May 23, 2018
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Of hammers, lost keys and economic malaise

By David Farmer

My son is six years old.

He has proven beyond a reasonable doubt the words of philosopher and educator Abraham Kaplan, who wrote in 1964’s “The Conduct of Inquiry”: “Give a small boy a hammer, and he will find that everything he encounters needs pounding.”

Over time, the Law of the Instrument, as Kaplan called it, evolved to the more common iteration known as Maslow’s Hammer: “It is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.”

For too many Republicans — including Gov. Paul LePage — the tool they have to address every ill, from unemployment to economic recovery to an aging population, is a tax cut.

After pushing through tax cuts last year that will prove difficult, if not impossible, to pay for in the coming years without Draconian cuts in state-provided services, the governor has proposed an encore.

He would like to eliminate taxes on about 75,000 Mainers who draw government or private pensions. According to the Wall Street Journal, the cut would reduce state revenues by $93 million per year.

Besides the less-obvious goal of handicapping government and creating an ongoing fiscal crisis that will make it easier to slash government programs in the future, the governor has said he wants to make Maine more attractive to retiring seniors.

I can understand the goal. Older workers are significant contributors to Maine’s economy. Anecdotally, they use a “second career” to open new businesses, continue their education, participate in their communities and generally reinvent themselves in retirement. In some cases, they also fill important work force needs in the state.

But there’s little evidence that tax cuts will impact migration patterns into Maine or out of other places.

Most obviously, Maine is already the oldest state in the country. We are graying faster than even our neighbors in New England. We don’t need tax breaks to get older. It’s just happening. But even so, tax cuts won’t work.

As the Political Economy Research Institute at the University of Massachusetts, Amherst reported in April 2011, “The impact of taxes on cross-state migration decisions is weak. There are many reasons households do not flee from a state when taxes are increased, including the fact that they value the public services financed by taxes, the cost of relocating to a different state (both financially and psychologically) is quite high, and the potential gains from moving are often small.”

The main reasons people move, according to the study, are related to employment, their family and for education or housing.

“Taxes account for little of the migration from New England,” the research continues. And, in fact, the rate of people leaving New England is lower than the national average.

Perhaps ideology says that we must lower taxes at all costs, but there are some problems that won’t be solved by this particular hammer, including changing migration patterns and attracting more retirees.

Which brings me to a second useful insight from Kaplan called the Drunkard’s Search.

It goes like this: A person happens upon a drunk man searching for his keys underneath a street light. Upon offering to help the man find his keys, the good Samaritan learns that the keys were actually lost away from the light post. Asked why he wasn’t looking for his keys where he actually dropped them, the drunk man responds, “It’s lighter here.”

No matter what the causes are of our current economic malaise, the temptation is to look for answers that are simple or plainly understood. We’re looking in the light even though our keys are somewhere else.

In the coming years, the biggest problem Maine will face is that our population of younger workers is not growing fast enough to support our economy.

As former Maine State Economist Mike Levert wrote in the Portland Press Herald, “We’re the oldest and least racially diverse state in the country. In less than 20 years, a quarter of our population will be in retirement. We cannot grow the economy with these demographics.”

We can keep swinging our hammer underneath a street light — to no avail.

Or we can take a more thoughtful approach that includes improved funding for education and smart investments in the infrastructure, services and job creation that will bring new people of all ages to our state.

David Farmer is a political and media consultant. He was formerly deputy chief of staff and communications director for Gov. John E. Baldacci and a longtime journalist. You can reach him at Follow him on Twitter @dfarmer14.

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