The bottom line is while we really don’t stink particularly bad at any one thing, factors combine to push MA into the lower 20% of all states.
BMG readers continually defend Massachusettsâs tax-burden ranking (13th?), but the bottom line is our poor showing on the job creation front. I think this study does a good job at highlighting where the Commonwealth falls short, at least compared to other states. The northeast is generally a job-creation wasteland with New Hampshire the sole exception (maybe Maine, too.) Hereâs a quote:
âCalifornia, Connecticut, Illinois, Massachusetts, New York, Ohio, Pennsylvania, and Wisconsin all elect governors this year. And all languish near the bottom in terms of economic freedom. They have all also struggled with significant budget deficits. Candidates from California and Ohio highlight the stark differences on taxation.â
Overall, Massachusetts ranks 41st in economic freedom (see Table 3.) The only good news is that we were 47th in the 1999 study.
I sure our gubernatorial candidates are all “for” more jobs. But what specifics do they cite which follow some of the lessons learned in the PRI study?
Patrick has supported raising meal taxes and room taxes and still will not support the tax rollback.
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Gabrielli wants to spend $1 Billion in stem cell research without explaining how we plan to pay for it. Wishy washy on the tax rollback.
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Tom Reilly , without hesitation, is the only candidate that is 100% committed to the tax rollback.
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The answer is simple .
continue to slash state revenue and pushing the burden onto homeowners in property taxes? Or would you rather just continue laying off teachers and cops.
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Come on, I’d expect that attitude from someone who didn’t know what was going on, but you read this blog, you know better. You think that .3% of income tax is gonna put significant money in your pocket compared to the cuts it will lead to in your community?
or hang around many entrepreneurs. But I became involved in a local group that was a really nice, Women Entrepreneurs in Science and Technology. Recently I got more busy with my company, so I haven’t been as involved, but my first couple of years on my own I really appreciated the functions they provided.
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The people I talked to at these events didn’t need to be sold on Massachusetts. Mostly techies, they liked it here. We have networks here. We have houses here. We can go to current science lectures for free, a lot. We may be tied here for other family reasons (faculty spouses or other area jobs, for example).
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Not a single one of them ever asked me about policy and economic freedom/taxes. The most common question I got: “What did you do about health insurance?” Swear to [deity of choice].
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We know that when we start a business we aren’t making money for a long time. Taxes really weren’t at the forefront of our minds. The tech climate, and access to talented people in the field, is nearly unbeatable here. You figure you’ll deal with the taxes later….Maybe that’s naive. But I’m not about to do a deep analysis of the taxes that won’t be an issue for probably several years, relocate to some area I don’t have a network, incur costs of moving, move away from my family support network, for a putative future tax break.
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That said, I am in biotech, and I would never move to a state that discounted evolution….so there is a policy aspect I would consider.
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This is anecdotal, I know. And maybe there are no conclusions you can draw from my experience. And I blog anonymously because I compete for goverment grants and contracts and don’t want it to be 100% easy for people to associate my name/company with my political stance. So take it as you will.
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I would think about expanding if I knew there was universal health insurance that taxes on my profits, and taxes from income of my workers, was jointly paying for.
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As it stands, if I get too busy and can’t get contractors to take up the slack, I don’t take the work. It’s starting to become a problem actually…
Among other things:
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1. The study purports to rank Massachusetts 30th and New Hampshire 50th — dead last — with regard to the “judicial sector,” i.e., are the courts and laws business-friendly in that state? Ranked ahead of Massachusetts are Alabama, Georgia, Mississippi and Texas. You would have to be twelve kinds of high and completely ignorant about the subject to rank the states that way. The courts in Massachusetts and New Hampshire are good, efficient and business-friendly. Alabama and Mississippi, on the other hand, are widely recognized judicial hellholes.
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2. The results have essentially no quantitative significance (which is different from statistical significance). That is to say, the study did find that “economic freedom” was statistically correlated with state per capita income, but the actual effect was tiny. For example, the state’s average temperature was three times more important than “economic freedom” (colder states do better). The historical income of the state residents was 13 times more important than “economic freedom.”
3. Massachusetts is doing just fine on keeping its people employed. (See this chart — New England is generally doing quite well.) The problem — to the extent it is a “problem”; a state could certainly have worse problems — is that we aren’t growing because the high cost of living, particularly housing, is pushing people out of the state.
The economist Peter Fisher examines this and other studies that try to rank states in similar ways in a recent book “Grading Places.” The book can be downloaded from this link to the Economic Policy Institute website (EPI is a think tank that my organization, the Massachusetts Budget and Policy Center, works with):
http://www.epinet.org/content.cfm/books_grading_places#toc
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The PRI study is discussed in Chapter 5. The analysis in Grading Places is a little technical, but worth reading before putting too much faith in any of these studies.
Ai yi yi. Even worse than I expected (p. 56):
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“Curiously, the judicial score actually enters negatively; the more ‘free’ a state on the judicial index the less ‘free’ the state is overall. As PRI concedes, this means basically that the measures comprising the judicial score did not work as they expected. …
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“Worst of all, PRI did not begin with the theoretically most defensible index, test it, and live with the results. Instead, it experimented with 48 different indexes and then picked the one that did the best job of producing the answer it was looking for.”
are always my favorite solutions. But if tax rollbacks were the answer to every economic problem, whether its a downturn in the economy or a problem in job creation, then you would think that Bush’s tax cuts in 2002 and Herbert Hoover’s economic policy would have been more effective.
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And take what the Pacific Research Institute has to say with a grain of salt. These guys have come out against global warming and the Kyoto Protocols and are in Exxon’s hip pocket.
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It’s true that there are states whose tax burdens are so low and whose regulations are so porous that companies migrate there to increase profit. We call states like that “Alabama.”
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Instead of focusing on why companies would want to leave Massachusetts, lets take a look at why they might want to stay and what we can do to improve our selling points. For instance, having sat in on conversations with small business owners over the past six months, they tell me that they love it in Massachusetts because of its proximity to their markets, and because of the pool of highly qualified, talented workers that are here in large part because Massachusetts is an educational mecca.
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Unfortunately, because that talent pool is fleeing the state, Massachusetts businesses might be less inclined to stay in the coming years. And where is the talent going? To places like New Hamshire, where its cheaper to live. Is it any wonder then that New Hampshire’s growth is predicted to be faster than Massachusetts’s in the coming years?
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It’s not cheaper to love in new Hampshire because there’s no income tax. Believe me, they make it up with exhorbitant property taxes. It’s cheaper because the same house you’ll pay $600,000 grand for in Newton, you’ll pay $350,000 for in New Hampshire.
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There are ways we can attract business without deregulating or rolling back taxes:
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1. How about matching funds for the federal governments small business innovation research program. Other states offer this, why can’t we?
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2. How many people are working on Beacon Hill solely on marketing Massachusetts to large corporations? At last count, fewer than 5! Ohio’s leuitenant governor has been making the rounds to Massachusetts companies putting on the hard sell. What are we doing in return?
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3. Affordable housing for employees. This can’t happen fast enough.
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4. Restore local aid to communities. This improves education and family life to Masachusetts residents. Hey, corporate officers are residents too. If they’re happy they won’t want to leave. And restoring local aid can’t happen with a rollback to 5%.
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And I’m sure there are many more. let’s be realistic about our solutions with an eye toward what kind of state we want to live in. Massachusetts or Alabama?
Bush’s tax cuts work! Recent tax cuts at the fed level are doing wonders for the economy. It’s all under-reported in the Globe and NPR so I wouldn’t expect you’d be aware of robust corporate earning (woooo..those awful corporations.) Also, look at tax revenues: CA just reported their highest tax receipts, mostly as a result of stock sales at Google and 200 other public companies. Perhaps the reduction in the cap gains rate (from 20% to 15%) had something to with that. Other indicators — personal income, GDP, employment, other too varied to mention — are all up and have been up for the past 12 months. Dumb luck? Try tax cuts stimulating the economy.
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I’ll pose this question: do you believe that reducing taxes actually increases tax receipts? It’s true and has been true in the post-WWII economy. JFK proved as much. So did Reagan. So does any state that increases it’s taxes — personal and business — and kills off jobs. If you want the government to have more cash coming in, reduce taxes! It’s empirically true but I suspect there’s no way to convince you of this. Ever.
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I can’t help but laugh at your prescription for keeping companies in MA (what is it that you do that you speak with small employers?) “Keep talent from fleeing to NH.” Brilliant! How do we do this? A fence? Suggestion: lower our taxes to the level of NH. I’d bet we’d not only keep our talent, we’d attract more, and tax receipts would increase.
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(BTW, I did a recent study of property taxes in NH compared to MA, for myself since I may want to buy property in NH, and there isn’t that much of a difference anymore. Densely populated towns/cities and municipalities with a commercial real estate base, like Framingham, Waltham and Westborough, still have a mill rate advantage over most places in NH, but local property taxes in MA are exploding due both to increases in the tax rate and soaring property assessments. NH looks better and better each year.)
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As for your other laughable ideas:
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(1) Of course, let’s seek money from the feds. They’re offering, we’re taking. That’s a given. But this is an unreliable source and economic window-dressing to boot. Engines of growth are almost always private-sector ones. Did Digital, Prime, Wang, and Data General hold their hands out for subsidies? Besides, the last people I want doling out venture capital are the rocket scientists on Beacon Hill … would you trust your pension fund to the guys responsible for the Big Dig? If not, why entrust them with public funds to “invest”?
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(2) The Ohio Lt. Gov. is poaching on MA employers because they think have something better to offer. If we’re one of the highest cost employment states in the US, what would tripling the economic development staff do? Zip. We can’t compete for economic reasons, not because people don’t know about MA or we lack slick corporate-relocation brochures.
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(3) Demand Affordable Housing Now! Great bumper sticker, but where’s the policy? Gosh, I’m in the housing industry. We’ve given up trying to develop high density residential in MA … too hard, too adversarial, towns fight you tooth and nail. 40B was watered down, and 40R and 40S are voluntary and thus marginal. I could list 50 other reasons why MA will not see affordable housing anytime soon, perhaps in new post.
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(4) Restore local aid to communities? Are you kidding? That’s a policy for growth? It’s a zero sum game that simply redistributes existing tax receipts. Where’s the money come from? Taxpayers in communities. Thank you for a little bit of insight into the liberal mind.
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I like MA. I don’t want to move to AL. But it’s not either-or. I’d certainly relocate to NH, VA, NC, SC, CO or a bunch of other states that are growing and attraching jobs and opportunity.
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My long point is this — if we reduced our income tax to, say, 4.0% or 3.0%, reduced or eliminated most coporate taxes and fees, reformed our too-generous social welfare system (including our new health “reform”), privatized auto insurance, provided some state-wide sanity to our punitive zoning regulations, and did other job-freindly and family-friendly things, we’d attract lots of job and new people, and tax receipts would go through the roof.
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We already have the talent pool, the educational institutions, and sufficient entrepreneurial stock in place. What we lack are the incentives to create the new jobs and opportunity that attract new people. You would need 2, not 5, people to staff the economic development office because the state’s economic attractiveness would be obvious to everyone in the private sector.
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To the contrary, we keep on adding disincentives — higher taxes, more social welfare, higher minimum wages, more zoning restrictions, blah blah blah.
Any citations for your claim that reducing taxes increases tax receipts, and raising them decreases receipts? Or are we just going to take your word on it?
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I guarantee you right now that you will provide no citation for this, since no such research exists. It’s a canard that is constantly repeated by right-wingers with nothing backing it up whatsoever. (And yes, the economy is better now than it was before Bush’s tax cuts. Just like the economy was better after Clinton’s 1993 tax increase. It’s the economic cycle that matters far more than the marginal tax rates).
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Anyway, if you actually talked with employers, you’d find that taxes are so far down on the list of problems that it barely registers. Housing is a huge problem, as is health care costs.
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Controlling health care costs is probably something that needs to happen on the federal level, which of course is not going to happen given the current federal leadership. But solving the housing problem can be done, as you suggest, by fixing zoning. So you are right about that, at least.
I want to know if this is true:
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I will bet you $10 that much of the growth of these companies came from government spending on grants and contracts. Even today at these entrepreneur meetings I attend much of the focus is on how to access this money. Where do you think that money comes from?
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Yes, in fact.
Anybody have a citation? Or is this ancient history and down the memory hole? Im guessing the state had few grant or subsidy programs for the embryonic computer business back in the late 70s early 80s.
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Still, I didnt say they did or did not receive any $ from MA. Anybody know better?
It’d be more compelling if it wasn’t so covered in crap. First of all, according to the very source you provide, GDP has increased by 2.7, 4.2 and 3.5 percent in the years 2003 through 2005 respectively since the Bush tax cuts. The “estimates” for 2006 GDP are just that – estimates. Your linkage of this growth – at or around the rate of inflation – to tax cuts is conclusory at best.
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Oh yeah, how many new jobs has the economy added since Bush’s supply-side solution?
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Your “starve-the-beast” solution for controlling the size of government is so patently and conservatively dogmatic that it doesn’t even deserve a response. But I’ll give you one anyway, linking you with actual facts that show trying to shrink government spending and deficits by cutting taxes actually has the opposite effect. Check out Jonathan Rauch’s piece at http://www.theatlantic.com.
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And the same people that manage the (HIGHLY underrated) Big Dig are not the same people that would be responsible for administering grants to promising enterprises. Lumping all of administrative government into the same pile is a jackass move most conservatives make.
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Did Digital, Prime and Wang “hold their hands out”? I don’t know, but at some point I’m sure they lobbied for favorable tax rates and regulations. How is that not holding their hands out? The government ergulates the economy in one of two ways. Giving people money in the form of grants and loans, and by taxing (or giving tax breaks). You’re tellnig me they’ve never received one of the two.
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Here are two SBIR recipients in Massachusetts alone who benefited from the SBIR, the Busek Company (who devolped a type of propulsion system for satellites) and the Science Research laboratory, Inc. (they work in lasers). together they’ve generated about $775,000,000 in sales and investement. How’s that for tax receipts?
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The rest of your post is, well, really really sad. I wouldn’t want to live in the understaffed, undefunded deregulated wasteland you’re proposing. I’d rather just live in a community that invests in itself with an eye toward growing business and the local economy.
We now have 5 employees and several contracts (largely from people who get NIH funds).
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Ok, that’s not millions in revenue yet–but we are working on it!
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The SBIR money was a major factor in keeping us alive during the roughest start up phase, and a major credibility factor in our field.
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The goverment as a venture capital source is effective.
It’d be more compelling if it wasn’t so covered in crap.
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This kind of line has no place on this blog. It reveals the weakness of your argument: you resort to invective because you can’t substantiate your points. Please drop this kind of line from your posts and focus on the questions at issue. Thanks.
he started it.
— In response to your âOh yeah, how many new jobs has the economy added since Bush’s supply-side solution?â
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All this in spite of the Dot Com bubble bursting, 9/11 and the worst hurricane season in 80 years.
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— Whereâs Rauchâs article at http://www.theatlantic.com? Can you link me? At least youâre not sourcing The Nation.
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— Concerning DEC, et al ⦠you say âI’m sure they lobbied for favorable tax rates and regulations. How is that not holding their hands out?â and you equate grants and loans with tax breaks. Grants are different than loans although both require capital, and tax breaks are different than both. All have different economic effects.
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I donât know what the numbers are but I think itâs safe to say capital raised from private sources â venture capital, junk bonds, stock issues, commercial loans, family and friends chipping in â dwarfs ALL government largess by a factor of a zillion to one. Your contention that state grants and loans can make a big impact on job creation is absurd. It canât hurt, but donât rely on âgrants and loansâ to fund the Commonwealthâs economic resurgence.
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— Concerning the SBIR success stories ⦠where’d you get your numbers? Can you link to any backup?
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I see the Busek Company occupies 15,000 square feet in Natick. General rule of thumb is 500 sf per employee for light manufacturing. So maybe Busek employs 30 people. Big deal. 600 employees left Boston with Fidelity for RI in a single corporate relocation. Unless you show me some reporting on Busek’s numbers, I contend a company with 30 employees in 15,000 square feet isn’t one that generates even $30 million in sales.
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Science Research Laboratory doesn’t even Google … can you give me a link to back up on your numbers?
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By the way, there’s a difference between “sales” and “investment.” I suspect you do not know what these differences are or you wouldnât have bragged about âgenerating $775 millionâ of whatever they generated. Sales may generate tax revenue if the company is profitable. Investment does not. Look at Sycamore Networks … they’ve burned through hundreds of millions in VC, and still are running a loss, i.e. no tax revenue for MA. But at least they employ 275 people, and they pay taxes.
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What about Busek? Science Research? How many employees? How much remitted in corporate taxes? Payroll taxes? Show me some numbers.
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And how much did they get in SBIR funding?
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— Iâm sorry you find the rest of my post âreally, really sad.â But you know, weâre a lot alike (beside both being reprimanded for our language.) I, too, wish to live in a community that invests in itself with an eye toward growing business and the local economy.
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Except I donât believe that doing more of what the Commonwealthâs been doing is going to add jobs and attract new people. Instead, what we did lost jobs and population.
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I look at other states which are expanding and growing. Whatâs VA doing that weâre not? Last year they added over 80,000 jobs. That accounts for 150,000 new citizens, or around 400,000 2000 through 2004. Lots of new income taxes, more sales taxes, more property taxes. Letâs emulate them. NH, CO and Fl, too.
A lot of those numbers are raw and don’t calculate increases in shear numbers of the work force. Of course there are more people working now than there were in 1995. There are more people! The workforce has grown. But unless you can create enough growth to absorb the new workforce, you’re moving backwards, not forwards.
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And yes, I too would like to look at VA and see what they’re doing right. I don’t have a problem with that. I’m just saying, lowering the tax rate to 2%(!) isn’t the answer.
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And by the way, small businesses make account for half of the countries GDP. Are you discounting their role in the American economy?
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And about cutting the tax rate to stimulate receipts, the is from massbudget.org:
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The recent performance of the U.S. and Massachusetts economies runs counter to claims that reducing taxes contributes to long-term growth. According to a December 2005 Economic Policy Institute briefing paper, despite a total of $860 billion worth of federal tax cuts since 2001,
â[by] virtually every measure, the [U.S.] economy has performed worse in this business cycle than was typical of
past ones, including that of the early 1990s, which saw major tax increases [emphasis in original] ⦠In fact, over
the last four-and-a-half years, nearly every indicator â from job gains to economic output to spending â have
fallen far short when stacked against comparable periods in past cycles.â1 Similarly, a January 2005 report by the
Center on Budget and Policy Priorities found that that the six states that cut taxes the most during the late 1990s â
a group that includes Massachusetts â suffered larger job losses, in the aggregate, than the other 44 states during
the 2001-2003 period. It also noted that, over the same time frame, total personal income in five of the six states
adopting relatively large tax cuts had fallen, after adjusting for inflation, even as it had risen in most other states.2
It’s all under-reported in the Globe and NPR so I wouldn’t expect you’d be aware of robust corporate earning (woooo..those awful corporations.)
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No one will take you seriously if you keep trying to change the subject like this. You just make yourself look ridiculous ala pill popping Rush Limbaugh if you resort to invective and unsubstantiated hyperbole. Cite your sources, if you have them, and keep to the point.
“… make yourself look ridiculous ala pill popping Rush Limbaugh”
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Ouch. I don’t take drugs.
“I’ll pose this question: do you believe that reducing taxes actually increases tax receipts? It’s true and has been true in the post-WWII economy.”
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First off:
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MA, bottom 1/3 of taxation on income. Completely flat also. You should think it’s a conservative mecca here.
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Second off:
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Your assertion is flatly untrue. Bush’s own head of the council of economic advisers (and author of my freshman year econ 101 textbook, obviously farther than you ever got), Gregory Mankiw, has manipulated and munged statistics to make a case that in the super-extended-long-run, clawback in revenue from tax cuts could approach 50%. Nowhere close to taht in the short run. And it contradicts your (and various other liars’) assertion that cutting taxes increases revenue. Voodoo economics and wishful thinking.
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You are blatantly spreading propaganda, and I’d suggest that you:
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A) Take an economics class
B) Reconsider your approach to honest argument.
First off: not sure what you’re arguing. I’m saying that low-tax states generally create more jobs and attract new people. Hence, the low-tax states (also the less regulated ones) are growing. Generally. There’s correlation but it’s not perfect.
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MA may be 22nd best in taxation, so we have some other problems in play causing job and population loss. But I will argue that to create jobs you wouldn’t want to raise taxes, fees, or other employment costs (like the minimum wage or employer mandates.) That’s my point.
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Second off: You offer Mankiw’s study as a mugging, Voodoo economics and wishful thinking. Haven’t read it, you don’t link it, so I’ll have to take your word for it.
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I will offer the Kennedy and Reagan administrations’ tax- cut/tax-receipt experience as broad proof that cuts can increase receipts. I’ll follow up with numbers and citations on this for you tomorrow.
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Responding …
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A1) have BA in Economics
A2) have MA in Economics (Univ. of Chicago)
A3) MBA, too (Chicago)
A4) was taught by more Nobel Prize winners than you can name. Nyah. So there.
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B) There’s an entire library of research and debate on static versus dynamic scoring of the economic effects of tax cuts, and reasonable men differ. You accuse me of being dishonest, which I am not. I’m debating a debatable point. I can make a case for tax cuts just as clearly as you can argue against them. Let’s argue them.
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But that’s no reason to impugn my motives, attack my character or insult me.
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Hopefully you didn’t spend too much for these degrees, if what you’ve written in this thread is what you’ve learned.
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And if you actually have this education, you should be aware that there isn’t a single economist (including right-wingers) who claims that tax cuts pay for themselves.
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What planet are you living on? Since the Bush tax cuts were enacted, the number of Americans falling below poverty level has increased, as have chronic unemployment, the loss of manufacturing jobs, and the number of personal bankruptcies. The stock market and employment levels have yet to reach the peak achieved during the Clinton Boom.
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Under the tax code that was in place during the Clinton Boom, America created more millionaires and billionaires than at any time in its history; the stock market reached all-time highs, and we posted the strongest and broadest employment, personal income and job creation numbers in US history.
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Clearly, the tax code that was in place then was not an obstacle to economic prosperity.
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And BTW — Ronald Reagan also raised taxes.
“Since the Bush tax cuts were enacted, the number of Americans falling below poverty level has increased, as have chronic unemployment, the loss of manufacturing jobs, and the number of personal bankruptcies.”
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Do we have the numbers? What about % of home ownership, disposable household incomes, GDP, corporate earnings … we each have our talking points.
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“The stock market and employment levels have yet to reach the peak achieved during the Clinton Boom.”
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News to me. Thought the Dow just passed it’s high from 2000 a week or two ago. S&P index, too. Am I wrong on this?
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And you’re TOTALLY WRONG on the employment numbers…I’ll reprint my prior citations below, but Bush’s employment figures passed Clinton’s a while back, and now exceed Clinton’s 8-year peak number by nearly 3,000,000.
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Here they are, straight from the BLS:
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All this in spite of the Dot Com bubble bursting, 9/11 and the worst hurricane season in 80 years.
“News to me. Thought the Dow just passed it’s high from 2000 a week or two ago. S&P index, too. Am I wrong on this?”
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You are wrong. The Dow came near its record high last Wednesday and has since dropped about 5%. The S&P500 has dropped a similar amount, but was nowhere near it’s all-time high. It was near it’s 2000 high, but that was a high in a declining market, so I don’t see why anyone would care. The Nasdaq is down more like 10% in the past week. The major market participants are now predicting a recession and aren’t very interested in buying stocks anymore. The forecasters that I follow have been fairly accurate so far and they are predicting another 5-10% drop by the end of the year.
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Your job numbers are useless, because you have to compare them to population. Otherwise, you would conclude that it doesn’t matter what the president does, because employment has grown over almost every 4-year period since WWII (which is primarily due to population increases).
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The recent recovery has been driven by low interest rates. Tax cuts had nothing to do with it. Low interest rates led to easy credit, which led to rapidly increasing home prices. This created a large number of real-estate related jobs and gave people money when they sold their homes or refinanced. Now that the real estate bubble is bursting, all of those jobs are going to disappear and so is the spending. If we’re lucky it will just be a normal recession. Housing bubbles easily lead to deflationary depressions when they are large enough.
Keep talent from fleeing to NH.” Brilliant! How do we do this? A fence? Suggestion: lower our taxes to the level of NH. I’d bet we’d not only keep our talent, we’d attract more, and tax receipts would increase.
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When faced with increased competition, you can do two things; you can try and compete on price (which usually results in lower quality), or you can try and compete on quality (which often results in higher price).
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I would propose that a relatively small state like Massachusetts isn’t going to be successful competing on price, especially when every other state is doing this.
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Offering better quality will let Massachusetts zig while other states zag.
Bostonshepard this article in the Atlantic pretty much reduces your entire argument to rubble (and in case you think that the Atlantic is a liberal rag, note that the article is written by the head of the Cato Institute and he advised REAGAN on tax policy as acting head of the Council of Economic Advisers). I talked about the meat of the argument on my blog. Basically your tax cuts are short run benefits at best. The long term implications of tax cuts are DISASTEROUS.
One can talk about taxes, the “judicial sector”, the political climate, etc. all they want as reasons for why businesses are leaving the state, but so much of it can be explained by two issues:
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1) The extremely high cost of housing in this state; and
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2) The extremely high cost of health care.
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You ask any statistically significant sample of Massachusetts businesses about they two biggest problems with doing business in MA, and I guarantee that these will be the two most-cited problems.
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As far as housing goes — MA has great high-tech and financial sectors, which rely on an educated workforce. MA has a very highly educated workforce, but many of them are leaving the state because they cannot hope to ever buy a house when they start a family. So it’s no surprise — the jobs are following the employees as they move out of the state.
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One thing I haven’t heard too much from the Gov. candidates yet on is their plans for increasing housing production is. “Smart growth” and 40B type developments are fine, but they only scratch the surface. What are we doing about single family homes? Does anyone know if the candidates have addressed this issue?
I’ve peronally heard both Kerry Healey and Deval Patrick address that issue, and they both sounded more or less the same about it, to paraphrase: “It’s a supply and demand problem and smart growth will help over the long term, but over the short term there’s nothing we can do about it directly.”
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I don’t mean to put words in their mouths, but that’s what I came away with. And I think that’s true. There are all sorts of reasons the market is the way it is. Demand to live here (albeit decreasing), speculation, stagnant incomes that don’t match housing price increases (to say nothing of inflation)…and I’m not sure there’s a magic bullet for this problem.
It’s unfortunate if this is all the candidates have said on the issue — it is pretty odd to say simply that “there is nothing we can do about it in the short term”. Actually, I have heard Healey say something along these lines, about Smart Growth and supply and demand, and she’s outright wrong on this.
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The problem is indeed with supply and demand — but the problem is with the supply of housing, something Healey doesn’t seem to grasp. And there’s plenty that can be done about supply — make it easier for single family homes to be built, for instance. With towns (esp. rich towns) constantly zoning in ways to keep people out (like with 2-acre lot sizes, various restrictions making development too expensive, etc.), it’s no wonder that the supply of homes is dwindling.
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There really is a key issue for one of the campaigns to pick up here, one that can counter Healey’s apparent lack of thought on the issue. I just want to hear candidate’s plans on how they will encourage more development of single-family homes in MA. That’s the ultimate answer, both in the long AND short term, to the housing cost problem, esp. for younger members of the workforce.
Of course, two-lot zoning might be a good strategy to increase property values for the people who live in those communities, so it has some advantages!
By my math, you can fit 25 single-families in there!
the more typical .25-acre zoning for a single family, 2 acres can easily fit 8 homes. (Of course, though the focus should be on single-family housing, multi-family housing is always a possiblity as well on these lots — though only in the municipalities that allow multi-families.).
What? That the land would be worth more with 25 single-families than with one? Or that it is morally wrong for one family to live on a space that could accommodate 25? Or something else?
My point is that I live in an absurdly small house on a ridiculously small piece of property.
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It was a joke — a reference to the name of my blog. Next time I’ll be more clear about it.
Sorry. I do love the name of your blog.
Of course, the land would be worth more with 25-single families (think about the difference in undeveloped land value from one permitted for 2-acre zoning and another for .25 acre zoning — even though it’s the exact same piece of land).
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And there’s nothing morally wrong with a family living on a space that could accomodate more. Rather, the problem is that there’s no such thing as a “starter home” in this state anymore. If you’re young, you live in an apartment or you win the lottery, or you wait 20 years to save up enough to get a house.
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That is the #1 reason, by far, that people, esp. young people, are leaving the state and taking the jobs with them.
What you need are multi-family homes–that’s the only way you’ll have a prayer of creating affordable housing that’s accessible to public transportation, which is a wonderful thing that you may not appreciate if you haven’t lived in a place where it doesn’t exist.
Massachusetts is never going to win out with the single-family home crowd, there just isn’t enough land. Anyway, with the cost of energy going nowhere but up, people are going to appreciate living in (and heating) smaller spaces. Also, less driveways to shovel. Fewer lawns to turn brown during droughts.
House prices are only temporarily high. The fundamentals should have forced house prices to be declining for the past few years (houses were still being built and people were moving out of the state). This means that almost all of the appreciation for the past 5 years has been an asset bubble driven by low-payment mortgages. This could have been prevented by having someone regulate the mortgage industry. Requiring something like a 20% down payment to buy a house prevents prices from going up too much when interest rates drop, which prevents them from falling when interest rates go back up.
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It doesn’t really make sense for the majority of people to think that houses are unaffordable. Somebody has to buy them at that price for them to get there. If people think houses are overpriced, why are they buying them?
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The housing bubble is the biggest economic problem that this country faces right now. Individual states could have regulated their mortgage industries to prevent (or at least reduce) crazy appreciation in their state. If MA had done that, housing would still be affordable and we wouldn’t have thousands of people with mortgages worth more than their house in a few years. The upside (from a population growth perspective) is that many homeowners won’t be able to leave the state for a while because they won’t be able to afford to pay off their mortgage, so they will be stuck living here whether they like it or not. I hope nobody actually considers that to be a good thing.
Sure, it will be great to have another declining values causing more foreclosures causing prices to decline faster death spiral. That was so much fun last time!
It is expensive to live in Massachusetts and it is expensive to do business in Massachusetts. The combination is not good. It is especially troubling as the global economy pushes American companies to become more efficient in order to succeed/survive. As they say in the business world: if you aren’t growing at 5% per year, you are dying. If Massachusetts deosn’t figure out a way to grow, we’re in big trouble.
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And it’s not just that jobs are leaving Massachusetts, it’s that jobs are leaving Massachusetts for anywhere but Massachusetts. Fidelity is relocating jobs to Rhode Island. Rhode Island! Rhode Island is hardly Arizona, North Carolina, or New Hampshire. It is a fairly high cost, Northeastern state. However, their business climate is apparently more conducive to Fidelity’s needs than ours. Ouch.
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The best thing that government can do about the expense of housing is to streamline the regulatory process and liberalize land use restrictions. Housing is excruciatingly expensive to build, so government will never be able to make more than a small dent on its own. In a manner respectful to environmental concerns, let the developers do what is in their economic interest: build. Government should invest its limited resources and/or create advantages for building the right kinds of housing, i.e. McMansions bad, affordable units good, multi-family housing even better.
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Meanwhile, government should invest the lion’s share of its limited resources in the two areas that it does best: education and transportation. The Eisenhower Interstate Highway System may have been the federal government’s greatest contribution to the nation’s economy in the 20th century. Similary, Massachusetts should focus on creating a UMass system second to none, so that MA students of modest means can obtain a top-notch education, and a tranportation infrastructure to move those bright minds around the state.
…especially on the housing issue. The problem really is with towns using everything in their regulatory power to prevent development of new housing. Your comments about infrastructure and UMass is right-on as well.
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I think you’ve identified a couple issues that, for whatever reason, the candidates have completely dropped the ball on to this point. Who will step up and take the initiative on these issues (particularly on housing/land use?)
about each of these issues. I’m a Reilly supporter, so I know that he has been talking about UMass from Day One of his campaign. I would expect that he will present a formal plan at some point during the campaign.
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Land use reform has been underway for a number of years. The problem is the Legislature – the legislators for those communities with brutally restrictive local zoning codes quietly put the kibosh on efforts to make the pocess more conducive for housing production every term. Unfortunately, “land use reform” isn’t a sexy political issue so it lacks a strong patron. Additionally, we live is a state governed by strong “Home Rule” principles. Municipalities, not the state, largely control what can and will get built. However, the state does have some regulatory oversight and the governor can always use the bullypulpit to call legislators out on NIMBY-ism.
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Transportation is a high-cost government investment, but it is often worthwhile. The truth of the matter is that Romney’s “Fix It First” policy is really the right one for the short term. Our existing infrastructure is in bad shape. The problem is that Romney-Healey and the Legislature have not funded a legitimate “Fix It First” program. The MBTA needs more revenues and, as a daily T rider, I believe the cost should be borne by those of us who use the system. Fair hikes are necessary. In the “nearer” term, we need to tie Southeastern MA into Greater Boston by extending the commuter rail. That region desparately needs a lift. Reilly has said that he will do it within his first term. I believe Patrick also also said it will be a priority.
I worry about a quick rush to land use reform to solve an immediate housing problem. I grant you, local restrictions on development are a problem and need to be addressed. But having read this mornings piece in the Globe about fast-tracking commercial development, I worry that we could wind up throwing the baby out with the bath water.
However, the housing problem is not temporary. If the market is strained during a period in which we are the only state to lose population two years running, just imagine what it will be like when the economy picks up again. The only thing temporary is the very modest dip that we are witnessing in the housing market.
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I’m not saying that we should bulldoze our forests and deregulate overnight, but the only real solution to this issue is to make development easier. Land use reform is critical.
“Rhode Island is hardly Arizona, North Carolina, or New Hampshire. It is a fairly high cost, Northeastern state. However, their business climate is apparently more conducive to Fidelity’s needs than ours. Ouch.”
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In last week’s Banker & Tradesman (I believe that was the journal I was reading), Fidelity came right out and said they’re moving because they can’t attract talented workers in Massachusetts because of high cost of housing. Part of their operation is moving to RI, and another part to NH.
if one’s definition of “business climate” includes the cost of attracting/retaining skilled employees. Fidelity’s statement affirms that they believe Rhode Island is a better environment to conduct business. . .because be are a high cost state.
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Who exactly says this? Some companies prefer to sustain high profitability without growing when growth requires lower margins. That can be sustained in some cases, and more power to them.
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2. Interstate system. May have been a good long-term investment and may not have been. Depends on one’s time frame. It looks pretty good so far, but if the U.S. winds up saddled with a huge investment in inaccessible suburbs in the future because gas is prohibitively expensive and no viable transportation alternative has been developed, we’ll be at a competitive disadvantage to countries that have better (cheaper/more efficient) transportation systems. My point is that the jury is still out on the US’s big national experiment with the automobile.
Excellent housing analysis. But don’t we have some of the highest education spending already?
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NH has one of lowest per capita spending on education, but some of the highest scores. How come we spend so much for the same results, or worse?
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As for UMass … like everything else government funded in MA, it’s a dumping ground for ex-pols and a spoils system, too. I don’t know how UNC Chapel Hill or UVA runs such fine institutions, but let’s find out. I wonder if their pension system is as rich as ours.
shepherd, you raise a very, very good point. When it comes to UMass, it can’t be just about the money. The reform must be systemic and it must be accompanied by a fundamental change in how we, as a state, view public higher education.
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Massachusetts is fortunate to have some of the world’s finest private colleges and universities. For generations, those institutions have been, by and large, accessible to students from families of modest means. It’s never been cheap or easy, but families and students somehow figured out a way to make it work. However, skyrocketing tuition rates at these private schools pose an significant obstacle and are too often prohibitive to even the most committed, creative families. Therefore, we must re-examine the roles that the UMass system, state colleges, and our junior colleges play in the present and future of this state. I am not an alum and I do not work in the higher education field, so this is not about self-interest. However, we all have an interest in perpetuating our greatest asset: a skilled workforce.
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Tom Reilly has said that UMass should be on par with UNC-Chapel Hill, Michigan, and UVM. I hope he continues to make it part of his campaign and part of his agenda if elected. (A policy paper would be nice too, which I wouldn’t be surprised to see at some point.) It has to start with a plan and then the issue of resources should be discussed. That being said, if an assessment is made that additional funding would be required to make UMass a gem, I would support that expenditure in a heartbeat. Public higher education can no longer be an afterthought. It should be a priority.
(and I AM someone from NH), we’d caution you about admiring our educational system too much. Test scores may be better (I’ll take your word for it), but this is still the same state that had poorer school districts sue it in the 1990s for having a constitutionally inadequate funding mechanism in place (the property tax). And by “constitutionally” I’m referring to the NH state constitution.
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I’d also imagine that the challenges facing relatively rural schools in New Hampshire are different than the challenges facing urban schools.
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Also, my guess would be that UNC and UVA score big bucks from alumni through athletic programs.
That’s what I get for doing statistical work at 12:30 in the morning. I offer revised employment numbers from the BLS, correct my clerical errors:
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Also, in response to ThrobbingPatriotâs contention that Bush has wrecked the stock market, letâs look at the numbers today versus their historical highs (dates given.) Iâd say weâre close to where we were at the height of the dot com boom except for the then-inflated dotcom-rich NASDAQ.
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DJIA — 11,722.98 Jan-14-00 // todayâs open 11,206
NASDAQ — 5,048.62 Mar-09-00 // todayâs open 2,205
S&P — 1,527.46 Mar-24-00 // todayâs open 1,271
The NASDAQ is right now back to the level it was at in January. And the Dow hasn’t returned to Democratic administration highs in six (six!) years. It’s starting to be a while. And why is that? In large part because high deficits weaken the dollar. High deficits brought on by reckless spending, the FEMA disaster (i.e. cost to rebuild), and bungled war…
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These aren’t accomplishments to brag about. Our main point of contention seems to be this: You say the economy is “okay” (my word, not yours) because of Bush. I say its okay depite him.
And the same goes for Clinton … he didn’t cause the ecomony to grow, cause jobs to be created, or cause the equity markets to soar. The economy did well on its own, despite Clinton’s tax increase.
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I’m of the school that Washington can only do harm to the economy. A tax reduction isn’t “cause” for the economy to expand, but it certainly reduces economic drag. Unavoidable events, such as natural disasters and commodity price spikes, occur, and are drags on the economy.
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As for how high deficits-weak dollar effect the equity markets, you’ll have to explain that one.
A falling increases the cost of US imports, fanning inflation and forcing the Fed to continue to increase interest rates. Bringing markets down.
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The classic argument! Clinton’s great economy was actually not that great, and in any case any growth was despite his efforts! Yet Bush’s lackluster economy is actually great, and it’s all because of his brillant management!
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I guess the economic rule you’ve introduced here is simple: “Presidental policy has very little to do with the economy. Unless they’re Republican, and only then if the economy is growing (under my definition, of course)!”
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You might not have much of a career in economics, but you’d be great in political spin.
The economy grew so much in the 90’s primarily due to the spread of computers. It would have taken extremely bad policies to prevent that growth. It hardly seems fair to give all the credit to Clinton.
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The policies that are limiting growth were decisions to not stop speculative bubbles from forming. Orderly growth is a good thing, while wild growth is unsustainable and will lead to a contraction. Raising capital gains taxes in the late 90s might have reduced the stock market bubble, which would have reduced the severity of the recession that followed it.
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Bush and Greenspan created an economy where house prices could appreciate easily and house price appreciation was the easiest way for someone to increase their income. This produced moderate growth for a while, but will lead to a severe recession within a year or two as the housing bubble bursts.
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Presidential policy normally does have little effect on the economy, except for when they screw things up. Mostly, the government should reduce the profitability of people being stupid before enough people do something that will ruin the economy. Beyond that, the government should just try to be countercyclical so that the business cycle will have a less severe affect on people’s lives. That means increasing spending/cutting taxes during recessions and decreasing spending/raising taxes during booms. There should be no defecit over a full business cycle. If there is, it will impede growth. Which means that Bush’s tax policies are anti-growth even if you ignore the housing bubble.