By David Flemming
Environmentalists like to claim that Vermonters won’t have to sacrifice the economy to enact the ESSEX Plan. But if the past 5 years is any clue, our environmental focus has cost the economy dearly, suggesting that Vermonters should reject ESSEX if we want to regain our economic strength.
The ESSEX Plan released in November reads: “since 1990…the state has reduced its carbon pollution emissions by almost 13 percent, while Vermont’s real GDP has grown by almost 23 percent – the fastest rate in New England…It makes economic sense to build on that success.”
That sentence is key to establishing the ESSEX Plan’s credibility. To paraphrase: ‘in the past, legislative action intended to protect Vermont’s environment has also inadvertently grown Vermont’s economy faster than our neighboring states. Therefore, if Vermonters support the ESSEX Plan to protect the environment, Vermont’s economy will grow faster than it would have otherwise.’
According to the Bureau of Economic Analysis (the official source of GDP data) “Gross domestic product (GDP) by state is the market value of goods and services produced by the labor and property located in a state.” While GDP is not a perfect measure of what “makes economic sense,” there are no comparable alternatives for measuring the overall size and growth of state economies.
I hoped that the ESSEX Plan would use BEA data when comparing the GDP between New England states, but the “Select Bibliography” on the final page of ESSEX is indeed ‘select.’ It makes no mention of where it obtained GDP data.
So, we will have to start from scratch. I planned on downloading the BEA state GDP data on an annual basis for each of the New England states from 1990 to 2016 (2017 data is not available yet). Sounds simple, but before I had downloaded the data, I was met with a cautionary note: from the BEA:
“There is a discontinuity in the GDP-by-state time series at 1997, where the data change from SIC industry definitions to NAICS industry definitions…. Users of GDP by state are strongly cautioned against appending the two data series in an attempt to construct a single time series for 1963 to 2016.”
So if the ESSEX folks did not use BEA data, the question is “why not?” and if they did used BEA data, “did they not realize that the data from 1990-1996 is not comparable to the 1997-2016 data?”
To avoid the ESSEX mistake, I will look at data going back to 1997 instead of 1990. From 1997 to 2016, Vermont’s GDP growth has averaged in the middle of the pack, growing 40.6 percent, which is actually more than the 23 percent claimed by ESSEX. Massachusetts had the top rate at 51.4 percent, while New Hampshire also exceeded Vermont at 45.9 percent. Vermont has not had the “fastest (growth) rate in New England,” as ESSEX claims.
Vermont’s ‘growth’ in recent years has been even less promsing. We’ve actually fallen behind both Rhode Island and Maine in the 5 year time span of 2012-16 (who we were ahead of in average GDP growth from 1997-2016), meaning that the only state we’re ahead of in GDP growth during the past 5 years is Connecticut. And that is only because Connecticut’s economy actually shrunk 0.3 percent from 2012 to 2016.
Our environmentalist neighbors have not been good stewards of Vermont’s economy in their efforts to curb carbon emissions, despite their claims otherwise. If we cannot trust them to make simple calculations like GDP, can we really trust them to implement the ESSEX Plan and levy taxes on every household in Vermont that uses fossil fuels? The answer for me is a clear ‘no.’
David Flemming is a policy analyst for the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.