The top money man

More politics below, but first an update on a post of three months ago (Non-Union Blues, April 28) about the Douglas Administration’s refusal to accept a Project Labor Agreement (PLA) for construction of the new Lake Champlain bridge.

Under a PLA, construction unions agree not to strike and to accept cost saving concessions such as surrendering premium pay for late shift work. In return, the contractor agrees to accept workers chosen at union hiring halls in the region, guaranteeing local residents some of the good-paying jobs on the project.

Last spring, New York State and the Federal Government agreed to a PLA for the bridge. Under pressure from the state branch of the Associated General Contractors, Vermont did not, so there was no public PLA.

The top money Dem

But according to a news release sent out Friday by the Vermont Building and Construction Trades Council, Vermont and New York unions have reached agreement on a private PLA with the prime contractor, Flatiron Construction of Colorado.

“The PLA will accomplish what Gov. Douglas was sadly unwilling to do – guarantee local residents an opportunity to land a job on this $70 million project,” Vermont Building and Construction Trades Council President Jeff Potvin said in the press release.

It isn’t clear how many workers from the area will get jobs on the bridge project. Potvin acknowledged that Flatiron will “self-perform a large portion of the project,” meaning it will bring its own workers from elsewhere. But it does seem that the more Vermont workers will get bridge jobs with the PLA than would have without it, and that the cost savings will go to Flatiron, not Vermont’s taxpayers.

It will be interesting to see if whoever ends up with the Democratic nomination for governor tries to use this issue in the general election campaign against Lt. Gov. Brian Dubie.

Oh, yes: the governor’s race. Wherein we segue to the significance of the campaign finance reports submitted by the candidates last week.

This significance should not be overstated. The typical voter does not pay attention to which candidate raises more money, being far more interested in which candidate he or she finds appealing.

But neither should the significance be pooh-poohed. First of all, the money itself is important; more is better than less. Second, the reports themselves send signals, however short-lived, that can speed or slow a candidate’s progress. The more money a candidate has, the more seriously he or she is taken by what the eminent journalist Jack Germond called “the political community”—reporters, TV commentators, and, not least, potential contributors, who prefer to bestow their largesse on likely winners.

There is little doubt, then, that last Friday’s headlines provided a boost to Dubie ($943,000 raised, $475,623 cash on hand) and Secretary of State Deb Markowitz, the top collector among Democrats ($523,946 raised, $186,756 on hand).

Also coming out ahead in the perception game were Democrats Matt Dunne ($267,861 and $132,959) and Sen. Peter Shumlin ($418,490 and $207,134.).

The news was not as good for Sen, Doug Racine ($210,158 and $63,097) and it was downright awful for Sen. Susan Bartlett, who reported raising only $70,920 from just 232 contributors, leaving her with only $11,146 in the bank.

As last Wednesday’s post noted, a candidate need not have the most money. She does have to have enough money.

Eleven grand is not enough money.

Bartlett insisted she would not drop out, and there’s no reason why she should. She has nowhere else to go for the next month, and there’s always the possibility of a “miracle,” which in this case would require no supernatural intervention, just a fairly even five-way split in which nobody gets much more than 20 percent of the primary vote on August 24 and anyone could win a squeaker.

But it would take something close to supernatural intervention. That isn’t the way multi-candidate primaries usually shake out.

The situation must be frustrating for Bartlett, who is highly regarded in Montpelier. Even as they pronounce her candidacy hopeless, politicians and legislative onlookers keep noting  that she might be a strong candidate in the general election, and a good governor if elected.

But nobody every claimed that politics was fair, or even rational.

A look behind the raw numbers indicates even better news for Dunne, and perhaps even worse news for Racine, who has only raised $107,742 from 491 contributors in the last year. His total includes the amount he raised before last July’s reporting deadlines. Dunne, who did not announce his candidacy until late last year, raised all his money in the last twelve months from 722 contributors.

That’s not as many as Dubie (an impressive 2,724 contributors in the last 12 months), or  Markowitz (1,070), but substantially better than Shumlin (390) who only kept pace with Dunne by lending his own campaign $150,000.  At the very least, Dunne seems to know how to raise money.

As, obviously, do Dubie and Markowitz. They have also spent the most money. Shumlin actually has a bit more cash on hand now than Markowitz, even after paying for the campaign’s first round of television ads. And while Dubie has far more money in the bank than anyone else, he is also spending it faster than anyone else, much of it on professional fund-raising and other political consulting firms.

All the candidates raised most of their money from, and spent most of it in, Vermont. That may not last. It is not unreasonable to suspect that the big out-of-state fundraising starts now, not reportable until after the election. Some voters, it seems think there is something wrong with raising money beyond Vermont’s borders.

But candidates need money, and have to raise it where they can find it. Asked why he robbed banks, Willie Sutton famously said, “that’s where the money is.” Campaign money is in Boston, New York, Washington, California, and Texas. Dubie has already raised thousands from Texas, and spent thousands there, on Harris Media an Austin political consulting firm serving conservative Republican candidates.

No doubt researchers from all six campaigns are poring over the filings of the other five, hoping to find either a contribution or an expenditure that could prove politically awkward. Two potential entries: Dubie got a $2,000 contribution from the Ely Lilly Co., the Indianapolis pharmaceutical giant. Drug companies are not universally admired these days.

The lieutenant governor also received $1,000 from Dairy Farmers of America of Kansas City, MO, and another $1,000 from its affiliate, Syracuse-based Dairylea Cooperative, Inc. DFA is the milk marketing cooperative that has been the target of several anti-trust allegations, (and at least one continuing investigation) and some Vermont dairy farmers blame it for keeping their prices low.

All are invited.

The host will be Sterling President Will Wootten.

The moderator will be…well, ahem, uh, as long as you asked, the moderator will be the News Guy his very own self.

Please do not throw tomatoes as the moderator. He will be doing the best he can. But he could use some help. What would you ask the candidates for governor if you had the opportunity?

Some of the issues that should be brought up may seem obvious – taxes, schools, jobs, Vermont Yankee. Except that they all seem to agree on taxes, schools, and Vermont Yankee. And it isn’t clear that governor can do much about jobs.

Remember eight years ago when candidate Jim Douglas’s slogan was “Jim =Jobs.” Sounded good, but even before the Recession, private sector job growth under Douglas was pretty close to zero.

Not necessarily his fault. Campaign rhetoric to the contrary notwithstanding, state government policy may be irrelevant to job growth.

Or maybe not. Anyway, if anyone has probing, specific, substantive questions he or she thinks someone should ask one of these folks, here’s your chance to suggest them to someone who is going to do the asking. And who will appreciate the submission whether or not he uses it.

(star break)

MEDIA NOTE—Not censure, this time, but praise. In the continuing discussion about the role of hydro power in the state, Vermont Public Radio did what news organizations are supposed to do – spent some money, sent reporters to cover the news.

VPR reporter John Dillon went 600 miles north of the border who where Hydro-Quebec, from which Vermont utilities just agreed to buy a whole mess of power, has built a huge dam which will divert 70 percent of the waters of the Rupert River to help generate that power.

As Dillon pointed out, the Rupert is just one of three rivers which will be part of a system of four dams, 74 dikes and a new tunnel carved through a mountain, all powering four new generating stations still farther north.

At the same time, VPR’s noon Vermont Edition went to Montreal where host Jane Lindholm presided over a spirited and informed debate between Claude Demers, Hydro-Quebec’s science communicator, and  Daniel Breton, founder of  a Quebec environmental organization.

One angle VPR didn’t deal with, and neither has anybody else. Hydro-Quebec gets criticized from folks on the left side of the political spectrum for those immense dams which have flooded thousands of acres of land, with damaging consequences for both the natural world and the Cree Indians who live in northern Quebec.

Another big corporation abusing the land and indigenous folks in the thirst for profit for the stockholders, no?

No. Hydro-Quebec doesn’t have stockholders. It’s owned by the Province and the people thereof. It is, in short, a socialist institution.

(star break)

More (mostly) good news: Some additional ammunition for the argument made in the post titled Not So Bad (June 4) that life in Vermont is…not so bad.

Maybe even pretty good.

The latest issue of  Kiplinger’s Personal Finance magazine named Burlington one of the “ten best cities for the next decade.” Praised  for its “creativity and entrepreneurship” Burlington was tagged the eighth best city for both living and working over the next several years. Austin, Texas, was first.

In addition, recently released  (or, perhaps more accurately, hitherto ignored) Census figures confirm that Vermont is one of the most affluent states, with a relatively low poverty rate, and one of the lowest rates of child poverty in the country. The statistics are from 2008, the most recent available.

Only eight other states have child (under age 18) poverty rates in the same low category as Vermont: New Hampshire, Massachusetts, Connecticut, New Jersey, Maryland, Utah, and Wyoming.

For the total poverty rate, Vermont was in the second best category, ranked with 13 other states with rates between 10.2 and 13.1 percent (Vermont’s was 10.4). Seven states, including New Hampshire, Massachusetts, New Jersey and Maryland, had lower rates.

As is true almost everywhere, Vermont’s under-18 poverty rate (12.8 percent) is slightly higher than its overall rate.  But not everywhere. Chittenden County’s total poverty rate was 9.6 percent, but the child poverty rate was 9.2 percent.

But that was unusual. In the other 13 counties, the under-18 rate was either slightly or not so slightly higher. Even Addison County, which had the lowest total poverty rate (9.5 percent had a slightly higher rate (10.6 percent, for those under 18.

Both the highest rates and the biggest differences between total and child poverty were in the Northeast Kingdom. Caledonia County had an 11.8 percent total poverty rate, with 17.1 percent of its under-18s in poverty. In Orleans County, the overall rate was 14.3 percent, with a 19.3 percent poverty ate for those under 18.

And in Essex County, the poorest in the state, 14.8 percent of all persons lived below the poverty line, but the under-18 rate was 23.8 percent.

That puts Essex at a level comparable with some of the rural counties of the Southeast and Southwest, the poorest areas of the country.

None of this is a big surprise. But it deserves more attention than it has been getting from either officials or observers. That latter, that’s us. More attention will be paid, starting with maybe a few questions to these candidates at Thursday’s debate.

Early in this year’s Legislative session, some lawmakers, businesspeople, and state officials became alarmed by the remarks an economist made during a Senate committee hearing.

The economist, Tom Kavet, noted that while the Department of Tourism and Marketing’s budget  had gone down over the past few years, — to $3.6 million from $5.1 million in 2002 — more tourists were visiting the state.

Kavet never suggested doing away with the Tourism and Marketing, though he did doubt that its activities had “significant near-term impact,” setting off worries that the Department’s funding was in danger.

“It got some people a little excited,” said Rep. Heidi Scheuermann, a Republican from tourist-dependent Stowe,

So Scheuermann, the Vermont Chamber of Commerce, the ski industry and the Department itself went to work to make sure that its budget wasn’t cut.

They succeeded. For now at least (pending possible further cuts because of the “Challenges for Change” process) Tourism and Marketing gets the same $3.6 million for Fiscal Year 2011 as for 2010.

So the “Crisis” – well, the argument – is over, at least for now. But the question has not been answered.

Make that two questions: Does the advertising done by Tourism and Marketing really bring more tourists to Vermont? And even if it does, should the taxpayers be paying for it? After all, ski resorts, golf courses, restaurants, marinas and the like are private, for-profit businesses. Most private, for-profit businesses pay for their own advertising and promotion. Why shouldn’t tourist businesses?

Without a doubt the answer to that first question is not a definite no. Advertising works; otherwise businesses would not spend billions of dollars a year to convince people to buy their product or their brand.

And that’s what Tourism and Marketing does, said Bruce Hyde, who heads the Department.

“We’re really the brand managers,” he said. “We saturate the media as best as we can with the Vermont message. Nobody else is doing that.”

And there is at least some evidence that it works. Erica Housekeeper, the Department spokesperson said (by email) that Tourism and Marketing’s web site “received an average of 66,600 unique visitors per month…and we see a bump in web traffic when we launch an advertising campaign.”

Probably more visitors to the web site means more visitors to the state. But “probably” does not qualify as data. It’s not as though the “Vermont brand” is unknown around the country. Perhaps many people, bombarded by promotion from every state and many countries, have to be reminded from time to time of Vermont’s existence as well as its charms.

But “perhaps” does not qualify as data, either.

In fact, one seeking data confirming that Tourism and Marketing promotions bring more visitors to the state will seek endlessly, and still probably not find.

Even confirming the effectiveness of the tourist promotion would not conclusively prove that the $3.6 million was well spent. It would depend on which criteria were used to make the judgment: That the extra visitors (the ones who wouldn’t have come anyway, without the Department’s promotions) had spent so much on hotels, restaurants, and gasoline that the tax revenue added up to $3.6 million? Or that their visits created enough additional jobs that the take from those taxes was $3.6 million?

Not that Vermont is going to abolish its Tourism and Marketing Department, which would be an act of unilateral disarmament. All the other states have similar agencies, and almost all of them spend far more than does Vermont.

“We arguably have the smallest state budget for tourism,” Hyde said, even though Vermont is “one of the states most dependant on tourism.”

Even with a lower budget and a staff that has dropped to nine from 20, the Department seems to be doing a good job. Maybe tourism has gone up even as the Department spends less money because it’s grown more efficient and innovative. Tourism and Marketing doesn’t just promote Vermont, Hyde said. Its web site provides a full-service, one-stop vacation planner for would-be visitors.

“It’s a free service for the entire industry,” he said.

Bringing up that second question. Why doesn’t the industry provide that service for itself? A lot of other businesses would like the state to do their promoting for them, too. Just to take one example out of thin air: suppose the state financed the promotion for start-up news web sites, especially those run by a proprietor who is uncommonly inept at the task?

Who knows? The web site might prosper so much that the proprietor could hire a local unemployed person as a part-time researcher. Presto! Job creation. Economic development.

OK, that’s neither a complaint nor a suggestion. Just an example to demonstrate that the state selectively showers its subsidies on favored industries.

Scheuermann calls that kind of thinking “short-sighted,” because “government entities support anything else with regard to people having jobs, to make sure that people are able to pay their bills and able to go to college.”

Except for the “anything else” part, she’s right. To maintain a healthy economy, government does support many private enterprises with direct or indirect subsidies. The difference with the tourism industry is that the subsidy is direct – a state agency picking up the tab for one of its major expenditures – rather than the more common tax breaks (though the state also forks over cash to some other businesses).

We’re not talking about a lot of money here; were the Department shut down entirely, the money saved would chop less than half-a-cent off the statewide school property tax rate.

But hidden in this discussion is an interesting – and indisputable – conclusion. There’s a lot of talk in this state (and country) about whether the government does too much and spends too much. This discussion about subsidizing Vermont’s tourist industry proves who really believes the government is doing and spending too much:

Nobody. Not if it’s doing and spending on them and theirs.

Sometimes the most important questions are the ones that don’t get asked, even by reporters, whose job it is to ask that next question.

Usually this failure to ask is more inadvertent than deliberate, and nothing in today’s post should be interpreted as criticism of any reporter. The first example, in fact, comes from a good story by reporter John Briggs on the front page of last Monday’s Burlington Free Press headlined, “Frustration grows over downtown scene.”

The story was about how panhandlers in and around Burlington’s Church Street Marketplace are harassing passers-by and angering store and restaurant owners who want those passers-by to shop and eat at their establishments.

No one has been hurt, but, Briggs wrote, merchants say the situation has become “unpleasant…and may seem threatening to potential shoppers and tourists.”

If anything, Briggs exercised excessive journalistic caution in attributing that conclusion to the merchants. The panhandling, often aggressive and vulgar, simply is unpleasant, and might well seem threatening, especially to women, children,  the frail or the elderly.

As a result, city officials are considering various steps, including passage of laws against blocking the sidewalks. The city council has already passed an ordinance prohibiting smoking in or near parks or recreation areas.

The story did an especially good job in dealing with the political and sociological tensions surrounding the dispute. The panhandlers, many if not most of them drug addicts, homeless, unemployed and perhaps unemployable, have their defenders and advocates who claim the business owners, and the council members working with them (merchants vote; street people do not) are indifferent to the plight of the poor and dispossessed.

Quite possible. And those poor and dispossessed are their fellow citizens whose humanity need not be belittled. But the needs of the non-poor, non-dispossessed should also be taken into account. Forget the merchants for a minute, who obviously have an economic self-interest here, and just consider all the folks – just regular folks, not particularly rich or poor or influential or even important (except in the sense that everyone is important )– who are walking along the sidewalks to shop, eat, sightsee or just meander.

They ought to be able to do this without being assailed by assertive drifters who clog the sidewalk and shout obscenities. This is not a free speech issue. Anyone has the right to set up a soapbox in the park outside City Hall and proclaim the most unpopular opinion imaginable. To the passer-by offended by that opinion, the only response – or at least the only American response – is: Who cares? Be offended. It’s the price for living in a free society.

But sidewalks are, as their name suggests, for walking, and those using them as they were intended to be used have a reasonable expectation that they will be neither impeded nor insulted. Regular folks have rights, too.

Reporter Briggs also did a good job pointing out that the problem had gotten worse because of the recession and because the local agencies that help addicts, the mentally ill and the homeless were stretched to their capacities and beyond. But now comes the question not asked:

Isn’t this what happens when the state cuts its social service budget?

At this point, that question can’t be answered definitively. It would take a great deal of research to make a direct connection between those budget cuts and the increase in the number of troubled panhandlers in downtown Burlington.

But for the last two years, the Legislature, prodded by Gov. Jim Douglas, has cut the budget of the Human Services Agency to hold down taxes and to maintain spending on schools, transportation, and other functions. They did this despite warnings from, among others, law enforcement officials (including Burlington Police Chief Michael Schirling) that the result would be more troubled or homeless people on city streets, creating problems that would have to be dealt with by local governments.

These cops seem to have had a point.

The other question wasn’t asked up at Morses Line.

This was last month, in another perfectly good Free Press story, this one by Matt Sutkoski, about the dispute between the Rainville family and the Department of Homeland Security’s effort (apparently about to be abandoned) to take part of the family’s farmland to expand a little-used border crossing station.

Among the sources quoted was a spokesman for the government agency who explained that no major improvements to the facility at Morses Line had been made for 70 years, and that the crossing station  “fails to provide the tools we need to guard against the threats to our national security.”

The question which should have been asked there was: Our What?

Because officials at DHS and its various sub-agencies have been throwing around that “national security” explanation almost every time there’s any debate about Canadian border policies. But the examples they give are invariably about attempted drug smuggling or foreigners trying to sneak into the U.S. to get a job or find a relative.

Stopping those activities is part of DHS’s job. But they have nothing to do with “national security.” The nation’s security is not threatened by a pot (or even heroin) peddler or an illegal farm worker. “National security” deals with threats to…well, the security of the nation, from foreign powers or – these days – from terrorists.

Since September 11, 2001, not a single terrorist seems to have entered the United States from Canada, and there is little reason to think a terrorist could get into Canada any more easily than he or she could come directly to the U.S.

“There’s lot of misunderstanding on the relationship between borders and terrorism,” said Edward Alden, a senior fellow at the Council on Foreign Relations in Washington.

Since 2001, Alden said, “there have been about 25 terrorist plots inside the US, involving 58 individuals. Thirty were US-born citizens, 11 were naturalized citizens, one had dual citizenship. Nine were legal immigrants or visa holders. Only six were here illegally and maybe one more, from the Middle East.”

Furthermore, he said, “illegally” meant only that they had overstayed their visas, not that they had snuck across a border.

“For the vast majority of incidents, the border was completely irrelevant,” he said.

There’s no guarantee that someday a terrorist won’t try to sneak over the border from Canada, as Ahmed Ressam, the so-called “Millennium Bomber” tried to do in 1999. He was caught at a border crossing station in Washington State. But that was before September 11, 2001. Since then, Canadian authorities have tightened their surveillance of refugee applicants, which was Ressam’s status at the time.

But like other anti-terrorism experts, Alden said that far more important than watching the Canadian border was working cooperatively with Canadian intelligence agencies.

“The level of intelligence  sharing with Canadian authorities is the best we have with any country,” he said. “It’s a very , very close and cooperative one. The US and Canada are trying to do the same things to keep these people out of North America altogether. They use similar systems to try to screen overseas passengers.”

If, as now seems likely, the Morses Line border station is closed, something will be lost; there will be less coming and going across the border for both business and social reasons.

That’s too bad. It has nothing to do with national security.

The head of a statewide business organization claims that the state’s “bureaucratic, arbitrary, time-consuming and expensive regulatory system” weakens the state’s “business climate.”

A small businessman argues that the high cost of workers compensation makes for a poor business climate.

Citing the ratings of business magazines, a legislative candidate laments the state’s standing “as one of the worst states in the nation for job growth and business climate.”

A pro-business think tank reports that the state has “one of the most difficult business climates in the nation,” and a pro-business journal notes that the state has “a well-documented bad business climate.”

No surprise, right? Vermont’s “poor business climate” has become a statewide mantra, and is already a factor in this year’s governor’s race.

Except that the above examples are from, in order: New Jersey, California, Wisconsin, Washington (State, not D.C.), and Maryland.

No doubt all these states have their economic problems, as do the other 45. It may be significant, though, that they are among the more prosperous states. Maryland and New Jersey have the highest median household incomes in the county. California isn’t far behind. Before the start of the Great Recession, Washington had the tenth highest per capita income in the country. Wisconsin had the 20^th largest economy, just about what it ought to have considering its population.

So why all the complaints about the “poor business climate”?

Because in almost every state, some (though not all) business leaders and their supporters in politics and academia complain abut the “business climate.”

They’d be fools not to. It’s a good argument for getting what business leaders often want: less regulation and lower taxes. Most business leaders are more wealthy than not, meaning that in state’s with (relatively) progressive income taxes their tax bills are (relatively) high (though, in Vermont at least, lower than they were a decade or two ago).

As to regulations, many of them are at least a big pain in the neck (forms to fill out and all that) and often a profit-reducing cost.

Furthermore, many businessmen think that they do not need most of the services financed by their and everyone else’s taxes. As it happens, they are at least partly wrong here. This year the Legislature approved more transportation spending than ever, according to House Speaker Shap Smith. Business interests did not complain. Roads are, among other things, a subsidy to businesses; the taxes they pay are a lot less than it would cost to build and maintain their own highway systems.

Schools are a subsidy to business, too. Vermont schools may be expensive, but firms would spend a lot more if they had to teach all their workers how to read, write, and do arithmetic.

Just because complaints about “business climate” are heard in almost every state does not make them totally invalid. In most states, a few costs could probably be cut and a few regulations eased to lubricate economic activity without harming workers, consumers, the needy, or the environment.

But not much. Otherwise, those costs would have been cut, those regulations eased. Almost all of them exist because they provide goods, services, and protection that people want.

What the near-universality of the “poor business climate” slogan does mean is that the phrase is meaningless. It is self-interested bumper-sticker drivel that does not deserve to be taken seriously.

Neither do the “studies” by some pro-business “think tanks” or business magazines that purport to rank states according to their “business climate.” These rankings are based on extraordinarily selective criteria, as if the studies were designed to promote a policy agenda rather than to examine the subject honestly. They were.

The studies do take into account a state’s spending, taxes, regulations, and labor union strength. They tend to ignore the state’s health care, education system, recreation and cultural amenities, and other factors which attract the educated, higher-income people who have money to spend, and are therefore good for business.

Among academic economists, who acknowledge that, as one of them put it, “exactly what constitutes a good business climate is not entirely clear,” there is no agreement on whether state taxes, regulations, and labor union power (weak in Vermont) have any discernible impact on economic activity at all.

“Considerable empirical evidence suggests that state and local taxes do not significantly impact the geographic distribution of economic activity,” noted economists Bruce L. Benson of Florida State University and Ronald N. Johnson of Montana State at the outset of an article in the journal Economic Inquiry hIn general, the consensus among economists who have carefully studied the data is that if these factors do affect a state’s economic performance, they do so minimally, and are therefore easily offset by the positive outcomes (good schools, parks, health care, etc.) taxes and regulations provide.

In Vermont, for instance, where the term is bandied about almost daily, the “poor business climate” argument faces an obvious challenge. If the business climate is so poor, how come the economy is relatively so good?

The “relatively” is emphasized because right now Vermont’s economy is not good at all. But that’s only because the national (and in fact the global) economy is not good at all. But compared to most other states – and especially most other states in its region – Vermont’s economy is somewhat better.

Its unemployment rate, though higher than it was a couple of years ago, is lower than the national or regional average. So is its poverty rate and its home foreclosure rate. Vermont seems to be coming out of the recession somewhat faster than most other states, based on the unemployment and job creation numbers.

That doesn’t mean that, from the perspective of some businesspeople, state laws and taxes are not a serious problem. But it obviously isn’t a big problem for all of them, or they wouldn’t be hiring more workers and planning new facilities, as many of them are.

Vermont’s regulations probably have their greatest impact on builders and developers. All states have environmental restrictions, but Vermont’s are among the most stringent. That helps explain why builders, developers, and realtors are among the most vocal critics of the state’s business climate.

But those regulations help other businesses, such as the software developers discussed in Friday’s post.   The regulations help attract affluent, educated, newcomers to the state, and John Canning of the Vermont Software Developers Alliance said that’s good for the software business.

The bottom line, to put it in business terms, is that objective examination of the “poor business climate” claim can not even define the term, much less find persuasive evidence of its existence in any state. Vermont, like the rest of America, is pro-business, and would be foolish to be otherwise. Everybody benefits from a strong economy, which in turn depends on the healthy profitability of businesses.

The “poor business climate” moan is just the whine-of-choice of some segments of the business community and the politicians pandering to them. In fairness to that community, they are hardly the only whiners these days. But as members of the wealthiest and most powerful faction in the land, they have less excuse.

To reverse the decline, Gov. Howard Dean and the Legislature passed a capital gains tax exclusion. On the first 40 percent of a capital gain – from selling stocks or a business – a taxpayer would pay no state tax. The hope was that this tax break would encourage investment, therefore the creation of new businesses (or the expansion of old ones), therefore more jobs.

In 2003, the year the exclusion went into effect, the state still lost jobs, if by one tenth of a percentage point less. But one year is not a fair test. Better to check the five years before and after the tax change.

From 2003 through 2007, the number of employed Vermonters rose from 298,600 to 307,800 a 3.1 percent increase. From 1998 through 2002, before the capital gains exclusion took effect, employment rose from 282,000 of 300,900, an increase of more than 6.5 percent,

Does this prove that cutting capital gains taxes depresses job growth?

No. It doesn’t conclusively prove anything. Despite the mini-recession of 2001-2002, employment in the rest of the country grew faster between 1998 and 2002, also. No state is an economic island, entire in itself, and no state’s tax change can save that state from the effects of a nationwide recession, or, for that matter, prevent it from enjoying the fruits of nationwide prosperity.

But along with several other examples, the relationship – or lack thereof – between Vermont’s capital gains exclusion and its job growth does come close to proving that cutting the capital gains tax does not necessarily create more jobs.

In fact, capital gains tax preferences, such as the one the Legislature and Jim Douglas just adopted, (bringing back part, though not all, of the 2002 exclusion) have only two certain outcomes:

(1)  People who pay capital gains taxes, mostly the very wealthy, will pay less in taxes.

(2)  The state government will have less money to spend on highways, schools, law enforcement, health care, protecting the environment, and the like.

This Fiscal Year (FY 2011, starting July 1), Vermont will have only $3 million less because of the capital gains cut, and state officials and lawmakers agree that they can save that much without actually cutting state programs or services. For FY 2012, though, the revenue loss will be closer to $11 million. Cuts will be required.

It is reasonable to assume that those who benefit from the lower rates will not be discomfited by the spending cuts.

It isn’t that there is no case to be made for a positive association between lower capital gains taxes and more employment. Most mainstream economists agree that, in theory, any tax reduction will eventually lead to more private economic activity, hence more jobs. And the assumption (or hope) that cutting the tax will boost employment crosses party lines. President Obama has recently proposed a cut in some capital gains taxes for small businesses.

But even in theory, the increase is very small, and the real world there seems to be no connection at all. In November, 1978, Congress cut the top capital gains federal tax rate from 39 to 28 percent. Economic stagnation followed.

The top rate was cut again, to 20 percent, in the summer of 1981, while economic was growth was  a healthy 3.5 percent. In the next 12 months, the economy declined, entering the early stages of the 1982 recession, the worst post-war downturn until now. In both cases, unemployment rose in the period immediately following the tax cuts.

Higher capital gains taxes don’t necessarily hurt job growth, either. They didn’t in 1976, when a capital gains tax hike was followed by faster increases in the Gross Domestic Product and lower unemployment.

Even the responsible pro-capital gains cut economists (as opposed to the shills for chambers of commerce and similar groups) do not project substantial job increases from cutting capital gains taxes.

Appearing before the Joint Economic Committee in June of 1997, Allen Sinai (one of Sen. John McCain’s economic advisors during the 2008 campaign) said he estimated that a 50 percent cut in federal capital gains taxes would lead to more jobs, but not many.

“The increases relative to what might have happened otherwise are definitely significant, but small to modest in magnitude,” Sinai said, presenting tables suggesting an increase of 353,000 more jobs nationwide over a seven-year period.

That’s such a tiny increase – about 50,000 jobs a year nationwide – that it’s hard to see how anyone could possibly figure out, after the seven years had ended, just how many of the newly created jobs might have been due to the tax change. Other academic studies project even tinier job creation from cutting the capital gains tax.

But there is no doubt that a state need not create capital gains preferences to inspire business investment. The biggest investment boom of recent decades – if not ever – was in the high-tech, “dot com” start-ups during the 1990s, concentrated in California.

California “taxes capital gains the same as ordinary income,” reported (by email) Jean Ross of the California Budget Project in Sacramento. “We provide an exclusion for cap gains on the sale of a principal residence – the same as in fed law – but that’s it.”

There are even circumstances under which a lower capital gains tax could lead to fewer jobs. The cut, after all, does not provide a direct incentive to invest in a business; it provides a direct incentive to sell a business. That’s when the investor realizes a capital gain.

John Canning of the Vermont Software Developers’ Alliance, representing an industry that has been growing in Vermont and expects to add 150 high-paying jobs during the rest of this year, said his organization decided not to press for a capital gains tax preference now because it might cost jobs in Vermont.

“Venture capitalists would like to see the capital gains tax go away completely,” Canning said. “What concerns our association is that when someone sells his company, he’s often going to sell it to a bigger company out of state, and we’re not sure that’s good for Vermont.”

Canning said his industry is thriving and growing in Vermont because “people who grew up here or visited fell in love with Vermont,” and wanted to live in the state.

Starting a software company, Canning said, “doesn’t require a huge amount of capital.” A software startup entrepreneur, he said, primarily needs “an idea.” And also “enough bright people in an area and they feed off one another.” Thanks to institutions such as the University of Vermont, Fletcher Allen Health Care, and IBM, Canning said, Vermont provides that advantage also.

All this suggests that to attract more jobs, Vermont might worry less about taxes and more about enhancing amenities and attracting the kind of businesses that respond to those amenities. Something like the “statewide office of Innovation and Intellectual Property” proposed by State Sen. (and Democratic candidate for governor) Susan Bartlett would seem to have at least some real potential for providing a path to more job creation.

The same cannot be said for the capital gains tax cut just adopted.

As some of the lawmakers who agreed to it seem to know. Democrats went along with the move because they had to compromise with Republican Gov. Jim Douglas, who wanted deeper cuts in the tax. But also because they wanted to placate the state’s business community.

“It was a reasonable compromise, targeting it to Vermont businesses,” said Rep. Janet Ancel, a Calais Democrat who is on the House Ways and Means Committee. “Perception is reality, and the perception (in part of the business community) is that Vermont has a poor business climate. This is an attempt to remedy that.”

In other words, for Douglas the Republicans, cutting the capital gains tax was an article of faith, against which mere evidence is powerless. For the Democrats, it was a matter of politics, signaling the “we feel your pain” message to the business community and trying to tone down the “poor business climate” rhetoric.

And is the evidence for Vermont’s “poor business climate” any stronger than the evidence that cutting capital gains taxes will create jobs?

Tune in Monday.

OK, who won?

Now that the palavering, posturing, and pontificating of the 2010 session of the Legislature is over, it’s time for at least a preliminary evaluation as to who did and did not come out ahead.

Not just by the measurement of raw politics, either. This assessment will also taka a look at whether the day-to-day lives of regular folks were affected by what the lawmakers and Gov. Jim Douglas wrought these last four-and-a-half months.

The short – and possibly welcome – answer is: not too much. A large majority of Vermont citizens who are neither rich nor poor will note little if any change in their bank accounts, their job security, their children’s education, their retirement benefits, their recreations, or their passions because of any legislation passed and signed into law this year.

Welcome news indeed to those who remember the old phrase about how “no man’s life, liberty or property are safe while the Legislature is in session.”

But there were exceptions. No one should be shocked by this news, but in general, the very wealthy came out ahead, while the poor and near-poor did not, especially the poor and near-poor who are ill or otherwise in need of social services.

And some 7,700 middle and upper middle-income households will face higher property taxes, quite a bit higher in some cases.

The results do not mean that impoverished Vermonters are going to be begging in the streets, their open sores exposed to the elements. Legislative sessions, especially as they wind down are: (1) dramatic; and (2) insular. The drama takes place in an enclosed space in which the same relatively small number of people – legislators, lobbyists, reporters, administration officials — constantly interact with one another.

What happens then is that all disputes become magnified and the disagreements are assumed to be more polarizing than they really are. Had Douglas gotten all the spending cuts he wanted – and he did not – the state’s social services would not have evaporated, no more than business investment would have dried up had the Democrats blocked all those tax reductions.

The last dispute resolved, for instance, was over whether the capital gains tax would be cut by $1.5 million or $3.2 million. Not an inconsequential sum, but a tiny fraction of a $3.77 billion budget.

But let’s get to the raw politics, because it’s easy and it’s fun.

Douglas won.

Not everything, but a lot. For a lame duck governor, he showed that he still has a fair amount of clout. He did it by being stalwart (or stubborn, depending on one’s political preferences), betting that the Democratic leaders wouldn’t risk a repeat of last year’s budget veto and subsequent veto override vote.

Last year, they won that vote. This year, they might not have won it in the House of Representatives. And even if they had won it, they feared it might play into Republican political hands, allowing Lt. Gov. Brian Dubie to paint them as big spenders who raise taxes.

Which he’s going to do anyway, but a budget confrontation might have strengthened his case.

Under some circumstances, Douglas’s strategy might have been risky for Dubie and the Republicans, giving Democrats the chance to portray them as friends of the ultra-rich but indifferent toward the needy.

But those circumstances would exist only if a leading Democrat started making that argument a few weeks ago. There are five Democrat running for governor, but none of them stepped forward to make that case. That left Douglas and his allies free to set the parameters of the discussion.

That Douglas “won” does not really mean that the Democrats “lost.” In the final bargaining, they gave up more points to him than he to them. But first of all, this isn’t really a game. Besides, they held firm on education financing. There will be no mandatory school district consolidation, nor a required change in the student-teacher ratio.

In addition, both sides could claim “victory” in that they passed a budget despite starting the year facing more than a $150 million projected deficit. They did so in a collegial manner, and they could claim that the budget was “balanced.”

It might be.

Celebrating the agreement and his success, Douglas said that “while other states are cutting programs and raising taxes in response to the fiscal crisis, Vermont, I am proud to say, is moving in a different direction.”

Sounds good. Except that what he and the Legislature did this year was cut programs and raise taxes. They didn’t eliminate programs or raise the key income, sales, or property tax rates. But they raised some people’s taxes (while reducing others) and effectively reduced the quantity – and almost surely the quality – of many public services.

By how much? Impossible to say, because the “challenges for change” concept grants the Administration broad powers to cut spending. One of Douglas’s victories occurred when the Democrats gave up on their proposal to allow the state to dip into its “Rainy Day Fund” if the “Challenges” process did not save enough money.

It won’t (for reasons to be explored in a post coming soon). The result will be more cuts in services for the poor, the sick, the mentally ill. It was not a liberal Democrat, but Republican Rep. Anne Donahue of Northfield who said (in Thursday’s Times-Argus), the lawmakers are “pretending that we are restructuring services when in fact we will be cutting services.”

The higher taxes will be the result of some tinkering the Legislature did with the formulas for deciding who is eligible for how much “income sensitivity” in determining their statewide school property tax bills. The tinkering means that more people will benefit less from income sensitivity.

According to figures from the Legislature’s Joint Fiscal Office, some 7,700 households will pay an average of $662 more a year in property taxes, a total of more than $5 million.

The hardest-hit will be 423 households earning between $85,000 and $95,000 a year. Their property taxes will rise an average of $1,639 each. But some households with incomes of $40,000 or even less will pay a few hundred dollars more a year.

The money will go into the Education Fund, holding down the statewide school property tax rate. The beneficiaries here are households with incomes too high to qualify for any income sensitivity, and who pay solely on the basis of the value of their property.

Upper-income taxpayers will also reap most of the benefits from the partial restoration of a capital gains tax break. Under the new law, someone with, say, a $10,000 capital gain from the sale of business assets with a Vermont connection would pay taxes on only $6,000. Douglas wanted the exclusion to apply to all capital gains including stocks, bonds, and homes.

In the end, he accepted a partial victory, and the Democrats agreed, in the hope that lower taxes on Vermont-related capital gains would provide an incentive for more business investment which in turn would lead to more jobs.

The evidence for this assumption – or hope –is…is…well, it may not exist, a mystery worthy of detailed examination next week.

Some time today, the Douglas Administration and the leaders of the Legislature either will or will not reach agreement on how to restore Vermont’s depleted Unemployment Insurance Trust Fund.

If they do agree, the Legislature will pass a bill that Gov. Jim Douglas will presumably sign.

If they don’t, the Legislature will pass a bill anyway, effectively daring Douglas to veto it.

According to sources privy to the negotiations that went on most of Thursday, Douglas is holding out for a compromise that cuts unemployment benefits more than the Democrats are willing to cut them.

But even without an agreement, it might be politically difficult for Douglas to veto whatever the Legislature passes. It’s the Governor, after all, who has been insisting for months that the UI Fund has to be made solvent immediately, if not sooner, to avoid fiscal catastrophe.

Actually, the state and its unemployment compensation system would survive if the Legislature went home without doing anything about the UI Fund. No matter what the lawmakers and the Governor do, the Fund will still be broke next year, and the year after that, and the year after that.

But Douglas is right when he argues that it would be better to put the Fund back on the road to solvency sooner rather than later. To pay unemployment benefits, the State is borrowing from the Federal Government. Without paying interest this year. Next year, the interest payments start. The longer the Fund is in arrears, the longer the borrowing will go on, and the more the interest payments will add up.

State officials have known this problem was pending for at least a year. As is common in the political world, they got serious about solving the problem about a month ago.

Well, what was the hurry? After all, the actual numbers involved aren’t that huge, so this seemed the kind of dilemma that could easily by worked out. It would require tiny tax increases on businesses. Or maybe, according to one proposal, even tinier – and temporary – tax increases on all workers. And perhaps some modest reductions in the benefits paid to the unemployed.

That would indeed sound like an impasse almost begging to be solved by reasonable compromise. But only for those who do not know the history of this issue, and the explanation for how Vermont got into this pickle in the first place.

Happily, the explanation can be brief: Vermonters were dumb, dumb, dumb, dumb. They were boneheaded. Or perhaps fatheaded. They erred.

And this was all of them.  Not just the Republicans or the Democrats, or business or labor, or the Administration or the Legislature. Everyone.

The financing of the Unemployment Insurance Trust Fund is very complicated, but the dumbness was very simple. The fund is financed by a small tax on employers, a percentage of only the first several thousand dollars of each workers’ pay. It’s called the Taxable Wage Base.

Last year the Legislature and Douglas agreed to raise that base from $8,000 to $10,000. That was actually not dumb. What was dumb is that until last year the Taxable Wage Base had not gone up for 25 years.

Twenty-five years of economic growth, including higher wages and higher prices. Considering that unemployment benefits are supposed to comprise a respectable percentage (roughly 40 percent) of the unemployed person’s pre-layoff wages, any fool would know that the Fund that pays those benefits would have to keep growing, too, or else it would run dry the next time unemployment rose.

Any fool but these Vermont fools.

In 1983, according to figures compiled by the National Employment Law Project (a liberal group, but its numbers are reliable) almost half of all wages were subject t UI taxes. By 2008, “the ratio of total wages to taxable wages had fallen to roughly 25 percent,” the Project found.

For this foolishness there are two explanations, one at least as old as the Tulip Panic (circa 1637), the other more recent.

The first is humankind’s incurable delusion that good times will last forever, so why plan for bad times? Businesses didn’t want to pay any more, politicians didn’t want to raise anybody’s taxes, and Organized Labor was happy enough because the jobless benefits kept rising. We could all afford it; hardly anybody was unemployed, anyway, so they could get generous benefits.

The second – more contemporary – delusion is that all tax increases, no matter how tiny, are always a mistake that will suppress economic growth. In this case, the tax amounts of 0.89 percent of total wages in 2009, according to George Wentworth, the project’s Unemployment Insurance Modernization Coordinator.

To their credit, Vermont business leaders (and the Governor who is usually allied with them) now realize that they should have agreed to small UI tax increases several years ago, and are willing to pay them now. Ironically, there is a better argument that even these tiny tax hikes will suppress economic growth during a recession, though they would have been an unnoticeable blip earlier.

Well, if the business community and Douglas are willing to accept higher UI taxes, what’s the problem?

The problem is that they also want lower unemployment insurance benefits. And they want these lower benefits to be permanent, so that unemployed workers in Vermont will continue to get less money per week forever.

Not necessarily less than they get now, but less than they would get under current law.

To labor advocates, such as Christopher Curtis of the Vermont Legal Aid Society, these proposals mean the Douglas Administration is “using the present (Trust Fund) crisis to reduce benefits far beyond the level needed to restore (the Fund).”

That’s true, not because Douglas, Labor Commissioner Patricia Moulton Powden and other officials are heartless beasts intent on starving the working class. It’s because they are convinced that some workers are gaming the Unemployment Insurance system, preferring to stay home and live off their benefits rather than trying to get another job.

“The Governor says some people work six months a year and then go to Florida,” said someone familiar with the negotiations going on between the Administration and the Legislative leaders.

Obviously, there are such people. There do not, however, appear to be very many of them, and the belief that large numbers of people would rather lie around and collect unemployment benefits than work for a living, while widespread, seems rare in, if not absent from the peer-reviewed economic literature.

In fact, a recent study by economists at the Federal Reserve Bank of San Francisco concluded that recent extension of unemployment benefits had only a “modest effect” on total unemployment. Extending benefits, to be sure, is not identical to the generosity of benefits. But Vermont’s aren’t all that generous. The average weekly benefit of $304 is 25^th in the nation, and the $425 maximum ranks seventeenth.

Besides, concluding that many people would rather earn less money than more money is something of a refutation of a basic tenet of capitalism, which rests on the premise that individuals rationally pursue their economic self-interest. Deliberately deciding to cut one’s income by more than 50 percent does not seem a rational economic pursuit.

If anything, Vermonters stay on unemployment less workers in other states. The average length of stay in the system has been 14 weeks, though Powden said it had recently ticked up to at least 15 weeks. Very few unemployed Vermonters stay on the unemployment rolls for the 26 week maximum. Most unemployed Vermonters, it seems, want to go back to work.

From one perspective, then, the Administration might be trying to solve a problem that does not exist. But Powden said that because Vermont has a high proportion of seasonal workers (ski resorts, and all that) some people are “utilizing the system to their advantage,” and “may choose unemployment” for part of the year thanks to Vermont’s “fairly generous benefits.”

She acknowledged that she was describing less than 10 percent of those who receive benefits, but said perhaps some of the seasonally unemployed “who know their job is coming back maybe should be getting a lower amount” to create “an incentive to get back to work.”

The problem seems to be that most of the formulas that will lower those benefits would also lower the benefits of many workers who don’t know their job is coming back, and are already trying as hard as they can to find work. The negotiators were seeking what one of them called “creative ways” to threat that needle.

The old bridge

Thanks to a decision made by the government of the state of Vermont – mostly the Douglas Administration but with the support of leading legislators – the new Lake Champlain bridge will cost Vermont taxpayers somewhat more than it might.

Thanks to that same decision, no Vermont worker is guaranteed to get one of the 150 or more jobs – some paying more than $47 an hour including benefits – on the $61 million project, the largest construction project in the state in some time.

Finally, thanks to the decision, strikes, labor jurisdictional disputes, or other work stoppages could interrupt progress on the new bridge, scheduled to be completed by July of 2011.

The decision was the state’s refusal to participate in a Project Labor Agreement (PLA). Under a PLA, construction unions agree to certain concessions, such as surrendering premium pay for late shifts and allowing flexibility in computing overtime. This holds down the price of the project.

They also agree not to stage strikes, slowdowns or other work delays, a provision especially important when officials – and the public – are impatient to finish the job.

In return, most of the workers are selected from union hiring halls, meaning union members get priority, though non-union workers are commonly chosen also, simply because the job requires more workers than there are union members in any area.

In this case, the federal government signaled its approval of using a PLA. The state of New York agreed. The unions made the necessary concessions.

Vermont said no.

To recap: The PLA would (1) Not cost anyone a penny; (2) Save the state and its taxpayers some hundreds of thousands of dollars according to the one study devoted to the question; (3) guarantee scores of Vermont workers high-paying jobs for 15 months.

And the state said no?

“It’s a philosophical opposition to unions,” said Sen. Vince Illuzzi, the Orleans County Republican who supports the PLA.

Not so, said John Zicconi, the spokesman for the Agency of Transportation, who said Vermont officials “didn’t think one (PLA) was necessary.”

Zicconi said Transportation Secretary David Dill told New York officials Vermont would consider the PLA if “nonunion shops were treated completely equally with the union shops,” a condition that he said was not met.

“Our non-union shops should have been on a level playing field,” Zicconi said. “That was the key issue to us.”

It was the key issue, Zicconi acknowledged, because the Agency was subject to “strong lobbying” by Vermont’s construction firms, organized as the Associated General Contractors of Vermont. Almost all of Vermont’s contractors are non-union shops, and obviously intent on staying that way. Both Zicconi and AGC officials said that under a PLA no non-union Vermont contractor could possibly get chosen as a subcontractor to do any work on the bridge.

But according to the “Due Diligence” report on the advisability of the PLA done by Arace & Co. consulting firm of Warwick, N.Y., non-union contractors win at leas”t 30 percent of all (contracts) under PLAs.”

The report also concluded that a PLA on the bridge “has the  potential to produce cost savings for the Federal government and the taxpayers of New York State and Vermont.  We estimate potential savings of approximately $1,756,032.”

Vermont’s share of that would presumably be several hundred-thousand dollars.

Besides, there do not seem to be any Vermont firms that could possibly win a subcontract for any of the work that would have been covered by the PLA. Zicconi and AGC sources said they hoped Vermont firms might get subcontracts for line-striping the road, installing the guard rails, or providing concrete.

But according to Michael Morelli of the Ironworkers union and other union officials, the less expensive contracts for line-striping and guard rails were not part of the draft PLA. And the concrete material, which is likely to be handled by a non-union Vermont firm, is considered supply, not construction contracting. It isn’t part of the PLA, either.

In fact, so many of the arguments in opposition to the PLA are so demonstrably incorrect that Illuzzi’s contention that state officials are motivated by “philosophical opposition” can’t be dismissed out of hand.

For instance, both builders and state officials repeatedly told lawmakers and reporters that the PLA would force non-union Vermont workers to “join a union.”

It would not. The workers would have to pay union dues while on this particular job. But they would not have to become union members, and they could stipulate that none of their dues money go for political activity. In the meanwhile, they and their families would enjoy the generous health benefits of the union plans.

And in disputing the consultant’s estimate of $1.7 million in savings, Zicconi said that would depend on whether the unions made concessions, and on the report’s assumption that union workers were more efficient, “and I don’t buy that.”

But the unions have already made the concessions. And the efficiency issue, according to Ed Acer of the consulting firm, based on findings that union workers are “more likely to be more productive and safety-conscious” because they are “graduates of rigorous state-certified apprentice programs,” accounted for $112,000, or .005 percent of the projected savings.

“That’s a rounding error,” he said.

A PLA would not have cost Vermont contractors a penny. All workers on the job will have to be paid the New York State prevailing wage, which is much higher than Vermont’s. A Vermont laborer, said, John Donahue of the Laborer’s union, earns about $12 an hour, usually with no benefits. The New York prevailing wage, he said, is $37 an hour, $23 in pay and the rest benefits. Even after deducting union dues (about $2.22 an hour) the worker earns a lot more under the New York system.

That, of course, could reveal a practical, rather than a “philosophical” reason Vermont contractors oppose the PLA. They may not want their workers to get a taste of the higher wages and benefits that unionization brings.

Labor leaders could be exaggerating when they say that without the PLA no Vermont worker might be hired. The general contractor, Flatiron Constructors of Colorado, is not likely to bring all 150 or more skilled workers with it. But Morelli of the Ironworkers said Flatiron was known for “self-performing” a great deal of its work and bringing some of its work force with it.

Efforts to reach Flatiron were not successful.

And Donahue might have been bluffing when he threatened labor unrest.

“We’re not going to stand by,” he said. “There could be picket lines and everything.”

But they are correct when they say that without the PLA there is no guarantee either that Vermonters will get any of these good-paying jobs or that there will be no delays because of labor squabbles. Under the draft PLA, 84 percent of the jobs would have been apportioned through local hiring halls in New York and Vermont, though non-union contractors could “drag-along” their own employes to make up the rest.

The final irony here is that there could be a PLA after all. Vermont’s refusal only scuttled plans for a public PLA. But the unions and Flatiron could negotiate a private agreement. Flatiron has operated under PLAs in the past. It was the general contractor for the replacement of the Mississippi River bridge in Minneapolis that collapsed in 2007. That jog was finished ahead of schedule and under budget, and it was conducted under a PLA.

A Flatiron official was in the Albany area yesterday,  perhaps negotiating.

Under a private PLA, though, the taxpayers will not save the money. Flatiron will add it to its bottom line.

USA Today came to Vermont last week to write about the Vermont Yankee squabble, and in Friday’s paper the reporter quoted Yankee spokesman Larry Smith describing the nuclear power plant’s opponents as “hippies from the ’60s who want to be against something, and it’s nuclear power.”

Not a very smart thing to say, at least not in the judgment of one Larry Smith, who said Tuesday, “not the smartest thing I ever said.”

Not what he meant, either, said Smith, who didn’t deny saying it. But he was referring, he said, only to some of those who oppose relicensing the plant for another 20 year run, “many of the same people who attended those (anti-nuclear) hearings” 40 years ago.

“The people who moved up here in the 60s, sort of counter-culture folks,” he said. “But it was not a general characterization. I would never characterize all our opponents that way.”

Good enough. But here’s the interesting thing. If he had meant it as a serious description of those against the relicensing (and we take him at his word that he did not), he would have had a point.

Not literally, of course. If the latest polls are accurate, most Vermonters don’t want the plant licensed to run past March of 2012, and surely most Vermonters do not fit the definition of “hippie”: “a person who opposes and rejects many of the conventional standards and customs of society” (American Heritage Dictionary, Second College Edition).

But broadening the definition a little (well, OK; a lot), the description fits. At least the leaders of the anti-Yankee forces tend to be political liberals, environmentalists who are suspicious of all large corporations, who might go out of their way to eat locally grown, organic food, who listen to public radio.

To a corporate executive at a nuclear power plant, these people would be not only wrong on the issue, but also…not my kind of people. Conversely, on the other side of the debate, those executives would be not only wrong on the issue, but…not our kind of people.

At some point this political tribalism becomes as significant, if not more so, than the differences over the issues, real though they are. On both sides, beating those other guys (not our kind of people) becomes the real goal.

This is not a phenomenon unique to Vermont. Take the dispute over drilling for oil in Alaska’s Arctic National Wildlife Refuge. The oil industry does not support drilling as fervently as do conservative commentators and operatives (the industry isn’t sure there’s that much oil there). The conservative commentariate has no economic vested interest. They just want to “stick it to the hippies,” or, more accurately, defeat environmentalists, who are not their kind of people (and who in turn delight in the conservative discomfort about continuing to lose this battle).

Something similar is going on in Vermont with regard to “permit reform,” which apparently isn’t going to happen again this year. But it’s a perennial. It will be back, promoted by the business community (especially the building contractors) and supported by most Republicans.

Their argument is that the hoops through which developers must jump before they are allowed to begin construction projects suppress economic growth in the state. Were it easier, quicker, and cheaper to get permits, they say, there would be more construction projects, hence more jobs and faster economic growth.

The argument is not provably false. But it is almost surely not true, raising the possibility that another motive is at work here, that what the “permit reform” advocates really want to do is “stick it to the hippies.”

Or to put it more responsibly, some Vermonters are still so bitter about losing the fight over the passage of Act 250, 40 years ago, and some other environmental laws since, that they want revenge. If not to repeal the law (a political impossibility) at least to weaken it.

This is not a sentiment confined to the right side of the ideological spectrum. Some feminists still (metaphorically speaking) froth at the mouth when reminded of the failure of the Equal Right Amendment 30 years ago.

But what is the foundation for concluding that Act 250 and the other environmental rules have not suppressed Vermont’s economy?

A good question with a simple answer: Vermont’s economy has not been suppressed.

By almost every measurement, the state’s economy has grown as fast as or faster than the economies of its neighboring states.  In the last 40 years, Vermont’s per capita income, once far behind the national median, has almost caught up with it.  The state now ranks 23^rd in personal income per capita.

The most recent statistics from the Bureau of Economic Analysis show that Vermont’s economy grew by 1.7 percent in 2008, faster than the country as a whole, faster than the New England region, faster than the rest of the Northeast, faster than the South or the Great Lakes, and just as fast as the Southwest.

And they got oil.

Furthermore, there are no data – none – indicating that Vermont’s permitting process prevents or even much delays development projects not likely to harm the environment.

According to a recent report by the Natural Resources Board, last year 82 percent of 380 Act 250 applications were approved without a hearing. Decisions on almost two thirds of all applications were issued within 60 days, and 81 percent were issued within 120 days.

Five, or 1.2 percent of the applications, were denied a permit.

But what about the applications that never get filed because the developer finds the process daunting or distasteful or expensive?

Well, one cannot prove a negative. But look at it this way: a smart developer seeing an opportunity to make a profit will file the application even if filing it is a pain in the neck.

Unless, of course, the developer is not sure the project will meet the guidelines. In that case, the law is working exactly as intended, stopping the environmentally damaging projects while allowing the vast majority of proposals to proceed.

This doesn’t mean that a developer has never given up on a project because of the permitting process. No doubt a few have. But it makes no difference. The site the developer was considering is still there.  Another developer will come along with another project.

None of this means that the permitting system can’t be improved. Anything can be improved, especially government bureaucracies, which often move at all deliberate dawdling. Nor is it intended to absolve  the other side of this discussion–the environmentalists–of their own tribal hostilities.

But next time someone says Vermont will go broke unless it does something about its environmental permitting system, remember that some folks have been saying this for the last 40 years, during which Vermont has gotten richer. Whoever spreads that message probably is less interested in prosperity than in sticking it to the hippies.