Monday, June 30, 2008

Optimists vs. Pessimists

Which side are you on?

Brian Wesbury and Robert Stein from First Trust argue that the economy is on the upswing.

Steven Perlstein of The Washington Post thinks the economy will get much worse before it gets better.

Income mobility is fact, not fiction

John Edward (not to be confused with presidential wannabe John Edwards) has a monthly column in the Lowell Sun in which he invariably tries to convince the reader that the American dream is dead.

Last Sunday he called upward mobility a myth.

They printed my response this Sunday.

Strickland ignores successful school choice program

Here is my letter to the editor published in last Wednesday's Cleveland PlainDealer.

The June 19 article "Strickland school summit tries to ID what works" discusses Gov. Ted Strickland's desire to help Ohio's children get a good education. Yet, Strickland remains hostile to one of the highest-performing programs: school choice.
The summit is called the Governor's Institute for Creativity & Innovation in Education. Ohio already houses a creative and innovative plan for education in its EdChoice program. Studies show that school choice improves school performance and acts as an option to discourage dropping out.
If Strickland honestly wants to help Ohio's children, he must re-examine his beliefs and embrace the program that has helped education in Cleveland so much.

Friday, June 27, 2008

Farmington Goes the Wrong Way on Franchise Fees

While many states and municipalities have eased the burden on telecommunications consumers by reducing franchise fees, at least one is going the other way. The Farmington, Arkansas city council not only doesn't want to cut fees, it wants to raise them. Recently the council voted to raise gas and telephone franchise fees from 3% to 4%. The move is projected to bring in $25,500.00 in additional revenue.

As we noted elsewhere on the BHI Blog, an increase in franchise fees will hit consumers' pocketbook but also make it harder for low income persons to buy cell phone service.

The council vote was a brazen move. Two years ago, Farmington residents defeated a referendum to raise fees. It remains to be see whether residents will take this increase lying down.

School Choice Introduces Competition

Here is my letter to the editor published in today's Boston Globe:
AS GOVERNOR Patrick aims to reduce the achievement gap between white and minority students in public education ("Patrick targets gaps in learning," Page A1, June 23), his Readiness Report leaves out the most effective mechanism for improving education for all students in Massachusetts: school choice.

Patrick's plan does not include proposals for a school voucher plan, an education tax credit, or lifting the cap on the number of charter schools. School choice programs have granted access to better education for students across the United States. Governor Patrick recommends creating readiness schools, but these will still fall under the supervision of local school boards, restricting their ability to create modern curricula to properly educate students for the 21st century.

The only way to bring these reforms to public education is to force public schools to compete with their counterparts in the private sector. As Americans have witnessed in the broader economy, competition breeds increased quality and variety. Why is education different?


Thursday, June 26, 2008

"Tax Towns" on Google Maps

Several years ago, the institute ran a short story about the political geography of tax preferences in Massachusetts. Based on the public finance work of Charles Tiebout, we examined the following question: Where would a resident choose to live in the Commonwealth if he favored paying higher taxes and receiving a larger-than- average bundle of public goods and vice versa? We looked at several important referenda on taxes as well as Proposition 2 1/2 overrides. In the final analysis were able to identify various communities as either "Pro-Tax" or "Anti-Tax Towns." The anti-tax towns, so-called, were grouped mostly in the southeastern part of the state while those favoring an expanded tax base could be found in central Massachusetts.

Having completed this thought experiment years before the advent of Web 2.0 technology, we often wondered what our data would look like thanks to the magic of Google Maps. Here are our cartographical results.

View Larger Map

The original article can be found here. We're likely to revisit this story early next year after the results from this fall's ballot question to abolish the state personal income trickles in.

Wednesday, June 25, 2008

City WiFi Failure

Cities across the United States have attempted to create public Wi-Fi networks to expand affordable internet access to consumers. But such efforts continue to hit hard times. In April, Boston abandoned its attempt to establish its own Wi-Fi network because of low investment interest. Cities are no better at providing a service that could be provided more effectively by the marketplace.

There's one way to expand the opportunities for access: reducing excessive telecommunications taxes. The Beacon Hill Institute found that Boston consumers could save an average of $13.19 a month if telecommunications taxes were eliminated. This tax cut would give consumers more money to purchase among other services,internet access. According to the Cato Institute's Wayne Leighton, the best way to encourage low-income consumers to purchase internet access is to reduce telecommunications taxes. Boston should slash its excessive telecommunications taxes now and increase opportunities for low-income consumers.

Promising Fields in Economics

Experimental economics and neuroeconomics are two of the most promising fields to shake up the economics profession since game theory. They combine laboratory experiments with psychology to get a better understanding of human action.

Several BHI summer interns took part in a series of experimental games several weeks ago and were impressed with both the methodology and results.

Ronald Bailey has an interesting article in Reason magazine looking at some of the most recent research being done in the field and it's implications for how we think about economics and public policy.

Taking a look at wired cities

The American Electronics Association (AEA) released its “Cybercities Report 2008” yesterday The report ranked the top 60 metropolitan areas for “wages, establishments, payroll, employment concentration, and wage differential.” According to the report, the top five “cybercities” were:
New York,
Washington D.C,
San Jose, Boston and
Dallas-Forth Worth.

Comparing indexes is always a useful exercise. The AEA offers some interesting contrasts with the Metropolitan Area Competitiveness Index, issued each year by BHI.

While AEA identifies the value of a wired city or metropolitan area to the workforce, BHI takes a look at the depth of that connectivity.

According to the report, the top five cities for high speed internet access per 1000 residents, a variable BHI lists under the infrastructure subindex, were:
New York,
Providence and
Washington D.C. ranked 21st and Dallas finished 39th. While these two reports do not compare the same exact figures, the AEA report and the BHI report do appear to complement each other and underscore the importance of broadband access to the new economy.

Given these measures, it's likely that high-tech companies and its workers will place a high premium on how well a city or metropolitan area is wired.

Tuesday, June 24, 2008

Crumbling Infrastructure: It's Not a Lack of Funding

Today's Boston Metro has a frontpage story on the release of a new report by the DC-Based TRIP which found:
  • More than a third of major roads are rated in fair or poor condition.
  • Driving on roads in need of work in Massachusetts costs the average driver about $156 in added repairs and extra gas;
  • Traffic on major highways in Massachusetts is expected to jump 20 percent by the year 2025;
  • Car crashes cost the state $6.3 billion a year in medical bills, delays, lost productivity and insurance costs; and
  • 35 percent of interstate bridges in Massachusetts are one rating point away from being structurally deficient.
This is pretty scary stuff and the conditions of the Bay State's roads and bridges can no longer be ignored. I am a little bit skeptical of the authors' conclusion:
"The deficiencies cited in this report are not a reflection of the effectiveness of state and local transportation agencies, but a lack of adequate funding."
Oh right, our problem was that we just didn't throw enough money into that boondoggle we call the Big Dig.
But really, inadequate funding? You're telling me it has nothing to do with police details, project-labor agreements, or prevailing wage laws, all of which drive up the costs of public construction?
I doubt it.

Friday, June 20, 2008

BHI in Today's Boston Globe: Scrap the police details

David Tuerck, executive director of the Beacon Hill Institute, has another op-ed, "Scrap the police details" in the Boston Globe. In this latest op-ed, David discusses the benefits of hiring civilian flaggers in a competitive system.

Handouts in Maryland

Not to be outdone by Massachusetts' $1 billion life science initiative, the governor of Maryland has just unveiled his own initiative to the tune of $1.1 billion. Following the logic of Governor Patrick, this means that Maryland will soon be the most attractive state for the biotech industry.

On the other hand, if you're like us and you believe industries are attracted by good infrastructure, an educated workforce, low taxes, and unobtrusive regulations then you might think that Maryland's governor just made an even worse mistake than our own.

Reforming Franchise Fees

Have you looked at your recent telephone or cable bill?

The residents of Port Richey, Florida have and are upset by the franchise fees on cable.

Franchise fees are the charges on your monthly utility bill that the local municipality charges to utility companies to use public rights of way (such as a telephone pole.) In his campaign for election, Vice-Mayor Michael Hashim called for lower franchise fees and apparently he's following through. Calling the excessive franchise fees, “a burden on our residents, especially when neighboring counties have lower rates with similar services,' Hashim is taking action. At his request, the city council is asking the municipal attorney to look at which fees the council can reform.

Franchise fees are a throw-back to another era, ill-suited for the new telecommunications landscape. Last year, a joint study by the Beacon Hill Institute and the Texas Public Policy Foundation found that consumers spend about 11% of their monthly cable television, wireline telephone, wireless telephone and internet bills in taxes related to franchise fees. The 11% is almost double most states’ sales taxes on regular goods.

Cities claim franchise fees are necessary to maintain the public right of ways, however, these funds are treated as general revenues and are used for spending unrelated to the provision of telecomm. Cities, towns and counties would be wise to disclose how these franchise fees revenues are spent. Better yet they should probably abolish them to the benefit of consumers.

Wednesday, June 18, 2008

Budgeting Waste

I tend to be very skeptical whenever I hear the term "budget deficit". Back in May, my hometown of Lowell projected a deficit of $6 million for the upcoming fiscal year. Half of that deficit came from our trash collection program which is expected to increase to $4 million next year if no changes are made.

As we all learned in Economics 101, incentives matter. The problem is that everyone is charged the same standard fee each year regardless of how much trash they actually produce. Why bother to reduce the amount of waste you produce or increase the amount you recycle (Lowell has a 7% rate) if you're going to pay the same cost either way?

In response, Lowell's city manager has proposed a new flat fee/pay-as-you-throw system which could lower the deficit, increase recycling, and bring about more fairness in trash collection. The idea is that when you charge people something closer to the actual cost then they will tend to change their behavior.

This is a step in the right direction (even my nemisis at Left in Lowell agrees), but why not go all the way? The city manager is still projecting a $2.5 million trash deficit at a time when cities are struggling to balance their budgets. A complete conversion to pay-as-you-throw could totally eliminate the budget deficit and perhaps result in a surplus.

Patrick Signs Life Sciences Bill

Governor Patrick signed his life sciences initiative into law on Monday. The 10-year $1 Billion dollar initiative is supposed to stimulate the state's biotechnology sector and create more jobs for Massachusetts.

Unfortunately, as the Beacon Hill Institute testified several months ago, the initiative will only burden taxpayers without adding any real benefits to the economy. Politicians have never, and never will be, good at picking winners. Companies like Genzyme and Novartis did not come here because of corporate handouts. Irrespective of any handouts, the biotech industry has already decided that Massachusetts is a great place to locate and expand.

Instead of trying to pick winners, the state needs only to simplify the tax code to make Massachusetts competitive.


Welcome to BHI's new and improved blog, where you can find commentary on the current issues related to the institute's research agenda.

Grounded in the principles of limited government, fiscal responsibility and free markets, The Beacon Hill Institute at Suffolk University produces vital economic research accessible to voters, taxpayers, opinion leaders and policy makers.

The opinions expressed on this blog by individual writers do not necessary represent the views of the Beacon Hill Institute nor those of Suffolk University but they do intend to foster new thinking on the major public policy issues facing the Commonwealth of Massachusetts and other states. To learn more about the institute and its work dating back to 1991 visit

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