that problem? The way that Rhode Island approaches economic decisions. Its most visible by-product is the extremely serious image problem Rhode Island now has.

While there are those in our state who would argue that Rhode Island does a very thorough job in analyzing decisions before we make them, reality paints an entirely different picture. Conspicuously absent has been in-house due diligence performed by persons with advanced degrees in economics who possess substantial experience in performing these types of analyses. In place of this, Rhode Island seems to always “order out” when it comes to due diligence, and as we have seen so many times, the results are either disastrous or mediocre at best. Worse yet, this defective analysis is quite expensive. Rhode Island recently tried to move in this direction, but in a highly misguided way, by proposing that economists with advanced degrees gather data then pass it on to others who are charged with analyzing it. Not only is this approach backwards, it is an excellent illustration of government redundancy. The people gathering the data should be interns or research associates, and the persons analyzing it should be the economists with advanced degrees. From this analysis, a knowledge base would then be created that would serve as the foundation for a non-understood concept here – a plan.

Compounding this, or perhaps the cause of this, is a mindset by the persons who have been running this state for years: they are, to use a term I made up, PAROPIC, which means both parochial and myopic. They tend to almost always focus only on Rhode Island and restrict their focus to the present time. Worse yet, these same people tend to think linearly. In their world, everything is presumed to be independent of everything else. Two excellent examples of this have been the discussion surrounding bond default and the non-planning for the consequences of Massachusetts gambling.

At present, Rhode Island has an extremely negative image nationally. We have essentially come to be known as “the unemployment rate state.” This is not surprising, since we’ve either been the highest or in the top six rates nationally for almost every month since 2008. What else do others know about us? In virtually every 50-state economic comparison, Rhode Island fares extremely poorly. That, of course, is entirely consistent with what one would expect from “the unemployment rate state.” Furthermore, recent surveys have shown more than four-fifths of Rhode Islanders are dissatisfied with this state, something that also fits quite nicely into the national perception of us. So, it is important for us to understand that others view Rhode Island as acting “in character” when we do things that are not exactly competent when it comes to economic consequences.
Put this all together, far too many of our state’s elected officials have adopted a game show mentality as their approach to economics. All we need to do is to choose the right curtain and all will change in our favor. To them, everything is “a game changer”, or a home run. This, of course, is a natural outgrowth of the lack of due diligence here and linear thinking. Wasn’t that what was said about 38 Studios? Now, we are told, we need to do something drastic. One recent “game changer” is supposed to be the elimination of our estate tax. In their eyes, that would change everything. Of course it wouldn’t, since our problems run far deeper, but with such an unenlightened level of economic discussion, complex problems have, to quote the saying, simple easy to understand wrong answers. Then there is the issue of dramatically lowering or eliminating our sales tax. Certainly benefits would emerge, but the loss in tax revenue and likely gain in employment make this an unsatisfactory change. But, as the old saying goes, in chaos there is profit! The irony here, is that we actually had in-house due diligence by an economist with an advanced degree for the sales tax. Yet, our elected game show contestants conveniently chose to overlook it.

At this point, the most constructive thing Rhode Island can do is to dramatically revamp its approach to economic development. What Rhode Island needs most is to begin acting “out of character,” based on how the world now views us. What should we do about moral obligation bonds? Until meaningful changes are made the way we approach economic development, it would be best for us to ban them.

by Leonard Lardaro


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