“The New York Times recently ranked Vermont #1 in the nation for government assistance across six categories of social services,  while Forbes magazine ranks us as the highest tax state in the nation” Gov. Jim Douglas proclaimed in his tough letter to the Legislative leaders last week.

Actually, no.

Commissioner Dale

Or at least no to the first assertion. Yes, narrowly speaking, to the second. Forbes Magazine did make that ranking. It was, however, garbage, and not the least bit supported by the article, which was shoddy enough that an honest editor would fire the reporter who put the piece together (unless, of course, the editor him/her-self was responsible).

Douglas himself seemed to recognize that he’d gone too far. Later in his letter he wrote that the Times assessment put Vermont near the top of all six categories, and wrote that  ”Vermont has one of the highest — if not the highest — tax burden of any state in the country.”

Aha! Actual fact, albeit tarnished by the gratuitous hyperbole within the hyphens. By almost any assessment, Vermont is one of the more highly taxed states. But Forbes Magazine to the contrary notwithstanding, not the highest.

(Briefly, what Forbes did was add up all state taxes and fees, then divide by population, forgetting that (a) Vermont spends more on the state level, less on the local, than many other states; (b) a disproportionate share of Vermont taxes are paid by tourists who don’t live in the state).

The mystery here is why Douglas decided to overstate his case when his case, honestly stated, is legit. With all that tax revenue, Vermont is in fact one of the more generous states when it comes to helping the sick, the disabled, and the poor. That New York Times assessment he referred to said as much. It just didn’t say what first he said it said.

According to the New York Times May 9 assessment of several federal social programs, Vermont is first in its “share of poor children and parents that receive cash welfare,” with 49 percent of the target population getting benefits.

If you don’t know what that means, don’t feel ignorant. Neither did Steve Dale, and he’s the Commissioner of  the Department for Children and Families. But we’ll come back to that anon. First let’s dispense with where Vermont stood in those other rankings.

Not Number One. Other states were more generous when it came to unemployment compensation, food stamps, housing assistance, and health insurance. In unemployment compensation and housing assistance, Vermont wasn’t even in the top ten.

But in health insurance and food stamps, it was. Like the other states in New England and the Northeast, Vermont provides its poorest citizens with more benefits than most of the Southern and Western states.

In fact, Douglas may have understated his case. Vermont might pay the highest welfare benefits in the country. At least according to the assessment by the Center on Budget and Policy Priorities, a liberal research and advocacy group in Washington. Its figures show that last year a Chittenden County single-parent family of three received a monthly grant of $709 (the benefits are slightly lower in the rest of the state). Only a similar family in New York City gets more, $738.

So when the Governor assailed the Legislature for “raising already high taxes to support aid programs that are already the very best in the country,” he wasn’t blowing smoke, even if he was overstating his case.

At this point, a few qualifications are in order. All those welfare benefit figures above are inexact. There are so many variations due to geography, family size, and family make-up, that different organizations estimate average or median benefits differently. Commissioner  Dale, for instance, said the typical Vermont beneficiary household gets about $680 a month from the state’s “Reach Up” funds.

“Reach Up” is what Vermont calls its version of  Temporary Assistance for Needy Families (TANF, pronounced “Tanif”), the federal program that replaced Aid to Families with Dependent Children (AFDC) the old and much reviled welfare program.

Then there’s the confusion over that category where Vermont did place Number One, the percentage of poor parents and children getting cash benefits. Dale said it isn’t 49 percent. It seems higher.

Roughly ten percent of the 144,000 Vermonters under 18 are poor, Dale said, meaning they live in households that earn no more than the federal poverty line (roughly $22,000 for a family of four). The total number of people receiving Reach Up funds is 13,700, he said. At least 10,000 of these would be children.

As to that New York Times table, Dale said, “I see a lot of numbers every month and I’ve never seen a number like that.”

Nor was the Commissioner aware that the state’s benefit levels might be the highest in the nation, and he certainly didn’t think they were too high.

“Nobody lives on $680 a month,” he said. Reach Up Recipients also qualify for Medicaid and Food Stamps, but even then, he said, “that’s not a place anyone wants to be. If it’s generous (compared to other states) it’s still very little, and it has not been increased in years. Years.”

Actually, in real terms, it’s gone down. In inflation-adjusted dollars, that $709 payment in Vermont (according to the Center for Budget and Policy Priorities) is 17.6 percent lower than the $633 a Vermont household received in 1996 under the old AFDC program. There were many more recipients then, too. Even with Food Stamps added, a Vermont family on Reach Up has an income 25 percent lower than the federal poverty level.

And Douglas wants to pay them less?

Well, sort of.

What the Governor has proposed would save money, but not by spending less money in Fiscal Year 2010 (starting July 1). Instead, as Dale described it, the Douglas Administration would put into place a few policy changes hoping both to save money and to help Reach Up recipients .

Without getting into all the technicalities, here’s how it would work: The typical Reach Up household is headed by a young single mother with one or more small children. To remain eligible for benefits, the young women are expected to get a job, go to school, enter a training program, or engage in some other activity that might help them become self-sufficient.

Federal law allows states to reduce the monthly payments to women who refuse to cooperate, even to drop her entire family from the program after five years. For the most part, Vermont has ignored these penalties. Douglas wants the Legislature to give Dale’s department the power to invoke them.

The goal, Dale said, is not punishment but “reciprocity. Many folks have significant barriers and need a lot of help. The deal is you need to be moving toward some kind of improvement.”

In addition, the Administration wants to reduce payments to some Reach Up households in which one resident is also getting federal disability SSI benefits. Dale acknowledged he was not happy about this proposal, but said it was justified under the circumstances, both to save money and because receiving “SSI plus TANF can result in less incentive to participate in work programs.”

The Legislature rejected these proposals, some members calling them “draconian.” But the differences here are at the margins. Douglas is not proposing to decimate Reach Up, just to restrain its growth. Dale said the Administration’s plans would save $3 million of the state’s $15 million contribution to Reach Up. But this does not signify a 20 percent reduction; the program is largely funded by some $43 million in federal money.

This argument is at least 40 years old and will probably be around for another 40 years. Liberals point to the actual reduction in benefits over the years and to the difficulties many Reach Up recipients have in meeting their work or school requirements because of ill health, babies who need tending, psychological and emotional problems. Conservatives argue that simply giving people money without also providing incentives for them to become self-supporting is a disservice to the young mothers and their children.

In one sense, Douglas is proposing a redistribution of income upwards. He wants to save this money in Reach Up so the state doesn’t have to increase taxes on the wealthy. The Democrats want to redistribute the other way. Again, it’s an old argument, and one with some merit on both sides.

Why all the emotion, then? Well, that’s what happens in politics. It often gets personal. Perhaps unhappy about being the target of so much criticism from the Democrats, the Governor lashed out. He wasn’t just personal; he was tribal.

“You seem intent on a budget that satisfies more fiscally liberal members of your caucus, even if that comes at the expense of fiscal prudence,” he said to the lawmakers, effectively accusing the leaders of being captive to their party’s most liberal wing and their occasional allies, the Progressives.

That could have been anger, or it could have been political calculation, based on the assumption that most voters distrust “tax and spend liberals.” For most of the last 30 years, that has been a reasonable assumption. It may not be playing as well any more.

Either way, Douglas’s staff released his new budget counter-proposals yesterday afternoon. The Legislative leaders to whom he addressed his confrontational letter were not invited, but they will no doubt be reading it carefully today. The intention here is to do the same, and to provide a report tomorrow.

Stuff happens.

Not always in Vermont, or even the U.S., and not always with the traditional “local angle” that attracts the casual eye, but perhaps relevant to life here anyway. No state is an island, and the rest of the world affects us whether or not we realize it.

For instance, from the Rural Blog, which describes itself as “a digest of events, trends, issues, ideas and journalism from and about rural America, from the Institute for Rural Journalism and Community Issues, based at the University of Kentucky,” comes news that could provide some economic hope for the Vermont countryside.

Turns out that the sluggish economy could be good news for agritourism, which is the fancy term for paying to visit (and maybe even stay overnight at) a farm. Down South, at least, the tourist farms are busy.

“I think the main reason for the boom is the economy,” Blake Brown, an extension agricultural economist at North Carolina State University, told a reporter for the Southeast Farm Press. ” People are finding that visiting farms provides a relatively cheap excursion close to home.”

It isn’t that Vermont has to be introduced to agritourism. Though the term doesn’t seem to be used much in the state (the Department of Agriculture, Food and Markets web site just calls it “tourism”) it may have started here. The Department’s web site lists 50 farms that welcome tourists.

That’s a tiny percentage of the 6,984 farms in the state (from the U.S. Department of Agriculture 2007 Census), so if the demand for agritourism increases, Vermont obviously has enough potential supply to meet it.

But for some farmers, switching from food production to tourism is a difficult adjustment. The typical farmer thinks or him or her self as the producer of a necessity, not the provider of a recreational amenity. And as Barbara Berst Adams, author of The New Agritourism: Hosting Community and Tourists on Your Farm, wrote, farmers who invite paying guests onto their property take some risks.

It seems that one of the new fads in agritourism is getting married on the farm. The happy couple and/or their families sometimes pay handsomely for the privilege, but Adams warned that “crowds can sometimes surprise farmers new to agritourism. People need bathrooms, first-aid kits and a place for trash. City kids don’t seem to know the goats aren’t video games – they can bite back. And liability coverage for both the bride and groom and the farmer really are issues that need to have been dealt with ahead of time.”

But according to that story in the Southeast Farm Press, agritourism is “the one segment of agriculture that seems to be flourishing right now.” Probably even the most traditional farmer would rather make money than not.

Right now, the farmers most obviously not making money are the milk producers. Only about a thousand dairy farms are left in Vermont, but they still account the vast majority of the value ($493,926,000 of the $673,713,000 in that same 2007 census) of farm products sold in the state.

Right now, though, the price of milk is down and dairy farms are losing money. Besides, improper though it may be to say so aloud in these parts, Vermont is not really the best state for producing milk. Dairy production is far more efficient in the West and Southwest than in rocky, hilly, cold Vermont. The real question is probably not whether dairy farming will survive, but what will replace it: other farms or commercial/residential development?

Maybe farms. That 2007 census actually showed an increase of 413 farms from the previous census in 2002. Most of these new farms were quite small, and few of them were dairy farms. Increasingly, Vermont farmers are growing fruits and vegetables, raising beef cattle, llamas, vicunas, yaks. And perhaps opening their farms to paying guests.

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From the Organization for Economic Cooperation and Development comes a survey showing that the happiest people in the world live in Denmark, Finland, and the Netherlands. They were the top three in “life satisfaction,” which seems to be OECD jargon for “happiness.”

The U.S. placed 11^th, also behind Sweden, Belgium, Canada, Australia, New Zealand, Switzerland and Norway.

What’s their secret up there in northern Europe? Well, all of the top three countries are prosperous, offering their citizens ample opportunity to live comfortably and even opulently. But as Thomas Kostigen pointed out in his column in MarketWatch (a decidedly pro-business web site), the happy citizens of all three countries have something else in common: They are heavily taxed. Like their northern European neighbors, the Danes, the Finns, and the Dutch pay some of the highest taxes in the world. The Danes actually pay almost two-thirds of their income in taxes.

And they’re happy?

Apparently so.

And who among us will have the temerity so to inform Gov. Jim Douglas and his associates who think “tax” is a four-letter word?

Now, before anyone concludes that the path to happiness in America requires following this particular Nordic policy, a few caveats are in order, (starting with the acknowledgment that Holland is not really Nordic). First of all, surveys about relatively imprecise qualities such as “happiness” should be greeted with some skepticism. Asking someone whether she or he is happy is not like asking whether he or she is going to vote for Smith or Jones. The question is open to interpretation; the answer is subjective and debatable.

Besides, cultures are different, and what makes one people happy in one place would not necessarily make another people happy someplace else. Americans tend to be more aggressive, more mobile, less community-oriented and more ornery, perhaps more curious, and almost surely more materialistic than Europeans, especially the northern Europeans. Many Americans, it seems, would not be content to live comfortably or even opulently. They want it all. Now. No doubt the same is true of some Finns. But not, it seems, as many.

(Although the U.S. is not the richest country, either, but 15^th in per capita income according to the International Monetary Fund, behind many of the “happier” countries)

So what pleases the Helsinkians and the Copenhagenites  (that’s their city skyline by night above) might not please as many Burlingtonians or Rutlanders (not to mention Dallasites).

But these caveats are cautions, not dismissals. There might well be valuable lessons in the high tax-high happiness relationship worth emulating, at least to some extent. The great enemy of happiness is stress. We have it more than they do, largely because our tax bills are lower. Americans stress comes from worrying about paying medical bills, saving for retirement, wondering about being able to afford to send the kids to college.

There are no such worries in northern Europe. Health care is free, higher education is free or very cheap, a decent retirement is assured. Public transportation is extensive and comfortable, so far fewer people have to drive themselves through city traffic every day to go to work (and those who choose to drive anyway have less traffic to bother them).

They pay for this, of course. Higher taxes leave them with less discretionary income. This doesn’t seem to prevent most of them from living in comfortable (if slightly smaller) houses with all the modern conveniences, and having all the latest electronic gizmos (they invented some of them). Maybe they don’t eat out as much (perhaps a small sacrifice; when did you last hear anyone rave about Finnish cuisine?).

And maybe – just maybe – the Finns, Danes, and Dutch are happier because they know that all their fellow-citizens live in reasonably stress-free comfort. It is possible, in other words, that simply living in an equitable society leads to happiness.

Is that a subversive thought?

Speaker Smith

Do you suppose Shap Smith has the votes?

The Speaker of the House needs 100 of them – that would be 99 of his fellow-Democrats, Progressives, and independents (and possibly a Republican defector if needed?), plus himself, to over-ride Gov. Jim Douglas’s veto of the Fiscal Year 2010 budget and tax package.

“He’s got a hundred and two,” said a state official who tends to know what’s going on in the Legislature.

Could be. Though predicting what any legislative body is going to do two weeks hence is a fool’s errand (the Legislature will reconvene June 2), there are several signs that Smith may have commitments from at least 99 other House members.

The way Smith and Senate President Pro Tem Peter Shumlin have been talking the last few days betrays a bit of confidence, if not quite cockiness, that they can enact their budget over the Governor’s objections. Shumlin’s Senate has such a huge Democratic majority that the override is hardly in doubt. The House vote will be closer, but even Douglas, in announcing last week that he would veto the budget bill, conceded that it might well be over-ridden.

Thereby raising the question of why he’s going to risk the humiliation. It’s only been a month since he suffered the first over-ride of his governorship – and only the seventh in the history of the state – when both houses enacted same-sex marriage despite his veto. Politicians don’t like humiliating defeats. The possibility of two in a row might convince the average governor to make a deal, or even to let this bill become law without signing it.

But Douglas opted to fight, and in his letter to Shumlin and Smith he explained both the principle and the politics of his decision. The principle, from his perspective, is that “if my only choice is between allowing your fiscal 2010 budget to become law or a veto, I must choose veto. I cannot abandon Vermonters’ long-term economic security for short-lived political accord.”

In other words, he thinks that the Democratic spending and tax package is very bad public policy. But he also indicated he thinks it’s very bad politics, which will hurt them and help him before the next election.

“If this budget becomes law over my veto…I am prepared to accept that outcome. But understand that what you reap is what you sow; the adverse effects of your tax and spending choices will ripple through the Vermont economy for years to come and those consequences will be your sole responsibility.”

Allowing for the usual overwrought political rhetoric, the Governor has a point. How long or how deeply the Legislature’s budget/tax package “will ripple through the Vermont economy” is open to debate. But however the ripples flow, it is the Democrats who will be responsible for them.

For the moment, at least, the Democrats seem unconcerned. That’s because they’re convinced that Douglas is wrong on both the policy and politics. They think their budget is good policy that will help the state and therefore help them politically.

Who’s right? Who knows? Budgets, taxes, and economies are complicated, and hard to predict. No, make that impossible to predict. If this Democratic budget/tax package becomes law, it could perk up the state’s economy. Or it could tamp it down.

Or – and this comes close to being a prediction – it could do neither of the above, at least not to an extent that would be countable, much less verifiable. The package is simply not that  far-reaching. It raises taxes on some people, but not by much. It reduces taxes for more people, but not by much. It cuts spending on many programs, especially in health care and other human services,  enough to degrade the quality of life of the beneficiaries of those programs, but probably not enough to have an economic impact.

Don’t expect either side to allow these mere realities to inhibit their rhetoric. And remember this about budget and tax debates: The competing claims by politicians on both sides can be factually accurate even if they seem to be mutually exclusive.

Thus Douglas claims the Democratic plan raises taxes and increases spending. It does. The Democrats claim their budget reduces taxes and cuts spending. It does.

A budget can both cut and increase spending when some spending formulas are reduced and some programs cut back, but the total dollar amount spent goes up. In this case, the budget calls for spending five percent less than the state is spending this fiscal year from its own sources and from the usual aid it gets from the Federal Government. But then came the Stimulus, or American recovery and Reinvestment Act to be formal. Throw that money into the mix, and the FY2010 budget is higher than this year’s by roughly 3.5 percent.

Obviously, whether one describes this as fiscal responsibility or, as Douglas did, “unsustainable,” depends more on political position than on dispassionate analysis of the evidence.

The same is true of taxes. As Smith wrote in yesterday’s Burlington Free Press, taxes on most people who earn less than $250,00 a year will probably go down. Well, if they earn less than $250,00 a year, don’t smoke or drink (at least not much) and don’t get their television reception via satellite. But when Douglas says that taxes are going up, he’s right, too. Everybody’s income tax rates will go down, but taxpayers will no longer be able to deduct their state income tax payments from their state taxable income, and more capital gains income will become taxable. Add it all up and the state will collect more from its citizens next year under this Democratic plan.

The burden of the (slightly) higher taxes will fall on the wealthy. Their tax rates would go down, too, but they take the biggest state income tax deductions (though they’ll then get a bigger federal income tax deduction), and they tend to have lots of capital gains income. Heavy smokers and drinkers will pay more, too. Almost everyone else will pay less, possibly leading them to increase consumption and therefore help the state’s economy. The wealthy whose tax bills go up are more likely to reduce their savings than their consumption, so that won’t hurt the economy.

But suppose they move out of the state. Douglas did not mention this in his letter to Shumlin and Smith but in the past he and his associates have worried that Vermont’s relatively progressive income tax system inspires some wealthy taxpayers to move elsewhere, taking their job-creating capital with them.

No doubt some might. Just yesterday came word that billionaire Thomas Golisano is leaving New York, which is raising taxes on the wealthy, and moving to Florida, which has no personal income tax (though its economy is in much worse shape than either New York’s or Vermont’s).

But even for a billionaire, Golisano is rather an eccentric fellow who has thrice run for governor as an independent, financing his own campaigns that he had no hope of winning, accomplishing little except the enrichment of some lucky political consultants. By and large, the evidence does not indicate that many rich people move from one state to another because of taxes.

If the economics of the tax and budget dispute are murky, the politics is not. Another veto override would be a political disaster for the Governor. In and of itself, it would not be fatal. Governors have recovered from similar setbacks. But it would weaken him severely. And there is little reason to believe that the results of the Democratic package would be some kind of statewide economic disaster that would be evident by next election day.

That’s why it’s still possible that the detailed budget plan he said he would announce tomorrow might just be more conciliatory than he has indicated. So far, Douglas has talked tough. He even told the Democratic leaders that he doubted they’d like his proposal. He’s come across like a guy spoiling for a fight.

But it’s a fight he really can’t afford to lose. Facing the loss, he could just decide a little more negotiation wouldn’t be such a bad idea after all.