Economy for Better and Worse

My thesis is that economic predictions are currently being made after the method expressed by respondents to a recent Providence Business News survey:

A sense of nervousness can be gleaned from the results, but the respondents also maintained the optimism that came to the fore in the summer 2009 survey. Many in the business community say that hopefulness is a byproduct of the feeling that Rhode Island can’t go much lower.

Things will get better because they always do. Right? The economy can’t go much lower because it never has. It would be historic. Catastrophic. Well, I’m not predicting the end of the world, but the simple reality is that no economic mechanism of which I’m aware automatically kicks into gear when hard times top the Great Depression. Until we’re hunting rats in the streets of Providence for food, the reality is that Rhode Island can go much lower.
Of course, one non-automatic mechanism that would help the state can be discerned in the survey’s results: The pain could become so acute, and so clearly attributable, that state and local leaders will make it easier to live and do business in the state, lowering the unnecessary costs and lightening the misguided burdens that the state imposes with taxes, mandates, and regulations. A resolution by those whom Hasbro and Lifespan Chairman Alfred Verrecchia called “the collective leadership,” in his keynote speech before the Rhode Island Public Expenditure Council, to set Rhode Island’s economy free through rapid deregulation and dramatically shrunken government could make our state a bright spot in a dark region of a fading country.
The problem — the central flaw in Verricchia’s reasoning and in the reform-by-consolidation movement to which he’s contributed — is that the leadership class is going to do no such thing. Self-insulation and death-grip protection of special interests — coupled with the utter lack of a political price for their calamitous failures thus far — are going to keep RI’s aristocrats marching along the same path, and the mechanisms of consolidation — moving government farther from the individual taxpaying voter, fiddling with the tax code without reducing its all-around burden, and paying out large sums to unelected administrators at the top — are all contrary to the prior necessity to end Rhode-apathy and cultivate a new collective leadership group that can wrest control of the government from incumbent hands.

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