Doing Fine So Far

By Martin Harris

From a variety of related-indicator sources we can learn that Vermont’s unique (at State level) governance strategy experiment –the shifting of the economic foundation away from active income earned in the old quartet of ag, business, tourism, and manufacturing, and towards increasing reliance on passive income from government transfer and private investment sources– seems to be working, at least for now. Yes, out-migration of middle-income young families continues, but more importantly to Montpelier, in-migration of upper-age, upper-income and wealth households (without those expensive-to-school kids) also continues, in approximate year-to year balance. And no, the “Vermont Anomaly” hasn’t weakened: the upper-age, -income, and –wealth cohort, which in other States has fled when taxes were raised (think California) hasn’t yet shown any such local departure pattern. Stats from a one-time IRS study covering the period 1992-2004 (it hasn’t been up-dated, to the best of Humble Scribe knowledge) show the pattern:

Over that dozen years, active-earned personal income increased 66%; business income increased 44%; farm income was level at 0% (for an inflation-adjusted decline of 35%, because it required $1.35 in 2004 to match the purchasing power of $1 in 1992, thanks to ever-since-1913 Federal Reserve currency- “stability” policies) ; while taxable IRA income increased 280%, taxable pension income increased 116%, and taxable Social Security income increased 402%. An HS paragraph from 2006 on these stats makes a number of still-valid points:

“Income earned the old-fashioned way –by working for it—is still the major element of the income base of the Vermont economy, but it is shrinking in relative importance as unearned passive income, everything from trust funds to pensions, grows at a much faster rate. Because people who don’t have to work at a day job have more time and energy to be politically active on every area from the regulation of development to the level of taxation, they exert far more impact on the socio-economic and governmental framework of the State than their earned-income less-than-peers, who can’t even attend a daytime hearing without forfeiting work accomplished or pay received or both. UVM Professor Frank Bryan describes these highly politically active folks, almost entirely recent in-migrants from the megalopolis to the south of northern New England, as “third-wave” post-industrial newcomers, having escaped from a “second-wave” urban-suburban environment, and determined to use their political clout to keep themselves surrounded by a “first-wave” (pre-industrial) countryside…” and so on. Since then, they’ve caused the shut-down of Vermont Yankee and OMYA, the Montpelier- and locally-subsidized expansion of wind turbines and organic farmers markets, the raising of a range of taxes, the acceleration of middle-class out- and under-class in-migration, and the expansion of such “free stuff” initiatives as school-breakfasts-for-all and subsidized (now in garden-apartment format, of course) housing for the newly-defined “poor”. During and after the recent recession and tepid recovery –think the inevitable collapse of government-mandated mortgages for NINJA buyers (no income, no job or assets) for “root-cause” logic– Vermont has posted remarkably good figures for housing values, income, employment, and so on. For an indicator of just how the never-openly-admitted or -denied set of Vermont policies favoring the rapidly-growing upper income-and-wealth cohorts might be the reason, consider these recent paragraphs, the straight-news one from The Wall Street Journal and the tongue-in-cheek one from investment-advisor Porter Stansberry.

“A surging stock market and recovering housing prices have given well-heeled Americans a shot of confidence. Indeed, the wealthiest Americans, who took a significant hit during the recession, as stocks plunged and homes lost value, have seen a far stronger rebound than their less affluent neighbors. The average household in the top 20% of earners has had its income rise more than 6%…households in the middle…2%… incomes for the poorest still below their pre-recession peak. “If you have a home and a stock portfolio, things are looking better, said analyst Craig Kennison at R.W. Baird Co.” (WSJ, 23 Oct 13)

“Dear [Fed Chairman] Ben Bernanke: thank you so much for providing us with nearly risk-free limitless ways to grow our capital. Please, never for a minute doubt your ability to “help the economy” by printing more money, thereby making us so much wealthier. Never consider whether it’s fair or proper for the government to impoverish millions so that the very privileged few can gain so generously…” and so on. (Investment Advisory, Oct 13)

To support both paragraphs, a new Bureau of Economic Analysis chart shows “Inflation-Adjusted Income Change, June 09 to March 12” as follows: dividend income, up 38%; proprietors’ income up, 18%; wages, up 3%; and personal [earned] income, up 4%.

And, of course, the money-printing was and is all based on Progressive (Keynesian) doctrine, all the usual pious proclamations about Progressives-pursuing-equality-for-all notwithstanding. Speaking of Progressively-admired “root causes”, such successful wealth-enhancement for their favored top tier, generating enough “extra” wealth to subsidize the stuff-for-votes bottom tier, may well explain how and why “Patrician Socialists” have personally done so well in the new Vermont, and why both upper and lower socio-economic/voter tiers, critical to continued re-election of Progressive management in Montpelier, have reliably done so, with (by design) ever less resistance from an ever-shrinking middle-class socio-economic cohort. Only a few lone voices –think Tom Pelham, Tax Commissioner emeritus– have raised warning arguments.

One question remains, as the old quip about the Empire-State-Builder jumper passing the 80th floor and thinking “doing well so far” illustrates: what do we on the sidewalk below know and suspect that the Progressive Montpelier leadership and their now-dominant electoral majorities don’t or won’t?