Does Rhode Island need outside economic intervention?
Although the worst of the Great Recession was yet to come, Rhode Island’s decades-long struggle to build a better economy was abundantly clear by the time when I wrote a Providence Phoenix story on the subject in March 2008.
The piece outlined the various symptoms of the problem and efforts to improve it. It closed with URI economics professor Leonard Lardaro’s view that Rhode Island was past the point where it could solve its own problems.
Four years have passed, and local signs of economic distress have only worsened. So I asked Lardaro for an updated view on whether Rhode Island can fix itself.
My first question was what the last four years show about the ability of elected officials to address the situation. Lardaro says, in his view, their inaction has failed to move the state toward a better long-term economic performance:
In spite of a very severe crisis, where the global economy flirted with depression, Rhode Island made very few changes to either eliminate or moderate its major structural deficiencies, other than occasional lip service …. Most notably, the cost of doing business here (taxes + fees + regulations + electricity costs + skills of our labor force) remain about as non-competitive as they have been for quite some time.
This state’s greatest deficiency, the lack of skills possessed by our labor force, has been sustained and even exacerbated by the dozen-year defunding of public higher education, which has made tuition ever-more expensive, placing the skills required to make our state’s labor force more competitive farther out of the reach of our residents. Fees and regulations also remain a problem, even though we supposedly have made inroads into making regulations less burdensome.
On a related note, Josh Barro, nudged along by Ted Nesi, recently wrote in Forbes on the question of whether Rhode Island needs economic union with Connecticut. Barro found Rhode Islanders are poorer, but pay higher taxes and make lower public expenditures than our counterparts in Connecticut and Massachusetts.
Back to Lardaro. Like Barro, he believes structural weaknesses are holding Rhode Island back:
Since due diligence is virtually non-existent in Rhode Island, an in-depth analysis is needed to identify both our strengths and weaknesses before we can “reinvent” our state’s economy through significant structural changes …. I therefore believe we need to either institutionalize due diligence here, or hire outside consulting firms to perform the analysis for us and to make recommendations for legislative changes.
Lardaro recommends following political changes as prerequisites for necessary economic changes:
(1) Have a full-time legislature;
(2) Dramatically reduce the size of the legislature to about 50 persons;
(3) Institute four-year terms for the legislature;
(4) Have term limits of two (four-year) terms;
(5) Give the governor a line item veto authority; and
(6) Earmark all revenues generated by increases in taxes or fees to investment-oriented uses.
In tandem, these ideas seem unlikely to find legislative favor. Yet just as I wrote in 2008, the onus remains on elected officials to prove critics such as Lardaro wrong.