by Martin Harris
For most of American history politicians at State level didn’t presume to invade the private sector, to strategize about State-guided economic development, and then legislate in support of some particular focus. They preferred to leave the subject to (a little Adam Smith lingo, here) the “invisible hand” of the (free) market place, and confined their role to infra-structure investment. Not any more. Now there are frequent politico comments to the effect that their State should strive to be “the xxxx State”, and to advance that strategy by focused legislative action to stimulate the in-favor economic sector. Earliest in recent history (Humble Scribe amateur-historian conclusion here) was Vermont in the early ‘60’s, when more than a few Montpelier movers and shakers, from then-Guv Philip Hoff on down, preached enthusiastically about their domain’s destiny as “the education State”, and how they in the corridors of power could advance that noble economic-development/intellectual-improvement strategy. For a variety of reasons, it never happened. Latest in recent history: Wyoming, where now-Guv Matt Mead “is pushing the State’s brisk climate as an ideal draw for data-processing centers,” (quoted from a Wall Street Journal March 2011 report) and offering a spectrum of legislative attractions, for promising corporate candidates only, ranging from sales tax exemptions to taxpayer-funded infra-structure improvements. His goal: that Wyoming become “the Data-Processing State.”
Not as overtly-declared State policy but happening anyway in parts of all States, a 2008 WSJ map showed, is a new demographic trend: rural gentrification , in which above-average-passive-income retirees and trust-funders have flocked to specific areas they found attractive, a pattern illustrated by the 1996-2005 data showing major increases in passive income –dividends, interest, rents—in such destination counties. In this space, your Humble Scribe reported a few years back, the several-hundred-percent jump in Vermont stats for the ‘90’s decade. It’s a trend which will accelerate, supposedly fashionable “back-to-the-city” campaigns notwithstanding, as electronic tele-commuting enables even pre-retirement folks in the baby-boomer generation (WSJ quote) “with the Internet allowing people to work from almost anywhere…to buy retirement property while they’re still employed”. Here the VT-WY contrast becomes evident.
In the Cowboy State, Guv Mead explains, key elements for data-processing are “cheap energy” and “state-wide broadband”, but in the Green Mountain State Guv Shumlin wants to close Vermont Yankee (and raise energy prices) and tax the new generation of cloud-computing applications. Vermont’s climate is even brisker than Wyoming’s, a huge energy-cost savings for large-scale data-processing applications via reduced air-conditioning costs, but in-State power already costs a lot more in VT than in WY, and will soon cost even more. In January, by Emergy Information Administration report, commercial power in VT cost 14c/kwhr, and in WY it was at 8c. That helps explain why Vermont came in at #50 for Economic Outlook in the detailed 2007 Rich States/Poor States analysis by the American Legislative Exchange Council, and has posted similar ranking in other more recent studies of business climate, tax burden, and related matters. By those benchmarks alone, Vermont couldn’t have aspired to “data-processing State” status even if the Golden Dome and top-floor Pavilion Hotel folks wanted it. Humble Scribe guess: they didn’t and don’t.
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States like Vermont, which are losing young middle-class working families (and young natives who don’t return after college elsewhere) have been the subject of numerous demographic studies. “New England leads in the greying of its population,” says Brookings Institution demographer William Frey of the Census Bureau stats showing VT as one of only seven States with a median age of 40 or more. Like the others (New Hampshire in particular has a specific “Stay-Work-Play” program aimed at recent college grads) VT claims to want to counter the young adult out-migration but it has long had practiced, via bureaucratic behavior and Golden Dome legislation, just the opposite. Its law-makers in recent decades have created a notoriously anti-business climate, a chronic shortage of middle-class and tech jobs, a well-above-national-average housing cost, and of course one of the heaviest personal and household tax burdens in the nation. These de jure policies have had the de facto result of middle-class shrinkage, somewhat concealed by a slightly larger older-age-cohort in-migration of upper-income retirees and trust-funders who can more easily afford the Montpelier-generated high cost-of-stay in the modern Green Mountain State. Montpelier claims to want to reverse the young-adult out-migration, but its policies, and the attitudes causing them, remain in place. Most recent evidentiary proof: the Montpelier campaign to close Vermont Yankee and thereby raise power rates. However, the present Guv hasn’t yet declared Vermont “the high cost-of-stay State”. But, in the absence of any hint of a State conventional-economic-focus goal (think the Hoff education-State rhetoric) and in the presence of visible demographic changes pretty much balancing middle-class out-migration with upper-middle-class in-migration, it’s tempting to conclude that the unspoken socio-economic goal is for Vermont to become “the rural-gentrification State”, a reasonably apt label for the post-industrial, upper-middle-class in-migration which has been increasingly evident in recent decades. In academic circles, the acronym is PIMC, for Post-Industrial Middle-Class. The U is statistically evident but unacknowledged.
Whether modern State governments should be thus engaging themselves in formerly private-sector matters –either directly, by recruiting and “incentivizing” favored players, as Tennessee does, or indirectly, by taxing and regulating in ways sometimes designed, sometimes inadvertent, as California does, to cause either in- or out-migration of specific socio-economic/demographic groups, isn’t the question any more. All do it. Periodically, voters get to evaluate the “Five Year Plans” of State House planners, whether those plans are overtly stated (WY as the “Data-Processing State”) or covertly installed (VT as the “high cost-of-stay State”) and pass judgment on the wisdom and efficacy of the government-planner effort. Past results do not guarantee future performance, as the mutual-fund sellers say. But it’s evident that Montpelier’s unspoken rural-gentrification strategy has been enjoying wide voter support.