RI Political Predictions for 2014

The now famous phrase coined by the original president of swagger, William Jefferson Clinton, rings true for the political landscape of 2014 in Rhode Island more than ever: “It’s the economy, stupid.”

Jobs, education and taxes are the holy trinity of economic growth, and Rhode Island can boast few of its 39 municipalities as being worthy of veneration. To change the metaphor, the three are cyclically intertwined and can perform as a well woven rigging, hitching sail to boat and propelling forth with confidence. Or the strands can become so hopelessly entangled that even the most favorable winds will not move the craft. That point being made, I will move onward to my crystal ball and away from displaying my disdain for Catholicism or my complete ignorance of sailing and its terminology.

Prediction #1: Rhode Island will experience an economic backslide for the first half of 2013. Although the state seal displays the motto “Hope,” hope is not going to override arithmetic.  With the exhaustion of Federal Emergency Unemployment Compensation (EUC) as the calendar year ends, so goes the income for more than 5,000 unemployed citizens. Furthermore, with a predicted 15,000 unemployed or underemployed scheduled to exhaust benefits in the 2014 calendar year, the total loss of revenue statewide – money that goes to pay mortgages, rent, purchase milk, eggs, bread gas, tires, whiskey, cell phones, sweaters and pet food – amounts to approximately $5.2 million. Foreclosures will increase. Small businesses will lay workers off. Unemployment numbers will begin to creep back up. Basic supply and demand applies not only to goods and services, but to jobs, and the elimination of federal jobless benefits is not going to increase the demand for employees from the abundant supply of able and available workers flooding the market.

Prediction #2: Sales tax will be reduced while income tax on the top 2 percent will be increased. Since the myth of the “job creators” has been effectively debunked in tandem with the need for retail to be more geographically competitive, there will be a legislative trade-off. The yard-marker has already moved on the Overton Window of sales tax and talks have begun on possible legislation to eliminate the tax on retail goods in RI. While I don’t believe the scale has tipped from “radical” to “acceptable” in a motion to eliminate sales tax, I do think it has done so as far as a reduction to a more competitive rate with neighboring states. We will have to keep our eye on the elimination of sales tax on wine and liquor that went into effect on the first of December to see whether it boosted booze sales. In a contrasting offset measure, a long suggested bump in income taxes for the top 2 percent of earners in Rhode Island will seem a more appealing offset for the hundreds of millions of dollars in decreased general revenue, if such a reduction in sales tax becomes law. Rhode Islanders for Tax Equity has been proposing this legislation for years and has met with opposition from the GA based on a “flight of the lords” argument. But, seeing as the “lords” fly at will and have failed to create jobs (or at least better than subsistence level, part-time or temporary jobs), the argument holds less weight each year and the people want relief from property, car and other taxes. Again, arithmetic weighs in. Studies have shown property taxes to be the real motivational force behind small business growth and without restoring (not raising, mind you) income taxes on those who can afford it, the revenue will continue to come from the pockets of those who cannot and the small business is frightened away. If, however, property taxes can be offset by the restoration of pre-2006 rates for the highest earners, and sales tax is reduced to be more competitive, small business growth can occur within communities. This is a legislative trade I believe will occur this year.

Prediction #3: Mayors will take charge and legislators will let them. This will be the year of the mayor. Faith in the Federal Government is at an historic low. Rhode Islanders have become increasingly cynical (if that’s even possible) with the state government. 38 Studios, pension cuts, jobless rates, dysfunctional divisions, potholes, you name it.

The role of the American mayor has been undergoing a makeover from that of a ceremonial position to a vital job, as important to the management of his or her city, town or municipality as any elected state or federal official. In fact, the rise of mayoral responsibilities has increased as the faith in state legislatures has decreased and the ability of federal representation has literally led to the least effective congress in modern history.

In a recent New York Times Op-Ed, Columnist Thomas L. Friedman wrote quoted

This is the conclusion of an important new book by the Brookings Institution scholars Bruce Katz and Jennifer Bradley, titled The Metropolitan Revolution: How Cities and Metros Are Fixing Our Broken Politics and Fragile Economy.

For generations, they write, we held the view that “the feds and states are the adults in the system, setting direction; the cities and the metropolitan areas are the children, waiting for their allowance. The metropolitan revolution is exploding this tired construct. Cities and metropolitan areas are becoming the leaders in the nation: experimenting, taking risks, making hard choices.” We are seeing “the inversion of the hierarchy of power in the United States.”

Where the state and federal level policy-makers have fallen out of favor, due in part to their own internal, partisan deadlocks and horse-trading style of watered down legislation, mayors have filled the vacuum with their ability to experiment on a hyper-local level with innovative tactics that allow for true community-based initiatives that do not necessarily require the approval of a national or statewide majority of constituent approval.