Category Archives: Economy

Nobody’s figured out how to make this economy work

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Vermont Republicans are fond of slamming the Shumlin Economy, cherrypicking statistics that make the Governor’s record look bad. They criticize his policies as crippling to economic growth and middle-class prosperity. (And now that Bernie Sanders is running for President, they try to blame all the ills of the last three decades on him, even though he hasn’t been running the place and would clearly have adopted very different policies if he had been. Protip to Republicans: correlation is not causation.)

And yes, in spite of very low unemployment, it’s inarguable that the recovery has been slow and spotty for most Vermonters. Their purchasing power has remained stagnant. But this isn’t just a Vermont phenomenon, and if you look at other states with conservative governments, they’re failing at least as badly as we are.

Last Friday, Talking Points Memo posted a piece about how four Republican governors are seeing their presidential aspirations undercut by severe budget problems back home — problems attributable to the failure of their policies to hotwire their economies.

The basic concept is as cartoonish as when it was first sketched on a napkin by Arthur Laffer: cut taxes and the economy will flourish. Revenues will rise, as government takes a smaller slice of a growing pie. Business, freed of its public-sector shackles, will lead us into a prosperous future.

Trouble is, it doesn’t work. In Louisiana, WIsconsin, Ohio and New Jersey, Republican tax-cutting policies have failed: all four states have sluggish economies and huge budget shortfalls. It’s worse on both sides than anything Peter Shumlin has inflicted on the state of Vermont.

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Vermont: Hellhole or paradise?

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There’s something of a disconnect on the Republican side of things when it comes to the health of Vermont’s business climate. On the one hand, it’s so disastrous that businesses are closing left and right, the rich are scoping out tax havens, and regular old workers are, in the words of Burlington school board member (and spectacularly unsuccessful House candidate) Scot Shumski’s Twitter feed, “fleeing” by “the thousands.”

Hardworking Vermonters in full flight mode

Hardworking Vermonters in full flight mode.

Which you’d think would show up in our Census figures, but never mind.

Funny thing about the notion that Vermont is a horrible place to do business. During the past Legislative session, Republicans threw their weight behind a proposal that came out of Lt. Gov. Phil Scott’s series of “economy pitch” sessions: the need for a marketing campaign that promotes Vermont as a great place for budding entrepreneurs and relocating businesses.

Well, which is it? A hellhole of taxation and regulation that doesn’t give a damn about the needs of business? Or a great place to work that just needs an image tweak?

Sorry, it can’t be both. If Vermont is really such a bad place for business, then you won’t attract entrepreneurs with catchy slogans and web videos. And even if you do attract some, won’t you be guilty of false advertising?

In truth, conservatives do damage to Vermont’s image with their constant drumbeat of negativity. Constructive criticism and new ideas are fine; across-the-board trashing is not. When Phil Scott launched his economy pitches, I was skeptical. I still don’t think they made a huge difference, but they did accomplish something important: they turned the conversation in a positive direction.

That’s a good thing for our political discourse. But it does undercut the right-wing narrative about Vermont.

VEGI: A step in the wrong direction

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Sometime this week, the state senate will take up S.138, an economic development bill that includes a taxpayer-funded incentive for businesses to create crappy jobs.

Tough assessment? I don’t think so. The bill allows employers to pay its workers less and still qualify for state job-creation incentives. Currently, cash awards from the Vermont Employment Growth Incentive program (VEGI) require that employers pay at least $14.64 per hour. S.138 would lower that minimum to $13.00 per hour — the Joint Fiscal Office’s standard for a “livable wage.”

Well, that’s the livable wage with significant caveats. VTDigger’s Erin Mansfield:

The $13 per hour figure assumes two adults living together in a two-bedroom home, who share expenses, have no children, and have employers that pay 80 percent of health insurance costs.

Problem: that description doesn’t apply to an awful lot of working Vermonters. The consequence: those state-funded jobs leave full-time workers poor enough to “qualify for thousands of dollars in annual assistance,” according to economist Tom Kavet in a report to the legislature’s Joint Fiscal Office.

So we’d be paying companies to put workers on public assistance. This is… progress?

The downward expansion of VEGI is “expected to cost the state between $10 million and $25 million.” Your Tax Dollars At Work.

Kavet’s report leaves no doubt about the dubious value of that public investment:

The Shumlin administration’s plans, Kavet said, “serve to diminish the public return on investment from this program by lowering standards, eliminating basic fiscal controls, or allowing public subsidies when they would not previously have been allowed.”

Commerce Secretary Pat Moulton defends the proposal with the kind of language you usually expect to hear in Texas or Mississippi:

Moulton said she would rather employ a Vermonter at $13.50 per hour than let the jobs go elsewhere. Employees can move up from lower-paying jobs, she said.

“We’re competing globally for jobs. We’re competing regionally for jobs,” Moulton said.

I understand the harsh economic realities of our troubled times, but if you ask me, this is a bad idea. I don’t want my tax money being spent to underwrite dead-end jobs. And I’d love to know what kind of corporate lobbying went into this ill-considered proposal.

Shumlin’s promise problem

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On Thursday, Governor Shumlin held one of those feel-good “press conferences” so beloved by politicians everywhere: the activation of a new cell tower that fills a notorious gap in coverage on I-89 in Richmond.

However, the media wasn’t quite as universally fulsome as the Governor hoped. The Burlington Free Press’s headline was just what Scott Coriell wanted:

Cellphone dead spot in Richmond area eliminated

But VPR and WCAX sounded variations on the same mixed message. VPR:

Shumlin Marks Slow Progress On Cell Service Expansion

WCAX: 

Cell service slowly expands across Vermont

Both accounts inconveniently resurrected a decree from Shumlin’s first day as Governor:

“Today I am proud to launch Connect Vermont, an initiative to deliver by 2013 my promise of high speed Internet access and cell service to every corner of our state.”

Which is something he should never have said, but can’t resist saying. Shumlin loves the bold pronouncement, the courageous initiative. And when it works, as with Tropical Storm Irene coverage, it’s tremendous.

And when it doesn’t, it erodes his reputation for honesty and effectiveness.

Getting cell service and high-speed Internet to a place with a tiny population and unfriendly topography is a terribly difficult job. You need lots and lots of expensive infrastructure, and Vermont is short on potential profits to glean from all those lines and towers.

Plus, in every small town there’s tenacious opposition to any technological intrusion, no matter how temporary or thoughtfully sited.

Given all of that, there’s no way in hell that any governor could have made cell service and high-speed Internet universally available in three years’ time. The administration has actually done a decent job; Public Service Commissioner Chris Recchia says wireless coverage now reaches 92% of Vermont homes, up from 85% when Shumlin took office. The low-hanging fruit had long ago been plucked; every bit of that 7% improvement was a challenge.

With all our isolated houses down all our long winding dirt roads, we may never reach 100%. And that’s okay; nobody who lives way out in the boonies should expect all the comforts of civilization.

The only problem, really, was Shumlin’s audacious promise.

Similar story with Vermont Health Connect. It was behind the eight-ball from day one for reasons that had nothing to do with Shumlin’s competence; the complexity of the job and the long delay caused by the court challenge to the Affordable Care Act meant that the national exchange and Vermont’s faced incredibly short timelines and monstrous programming challenges. Delays and bumps in the road were inevitable.

But Shumlin’s promises made him appear untrustworthy, and his administration incompetent.

It’s doubtful that Shumlin can fundamentally change his style at this point. Nor should he; his ambition and decisiveness have often served him well.

They are his strengths. They are also his weaknesses.

The nice and the necessary

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Congrats to the House Republican Caucus, which finally came up with something like a budget plan, on the very day the House Appropriations Committee passed a budget. Three observations to begin:

— The committee vote was 11-0. Even so, the Republicans were lambasting the budget even before the vote was taken. Are the committee’s Republican members hypocrites, or is it harder to be a simple-minded partisan when the rubber hits the road and you’re in a small room with your Democratic colleagues, than when you’re facing the camera with fellow Republicans?

— The Republicans clearly didn’t take the budget-writing process very seriously, since they waited until Approps had finished its work before offering a single specific cut. Even worse, during the process Republicans frequently objected to cuts proposed by Democrats — again, without suggesting alternatives.

— The Republicans’ budget plan is unworkable on its face. Its major initiative is a call for zero growth, but that’s (a) impossible because some programs are growing, like it or not (Lake Champlain cleanup, for instance), and (b) an abdication of the Legislature’s responsibility to draw up a budget. The responsible course, as Approps chair Mitzi Johnson has pointed out, is to fulfill the legislature’s duty and make the hard choices. Across-the-board slashing is the coward’s way out.

The GOP caucus did identify some cuts they’d like to make — finally. Most of them are short-sighted as well as mean-spirited:

The cuts [House Minority Leader Don] Turner put on the table Monday include eliminating grants to substance abuse recovery centers, scrapping a childcare subsidy for poor mothers, cutting funding for state colleges by 1 percent, and taking $5 million from a fund that would otherwise provide college aid to Vermont students.

Republicans also say spending reductions on items such as the renter rebate, financial assistance for health insurance and the Vermont Women’s Commission are preferable to increasing revenues that would otherwise be needed to fund levels recommended for those programs in Gov. Peter Shumlin’s budget.

Okay, let’s make it harder for addicts to get clean, harder for poor mothers to hold down a job, make higher education less affordable, and make health insurance less accessible. All those cuts would save money in the short term, but cause even more expensive social damage in the long term. The Democrats are trying to walk a fine line, and craft a budget that’s not fiscally irresponsible while still helping to make Vermont a better place to live.

Which brings me to something that Senate Minority Leader Joe Benning said last Friday on The Mark Johnson Show. I don’t have the exact quote, but the gist was, “There are things that are necessary, and things that are ‘nice.’ At a time like this, we cannot do the things that are ‘nice.'”

That sounds good and responsible, but the devil is in the definitions.

Do you think low-income heating assistance is nice or necessary?

How about broadening access to health care? A social obligation, or an extra?

Let’s talk substance abuse treatment, at a time when Vermont is in the throes of an addiction epidemic. Necessary or nice?

The good Senator apparently believes all these things fall into the “nice” category. Many of us don’t agree.

Okay, now let’s look at some items that aren’t on the Republican cut list — and weren’t on the Democrats’ either, for that matter. Necessary or nice — you make the call!

— The state giving $2.5 million to GlobalFoundries, a move that will do nothing to keep the company in the state. On a worldwide corporate scale, that’s nothing. It amounts to a burnt offering meant to propitiate the corporate gods. And it takes a big leap of faith to think it’ll have any effect whatsoever. Necessary?

— The state continuing to let unclaimed bottle deposits go to bottling companies. That’s a $2 million item, I’ve been told. Is that a necessary giveaway? Hell, I wouldn’t even class that one as “nice.” “Noxious” is closer to the mark.

— When ski resorts purchase major equipment, they don’t have to pay sales tax. That’s another $2 million a year. Is that necessary, in any definition of the word?

— For that matter, we’re letting the ski industry make a fortune thanks in large part to bargain-basement leases of public lands. The industry is understandably loath to reopen the leases, but there are ways to get it done. Instead, we’re letting them ride. Necessary? Hell no. Nice? Only for the resort owners.

— Vermont is one of only a handful of states that exempts dietary supplements from the sales tax. Nice or necessary?

In addition, the state gives quite a bit of money in small grants to private and corporate groups. Here’s a few examples:

— The Vermont Technology Alliance gets a $52,250 grant. Why?

— The Vermont Captive Insurance Association gets $50,000 to pay for “promotional assistance.” I realize the industry is a strong positive for Vermont, but the grant is certainly not necessary.

— The Vermont Ski Areas Association gets $28,500. This is the same group that refuses to reopen the leases. Why are we rewarding their intransigence?

That’s just a few I happen to know about. I’m sure there’s lots more. Are grants to industry “necessary” or “nice”? If we’re asking the poor and downtrodden to take major hits to the social safety net, couldn’t we ask our industries to accept at least a haircut?

And if we want to promote business in Vermont, why not take back all these penny-ante grants, put part of the money into a coordinated statewide campaign (like the one proposed by Lt. Gov. Phil Scott’s economic-development crew) and bank the rest?

Also, the state Senate is considering a bill that would make Vermont’s economic development incentives easier to access. Supporters, such as Republican Sen. Kevin Mullin, posit the bill as an investment in Vermont’s future. 

Which is fine. But so is increasing access to higher education, providing child care for working mothers, and helping addicts get clean. Those social programs aren’t just “giveaways,” they are investments in a safer, healthier, more productive Vermont.

Unfortunately, they are investments on behalf of Vermont’s voiceless. LIHEAP recipients and working mothers and addicts and prison inmates can’t hire lobbyists or mount a PR campaign. So we too often fail to invest in them, while we’re more than happy to invest in corporations that might or might not use the money productively — but in either case, it’s definitely in the “nice” category, not the “necessary.”

So you see, Senator Benning, I agree with you. I just have different definitions of “necessary” and “nice.”

Not all businesses think alike. Or, Mr. Barlow, your table is ready.

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We have a winner in theVPO’s first-ever giveaway.

In some secluded rendezvous…

In some secluded rendezvous…

As you may recall, earlier this week the Lake Champlain Regional Chamber of Commerce made an ass of itself: one day, its president issued a clarion call for action on Lake Champlain, and the next, its lobbyist strenuously insisted that the LCRCC would fight tax increases to fund cleanup efforts.

Hypocrisy, thine initials are LCRCC. Anyway, in light of that, I offered a free dinner to the first lobbyist who accepted a measure of financial responsibility for his/her group, industry, or membership.

Well, we have a winner, and it’s just who you might expect: Dan Barlow of Vermont Businesses for Social Responsibility.

Dan didn’t nominate himself; a friend in the media, who’d just love to see me spend my money, pointed out to me that at a Statehouse press conference yesterday, Barlow (speaking for VBSR) endorsed Gov. Shumlin’s proposal to close the Medicaid cost gap through a payroll tax. I wasn’t at the presser, but Barlow’s statement has been reported by VTDigger, which is good enough for me.

So Dan, if you want to strap on the ol’ feed bag, let me know.

This brings to mind something that’s been bugging me for a few days. On Monday, the usually impeccable Anne Galloway of VTDigger posted a story entitled “LEGISLATIVE MANDATES HAMPERING RECOVERY, BUSINESS GROUPS SAY.” The story recapped the usual litany of complaints about taxes and costs and regulations — and that hoary old chestnut, “uncertainty.”

Which is just bullshit. Life, by its very nature, is uncertain. Potential legislative changes are one of the smaller aspects of it. To cite just one obvious example: the price of oil. Who predicted its nearly 50% drop in recent months? That alone plunged a fatal dagger into Vermont Gas’ pipeline to Ticonderoga. Fuel costs are a much bigger factor in running a business than anything the legislature might reasonably do.

Galloway’s piece could have been written by a functionary in Jim Harrison’s back office, so one-sided was it. The only note of dissent was a brief comment by House Speaker Shap Smith in the very last paragraph.

Now, you could make an argument for this article as part of VTDigger’s ongoing coverage of the legislature: let’s take a look at how business groups are feeling about the course of the session. Other views will get a hearing elsewhere.

But even on that narrow pretext, the article falls short. By focusing on The Usual Suspects, it fails to reflect the range of views within the unmonolithic “business community.”

It doesn’t, for example, quote VBSR. Not even a little bit. It doesn’t quote business types like Small Dog’s Don Mayer or Fresh Tracks Capital’s Cairn Cross, who have much more nuanced views of the potentially positive role of government in economic development. It doesn’t mention former State Rep. Paul Ralston of Vermont Coffee Company, who’s chairing Shap Smith’s working group on improving the economy. It sure as hell doesn’t quote Ben Cohen or Jerry Greenfield.

EVen if you accept the premise that an overview of the business community is a worthwhile use of VTDigger’s media platform, this article was woefully incomplete. A rare FAIL for a diligent and trustworthy news source.

The real lessons of Plasan

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Vermont’s pro-business community couldn’t hardly wait to score a cheap political point (and, as usual, soil the state’s reputation) after Plasan’s announcement that it was relocating to Michigan. Decent interval, bah: we’ve got a boilerplate press release ready to go.

Lt. Gov. Phil Scott did the honors for the VTGOP, offering a quick word of sympathy to Plasan’s workforce and then pivoting to the red meat:

This announcement is yet another clear sign that we in Montpelier must put our full focus on not only protecting, but on growing Vermont’s economy and face the reality that we are competing in a regional, national and global marketplace. We cannot continue to blame “forces beyond our control” for our job losses, but turn the mirror back on ourselves and ask ourselves: “What can we do to change the direction of this trend? How can we make Vermont better?”

The best part is Scott’s dismissal of “forces beyond our control,” when Plasan made it abundantly clear that Vermont’s business climate had nothing to do with its decision, and Vermont couldn’t have done anything to change it. But let’s not let a little inconvenient truth get in the way of a stale talking point.

Former Wall Street supremo Bruce Lisman kept it simple; he made time for one self-congratulatory Tweet, with nary a word of sympathy for the workers.

(The link is to WCAX’s story about the Plasan closing.)

Nice, Bruce. Way to show your concern for the common folk.

Okay, so the Usual Suspects reacted in the usual way: grabbing at any available pretext for regurgitating their political cud. (Please chew with your mouths closed.) But there are lessons we can learn from the departure of Plasan and other industries, and things we should bear in mind.

FIrst, let’s re-examine the unique strengths of Vermont. We do have our share of weaknesses, even if you omit the tired bromides of rightist politicos. So why do so many businesses establish themselves here or move here? Why does anybody stay? Why don’t they all move to Michigan or Texas or Mississippi?

Quality of life must be near the top of the list. Our topflight public school system is a draw. We have some very nice cities and small towns, good places to call home. Low rates of violent crime. Abundant recreation. A market small enough that entrepreneurs can gain a foothold before venturing out into the big time. (Ben & Jerry’s would have had a much harder time starting out in a big state with big distribution systems.)

I’m sure there are others. My point is, before we try to tear down Vermont, let’s figure out what we’re good at, do what we can to make it even better, and market the hell out of it.

Okay, so now: what are our weaknesses?

We should certainly review the items on the VTGOP hit list. If there are ways to smooth regulatory pathways without selling our souls, great. If forms or bureaucratic procedures are cumbersome, simplify them. But there’s no way we can compete with bigger states or other countries on things like taxes and incentives. Vermont can’t come anywhere near the packages being offered by New York state, for instance. We can’t be as low-tax as Florida or as development-friendly as Arizona, nor would I want us to be. That’s why our first priority should be identifying and maximizing our strengths.

Beyond the usual GOP talking points, I see three major areas that are drawbacks for Vermont’s business climate. In no particular order:

— The high cost of post-high school education. It’s the one thing we consistently hear from business owners (as opposed to their political mouthpieces): “We can’t find enough skilled workers. We can’t fill available jobs.”

The cost of attending our public colleges and universities is absurdly high — especially at the community college level. Governor Shumlin has done some incremental things to nibble away at this problem, but has failed to tackle it in a thorough, systemic way.

— Getting around. When Chris Graff wrote his memoir a few years ago, he ranked the top stories in recent Vermont history. His pick for #1: the coming of the interstate freeways. They made it possible to travel and transport goods much more quickly, at least in certain corridors. They brought dramatic change to Vermont — mostly for the good.

But large stretches of Vermont are still remote — or remote enough that it’s a significant competitive disadvantage. The biggest obstacle for places like Bennington and Rutland is the lack of high-speed roadway. The best thing we could do for them is turn U.S. 7 into a freeway. We could also use speedier corridors across central and southern Vermont.

(We pause while liberal readers gasp for breath.)

Also, and just as significantly, we need more public transportation. This is a tough nut to crack in a place with a small, scattered population, but if it was easier to get around Vermont without a car, it’d help convince people to live somewhere besides Chittenden County.

— The lack of housing, for purchase and rental. One of the biggest drags on our economy is the aging demographic. What do young families need? Rental properties and small- to mid-sized houses. Just what we don’t have.

This is one area of regulation that needs to be loosened in a targeted way. We need to do more to encourage affordable housing — by which I don’t just mean Section 8 or mobile homes, I mean houses costing less than $250,000 and enough rental stock to keep rents reasonable. I’d like to see an emphasis on in-fill housing in existing cities and towns. I don’t want to open the regulatory door to more suburban sprawl.

Housing affordability touches on a fundamental problem with our 21st Century economy: wage stagnation in the middle and working classes. Part of the problem with affordability is depressed wages, something that’s beyond the scope of this post. But as long as young people are starting their lives with college debt and low salaries, we need to help them find housing that fits their budgets.

So there you have it. My initial prescription for improving Vermont’s business climate. And it has nothing (much) to do with taxation or regulation.

Burlington will grow. Burlington must grow.

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The race for mayor of Burlington has a clear and concise theme, at least in the minds of the media: it’s a referendum on development, with incumbent Miro Weinberger favoring growth and his main opponents, Steve Goodkind and Greg Guma, resisting change. It’s an oversimplification, but there’s a lot of truth in it — especially when his critics are typecasting the Mayor as a willing partner of rapacious developers.

There’s a big disconnect at work here. In reality, the question is not, will Burlington get bigger? The question is, how will it grow and how will it manage change? Because like it or not, Burlington is going to grow. In fact, I would argue that Burlington needs to grow, for the sake of Chittenden County and the entire state.

Burlington is a highly desirable place to live. Beautiful setting, great food, a lively cultural scene, close to recreation of all sorts, and full of opportunity for entrepreneurs and garden-variety job-seekers. Its housing market reflects all of that: homes and rental properties are scarce and expensive.

The city itself has seen modest population growth, from 36,000 in 1960 to 42,000 in 2010. The population pressure has been forced outward: in the same 50-year period, while Burlington’s population has increased by roughly 18%, Chittenden County’s population has nearly tripled — from 63,000 in 1960 to 157,000 in 2010.

That outward development pattern carries heavy costs: loss of farmland and open space, traffic density over a wider area, higher costs for building and maintaining infrastructure, and the toll on Lake Champlain from all those impervious surfaces. This trend is only going to continue, and the region would be much better off if more of the development were to take place in Burlington.

Vermont likes to position itself as a technology center. To the extent this is true, its hub is Burlington. That’s where the activity is, that’s where most of the techies want to live, that’s where the successful tech enterprises and startups are located. If our tech economy is to grow, Burlington will grow with it. If we artificially depress growth in Burlington, we will also limit the growth of the tech sector.

The state has a real problem with its aging population. Burlington is the most attractive place in Vermont for young people to live*. But as things stand now, many of them are priced out of a market in which supply fails to meet demand. Burlington is our best hope for attracting a cadre of young people who can build their careers and raise their families in Vermont. We can best do that by boosting available housing and rental stock. This is especially true for the working-class Burlingtonians so cherished by Goodkind and Guma: if housing prices are high and rentals are scarce, how does that enhance the city’s affordability?

*Quick story. When we first moved to New England, we lived in a town of about 4,000 people in New Hampshire. We liked it, although there were some drawbacks. A couple years after our arrival, a younger couple from our old hometown moved to the same NH town. And they moved out within a year, relocating to a city of 50,000, because small town life was just too damn quiet. They were actively unnerved by it. A lot of people are like that. And by most outside standards, Burlington is the only real city in Vermont. 

The tides of history, geography and finance have made Burlington, and Chittenden County, the locus of Vermont’s economy: its population center, its best hope for the future. That’s made Burlington a prosperous and vibrant place to live, which wasn’t the case through most of its existence.  With that success come internal challenges and external responsibilities. You can’t evade that by just saying “No.”

As for the desire to preserve Burlington’s “character,” whatever that means, it’s an impossible dream. Burlington is changing. Burlington is growing. Resisting development is not a wise or tenable strategy. Managing development, so that the future Burlington is a desirable place to live and work, is the right approach. The future Burlington might not look exactly like the present edition, but it can be an even better place — for its residents and for the entire state.

This is not an endorsement of Miro Weinberger’s candidacy. I don’t live in Burlington and I haven’t studied his performance or his opponents’ records enough to make that judgment. I’m writing what I see from a distance, and among many of his opponents I see a futile misperception of reality.

 

The New Hampshire Chimera

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See also previous post, “The Bag Man carries a heavy load.” 

The Monster of Jim Harrison's nightmares.

The Monster of Jim Harrison’s nightmares.

Previously in this space, I examined the various arguments against a proposed tax on sugar-sweetened beverages unleashed, helter-skelter, by Jim Harrison of the Vermont Retail and Grocers Association. But I saved the best for last: his frequent invocation of the great mythical devourer of Vermont businesses, the New Hampshire Chimera.

Yes, every time someone proposes a new tax or tax increase, its opponents summon the spectre of businesses shuttering en masse and countless jobs fleeing to the tax haven on our eastern border. There’s some truth in this dire outlook — just enough to keep the fear alive — but far less than its proponents would have you believe.

Let’s start with population. Fewer than 170,000 Vermonters live in the counties that border New Hampshire. Most of those people live close enough for major shopping excursions, which is why you see relatively few large malls or superstores on the Vermont side. That’s a tangible loss to our economy, but its true value is questionable: most of the jobs are low-quality, and we avoid the environmental costs of large-scale retail development. (Just look at the West Lebanon strip. Bleurgh.)

For more casual shopping, such as picking up a few groceries, filling your gas tank or getting a snack, a much smaller fraction live close enough to the border — say, five miles or so. Any more than that, you’re not going out of your way for a quick stop.

Now there’s the matter of crossing the border. There are long stretches where you’d have to travel five miles or more to access the nearest bridge.

Then you come to shopping availability on the other side. The scaremongers see a New Hampshire border bristling with retailers from Canada to the Massachusetts line. In fact, there are three major retail zones in western New Hampshire: Littleton, West Lebanon, and Keene. Otherwise, there are long stretches of Not Much.

Once again, the greatest impact of higher Vermont taxes is not on the mom-and-pop stores so dear to the rhetorical heart of Jim Harrison; it’s on the supermarkets, megamarts and strip malls that you can find in those three retail hubs. And nowhere else.

In sum, New Hampshire is a major draw for mega-shopping, but it’s a relatively minor threat to other economic activity. And border communities with some creativity, like White River Junction and Brattleboro, find ways to juice their economies even in the shadow of the New Hampshire Chimera.

(Harrison likes to throw in Massachsetts and New York as well, but they are no threat. Their taxes are also pretty darn high; relatively few Vermonters live near those borders; and there’s virtually no destination shopping within easy driving distance in either state.)

Given all of these factors, New Hampshire looks like a much smaller threat than it is in the mind of Jim Harrison. There is no reason for us to be a captive of our neighbor’s policies. We should set our tax policies on their own merits, not out of fear of New Hampshire.

Let’s take an example right out of the Jim Harrison playbook. Here’s one of his vague-on-details anecdotes:

Two years ago, the legislature needed some more money for roads and bridges. They increased Vermont’s gas tax. At that time, the gas tax was 13 cents more per gallon than it was in neighboring NH. Within months, four gas stations on the Vermont side of the Connecticut River Valley closed.

Wow. That’s an oddly specific and limited horror story. It raises a host of questions.

— Where, exactly, were these gas stations?

— Can a direct line be drawn between their closures and the gas tax hike?

— If they closed “within months,” were they marginal businesses before the gas tax took effect? It sure sounds like it.

— Had any of them been planning to close anyway? Small businesses do tend to come and go at a rather alarming rate under any circumstances.

— How many gas stations are there in that zone? I’m guessing several hundred. And while the closure of any business is a sad thing, four is a pretty small number by comparison.

— If the gas tax increase had that great an impact, I’d think the closures would have continued beyond “within months.” Did they, or was the damage limited to four?

And finally…

— Is Harrison saying we shouldn’t have raised the gas tax? If not, then what exactly is he arguing for?

He would probably reply that border convenience stores have already taken a hit, so we shouldn’t hit them again. That’s an arguable point, but how much of a gas station’s business consists of customers buying sugary drinks and nothing else? If the gas tax didn’t chase them across the border, why would a tax on sugary drinks, which represent a smaller slice of their business?

The more likely outcome, it seems to me, is that customers will pay the extra freight or switch to unsweetened beverages — diet sodas, iced tea, flavored waters. There’s quite a variety of drinks with no added sugar. Dairy drinks, even with added sugar, wouldn’t be covered by the tax. Coffee wouldn’t be, no matter how sweet you like it. (Smart retailers will load up on the non-sugary options and feature them in shelving and advertising.)

This is especially true for the typical convenience store stop: filling the tank, using the restroom, buying a drink for the road.  The drink is one small part of the equation. And again, if you’re not going to New Hampshire for the cheaper gas, you’re not going there because your Coke costs an extra quarter.

The bigger burden of a beverage tax would fall on — say it with me, children — Big Retail. Places you go when you want a 12-pack or a case or some two-liters at the lowest price. You wouldn’t drive an extra ten miles to save a quarter on a Mountain Dew, but you would to save a few bucks on a case as part of a big trip to the supermarket.

Which is the point I made in my previous post: the tax poses the biggest threat to Big Retail and Big Beverage, and they’re the ones providing the big money behind the opposition to the beverage tax. The mom and pops are the poster children, but their actual victimhood is significantly limited.

And if you’re worried about the loss of Big Retail in Vermont’s economy, bear in mind that the border regions are largely empty of Big Retail. They’ve already departed for the low-cost option.

In sum, there is a cost to the beverage tax. It should be considered as part of the equation. But the effect is nowhere near the monster that inhabits Jim Harrison’s dreams. And it should not be a decisive consideration in the coming legislative debate.

The Phil Scott Policy Engine gets off to a slow start

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In a little-noticed press release, Phil Scott’s Economy Pitch project announced three bills “aimed at growing the state’s economy.”

Little-noticed because of the odd and counterproductive timing: the release was issued on Friday afternoon, the traditional dumping ground for bad news you hope will go uncovered. Well, this one surely went uncovered.

But also little-noticed because the three bills are completely underwhelming in scope. Even if they all sailed through the Legislature, they’d have a negligible effect on the course of Vermont’s economy.

One could charitably assume that the Scott Gang is tactically aiming low: introduce some small incremental ideas first, and get to the real meat later on. After all, the Economy Pitch series is still ongoing: there was a meeting last night in Rutland, and another is coming up next week somewhere in Franklin County. (Location TBA.”) More ideas could emerge. But if that’s the case, don’t oversell.

On the other hand, one could less charitably conclude that this whole project is nothing but classic Phil Scott centrist incrementalism, and that a cattle call for business owners is unlikely to produce anything terribly visionary.

The three bills, and try not to laugh:

— H. 80 would declare a state sales tax holiday on August 29 and 30. Oh, Lord, this again? A sales tax holiday is like a waffles-and-Coke breakfast: a short-term burst followed by an equivalent decline. Sales tax holidays do nothing to grow an economy. All they do is concentrate consumer purchasing into a couple of days.

Well, business purchasing as well. Indeed, I suspect that businesses are best poised to take advantage of a sales tax holiday; they can easily schedule their purchases to take advantage.

— H. 83 would establish a brand marketing effort under the rubric “Vermont: Innovative By Nature.” This would be a combined effort aimed at both economic development and tourism, which is kind of a misfit. How does “Innovative By Nature” appeal to potential tourists?

Beyond that, the bigger problem is the inherent limitation of marketing. You can’t put lipstick on a pig and call it a supermodel. It’s fine and dandy to tout Vermont’s advantages, and we do have quite a few; but a marketing campaign in and of itself will have, at best, a limited long-term effect. It’s far better to address the underlying problems. But that’d cost real money. A marketing campaign is cheap by comparison.

Still, it’s a strange approach for a guy who sympathizes with the struggles and complaints of Vermont’s business community. A marketing campaign does nothing to improve Vermont’s business climate, and I’d think the business community would realize that immediately.

— H. 146 would exempt “software as a service from Vermont’s sales tax.” The so-called Cloud Tax is said to create “an image that Vermont is not a business-friendly place for the technology sector.” Hey, wait — didn’t I read somewhere that Vermont is Innovative By Nature, an excellent place for a high-tech startup?

Mixed messages, people.

Repealing the software tax may or may not be a good idea, but it shouldn’t be done for the alleged, and amorphous, benefit of enhancing Vermont’s “image.” This is a big step with growing ramifications. It should be considered as part of a thorough re-examination of the sales tax in light of changing technology, not as a short-term move to enhance our “image.” (Of course, the urgency behind this move has nothing to do with growing Vermont jobs; it’s all about  Amazon.com’s attempt to bully us into surrendering more of our taxing authority.)

Software used to be a commodity, a tangible item subject to sales tax. Now, increasingly, it’s cloud-based. Should it be taxed? Maybe yes, maybe no. But if we exempt it, we’re closing off a large and growing source of revenue. Is that what we want to do?

Similar questions abound. Vermont already loses an unquantifiable, but significant, amount of revenue thanks to Internet retail. Now, more and more “products” are intangible in the same way as cloud-based software: e-books, audio content, subscription access to news content. Are you actually “buying” anything when the products are intangible and/or access is limited in scope or duration?

Our tax code contains many references to “downloads.” That term is almost an anachronism, and its application to cloud-based content is questionable. Example: At a recent hearing of the House Ways and Means Committee, no one knew whether digital “newspaper subscriptions” were subject to sales tax, or whether newspapers are collecting and paying the tax. I’m sure someone knows, but nobody in that room did, and they’re the ones pondering changes to the tax code.

Enough of that. Color me underwhelmed with the initial product of the Economy Pitch. If there were any creative, original, or far-reaching ideas broached at the first session, they didn’t make it into proposed legislation. We can hope for better things from future pitch sessions.