Self-Defeating Government Systems

First things first, Grafton Willey deserves a round of applause for speaking truth:

“This is a deep recession which we worked hard in Rhode Island to get into. We have to take a long-term recovery view,” said Willey, who is also a managing director of CBIZ Tofias, a CPA firm with offices in Providence and Newport.

Don’t let anybody tell you that Rhode Island has reached its lowly state without effort. Of course, it would be accurate to suggest that some of our problems do flow naturally from basic assumptions of political philosophy, and those intellectual problems will continue to hinder our recovery. The above-linked report from Neil Downing, for example, proclaims that the General Assembly has given employers a little boost by waiving a surtax that would have more rapidly passed on the cost of borrowing unemployment funds to them. But that doesn’t mean that business owners won’t see an increase in their insurance that’s directly proportional to the difficulty that their operations have faced:

Thus, it is “very likely” that employers will have to pay more in regular unemployment insurance tax, starting in January, to help replenish the fund, [state Department of Labor and Training Director Sandra] Powell said.
On average, employers may wind up paying $674.50 in state unemployment insurance tax per worker next year, up from $628.20 this year, an increase of 7.4 percent, according to the agency’s preliminary estimates.
Rhode Island’s unemployment insurance tax rates (which are set by state law) range from a minimum of 1.69 percent to a maximum of 9.79 percent. That range of rates probably won’t change for 2010, Powell said.
But some employers will probably wind up facing a higher tax rate within that range next year because of layoffs. (In general, the more layoffs an employer has had, the higher the tax rate.)

In other words, the human beings who thunk up this system managed to yoke the companies that have been the hardest hit with a higher proportion of the post facto costs of recovery, and to retard new employment to compensate for previously lost employment. I’m not saying that I could have come up with something better, but this is why government solutions are problematic. Of course, a problematic emphasis in the following likely contributes to our woes:

Carcieri proposed that the budget be amended to include the waiver. The General Assembly approved the waiver mainly because levying a surtax on employers now, amid a global recession, would not be fair, said Steven M. Costantino, D-Providence, chairman of the House Finance Committee.

The waiver is prudent, without a doubt, but the question of fairness shouldn’t be more than an afterthought. Wisdom is what is required, and it’s in short supply in government generally and Rhode Island government especially.

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