Category Archives: Economy

GlobalFoundries: Too big to fail?

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Chittenden County is blessed — and a little bit cursed — by the presence of a large high-tech employer: GlobalFoundries, formerly d.b.a. IBM. The Essex facility is a major driver of the area’s economy, and the entire state’s economy for that matter.

And GlobalFoundries knows this, and they seem to know they have us over a barrel.

This is my inference based on a new report by the Associated Press’ master gardener Dave Gram, who has used public-records requests to discover the extent of GF’s demands on the state.

We already knew about the questionable $1 million from the Enterprise Fund. Gram now brings us tidings of a $17 million highway project that GF wants fast-tracked. It would involve improvements on Route 22A, which happens to be the most direct route from the Burlington area to New York State. (22A goes straight through downtown Vergennes. Hope you like your new highway, Vergennians!)

But otherwise it’s of little utility to intra-state traffic. For general transportation, trade and tourism puposes, improvements to US-7 would be more efficacious. But I have a feeling that what GlobalFoundries wants, GlobalFoundries will get.

(Now, if GF can convince New York State to build a decent highway from the Vermont border west of Rutland to I-87, then that would be a great benefit to the western Vermont economy as a whole. If they can do that, then our investment in 22A would be a worthwhile tradeoff.)

GlobalFoundries also wants state backing for “payments to GlobalFoundries from the Regional Greenhouse Gas Initiative, a multi-state pact that spins off money to states with a low carbon footprint.” Gram’s report doesn’t go into the reasoning behind GF’s request; in the absence of more information, I have a feeling that there are more pertinent uses for the money.

But hey, GlobalFoundries is a yoooge employer, and its loss would cripple Vermont’s economy. We may not have much choice.

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Our favorite Taxation Imp strikes again

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As is customary on Thursdays, yesterday’s edition of the Burlington Free Press* once again was graced by the comedy stylings of Art Woolf, Vermont’s Loudest Economist. This time, Art was letting us know just how difficult it is to be rich.

*Newsstand price now a DOLLAR-FIFTY!!! for a few pages of wire copy and recycled USA TODAY “content.” I’d like to see Professor Woolf’s cost/benefit analysis of that little bargain.

No, seriously. The One Percent have it rough. Here’s how it starts.

Rich get richer, pay more taxes

In 2014, the state collected $650 million in income taxes from Vermonters. High income Vermonters continue to pay a very large share of that.

Well yeah, because they make most of the money.

He goes on to break down tax collections by income bracket in a way that emphasizes just how much we peasants are benefiting from the forced largesse of Our Betters. Which, if you consider state income tax in isolation, is true; the more money you make, the more taxes you pay.

But when you consider the entire burden of state and local taxes, you flip the script. Here’s a handy chart from the Institute on Taxation and Economic Policy (ITEP), showing Vermont’s total tax burden.

ITEP chart

That’s right. In Vermont, the rich get off easy and the middle class takes it in the shorts.

See, our income tax is reasonably progressive, but our other primary taxes are not. Sales taxes are strongly regressive, hitting the poorest people hardest. Property taxes slam the middle classes. Add ‘em all up, and that chart is what you get.

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Interlocking investments: a mockery of “free markets”

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One of my core principles here at theVPO is:

There is no such thing as a “free market”

This is my response to conservatives who natter about how the “free market” will fix anything, from health care costs to poverty to global warming. It might be true in the pages of Ayn Rand, but nowhere else.

I’ll get to my reasoning in a while. But first, a People’s Exhibit to present, courtesy of those pinko fellow-travelers at The Economist.

In the January 23,2016 issue, there’s an article about the effect of low-low oil prices on airfares. The surprising conclusion: don’t expect any bargains in the Unfriendly Skies. This is true despite the fact that domestic carriers are raking in the dough.

On January 19th Delta kicked off the results season for the airlines, announcing record fourth-quarter profits and forecasting that first-quarter margins in 2016 would be twice as high as in 2015. Analysts also expect its rivals to report bumper earnings for the most recent quarter.

Prices went up when oil shot through the roof. Why aren’t they coming down now?

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The mass exodus myth

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Vermont faces a demographic challenge. Our population is stagnant and getting older. We have fewer school-age kids, which drives up the per-pupil cost. We have fewer young adults to invigorate the workforce and pay forward the costs of retirement and health care for older Vermonters.

That is true. But there’s a popular myth about why that’s true. Take it away, Ethan Allen Institute’s Rob Roper:

The fact of the matter is that Vermont’s progressive tax, regulatory, healthcare, land use, and energy policies are driving up the cost of living, and driving our young, educated workforce out of the state. Who wants to work or start a business or put down roots in a state that punishes success and whose guiding governing principle is to redistribute what you earn to someone else?

The assumption beneath the thickets of dogma: young people are fleeing Vermont. And that’s not true.

Here’s the truth. Young adults are highly mobile. Many of them do leave Vermont. However, an almost equal number move in. (More on this in a moment.)

So why do we have so many fewer people aged, say, zero to 35?

Because, for a long time now, Vermont has had very low birthrates. The average female Vermonter has about 1.5 children during her lifetime. Replacement level is 2.1. This has been true long enough that we are losing ground in the younger demographics.

That’s it. Not regulation or taxes or education costs or business climate or cost of living or Peter Shumlin’s nose. Simple and straightforward: not enough babies.

And now let’s see some actual figures, as opposed to conservative wishful thinking, on whether people are actually fleeing Vermont.

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Socialist Canada: Land of opportunity

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Gee, maybe this is the reason for Vermont’s demographic crisis.

You know Canada, that country to our north? The socialist nightmare with high taxes, a robust social safety net, single-payer health care and tough regulations on the financial sector?

Well, for the Millennial generation, it’s a lot better place to live than the United States. This, according to a study by TD Bank, which as far as I know is not a commie-pinko front organization. So maybe our kids are all moving north.

Canadians aged 25 to 34 are more likely to have jobs than Americans of the same age (nearly 80% are employed, compared with less than 75% of Americans). American millennials are worse off than their compatriots from Generation X (the cohort that came just before them). In Canada millennials’ household incomes are 16% higher. Just over half are homeowners, compared with 36% in the United States.

Huh. I guess nobody told them they’re being downtrodden by an oppressive regime.

And why do young-adult Canadians fare so much better? No, sorry, it’s not Stephen Harper’s devout efforts to turn his country into a free-marketeer’s wet dream. In fact, Millennial prosperity exists precisely because of Canada’s democratic socialist blots upon economic opportunity.

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If everybody’s leaving, why are most of the moving vans inbound?

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The new year brings a seemingly never-ending flood of 50-state rankings. Some, assembled by pro-business interests, tend to rank Vermont near the bottom. Others, like Politico Magazine’s broad-based quality-of-life mashup, put Vermont near the top. Number 3, in the case of Politico.

Well, here comes United Van Lines with its own 50-state ranking, “which tracks customers’ state-to-state migration patterns.” And contrary to the standard Republican talking point — nobody wants to live here because taxes — Vermont comes in near the top. Number 3, as a matter of fact.

The United ranking is based on one single criterion: where are the moving vans headed? And in Vermont last year, there were a lot more inbound than outbound. Here’s the map.

Screen Shot 2016-01-27 at 1.04.39 AM

Okay, so how do we square this with our flat population and very real demographic crisis?

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We have displeased our benevolent overlords

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Hey, remember when Vermont was ranked third in the nation by Politico magazine as a place to live?

Well, here comes the flip side, courtesy of none other than the American Legislative Exchange Council (ALEC), that overflowing cascade of Kochian “economic liberty” bushwa. It ranks Vermont #49 in “economic outlook,” which is a very interesting way to put it. Because what they are ranking is not actual, tangible economic health — it’s how the state is poised for intangible future prosperity. And it is measured in terms of taxation and regulation.

But wait, it gets better. The lead author of the ALEC report is none other than Arthur Laffer. Yep, the guy behind the Laffer Curve, the absolutely unproven bit of dogma that claims you’ll create more revenue by cutting taxes, because the tax cuts will stimulate a cornucopia of prosperity.

Well, not only is it absolutely unproven; when it’s been tried in the real world, the results have been dismal. The Laffer Curve isn’t a coherent, evidence-based economic practice; it’s the money shot in a right-wing porn flick.

In case you think I’m overstating my case, let’s look at a state deemed praiseworthy by ALEC.

Kansas.

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Gosh, maybe Vermont isn’t such a bad place after all

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We hear a lot of bad news about Vermont, especially from Republicans. They seem to be hoping Vermont will fail, based on their constant bad-mouthing. (Interesting that a plank of Phil Scott’s economic platform is more resources on marketing the state as a place to do business. If Vermont sucked as bad as the VTGOP thinks, any such marketing would be, ahem, lying.)

And then once in a while we get a ray of sunshine piercing through their doom and gloom. Today comes Politico Magazine’s third annual ranking of the 50 states (plus D.C.) in “State of the Union” terms. i.e. which states are in the best (and worst) shape overall.

And where do they rank Vermont?

Third.

Third best in the country.

It should be pointed out here that Politico isn’t exactly leftist. It is, in fact, a bastion of conventional thinking. And this ranking was based on a wide variety of factors: health, education, financial security, unemployment, crime, overall well-being, prosperity. Fourteen categories in all.

Nice little state we’ve got here, eh?

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The million-dollar greeting card

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Okay, here’s my promised post about the Vermont Enterprise Incentive Fund.

It’s garbage. It stinks. It’s an insult to everyone, liberal or conservative, who believes in good government.

It needs to die. Or at the very least, it needs a complete overhaul. Strong words, but I can back ’em up.

The Enterprise Fund, for those just joining us, is a program of state grants for businesses moving to, or making significant investments in, Vermont. It is meant to be used in “unforeseen or extraordinary circumstances.” Those are Governor Peter Shumlin’s own words, quoted from his own press release.

The Fund was most recently deployed last Friday with a $1 million grant to GlobalFoundries, in support of a $72 million investment in its Essex Junction facility. In a number of ways, this grant seems at odds with the Fund’s stated purpose. Let’s start with this: GlobalFoundries announced the investment in October. By November, it had already invested $55 million of the money.

So, absent a time machine, how could an investment made in October be contingent on a state grant approved three months later?

Even if you ignore that anomaly, if the investment is already well underway, how in the world can you classify it as “unforeseen or extraordinary”?

Well, you can’t. In the words of State Auditor Doug Hoffer, this grant was “basically a thank-you note.”

A million-dollar thank-you note. Next time, maybe just go to Capitol Stationers. They have a very nice selection.

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Phil Scott is right about an “affordability crisis.” He is dead wrong about the causes.

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Our Lieutenant Governor is basing his gubernatorial campaign on “the affordability crisis,” the very real phenomenon that has more and more Vermonters pinching every penny and losing ground in areas like saving for retirement and college tuition. Of course, being a Republican, he defines “the affordability crisis” as a matter of burdensome taxation and enterprise-crushing government.

Those may be contributing factors, but they’re not much more than cherries on our affordability sundae. The real, fundamental problem is wage stagnation for the middle and working classes. They’re getting the big squeeze from a financial system that’s benefiting the wealthy at everyone else’s expense. Tax pressures on working Americans are a relatively small factor in the affordability crisis.

And Phil Scott’s agenda will do little to address the fundamental challenges we face. Some of his ideas would actually make things worse.

Evidence galore for the real affordability crisis can be found in Public Assets Institute’s recent report, “State of Working Vermont 2015.” The topline:

… the gross state product as grown since 2010, with a slight dip in 2013. But the rewards of Vermont’s recovery concentrated at the top of the income scale, while everyone else lost ground. In the decade since 2004 median household income fell from $58,328 inflation-adjusted dollars to $54,166.

If the benefits of economic expansion had been shared equally, PAI reports, “median household income would have been nearly $62,000 in 2014 — $7,680 higher than it was.” Under that scenario, we wouldn’t have a middle-class “affordability crisis.”

And it would be impossible for Phil Scott or anyone else to cut taxes enough to make up for that.

Coming up: Charts!

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