http://www.hks.harvard.edu/news-events/news/commentary/what-vision-for-the-state
What’s the Vision for the State?
June 17, 2010
by Edward Glaeser
Boston Globe
PEOPLE GET more excited about national elections than about state and local races, which is unfortunate since lower levels of governments greatly impact most of our lives. State and local governments oversee the schools that teach our children, the police that protect our streets, and the roads and rails on which we commute. The candidates in the governor’s race need to engage in a passionate policy debate that brings out the economics behind political disagreements.
Does job growth come from government initiative or by eliminating the barriers to entrepreneurship? Democratic Governor Deval Patrick is an economic activist who favors targeted public investments, like the billion dollars committed to life sciences in 2008. Economists have long been skeptical about politicians playing venture capitalist. The Japanese tried to implement a national policy of supporting key sectors for decades and they generally backed losers. Why would a US state government be able to do better than the best minds of Japan?
Republican Charles Baker and Independent Tim Cahill both seem to believe that government can’t micro-manage the unpredictable genius of entrepreneurial innovation, and that the best economic policy is, in Cahill’s words, to “lower taxes and create a business-friendly state.’’ That’s a legitimate view, but for this approach to work, the state needs to find a free lunch by cutting costs without cutting valuable services.
One of Baker’s big cost-saving ideas is to cap government pensions at $90,000 a year. Of course, pension reform is needed — especially replacing defined benefit plans with more transparent and sustainable defined contribution plans similar to 401(k)s — but the great Boston Firefighters’ fight reminds us how difficult it is to stop pay increases, let alone to effectively reduce compensation.
Patrick also supports pension reform, so if Baker wants to differentiate himself as a compensation cutter, then he must explain why police officers and teachers deserve less money, why the savings will more than offset any associated reduction in services, and where he will get the muscle to work this political sea change. Free lunches are rare.
The candidates’ differences appear most starkly in their approaches to health care. Patrick favors capping payments to providers and has filed legislation in which “any contract under which provider payments increase by an amount in excess of the applicable Consumer Price Index for Medical Care Services shall be presumptively disapproved.’’
Baker favors softer medicine to make health care more competitive, like more transparency and eliminating state mandated benefits. Will Patrick’s price caps lead to insolvent hospitals and deterioration of heath care? Will Baker’s proposals do anything significant? Cahill displays the most ire toward the current system, and he seems open to everything— more competition, capping fees, and rethinking the current fee-for-service model altogether — but his website is short on details.
An electoral debate over education should bring out the conflict between a government-centered view that emphasizes spending and smaller class sizes, and a more competitive model that promotes school choice and accountability. Baker supports increasing charter, magnet, and alternative schools, but that doesn’t set him apart from Patrick. The governor once resisted charters but has signed legislation doubling the number of these schools. If Baker wants to be a choice, not an echo, he needs to be more radical in his support of parental choice, data systems that tie promotion to performance, and linking state aid to school district reform.
Housing policy provides another opportunity to differentiate between state-led solutions and a market approach. A morass of local land use regulations limits new construction in Massachusetts, which makes our state unaffordable and unattractive to new businesses. The statist approach is to build public projects; the competitive approach is to push against the restrictions on building. Patrick again occupies a middle position, favoring public investment in affordable housing and defending the few restraints against local NIMBYism that do exist, like Chapter 40B. But other than opposing 40B’s repeal, housing doesn’t seem to be on either Baker’s or Cahill’s agenda.
Neither challenger will win the governorship relying on a reputation for managerial competence. This election should be a debate over issues and for that to happen every candidate must offer different and compelling visions of state government.
Does job growth come from government initiative or by eliminating the barriers to entrepreneurship? Democratic Governor Deval Patrick is an economic activist who favors targeted public investments, like the billion dollars committed to life sciences in 2008. Economists have long been skeptical about politicians playing venture capitalist. The Japanese tried to implement a national policy of supporting key sectors for decades and they generally backed losers. Why would a US state government be able to do better than the best minds of Japan?
Republican Charles Baker and Independent Tim Cahill both seem to believe that government can’t micro-manage the unpredictable genius of entrepreneurial innovation, and that the best economic policy is, in Cahill’s words, to “lower taxes and create a business-friendly state.’’ That’s a legitimate view, but for this approach to work, the state needs to find a free lunch by cutting costs without cutting valuable services.
One of Baker’s big cost-saving ideas is to cap government pensions at $90,000 a year. Of course, pension reform is needed — especially replacing defined benefit plans with more transparent and sustainable defined contribution plans similar to 401(k)s — but the great Boston Firefighters’ fight reminds us how difficult it is to stop pay increases, let alone to effectively reduce compensation.
Patrick also supports pension reform, so if Baker wants to differentiate himself as a compensation cutter, then he must explain why police officers and teachers deserve less money, why the savings will more than offset any associated reduction in services, and where he will get the muscle to work this political sea change. Free lunches are rare.
The candidates’ differences appear most starkly in their approaches to health care. Patrick favors capping payments to providers and has filed legislation in which “any contract under which provider payments increase by an amount in excess of the applicable Consumer Price Index for Medical Care Services shall be presumptively disapproved.’’
Baker favors softer medicine to make health care more competitive, like more transparency and eliminating state mandated benefits. Will Patrick’s price caps lead to insolvent hospitals and deterioration of heath care? Will Baker’s proposals do anything significant? Cahill displays the most ire toward the current system, and he seems open to everything— more competition, capping fees, and rethinking the current fee-for-service model altogether — but his website is short on details.
An electoral debate over education should bring out the conflict between a government-centered view that emphasizes spending and smaller class sizes, and a more competitive model that promotes school choice and accountability. Baker supports increasing charter, magnet, and alternative schools, but that doesn’t set him apart from Patrick. The governor once resisted charters but has signed legislation doubling the number of these schools. If Baker wants to be a choice, not an echo, he needs to be more radical in his support of parental choice, data systems that tie promotion to performance, and linking state aid to school district reform.
Housing policy provides another opportunity to differentiate between state-led solutions and a market approach. A morass of local land use regulations limits new construction in Massachusetts, which makes our state unaffordable and unattractive to new businesses. The statist approach is to build public projects; the competitive approach is to push against the restrictions on building. Patrick again occupies a middle position, favoring public investment in affordable housing and defending the few restraints against local NIMBYism that do exist, like Chapter 40B. But other than opposing 40B’s repeal, housing doesn’t seem to be on either Baker’s or Cahill’s agenda.
Neither challenger will win the governorship relying on a reputation for managerial competence. This election should be a debate over issues and for that to happen every candidate must offer different and compelling visions of state government.
Edward Glaeser is director of the Rappaport Institute for Greater Boston and the Taubman Center for State and Local Government. The views expressed in this are his own.
Copyright © 2009 The President and Fellows of Harvard College
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