2014 Gubernatorial Campaign

Frary: Mike Michaud’s “investment” strategy unsound


FraryTipOur state’s media have looked upon Mike Michaud’s “Maine Made” economic plan and found it good. One newspaper editorial saw an “ambitious, comprehensive business and investment plan for Maine that calls for a dramatic rethinking of our approach to economic. development.”  Paul Merrill, the  WMTW political reporter told us that unidentified “analysts” say it’s “more specific than Eliot Cutler’s and more realistic than Paul LePage’s.” Readers can check on the document here if they wish to make their own analysis.

I’d be surprised—astonished—if more than a hundred Mainers actually went there to read Mike’s 33-page snoozer. Your average politician produces such “plans,” only to entertain editorial writers and a few journalists. Mike tells us, with the friendly earnestness that becomes him so well, “I would like to begin a conversation about the best way to revitalize Maine’s economy and to put our state back on the right track.” No such a conversation will take place. No one expects one, the Democratic candidate least of all.  People who regularly pay attention to politics know that “Maine Made” is really part of a “Get Mike Elected” plan. The media has already lost interest. If the Democrats sweep to victory in November no one will remember to check to see if the components of this plan were successful or even implemented.

Crystal Canney. Eliot Cutler’s communications director, shows no inclination to engage in a conversation. “Mike’s approach is a typical Washington, D.C.,” she tells us, “big-government, big-spending approach with lots of new programs and millions of dollars in new spending. Under Michaud, the spending spigot will be full on, especially for the special interest groups lobbying Maine’s Legislature.”

That “big-spending” sneer is monstrously unfair. How can Ms. Canney not know that Democrats no longer spend? They “invest.” The verb “to spend” has almost entirely disappeared from their speeches and literature. If my agents’ reports are accurate the word has been systematically erased from their dictionaries.  If Cutler’s communicator had bothered to examine “Maine Made” with due diligence,  she would have found that he words invest/investing appear sixty-six times while “spend” appears only three times – twice about private spending.

“Maine Made” has no value or interest as an economic plan. We read it for illustrations of certain trends and features of the liberal mind set.

Something like 98% of all liberal Democratic policy ideas require expansion of government power. Apart from defense reduction, the remaining 2% involve standing pat. Read Mike’s plan and you will not find even one project for reducing our government’s power over its citizens.

Governments regularly ran deficits for centuries without wishing and intending to sink into bankruptcy. After John Maynard  Keynes wrote his General Theory of Employment, Interest and Money (1936) politicians had an argument that deficits are not only allowed and inevitable, but downright beneficial. The theory is that if you give low income people money, they will spend it and  the economy blasts off.

I’m not saying that Rep. Michaud has read this 1936 book or has even heard of it. However he understands that the Democratic Party is primarily in the business of giving things away, never mind the empirical and theoretical arguments for Keynesian economics. He may not know Keynesian theory but he knows voters like free stuff but they don’t enjoy paying taxes nearly so much.

State governments have no “printing press” and are restricted by their constitutions from deficit spending. Some left-lurching economists think this is a shame, but it’s not likely to change soon.

Maine’s Democrats, who consider take-home pay to be a “tax expenditure,” have criticized the Republicans for allowing the citizens to keep a larger share of their earnings, but “Maine Made” makes no reference to tax increases. Such a reference is cyanide to a political campaign. East Millinockett’s financial mastermind assures us that he can find the necessary money in the budget. It’s already there somewhere.

The solution is to give away other people’s money. Hiking the minimum wage meets the need to give things but displaces the cost onto consumers, small business owners, and some corporate stock holders. Expanding MaineCare with federal funds is another cost-free exercise in generosity. It involves no taxation. Magical money just comes raining down from Washington, much like the manna that rained from Heaven upon the Israelites.

The middle class is entitled to some freebies. It votes.  Middle class parents aspire to send their whelps out into the world equipped with degrees. So Michaud’s Master Plan calls for an investment of more than $18 million to increase Maine’s college graduation rates. Most of this will pay for a free sophomore year for all comers.

What parents would not welcome a whole year for free? The Bangor Daily News recognized a story opportunity and sent out a reporter to find a student who preferred a gift to a debt. He found one. The lad pointed out that a free year would reduce a student’s debt. You need a real life student for that kind of insight.

Mike assures us that his plan is “definitely affordable.”  His tuition guarantee for incoming students, his Accelerated Learning Grant to promote year-round learning at community colleges, Peer-to-Peer Mentoring Program for public school teachers, universal public Pre-K programs and revitalized Governor’s Training Initiative are especially affordable. In fact they won’t really cost anything. They will make money. The more the government invests the richer we all become.

These are the most attention-getting investments. There are many others: 1) a “compact with small businesses,” which will make grants for small business development, energy efficiency and weatherization, roads and bridges, aging in place, land conservation and startup businesses; 2) a Maine Domestic Trade Center; 3) a network of local food hubs; 4) a “Maine Institutional Buying Program;” 5) a “Maine Tourism Training Initiative:” 6) a “Maine Ocean Energy Center of Excellence.”

All the “Maine Made” projects and initiatives include careful cost estimates. It’s not as if anyone has ever heard of a government program that went over budget other than the rare exception like the tax credit for paper companies using “black liquor” in the Troubled Asset Relief Program.The original estimate foretold a $61 million loss to the U.S. Treasury. One year along and the Joint Committee on Taxation calculates that the payout could reach $3.3 billion. There have been a few others. The Boston Big Dig estimate grew from $4,000,000,000 to $14,600,0000,000. The 1967 House Ways and Means Committee projection for Medicare Costs in 1990 was $12,000,000,000. The actual cost by 1990 was $107,000,000,000. The 1965 federal figures for 1990 expenditures on the Medicare hospital program was $9,000,000,000 and the actual 1990 cost was $66,000,000,000. In 1987 the estimate for the Medicaid Special Hospitals Subsidy was 1992 $100 million. The actual 1992 cost was $11,000,000,000. The original Congressional Budget Office estimate for Medicare’s catastrophic insurance benefit was $5,700,000,000 but it hit $11,800,000,000 after one year. The projected cost of the “skilled nursing benefit” was $2,100,000,000 versus an actual $13,500,000,000. In 1935 Congress predicted our 1980 Social Security outlays would come to $3,500,000,000. The turned out to be $105,000,000,000.

This doesn’t prove that the “Maine Made” estimates are false or faked. For all I know some political or governmental cost estimate somewhere at some time may have come in on target.

For a man whose personal investments, according to his FEC report, consist of some mutual fund shares and a little real estate in East Millinocket Mike shows impressive audacity in disposing of the taxpayers earnings on such a generous scale.

We can only wonder about how many loyal Democrats would entrust their life savings to Michaud, Baldacci, Cain, and Mitchell Investment Advisers, LLC?

Professor John Frary of Farmington, Maine is a former US Congress candidate and retired history professor, a Board Member of Maine Taxpayers United and publisher of www.fraryhomecompanion.com and can be reached at: jfrary8070@aol.com

About John Frary

Professor John Frary of Farmington, Maine is a former US Congress candidate, retired history professor, a Board Member of Maine Taxpayers United and publisher of www.fraryhomecompanion.com. He can be reached at jfrary8070@aol.com.

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