Setting the Record Straight

Courage (4.00 / 2)

Instead of criticizing Rep. Kitzmiller, we should be grateful for his candor and applaud his values. I would say shame on the St Albans Messenger but it's just the way they operate up there. Rather than examining the actual content of his remarks (especially in light of his experience), the editorial writer went into attack mode. Is it any wonder that it's so hard to have a reasoned discussion about economic development in this state?

Sadly, it's not just Vermont. While conducting research for Phase 9 of The Job Gap Study, I did a LexisNexus search for newspaper articles discussing the "business climate". Perhaps not surprisingly, I found that in virtually every state there were complaints about the "business climate". Now really, can all of America actually be "anti-business"? Of course not.

Unfortunately, there is little organized response to the mantra so most legislators are reluctant to entertain new ideas or speak up (look at what happended to Rep. Kitzmiller). This is a huge disservice and leads to millions being wasted on trickle down policies that have not worked.

It is imperative that all of us become engaged in this debate. Economic development policy has been controlled by a very small group of people / interests for too long. We need accountability; we need new ideas; and we need to create a safe place for this discussion. It's our money; our future; our state; and our legislature.

I encourage you to contact Rep. Kitzmiller and his colleagues on the House Commerce Committee (and Vince Illuzzi's Senate Econ. Dev. Committee) and tell them that you want to expand the discourse; that we won't stand for the kind of demeaning treatment dished out to Kitzmiller; and that we want to be heard.

If you're interested, see Phase 9 of the Job Gap study at
http://vtlivablewage.org/jobga...

Thank you Rep. Kitzmiller.  

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by: Doug Hoffer @ Fri Dec 07, 2007 at 23:05:14 PM UTC

The GOP (4.00 / 1)

Has won so much over the last 25+ years exactly because they have controlled the dialogue surrounding economic and taxation issues.  of course Vermont is a great place to "do business", to live, etc.  The whole f@*king country knows that (save maybe parts of the midwest and deep south).  The only purpose of repeating such blasphemy as the "{insert your State's name here} is the highest taxed in the country" mantra is to further the interest of big business.  This is obvious to many by now, and hopefully Pollina/Raccine/whoever is paying some attention.  There is no need for anyone to believe the crap of Reaganomics  ever again, but without a similarly well put together messaging campaign, few will believe.
No wonder so many doubt the Dems ability to "save us" from this mess- so few of them are articulating the obvious when in comes to this kinda stuff.
I mean, as anti-capitalist as I am: where's the New Deal when you need it?

"GMD's once proud libertarian-socialist"

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by: wdh3 @ Sat Dec 08, 2007 at 06:47:36 AM UTC

[ Parent ]

Reality Check (4.00 / 1)

First, I am sorry that Rep Kitzmiller was quoted out of context.  As a business person, I fully agree with your sentiment.  I relocated to Vermont to start my own business precisely because it was more than about profits.  It is about making a difference, doing the things I love and giving my kids are great place to grow up.

However, I am also uncomfortable with the blanket dismissal of complaints regarding the state's business environment.  The simple fact is the state does a simply lousy job at economic development and an even worse job at promoting itself as a 'great place to do business.'  

I am also very comfortable with our Party's position on economic development.  Essentially, it is to dismiss complaints about the business environment as right-wing rants.  That makes for bad politics and lousy policy.

Let's take a few points:

1) Infrastructure. Vermont's telecommunications infrastructure is pathetic and, to the extent it gets any attention at all, debate is focused on the FairPoint sale.  Worrying about Fairpoint is a bit like re-arranging deck chairs on the titanic.  In case you didn't get the memo, the era of copper fixed lines is over.  The state should be moving MUCH more aggressively to deploy wireless broadband.  The new Telecommunications Authority is moving far too slowly.   In the time it has taken them to get set up, my company has helped rolled out wireless broadband to  more than two dozen small towns .... in rural Sri Lanka.

2) Taxes. Yes, taxes can be part of a policy solution to build the type of economy we want to see here.  As a business person, I'd be willing to see taxes on my own business creep up a bit, if that could be used to create real incentives for innovative, green businesses to relocate to the state and generate jobs.  The reality is that tax stability is more of an issue than marginal tax rates.  Here, the issue is the property taxes.  If you are building a manufacturing plant with lots of capital equipment property taxes are a major consideration.

3) The Vermont 'brand'.  On VPR yesterday, Douglas went on and on about how Vermont's green brand would trump the Chicago Climate Exchange.  Right.  A lot of Vermonters have a very (perhaps justifiably) opinion of their state and its reputation.  In fact, it verges on arrogance.  The Vermont brand is actually quite weak in the business context.  We are a small state of 500k competing in a globalized marketplace.  We need to actually promote ourselves, once we know what it is we are promoting (see no 4).

4) Economic Development Strategy.  There is none and I have not heard a single credible proposal from either side of the aisle (or from the progs).  Vague, unsupported notions of Vermont building a green economy are not sufficient.   You want to build a green economy?  Get in line, so do half the municipalities in the EU, Oregon, most of Northern California and a host of other places.  Hell, even the Russians and Chinese are getting into it.  An economic development strategy has to be more than declarative, it has to address the fact we are competing for good people and good investment.  It also means making some hard choices because the state cannot compete across the board even within the green space.  We are too small to take on the Germans on windmill manufacturing and Missouri on bio-diesel.  We need to decide what the priority industries are, why they are important to the state and why Vermont is the BEST place in the world to grow that kind of industry.  That means investment incentives, supporting fundamental research as well as addressing the above issues.

     

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by: SPS @ Sat Dec 08, 2007 at 12:08:34 PM UTC

[ Parent ]

more reality (4.00 / 2)

To: SPS

1. Re. "blanket dismissal of complaints regarding the state's business environment"

I can't speak for others but when I dismiss such complaints it's based on an analysis of the methods used to define & measure the so-called "business climate". I encourage you to read Peter Fisher's excellent critique of the major indices  

"Grading Places: What do the business climate rankings really tell us", EPI, 2005In general, I agree that the state "does a simply lousy job at economic development" and wrote a report about just that subject [Phase 9 of the Job Gap Study; link shown above.

2.  Re. the "Party's position on economic development...to dismiss complaints about the business environment as right-wing rants."

Not sure which Party you're referring to but, again, I don't dismiss them as right-wing rants, I (usually) call them myths based on unexamined assumptions and misleading data.

3.  Re. infrastructure - telecom: I couldn't agree more with your position and your frustration. The problem is that the private sector will not solve this problem as long as it can get higher returns from urban areas outside VT. But the Governor is ideologically opposed to direct gov't. intervention / ownership (as in Burlington) and the Leg. is (as yet) unwilling to push the issue.

4.  Re. Taxes: Glad to hear that you have an open mind about taxes. But the idea that taxes "could be used to create real incentives for innovative, green businesses to relocate to the state and generate jobs" is way past prime time.

There is considerable evidence that state taxes are a small part of business costs. According to a location expert with Deloitte & Touche/Fantus who reviewed five years of company files to determine the relative cost factors for location decisions, state taxes were "a low priority [and] had minimum cost impact" [see Ady, New England Economic Review, Federal Reserve Bank of Boston, March/April 1997, p.79]

In addition, Vol. 1 of JFO's Tax Study demonstrated that VT state tax liability for C corps was quite modest regardless of the marginal rates [see p.58]. And Vol. 2 showed that VT was very competitive in New England for the two case studies presented [see pp.36-39].

More importantly, "attraction" strategies are based on anecdotes rather than data. Remarkably, there is no public data in the interstate movement of businesses. The only available data shows that the net jobs impact from interstate business relocation is a tiny percentage of total job growth. See "Are Businesses Fleeing the State: Interstate business relocation and employment change in California" from the Public Policy Institute of California  That is, instate job creation & destruction dwarfs the impacts of relocation.

Therefore, we should question the wisdom of (and expected returns from) such attraction policies and focus on other approaches.

5.  Re. economic development strategy: I'm sorry that you "have not heard a single credible proposal from either side of the aisle (or from the progs)" because there are lots of ideas out there.

First, we should abandon the dominant view that cutting business costs (e.g., taxes, energy, etc.) will result in a cornucopia of "goods". This has been the focus of state & federal policy for decades and the evidence is in; good for profits, bad for workers & communities.

CEOs have been telling us for years what they want and need: a well trained & educated workforce, good infrastructure, and quality of life. We don't need to "brand" VT, we just need to walk the walk and make the necessary investments in people, communities, and infrastructure.

Second, I'm uncomfortable with all the talk about a "green" economy because it's too narrowly focused and leads to calls for "incentives", which diverts attention & resources from the investments discussed above. Morever, every state in the country is saying the same thing. Silicon valley, the Research Triangle, and Rt. 128 did not grow because of "incentives". They grew organically from the confluence of major research institutions, capital, and location. While we should maximize the potential we have, we should be honest about the prospects of recreating those unique circumstances.

Third, while exports are important, the economic & fiscal value of a dollar retained is exactly the same as a dollar earned from exports. We need to stop the outflow of capital and consider all practical opportunities for import substitution. see The Leaky Bucket at

This is why proposals like the all fuels efficiency program are so smart. It would save residents & businesses $500 million (money kept instate and available for other things), create lots of good jobs, AND reduce greenhouse gases as a bonus. This is an example of a smart investment (and the same is true for instate renewables).

And we should evaluate similar opportunities for food and wood products, as well as consumer credit. Did you know that VT'ers send approx. $240 million out of state every year in interest alone (not including mortgages)? Why shouldn't we consider an instate quasi-public credit card operation?

And why not make better use of state purchasing? In FY03, VT purchased almost $200 million in goods & services but 70% of it was from outside VT.

As for capital, the state's three major public pension funds have almost $3 billion but practically none of it is invested in VT. Some of this money should be used to finance affordable housing (as other states do; strong multipliers), renewables (Conn. River dams would have been a great match), and publicly owned telecom backbone. To his credit, Jeb Spaulding is moving in that direction, but it's a slog.

This has gone on way too long so I'll wrap up with just a few more: make higher educ. more accessible & affordable; expand technical assistance for small businesses; expand & improve the quality & affordability of child care / early education (essential for the labor market in addition to the other benefits); promote locally owned businesses (greater local multipliers and less likely to leave or sell out); promote employee ownership (helps with founder's transition, gives workers a stake, reduces likelihood of sell outs, etc.); and so on.  These all represent investments in the future, rather than short-term fixes.

Where will the money come from? Start with eliminating VEPC and cut way back on subsidies to the tourist industry (there is no way to measure the return on investment from the state's $ spent on advertising & marketing compared to the millions spent privately; plus, tourism creates low-wage jobs). Together, these two represent half of all annual state expenditures for econ. development.

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by: Doug Hoffer @ Sat Dec 08, 2007 at 15:01:03 PM UTC

[ Parent ]

from Colby's Broadsides blog.... (0.00 / 0)

One thing I do have to point out regarding leadership in economic development, Doug, is that the Dems really need a solid plan.  Michael Colby points out the kind of "vision" we're looking at under Dem leadership in this area in response to Symington's recent presser.  From my end, it almost looks like she had to come out with something on the heels of the VT Tiger Symposium and VT Chamber conference over the last two weeks.  

Here's Michael:

Speaking of Unfocused Dems: Vermont's Speaker of the House, Gaye Symington, a Dem, called reporters to her office yesterday to announce a whole new way of talking about business in Vermont. Wow. At first blush it looked like the Speaker was going to come out swinging and leave her usual meandering mush behind her. No such luck. Both at the little press event and in her "draft" written material, Symington showed all her - and her party's - usual timidity by stating over and over again that her thoughts and plans really weren't "finalized" yet. Well, Gaye, call us when you get it all worked out.

Here, for example, is how Gaye reaches out and grabs her audience with the beginning of her report:

   Attached is a still-evolving outline of my vision for opportunities for economic development in Vermont. This outline is a work in progress that I am using to solicit input and to encourage others to think about Vermont's economic development strategy.

Sorry, Gaye, but this whole thing reads like a really bad funding proposal. You're just fishing. And that might work for your other job as a fundraiser for the Intervale but - ahem - you're writing this as the Speaker of the House. And, in that capacity, people expect you to have a vision, not a "still-evolving outline of my vision." I mean, who's advising her on this stuff? We're not talking about some obscure notion here, either. This is economic development, and you're asking people to "think about it"? Yeah, Gaye, most of us think about it constantly - and we think about it very intensely when the bills need to be paid. Welcome to the discussion.

How about this, Gaye: Why don't YOU think about it and then come out swinging with a plan? And perhaps some vision of your own too. Oh yeah, and we'd prefer if it was a focused vision rather than an evolving vision.

The more I think about it the more I think Symington just put her finger on the ills of the Democratic Party as a whole: Evolving Vision. It's a problem. Worse, it's embarrassing and destructive.

Nate Freeman

Northfield, VT

natefreeman@gmail.com

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by: mydog @ Sat Dec 08, 2007 at 16:48:23 PM UTC

[ Parent ]

The Lexus and the Olive Tree (0.00 / 0)

Doug,

As always, a lot of great thoughts in here. I admire the underlying logic of what you are saying: that Vermont can pull itself up by its bootstraps.  However, I don't see how any of the measures you propose will enable this state to have career paths that will allow young people to remain in the state and provide a tax base to support the type of services Vermonters have grown accustomed to.  I think we have to have a couple of core industry clusters that generate the value that will justify the livable wages you want to see in this state.    

On taxes.  Do you have any data on the impact of local taxes as opposed to state taxes, particularly taxes on capital equipment and property?  I don't have the data, but my experience suggests that this could be a major issue.   For a company, it does not matter whether the taxes are local, state or federal.   As I said, tax stability is a very important component on capital projects.  I am not a tax or a finance guy, but have participated in a couple of high dollar capital projects and I can assure that tax is often a very important component in decision-making in a project that may only pay for itself in 10-20 years.      

Import substitution.  Now there is a concept that I have not heard too many people advocating for.  For decades, developing countries tried import substitution strategies as a means of addressing economic growth and balance of payment issues.  The problem with import substitution is that it simply doesn't work because it undermines comparative advantage - economies need to specialize to maximize value creation. It also makes domestic firms incredibly non-competitive. India spent 4 decades trying and only started to take off economically when it abandoned import substitution.  Vermont needs to generate value that it can export across the country and the world because it will always need to import a majority of finished goods and services.  I think Vermont has some huge opportunities in the forthcoming economy, but we have to position ourselves for them.    

I think the debate we are having is a healthy one and one that Vermont needs to have regarding the challenge of globalization.  Not to put words in your mouth, but you appear to be advocating an isolationist approach to the challenge of globalization, where the state needs to rely on its own resources to sustain itself and preserve its unique way of life.  I am looking at it the other way around: globalization represents a challenge, but also an opportunity for the state to develop an economic base that can sustain the values we both share.  

Tom Friedman drives me nuts, but I will concede the guy is good at metaphor.  In this case, it seems we are debating the Lexus and the Olive Tree.

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by: SPS @ Sun Dec 09, 2007 at 12:43:26 PM UTC

[ Parent ]

self-reliance (4.00 / 1)

To: SPS

1.  "I think we have to have a couple of core industry clusters that generate the value that will justify the livable wages you want to see in this state."

I never said otherwise. The question is whether we use taxpayer money for incentives or just let the market work. There is enormous risk in doing so. We can never be sure if the economic activity in question would have occurred anyway (the pesky "but for", which is not verifiable).

As I said, our best hope is to make the investments necessary to sustain & improve our foundation: workforce, infrastructure, and quality of life. If we build it, they will come (and stay).

2.  Local taxes: The history of the last three reappraisals in Burlington (and elsewhere) is this: residential property has increased in value much faster than commercial property. As a result, the percentage of total taxes paid by commercial property owners has declined every single time. The burden has shifted significantly in the last 20 years and businesses have been the beneficiaries.

3.  Import substitution:

a) "The problem with import substitution is that it simply doesn't work because it undermines comparative advantage - economies need to specialize to maximize value creation."

If the only consideration is profit, you're right. But "value" has to be defined more broadly. On paper, it's cheaper to manufacture things in China. But the price at the cash register is not the full cost of the goods. The actual cost includes the enormous amounts of energy required to ship goods half way round the world; the loss of jobs in the U.S. and the adverse impacts on families & communities; the bad labor conditions in other countries and the lack of reasonable environmental & product safety standards; and so on. [and BTW - I don't buy the notion that "cheaper" goods makes it all worthwhile]

And as for domestic goods, it is absurd that the energy required to move a head of lettuce from California exceeds the energy (calories) contained in the head of lettuce (especially as we are forced to get serious about greenhouse gases).

Comparative advantage is an important concept that is a sensible guide in many industries. But macro-economic principles that don't take account of real world impacts are not always in the best interests of people. And isn't that supposed to be the purpose of the "economy"? We cannot be slaves to abstract principles that are based on a demonstrably false assumption; namely, that such "efficiencies" will result in the greater good. It's not working. Profits rise but wages don't; income inequality grows worse; environmental damage increases; and so on. So why not respect the principle but have the courage to ask whether it is ALWAYS in our best interests?

BTW - Many of the countries that abandoned import substitution are completely screwed because they were persuaded to focus on commodities for export instead. The international commodity markets are brutal and prices vary all the time. The countries buy into Western production methods - heavy capital investments, less labor, more debt - so they have millions of displaced rural families who go to the cities where they have no work and the countries have no social networks or programs to help them. And of course Western agricultural practices require submission to the centralized regime of heavy equipment, intensive chemicals, and seeds, which they used to produce themselves (after centuries of developing seeds for their particular local conditions) but now must buy from one of only 4 or 5 corporations that control the world market. They are not the masters of their future.

b) "It also makes domestic firms incredibly non-competitive."

That assumes trade is "fair". We all know that's not true. Why should our communities be expected to "compete" with those with no fair labor standards or environmental laws? So-called "free trade" agreements are anything but. They have been written by and for multi-national corporations. We are a sovereign nation. We need trade but not at any price.

c) "Vermont needs to generate value that it can export across the country and the world because it will always need to import a majority of finished goods and services."

Agreed. But why can't we do both? Acknowledge the areas where we will never be "competitive" (e.g., auto manufacturing) but investigate opportunities for substitution where we have the necessary resources and where the multipliers work to our advantage (e.g., food, wood products, energy, some finance, etc.).

"Not to put words in your mouth, but you appear to be advocating an isolationist approach to the challenge of globalization, where the state needs to rely on its own resources to sustain itself and preserve its unique way of life."

I never said or implied isolationism. I never said we should hide from globalization. I simply said we should not be afraid to admit that globalization may not always be in our best interests and be open minded about alternatives. It need not be either - or and, frankly, I'm tired of people suggesting it is (you're not the first to say that so I'm not attacking you personally).

"Comparative advantage" and "globalization" are not magic incantations. They are constructs; not received wisdom. They should not prevent us from thinking about other ways to organize our society. If a system (any system) is not working to our advantage, we have an obligation to question it and discuss alternatives. And to paraphrase Barry Goldwater, "self-reliance in the defense of community is no vice".

Finally, the numbers don't lie. Our dependence on imported goods & services makes us terribly vulnerable to the vagaries of a system that could care less about the people of VT (think oil & gas imports, giant financial institutions, etc.). To the extent we can reduce that dependence, we reduce our vulnerability. It seems to me it would be imprudent not to consider our options.

BTW - Tom Friedman is a thoughtful guy but I prefer to bank on Paul Krugman. He started out as a fan of globalization and "free trade" but has seen the writing on the wall. It is not all roses and needs to be rethought.

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by: Doug Hoffer @ Sun Dec 09, 2007 at 16:27:51 PM UTC

[ Parent ]

Numbers certainly don't lie (0.00 / 0)

Doug,

On import substitution:   Import substitution was a catastrophe everywhere it is was tried - period.  Ghana and South Korea had the same standard of living in 1953.  Ghana adopted dependency theory and (as a consequence import substution).  Korea adopted a value-added export-based model.  Now, compare.

I find all the slamming on free trade among people who are otherwise liberals ironic.  The simple fact is more people have been lifted out of poverty by trade liberalization than ANY other intervention.  400 million in China, 300 million in India, not to mention places such as Chile, Eastern Europe and elsewhere.  those numbers don't lie.   Please let me know how many countries have lifted themselves out of poverty through import substitution....

Do you know who is really pushing to complete the Doha round at the WTO?  It is not, as you might think, big capital.  It is the G77 - the group of developing countries led by Brazil.  Why?  Because we are finally talking about liberalizing agriculture and other goods where developing countries can compete and win.  

Regarding environmental and labor standards: let's put the foot on the other shoe for a moment. Why should developing countries have to adopt our standards when we are ourselves adopted them only after we had largely completed the industrialization process?  Isn't this just another way for rich countries to protect their own at the expense of businesses and workers in developing countries?  Isn't this just another form of 'conditionality' where the rich countries impose their views and their values on everyone else?  If you talk to people in Africa or South Asia that is exactly what you will hear.  What am I saying is that none of these questions have easy answers.      

We Democrats often forget that the beast we rail against is the beast we created.  GATT (now WTO), the IMF and the WB were all created by Democrats - New Dealers even.  They created these institutions because in the aftermath of 2 world wars and a depression that the global economy needed Keynsian supports.  If you compare the last 60 years with the last 500, the improvements in human welfare have been astounding.   We Democrats ought to be celebrating that achievement.        

Does that mean there is still not a lot of work to do?  Of course, we must do better.  Does the free trade agenda need to be adjusted?  You bet.  America needs to invest a lot more in its social safety net to ensure that people can make transitions and that those that cannot are taken care of.   We also need to make sure that business transactions have other costs built in (eg carbon tax) to ensure that trade truly reflects costs.  To my mind, the global trade system needs to tweaked, not dismantled.  

Getting back to Vermont, I think saving some money and buying/investing local are all great things and I further agree that it is not an either/or situation.  However, global experience strongly suggests self-reliance is not on its own sufficient to build an economy that can sustain the types of social infrastructure we want to provide.  We need to generate and export value.  Profits may not be everything, but they do provide two provide the basis for two pretty important things: payroll and taxes.

On Krugman: He wrote the definitive Macro text that is used in every higher level macro course in the country.   Like me, he wants the free trade agenda adjusted, but I think he would be loathe to be associated with the term import substitution.  

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by: SPS @ Mon Dec 10, 2007 at 11:01:51 AM UTC

[ Parent ]

I'll try one more time (4.00 / 1)

With respect, you're not seriously suggesting that our choices are represented by Ghana or South Korea? Why must you keep assuming that it's black or white or that there are no other options?

Besides, there are lots of examples of successful import substitution right here at home. You may not see it this way, but one of the very powerful arguments for energy efficiency is that we reduce the amount of money leaving the state for imported electricity and various fuels. THAT is import substitution. BED's McNeil Plant (and a couple dozen schools) uses local/regional biomass rather than imported natural gas. THAT is import substitution.

Re. "free trade": I'm glad millions in China & India are getting out of poverty. But is it necessary to eviscerate the U.S. middle class in the process? [And BTW - I never suggested that import substitution would lift VT out of poverty. I said it would reduce our dependency on forces beyond our control. Thus far, you have not responded to that point.]

Moreover, when the U.S. industrialized, it was obvious to such "progressives" as Henry Ford that if he paid his workers a good wage, they could afford to buy one of his cars. China & India have immense potential for building their own domestic markets. Why can't they take a page from Henry Ford? If you think Americans are better off with lower paid jobs and cheap Chinese goods, I wager you haven't had to take a 40% pay cut recently.

Creative destruction sounds good but the transition can be pretty nasty (and beefing up the social safety net is not the same as giving people hope & dignity in their work).

As for environmental and labor standards, we are not trying to impose our "views" on developing countries to protect our own. First, these are not arbitrary or self-interested opinions. Saving the planet is not a "view", it's an imperative. Second, it would make more sense to help developing countries skip all the crap we went through and just give/sell the technology and expertise necessary for them to benefit from our experience with energy efficiency and cleaner manufacturing. And treating workers with respect is not a "view", it too is an imperative (and as history teaches, all of those societies will eventually demand those rights anyway so why wait?). Your take on this seems terribly short-sighted to me; and, frankly, like a rationalization. "Free trade" needs more than "tweaking".

As for the Dems, free trade, and the improvements in human welfare, I agree that much has been accomplished. But it wasn't that long ago (at least in this country) that ALL income classes grew together (a rising tide and all that). Those days are over. By looking at the last hundred years, you conveniently ignore the radical changes in the last 20 years. American workerss are taking it on the chin and I'm frankly disturbed that you would say (or at least imply) that it's OK because workers in China & India are moving forward. It concerns me that we can't acknowledge the problem and try to find a mutually beneficial strategy.

And finally, as I pointed out in The Leaky Bucket, if we substituted instate production for 10% of imported food, energy, and consumer finance, we would create thousands of jobs and millions in tax revenues. Exports are important. At present, however, our biggest export (by far) is cash. Please try to consider the possibilities.

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by: Doug Hoffer @ Mon Dec 10, 2007 at 22:40:11 PM UTC

[ Parent ]

Terminology (0.00 / 0)

Doug,

With respect, you need to choose your terminology more carefully if you want to be understood.  Import substitution is a subset of dependency theory - part of international macroeconomics.  What you are describing is essentially micro-economic, ie that people, firms and organizations should be compelled/encouraged to buy/invest more locally.  If you continue to use the term import substitution you are gonna send people straight to Ghana or India conceptually.  If you want to play the part of policy wog, get your terms straight.    

Second, the Leaky Bucket and your posts have a huge, gaping hole in their analysis: you focus only on goods.  Yes, Vermont imports a lot of goods, including foodstuffs, fuel, cars, tobacco (from your paper), etc.  What your analysis completely ignores is services and IP.  How would a company like IDX figure in your Leaky Bucket?  What about National Life?    

Third, you make a logical leap in your analysis that assumes we can channel savings on imports to buy locally.  In other words, a fuel efficiency program is great, but that won't translate to Vermont jobs because consumers may choose to utilize that savings in different ways.  Some may, indeed, use it to buy another $8/ gallon of Vermont milk.  Others, may use it to turn up their thermostats and take off a sweater.    

How are you going to compel people/companies to  buy/invest locally?  Oh, I see it in your paper: you want to use a tax policy.  In fact, you want to use a tax credit to encourage wealthy investors to invest locally (page 12)....  Hmm, I thought I was wrong for saying taxes weren't part of the equation?  It seems when you propose it, it is sensible, but when I propose it, I am merely mouthing old policy saws.

Lastly, please don't ever condescend to me (or anyone else on this blog) about taking 40% pay cuts.  I run my own company (a services business that you choose to ignore in your analysis) and if clients change their mind about the value of the services we provide, I'll take a lot more than a 40% cut.  so too, our staff who depend on the wages (quite livable, thank you) we are able to provide to our staff.   If you've run your own business (or NGO) you will understand how serious the responsibility to make a payroll is.  

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by: SPS @ Tue Dec 11, 2007 at 11:01:13 AM UTC

[ Parent ]

outside the envelope (0.00 / 0)

Your anger is your own but you should think before you lash out.

1.  I did not "ignore" services in The Leaky Bucket. If you actually read the report you would see that I addressed consumer credit, mortgage financing, and insurance investments (in addition to public pension funds). Indeed, it was not easy to estimate the flow of capital because no one tracks the "geography of debt" (most economists don't ask new questions; they just stick with the texbooks).

Furthermore, there was no reliable data on services that would have allowed me to identify the sources of and markets for VT services. The only reason I could do it for goods was because I lucked into the Commodity Flow Survey, which (to my knowledge) had never been used for this purpose before.  

And BTW - You wonder how services fit in. Here is an example, if instate agriculture production grows significantly, farmers will need to buy more inputs, including services. As an industry declines, the chain of vendors that serves it declines as well. And as it grows, that chain grows with it. To the extent services can be provided locally, providers will enter the market and/or expand to meet the increased demand. And the same is true for renewable energy, wood products, and other industries with potential for substitution. Just look at the growth in services for energy efficiency as an example.

2.  As for terminology, The Leaky Bucket has been the subject of discussion for years and, until now, nobody has had any trouble understanding what import substitution means. Indeed, Anthony Pollina discussed the concept repeatedly on the campaign trail and, to my knowledge, not one person ever said "gosh, are you talking about Ghana?" But these were just regular folks (who all got it by the way) rather than "policy wogs".  

3. Re. "savings" from substitution: As you point out, we cannot predict with certainty how Vermonters may spend the savings from energy efficiency. But the goal of import substitution is not "savings" per se (although that's a nice bonus, efficiency is an unusual case). The goal is to produce more locally for local consumption. THAT generates jobs & taxes.

4.  I never said we can or should "compel" people to buy local. I said we should use public funds and public policy to promote substitution whenever the numbers work in our favor.

5.  Re. taxes: As for your comment about my suggestion that we use tax policy to encourage instate investments by wealthy Vermonters, are you not aware of the 40% capital gains exemption? At present, it rewards investors regardless of where they invest the money. But there is no evidence that it works to the benefit of VT. So why shouldn't we say instead that you can have a break but only if you invest in VT? If so, we could at least measure the costs & benefits of such a policy, which we cannot do today.

And your apparent glee in stating that I looked to tax policy when I've said elsewhere that it's "not part of the equation" (your words not mine) is just silly. You're mixing apples and oranges. I've said that state business taxes are not a significant factor in location & expansion decisions. And they're not. But the issue here is tax treatment for (primarily) passive investors (capital gains). Their tax treatment is entirely different than corporate income tax. While some VT businesses may pay tax on capital gains when they sell a business, they would be protected under my proposal because the investments that gave rise to the gain were in VT. But that is not the same as paying state income taxes on profits while they operated the business.

I am puzzled by your continuing inability / unwillingness to consider the benefits of greater self-reliance. The multiplier effect is not wishful thinking, it's real. Every dollar that leaves VT for something we could produce here is a lost opportunity. Will it work for everything? Of course not. But I fail to see why we shouldn't have the conversation, do the analysis, and maximize the value of local resources. Why is it so threatening to you?

Note to GMD: Shrinking the layout ot these trailing posts may not be ideal when the comments are lengthy.

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by: Doug Hoffer @ Tue Dec 11, 2007 at 14:24:28 PM UTC

[ Parent ]

Doug re: lengthy comments (4.00 / 1)

Doug,

RE: "Shrinking the layout of these trailing posts may not be ideal when the comments are lengthy."

-----------
Click on the "Doug Hoffer's Page" in the upper right hand corner of YOUR screen and go to "your profile." There you will find a "comment display mode" box under "comment preferences." Pick the "big tent" option or whatever its called.

Too many choices, but good luck!

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by: Joseph FX Mahoney @ Tue Dec 11, 2007 at 16:44:40 PM UTC

[ Parent ]

Doug & SPS -- time for a new diary (3.00 / 1)

I was about to start one yesterday -- but you guys are leading the charge, to why not start a new economics diary?

Nate Freeman

Northfield, VT

natefreeman@gmail.com

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by: mydog @ Tue Dec 11, 2007 at 16:58:41 PM UTC

[ Parent ]

getting too emotional (4.00 / 1)

just a procedural comment regarding the tone -- both of you are two smart to take it down to a rant.  Here' my unsolicited observation (albeit my own -- and I've been wrong before):

Doug, I think you're reading and responding too much to perhaps sarcasm, but what's not reading to me like anger.  SPS has made some legitimate points from the point of view of private enterprise, and frankly, I don't see you acknowledging that.  It might be more effective to perhaps say from time to time, "gee I hadn't considered that," or "maybe this is something that needs to be covered more," instead of refuting point by point by citing yet another study.  As a student of public administration/policy and a small business owner, I'm just not seeing your willingness to come out of the policy bubble far enough to see that, for example, Anthony Pollina talking about "The Leaky Bucket" on the campaign trail and people not having a problem with that verifies that you are using the terminology correctly.  Frankly, when a politician talks about economic concepts, it might be better to remain a little suspect.  Also, I have to side with SPS on the lack of connection between cost savings from energy efficiency (or cost savings from any area for that matter) and people buying "locally."  Local cost savings just can't be tied together, and to use the first in order to set a "goal" for the second is simply wishful thinking.  Buying locally will be driven in the same way other purchasing decisions are made:  cost, convenience, availability, or successful marketing.  Add to that, it is impossible to make huge generalizations about businesses whether these are products or services.  Some services can't be outsourced and must be local -- think dentistry, for example.  (And it happens there's a shortage of dentists both statewide and nationally, so why not promote that particular industry?)

SPS -- Ok, your comment asking Hoffer to please not be condescending was, in my opinion, a little much.  Maybe we can assume that, here of all places, we differ in our opinions but don't disrespect each other purposely.  Since we all know that type print is a poor way to communicate tone, how about we all take a breath before we assume the worst from the other party.  

Ok -- so maybe I don't need to play the role of mediator here, and maybe I've pissed off both of you in the process of doing so.  But I've already told you both how much I enjoy your discussions, right?  I'm learning from both of you, as I'm sure others are, too.  You both have an audience, and when you go back and forth you share the audience.  Just think about it as if you are sitting in a panel discussion with people attending out of legitimate intrest.

Nate

Nate Freeman

Northfield, VT

natefreeman@gmail.com

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by: mydog @ Tue Dec 11, 2007 at 17:26:31 PM UTC

[ Parent ]

efficiency programs (0.00 / 0)

Regardless of where people spend their savings, efficiency programs by their very nature involve local spending. We're talking about local workers getting paid to do the labor in the customers' homes and businesses, so that even if some of the products being delivered aren't manufactured in Vermont, the labor comes from here and the wages are paid (and probably spent) here.

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by: Jack McCullough @ Wed Dec 12, 2007 at 04:05:38 AM UTC

[ Parent ]

I don't know about Ghana ... (0.00 / 0)

but I do know South Korea was given a guaranteed and often subsidized market to export to.

As part of the US' post-WWII anti-USSR/China policy, nations around the Asian Pacific rim (most notably South Korea, Japan and Taiwan) were given one way access to the United States markets. No reciprocation was requested for decades.

Yes South Korea built up a solid exporting side, but they did not do that as a result of anything that could be defined as "free" trade.

And make no mistake: Koreans themselves aren't unanimous in the wonders of "free" trade:

United States and South Korean negotiators struck the world's largest bilateral free trade agreement on Monday, giving the United States a badly needed lift to its trade policy at home and South Korea a chance to reinvigorate its export economy.

. . .

As South Korean workers and farmers protested in the streets - on Sunday, one man even set himself on fire - negotiators haggled to the end early Monday.

("US and South Korea in Landmark Trade Deal", NY Times, 04/03/07)

South Korea's export success was not due to any modern day concept of "free" trade.

It's over at http://ramabahama.net ... only it's still under construction (but so is the rest of my life)

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by: Rama Schneider @ Tue Dec 11, 2007 at 09:35:28 AM UTC

[ Parent ]

Absolutely (0.00 / 0)

South Korea is a huge success and illustrative of how an export driven economy can create jobs and political stability.  And, while it was achieved under the auspices of GATT, you are right in pointing out that S. Korea protected a lot of domestic industries.  That made sound policy sense for both countries because it allowed S. Korean incomes to grow to the point where they can now actually afford to buy goods and services from the US in sufficient volumes that sustain the livable wages we want. Hence, the free trade agreement and resistance from South Korean interest groups.

Where I think the trade liberalization agenda has gotten off the rails is that governments have failed to adjust their policies to help employees adjust (or be compensated for) for the disruption that it causes.  Trade liberalization demonstrably improves welfare, but those benefits do not accrue equally or fairly.  In general, investors and the highly-skilled benefit disproportionately.  We need to substantially strengthen our social safety net to ensure that workers displaced by trade liberalization have new opportunities afforded to them or, in the case of older workers, receive sufficient compensation.  

Trade liberalization had a broad constituency after WWII because no one wanted to go back to the bad old days.  The memory of tragedy was still fresh.  Now, those memories have faded, thus shrinking the constiuency at the same time globalization is causing increased disruption.  In any country, trade liberalization needs a broad constiuency that accrues benefits from it.  I think this is where the 'free trade' crowd has missed the boat.

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by: SPS @ Tue Dec 11, 2007 at 11:52:08 AM UTC

[ Parent ]

Have to agree on telecoms infrastructure (0.00 / 0)

Telecommunications in the vast majority of the state is a joke.

There are many jobs high tech folks can't do without it. You simply cannot do most otherwise telecommuting-friendly jobs without decent internet and cell reception. I've tried. It's why either my spouse or I has had to work out of state for the entire time we've lived in the state.

Without bringing a single new business to the state, the state's employment picture could be noticeably improved if there was reliable access to a decent telecommunications network.

Beware the Everyday Brutality of the Averted Gaze

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by: mataliandy @ Tue Dec 11, 2007 at 01:10:55 AM UTC

[ Parent ]

Send this to the St. A. Mess.? (0.00 / 0)

Dear Rep. Kitzmiller,

I do hope you will, if you have not already done so, send this defense of your stance to the Messenger. Publisher and editorialist Emerson Lynn is well known for taking a Republican point of view, but he is also well known for publishing letters without limit on length, which several legislators of both parties have taken advantage of.

His email (and I suggest you send it directly to him): emerson@samessenger.com.

Thanks for your principled stand.

NanuqFC

PS to Doug Hoffer: Gosh, Doug, instead of writing off an entire county because its lone daily (and, yes, all but two of its legislative delegation) is conservative, you could confine your negativity to the offender in question.

In a Time of Universal Deceit, Telling the TRUTH Is a Revolutionary Act. -- George Orwell

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by: NanuqFC @ Fri Dec 07, 2007 at 23:52:12 PM UTC

Kudos to Kitzmiller (4.00 / 1)

The thing I will always remember about Warren Kitzmiller is his radio ad in which he says:

"... Onion River Sports:  on historic Langdon Street in Montpelier."  

How could tiny, short, cramped Langdon St be any more historic or memorable than State or Main?  By virtue of Kitzmiller's marketing campaign, that's how.  

So here's a hat tip to you, Rep. Kitzmiller, for making Langdon Street, Montpelier a famous place for three generations of bike, ski, and hiking enthusiasts beyond your tenure as a business owner.  

Just today I once again heard Governor hammering Vermont as the highest taxed state in the country.  So maybe we should ask Emerson Lynn and all of the Vermont Tiger folks what they prefer for an economic development slogan:

"Vermont:  Highest Taxes in the Country." -- Governor Douglas

or;

"...on Historic Langdon Street, in Montpelier."  -- Business owner and State Rep. Warren Kitzmiller?

You know where my vote goes.

Nate Freeman

Nate Freeman

Northfield, VT

natefreeman@gmail.com

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by: mydog @ Sat Dec 08, 2007 at 00:32:56 AM UTC

[ Parent ]

Update (0.00 / 0)

Rep. Kitzmiller's reply to Emerson Lynn's taking his comment out of context was published in the letters section of today's St. Albans Messenger -- in full without editing or censorship.

NanuqFC
In a Time of Universal Deceit, Telling the TRUTH Is a Revolutionary Act. -- George Orwell

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by: NanuqFC @ Sun Dec 09, 2007 at 02:23:49 AM UTC

[ Parent ]

to be clear (0.00 / 0)

To: NanuqFC

Your assumption that I was "writing off an entire county because its lone daily" is both incorrect and a bit of a leap. I was referring to the Messenger. I thought that was clear but apparently not.

Also, I wonder about your characterization of my comments as "negativity". Interesting choice of words in the context of this discussion. It was the Messenger that was - by all accounts - negative. I called them on it. How does that make me "negative"?

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by: Doug Hoffer @ Sat Dec 08, 2007 at 00:38:36 AM UTC

SPS & Hoffer (0.00 / 0)

gotta tell you both -- I really enjoy your discussions.  Hard hitting, fact-based, and knowleldgeable perspecties (SPS from private sector, Hoffer from public administration).

For me, a debate is rarely about who's "right"; it's about what we all learn in the process.  I'd just like to acknowledge that both of your contributions to GMD help provide good ideas, concepts, and perspectives in both policy-making and private enterprise.  Who's right?  Who cares.  Each of us takes what we will from the discussion.

Nate

Nate Freeman

Northfield, VT

natefreeman@gmail.com

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by: mydog @ Sat Dec 08, 2007 at 16:27:03 PM UTC

Right back at you (0.00 / 0)

Nate,

You've done a great job of putting economics back on the table at this blog.  

Steve

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by: SPS @ Sun Dec 09, 2007 at 12:46:13 PM UTC

[ Parent ]

Was it off the table? (0.00 / 0)

Did I miss a memo?

Musician, Web Designer, Photographer

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by: JulieWaters @ Sun Dec 09, 2007 at 14:39:33 PM UTC

[ Parent ]

not to this degree (0.00 / 0)

At least not by me, except for an occasional rant about the "Next Generation" commission (bleh) or somesuch.

Nullius perfectus est

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by: odum @ Sun Dec 09, 2007 at 15:33:36 PM UTC

[ Parent ]

No (1.00 / 1)

That would be impeachment, right? ;)

You can read JD's latest at five before chaos. Politics. Godlessness. Music. Films of questionable quality. It's all there, folks.

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by: JDRyan @ Sun Dec 09, 2007 at 17:39:38 PM UTC

[ Parent ]