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.

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.