The fight is on, and it promises to be a humdinger.

Attack and counter-attack. Quick response. Thrust and parry. Jab and hook. Give no ground or quarter. The best defense is…well, you get the picture.

All of which is lots of fun, but threatens to obscure the meaningful substantive differences between Republican Brian Dubie and either Peter Shumlin or Doug Racine.

In fact, “obscure,” may understate the case. “Pervert” could be more appropriate. The barbs each side is throwing at the other seem designed to convince voters that the opposition is extremist: that the Democrat would raise everybody’s taxes; that Dubie would permit the poor to starve on the sidewalks.

Not hardly.

As mentioned here the other day, the winner will be governor, not emperor. Even if Shumlin/Racine wanted to raise everybody’s taxes, the Legislature would not. Nor would it allow the poor to starve on the sidewalks.

Besides, the Democrats, who are prudent, do not want to raise everybody’s (or anybody’s) taxes, and Dubie, who is decent, does not want the poor to suffer at all, much less starve on the sidewalks.

“People who depend on vital state services are not going to be abandoned by state government,” said Dubie campaign spokesperson Kate Duffy.

Even the semi-defensible attacks are a bit over the top. There is some justification for Shumlin to argue that Dubie’s economic policies would lead to “deficits, unending deficits, tax cuts for the wealthiest Vermonters and budgets that don’t balance.”  Dubie’s determination to cut taxes and his vagueness about what programs he would cut do complicate the budget-balancing task.

But in addition to redundancy (deficits are “budgets that don’t balance”), the attack ignores Dubie’s pledge that tax cuts “won’t happen in one big step or one year,” but would be “incremental.”

Similarly, Dubie may not be dead wrong when he claims the Democrats have “only two solutions for the challenges we face: more government spending and higher taxes.” Both Shumlin and Racine are on record in the past favoring new programs and higher spending. But while they still favor  some new state initiatives, they are not for higher taxes.

Besides, there’s another candidate who proposes new government spending: Brian Dubie. The jobs plan in his “Pure Vermont” document calls for the state to “increase support for (Vermont Economic Development Authority’s) highly successful interest rate subsidy program,” “ increase public investment in the new Technology Lending Program,” “add support for (Small Business Development Center) counseling,” and create an investment tax credit.

All that costs money. Yet the heart of Dubie’s campaign is to hold the state budget to spending increases of  two percent a year. Because revenue is projected to rise at a higher rate, a Dubie Administration could then cut income taxes by a total of $240 million over four years.

This means, said  Duffy, that Dubie’s plan “is not making any cuts.” State spending, she said, would continue to rise, just more slowly than it has been rising, and more slowly than revenue would rise.

Dubie’s arithmetic is correct, except that he first pledges to close the projected $112 million deficit for the coming Fiscal Year (2012). That would require a spending cut of more than 9 percent, creating a new base. Increasing spending by two percent a year for the next four years on top of that new base would mean that spending would fall by an annual rate of about three-quarters of a percent over a five-year period. Extend the same policy out another five years, and spending does go up, but only at an average annual rate of slightly more than one percent.

That might be the smallest growth rate of state spending in decades, if not a century, raising questions about how realistic the plan is. Dubie claimed that in the early 1990s, Gov. Howard Dean actually level-funded (no increase) spending over a three-year period, a harsher reduction than Dubie’s proposed two percent growth.

Not really. Check the esoteric document available from the Joint Fiscal Office web site’s “Appropriations” page,called “Budget History FY 83-present.” It shows that while the General Fund budget actually went down for one year under Dean, it then started up again, and over a five-year period it rose by an annual rate of 3.4 percent a year.

That document provides other interesting information, both casting doubt on the assertion that Dean really “level-funded” spending and confirming that budgeting is a creative art. In those same recession years that Dean was spending less out of the General Fund, some new expenditures are recorded in the Transportation Fund.

Could it be that the state was using Transportation Fund money (financed from gasoline taxes, auto registration, etc) for non-transportation purposes? The document suggests, but does not prove, that the answer to that question is in the affirmative.

If so, it would not be unusual, in Vermont or elsewhere. One reason for that $112 million projected shortfall for the next Fiscal Year, for instance, is that the Legislature and Gov. Jim Douglas have been effectively filching from the Education Fund by not transferring into it as much General Fund money as the law required. (Legislatures and governors, who make laws, can change them as an alternative to obeying them). Reached at home where he did not have access to his records, Joel Cook, the executive director of the Vermont National Education Association, estimated that the shortfall was at least $50 million.

If the Legislature doesn’t repay that (as it said it would) or come up with enough money again this year, the Education Fund could be short tens of millions of dollars. That would require either deep cuts in school spending or substantial increases in local property taxes.

This poses a potential political problem for Dubie. He wants to cut everybody’s income tax rate by about a third, reducing the top rate from nine to six percent and the lower rates comparably. That’s good politics; everybody likes lower taxes.

But the Democrats will try to convince voters that the result would be higher property taxes, which are the taxes Vermonters really dislike. Democrats are already making that argument as well as claiming that, in Racine’s words, Dubie’s “numbers just don’t add up.”

“He wants to add money for various business promotion efforts…but he wants to cut taxes,” Racine said in a telephone interview. “This sounds like the federal budget discussion. Make promises of higher spending for business and lower taxes for everybody. That’s Washington. We don’t do that here in Vermont.”

That’s harsh, but standard political rhetoric. What came out of the Dubie campaign late yesterday may have crossed the line from standard to…well, to  false. In a statement released yesterday afternoon, Dubie said Racine had wanted to use money from the state’s “Rainy Day Fund” to “expand government-run services,” and that he opposed the “Challenges for Change” plan to make government more efficient.

The first of those accusations is simply incorrect. Racine has suggested dipping into the reserve funds, but only to support existing social service programs, not to “expand” government service. The second charge is minimally defensible, but a stretch. Racine supported “Challenges for Change” during this year’s legislative session, voting for it at least twice,  though he voted against the final Fiscal Year 2011 budget which incorporated “Challenges.”

“Fundamentally, Brian is a decent man,” Racine said. “If he wants to disagree with me, that’s fine. But don’t be deceitful.”

It could be a long two months.

Note One: An Apology– Thanks to the storms of Tuesday evening, the News Guy kept getting disconnected from the Internet. In the rush to finish writing, and to get the post into the system before the connection broke again, confusion prevailed more than it usually does. As some readers noticed, the post got posted twice. As at least one reader noticed, the first reference to the town of Hartford called it “Hartland,” another town entirely, if not that far away. Apologies to all readers and to the residents of both towns.

Note Two: The Next Two Weeks–As previously announced, the News Guy is going to take some time off. Admittedly, not the best timing, what with the primary on August 24, only a little more than two weeks away. But even primaries have to take a back seat to family events and school vacation periods.

So there will be no posts next Monday or Wednesday. There will be one on Friday, and it will be an in-depth analysis of the economic policy proposals of the five Democratic candidates for governor, one of which is not scheduled to be released until next week. (Republican candidate Brian Dubie has said he will release his after the primary).

There will also be no posts the following Monday and Wednesday (August 16 and 18), but there will be one on Friday, the 20^th, after which the regular Monday-Wednesday-Friday schedule will resume.

Note Three: A Clarification– Chris Roy, one of the two Republican candidates for Secretary of State, took issue with the News Guy’s assessment in last Friday’s post, Getting Tetchy, that he “seems to be losing” the primary race to Jason Gibbs.

Roy may have a point. He agreed that Gibbs has more money in the bank,(though Roy who has been running far longer, has raised more overall), has the support of Gov. Jim Douglas, and has been more successful in getting his name into the news.

But, Roy said, in what is likely to be a very low turnout, his “targeted” campaign, based on “a very focused mailing program and very focused phone call program” could propel him to victory.

So it could. At any rate, he provides a worthwhile reminder. Much attention has been paid to the likely Democratic primary turnout, with estimates ranging as low as 40,000. But at least the Democrats have a real race for governor, the highest-profile position. On the GOP side, though, nobody is challenging Dubie or U.S. Senate candidate Len Britton (whose prospects against Sen. Patrick Leahy are bleak anyway). Yes, there is a three-way contest for the U.S. House seat. But it is among three little-known long shots against Rep. Peter Welch, and therefore not likely to arouse much enthusiasm among rank and file Republicans. The Republican primary turnout could be really anemic.

Note Four: An Assessment– Speaking of the Democratic primary, has anyone noticed that it is one of the weirdest political campaigns in recent years, and not just in Vermont?

That’s because of what has happened in the race: nothing. Usually, in political campaigns, the process creates its own dynamic. Either Candidate A makes a fool of him/her-self, or Candidate B gets accused of some misdeed or peccadillo, or Candidate C makes a magnificent speech that captivates 5,000 cheering supporters in an arena, or some bizarre event not directly connected to the campaign plays to some candidate’s strength, or….well, or something.

If nothing else, in a close race the candidates start attacking each other. Or at least the candidates who are behind in the polls start attacking the front-runner. Rarely do these attacks enlighten, but they often get folks more interested.

Not here, at least not yet, and there’s not much time left. This race is about where it was when it began. It pits five honorable, responsible and not very exciting mainstream Democrats battling each other for the biggest share of the primary pie. Not one of them has stumbled. Not one of them has really caught on.

As to attacking, it isn’t certain that any of them knows how. Or, perhaps more likely, all are reluctant to start attacks because they know the attacker would be hurt as much as the attackee.

Just from the political perspective, the major recent development was Peter Shumlin’s decision to start television ads last month. The ads are pretty good, but as far as can be determined (not very far, there being no public polls) they haven’t much changed the structure of the race. Maybe, it being midsummer, voter are simply not paying enough attention.

All this is good news for Deb Markowitz, who started as the best-known, best-liked of the contenders, and seems not to have lost a step. True, as a candidate Markowitz is not exciting. But she’s likeable, and the other four haven’t inspired the voters to mobilize behind their banners, either.

Note Five: A Critique—The good news that came out of the Associated Press’s interviews with all six candidates about how, if elected, they would deal with next year’s likely budget shortfall, is that one candidate had a very specific idea which would clearly save money, and the candidate knew how much money the idea would save.

The bad news is that it would save only $16,000.

The idea was Markowitz’s pledge not to accept the $61 per diem allotment for the governor’s meals. She said the governor of Vermont earns enough to pay for her own meals.

From other candidates, the responses ranged between imprecise and arguably inaccurate. Bartlett said Vermont could save money by bringing home some of the prisoners it now sends to out-of-state facilities, though one reason the state sends prisoners elsewhere is that it’s cheaper. Shumlin said the state could save as much as $50 million by more closely policing some $250 million of outside consulting work, which might cut costs as much as 15 percent.

But 15 percent of $250 million is $37.5 million, not $50 million.

Then there was the candidate who, asked how he would reduce the budget gap, proposed increasing it.

That was Dubie, who told the AP he would make the budget easier to balance by cutting taxes.

“A gradual reduction in taxes will put more money in the hands of hardworking Vermonters,” Dubie said.

Yes, it will. And with more money in their hands, Vermonters (including the ones who don’t work all that hard) will pay more in taxes. But not enough more to offset the revenue loss the tax cuts will create. Whether cutting taxes is a good idea is debatable. That it will reduce revenue and therefore make the budget gap bigger, not smaller, is not. It will.

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.