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Tyler Rosenbaum '11: Poor old Rhode Island

When I was at the Empire State Building last week, I noticed an interesting mural. It was a stylized map of the northeast, the point of which undoubtedly was to portray New York at the center. All the states but one were labeled. Can you guess which was left behind?

Anyone who's ever lived in Rhode Island and Providence Plantations knows that it has its quirks, its unique pros and cons. Perhaps the most noticeable of these is the state's complete invisibility to outsiders. Sure, Providence is on the Amtrak route from New York to Boston, in much the same way, I suppose, that Minnesota and Wyoming are on the flight path from Boston to Los Angeles.

Even most Bostonians never have occasion to visit their southern neighbors. I have relatives who lived in Eastern Massachusetts for decades before ever making it down to Providence — to visit me at Brown.

But the loss of pride that accompanies encounters with benighted foreigners who fail to see Rhode Island's greatness is hardly the worst of the state's worries. Rather, it seems to be trapped in a demographic and economic quandary that prevents it from fulfilling its potential.

Quite simply, the state's population is growing too old. About 14 percent of Rhode Island's approximately one million residents are 65 and older. Nationally, the figure is only 12 percent. In fact, the largest sector of the state's economy is health care — essentially, taking care of aging Rhode Islanders.

The state is facing a demographic crisis similar to the one haunting Japan and most European countries. But unlike those other countries, this is not a result of declining birth rates. Rhode Island is one of only two states with a declining population, due entirely to emigration from the state.

These troubles go hand-in-hand with the state's deep economic problems. Of the approximately one million Rhode Islanders, only about 460,000 are working taxpayers. This small tax base has to support all the bureaucracy of the modern state's apparatus.
Of course, a small state like Rhode Island is cheaper to run than larger states like Massachusetts or California. On the other hand, certain fixed costs make it much more expensive to run Rhode Island as a separate state rather than, say, as an eastern county of Connecticut. For example, Rhode Island needs its own state house, governor, legislators, agencies and so forth.

The final blow to the state's economic well-being has been its stunningly high unemployment. As of August, our unemployment rate stood at 13 percent, behind only Michigan and Nevada, and far higher than the national average of 9.8 percent. It seems as if the state that gave birth to the Industrial Revolution in the United States has not successfully navigated the deindustrialization of the Information Revolution.

To make up for the financial disadvantage caused by its small size, aging workforce and high unemployment, it seems Rhode Island has had to raise its taxes. None of our New England neighbors have a sales tax as high as ours.

Even worse, for most taxpayers, the income tax is at least two percentage points higher than in Connecticut or Massachusetts. And though I won't be shedding any tears on their behalf, it can hardly make sense to tax away 10 percent of the wealthiest Rhode Islanders' incomes — twice as much as our neighbors would.

To compound the problem of high unemployment and high taxes, the economic crisis and poor governance have combined to create crippling budget deficits that will mean even higher taxes and even deeper cuts to state services. Despite frequent cuts, the state still failed to balance its budget over the last two years, and absent drastic action, faces a cumulative deficit of $850 million by 2012 (this year's budget was $7.8 billion).

The future does not look particularly bright for Rhode Island. Unfortunately, unlike New York, California or even Massachusetts, Rhode Island does not have a world-class city that will attract talent and taxes come hell or high water. Rather, it has to compete for residents and jobs.

It's high time Rhode Island began focusing on convincing employers and employees to move into the state, and enticing those who are here to remain. I'm no proponent of trickle-down economics, nor am I a knee-jerk advocate of tax cuts. But it is hard to imagine the state competing successfully without at least equalizing its tax rates with those of its neighbors.

This, as with much in life, will doubtless have to wait for the end of the recession and the stabilization of the budget. The planning, however, should have begun years ago. Obviously, the partisan differences between the legislature and the governor complicate matters, but unless we want Rhode Island to become a stagnant backwater, sinking deeper into economic and demographic decline, something must be done, and quickly. 

Tyler Rosenbaum '11 is not a fan of Reaganomics, he swears!




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