Beacon Hill Institute really is in the dark

23 July 2004

Sloppy and unpersuasive, more interested in publicity than crafting a solid analysis, the Beacon Hill Institute is losing its credibility.

The Institute is run by David G. Tuerck, chair of the economics department at Suffolk University. That connection has given the institute a patina of authority. Reports produced by it and other think-tanks, such as MassINC and the Pioneer Institute, are widely reported by the press. Yet while one can generally rely on the methodology of the latter two organizations, with BHI it's different.

Some of BHI's work is barely disguised ideology (a 1994 study, for example, called a graduated income tax a "slippery road to serfdom"). Other times it revels in its against-the-grain, counterintuitive conclusions. In 2000, it called for an income tax cut, predicting there would be no meaningful program reductions even if a recession hit. It argued in 2002 that eliminating the state income tax would create 300,000 to 500,000 jobs. Another report that year said the state's boosted educational spending had all been a waste. Last year BHI claimed people choose to live in communities that tax their residents the least.

The arguments can be intriguing, yet they don't stand up to scrutiny. When the recession came, it turned out there were severe program cuts. The number of jobs BHI boasted would be created by wiping out the income tax exceeded, by more than double, the number of unemployed Bay Staters. Its conclusions about educational reform are belied by consistent improvements in MCAS scores. And taxes actually are an insignificant factor in determining where people live; indeed, sometimes higher taxes - if accompanied by improved services - attract residents (think Newton or Brookline).

And now BHI is in the news with studies on two hot topics: a proposed wind farm in Nantucket Sound and the economic benefits of next week's Democratic National Convention.

Last October, BHI issued a report - updated recently - that blasted a proposal by Cape Wind Associates to build a 130-turbine wind farm five miles off Cape Cod. Some landowners have vigorously opposed the wind farm, which would provide up to three-quarters of the electricity used by the Cape and islands. Their group, the Alliance to Protect Nantucket Sound, receives a substantial portion of its funding from the Egan Family Foundation, two of whose members sit on the alliance's board (prominent supporters of George W. Bush, one of the Egans just released a critical documentary on John Kerry's failed 1972 congressional race).

And the principal funder of BHI's study? The Egan Family Foundation.

That raised eyebrows, of course. BHI claimed independence, but conducted an extraordinarily questionable analysis. The heart of it was a series of interviews with landowners and tourists, asking them what they thought would happen to land values and tourism if the wind farm were built. The questionnaire was obviously designed to provoke a negative response (comparing the wind turbines to the size of the Statue of Liberty for example). Five percent of tourists guessed they would visit less; 20 percent of homeowners speculated their property values would drop.

That speculation became the basis for BHI's conclusion that the costs of the wind farm were greater than its benefits. Cape Wind mounted a fierce rebuttal. The margin of error of BHI's sample could effectively undermine its results. The organization gave too little credence to benefits such as jobs and a cleaner environment. Most importantly, speculation notwithstanding, land values in fact have not declined when other wind farms have been built elsewhere.

Then there is the comedy of errors that is BHI's analysis of next week's convention. On March 30, it released a study claiming the net benefits from the convention would be $121.6 million. A week later, it released another study saying the net loss would be $12.8 million. The difference? The first time around, BHI had forgotten to include costs - such as disruptions to traffic - in its analysis. Yet the revised version was equally flawed, with "costs" (such as the cancellation of a planned Tall Ships visit) wildly inflated.

This week BHI mounted a follow-up. It trumpeted a study proclaiming the convention would be a "bust," helping only 11 percent of Boston businesses. The basis of that was a survey of 100 businesses near the FleetCenter, asking proprietors what they THOUGHTwould happen.

As Susan Elsbree of the Boston Redevelopment Authority says, "How stupid is that?"

It's a small and narrow sample size. The impact of the convention extends throughout the entire metro area; its benefits are both short- and long-term. As with the wind study, BHI relies on speculation. Released just three days before the delegates arrive, the report had no real value except, clearly, to get BHI some free press.

Looked at as a whole, it's not a great record. Just because the institute says something doesn't mean anyone should believe it.