Rhode Island’s economic crisis

Just finished reading Aaron Renn’s takedown of Rhode Island’s ambitions at his Urbanophile site. He argues that Rhode Island needs to develop its own policies to deal with its reduced circumstances; there is no fortress industry in Little Rhody any more, since the building of the Erie Canal, so the state is stuck like an older relative, living with inflated expectations.

First, for any polity, a policy of reducing expectations is unlikely to win any votes.

Second, there is a cost to policy generation of the kind that Aaron is looking to foster. Assume it costs at least $80k including benefits for an analyst to sit in a Providence office for 40 hours a week and come up with new policies to implement. I would hope that the policies generated would save at least $160k, but who knows? It’s a lot easier to amortize policy generation across a raft of clients.

Third, the Federal government is an equal opportunity supporter, and state activity mostly goes on at the margins. The business environment is largely the same no matter where you are.

Fourth, the dollar is everywhere. You could recast your state as a low-wage state, but those wages are being paid for in dollars. It would be great if you could pay wages and pensions in “R.I.yals” and then maintain a currency exchange so that imports from the rest of the U.S. were made more expensive. That would help support local industry.

Fifth, the pensions are still out there and need to be paid. It’s hard to reduce costs when the big costs to government are already incurred. If Aaron could fix this, the world will beat a path to his door.