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December 22, 2009

We Need Smaller, Smarter Government, Not More of the Departments We Prefer

Justin Katz

Count me in agreement with Scott Moody, Fellow for Economic Policy at the Ocean State Policy Research Institute:

Where should the state government begin its spending cuts? One way to cut spending is to eliminate programs that have proven to be ineffectual. Consider the example of the Rhode Island Economic Development Corporation (EDC), whose primary goal is to create jobs. However, given that Rhode Island has the third-highest unemployment rate in the country, the efficiency of this program is highly suspect.

Eliminating the EDC would save about $10 million per year. Some may consider that a paltry sum for such an effort. Yet, if that money was applied to reducing taxes, the state could nearly eliminate the alcoholic beverage tax ($11.5 million) or documentary and stock transfer taxes ($10.4 million), which are taxes on transfer documents such as mortgages, deeds and stocks. These small taxes are especially egregious because they act like bits of sand in the cogs of the economy.

Try to envisage what the EDC's presumptive big-salary director, Ioanna Morfessis, might target as evidence of success: While she'll certainly look into policies to support incremental, smaller-scale improvements among small and innovative businesses, the nature of her office and its powers suggests that she'll also look to make some splashes by luring a large company or two to the state.

If anything, Rhode Island should already have learned how flawed that approach can be. We don't need special deals to attract new special interests. We need changes in the core laws and policies affecting the state's economic environment overall, and for that, a public bureaucracy isn't necessary.