Author Archives: John Talberth

Pay for Performance: Maximizing the Impact of BMP Investments

Agricultural best management practices (BMPs) such as streamside buffer zones and cover crops are increasingly being used to reduce nutrient pollution from fertilizers into water bodies. Eutrophication from fertilizer runoff is the key driver behind growth of hypoxic “dead zones” where fish production comes to a standstill. The extent of these dead zones has increased more than nine fold since 1969 and now encompasses more than 245,000 km2. Continued growth of these marine dead zones undermines global biodiversity conservation goals and poses a significant challenge to meeting the world’s increasing demands for capture fisheries and aquaculture.

Governments heavily subsidize BMPs, but do not generally allocate funds to maximize their environmental benefits. The conventional approach to allocation of subsidies is most often first-come-first-served. But with ever-increasing fiscal constraints, policy makers are searching for ways to enhance efficiency of BMP programs and maximize their bang for the buck.

Pay for performance (PFP) presents an alternative platform based on the level of environmental quality actually achieved on the ground. With respect to agriculture, a PFP program would allocate subsidies for BMPs to those practices that accomplish the maximum amount of nutrient reduction for each dollar invested. PFP programs are applicable not only to BMPs that reduce nutrients, but to any subsidy program designed to achieve environmental quality outcomes including emerging payments for ecosystem services markets. In a new paper published in the journal Ecological Economics, CSE’s John Talberth and researchers from the World Resource Institute compared a conventional subsidy approach with PFP for BMPs designed to reduce nutrient pollution into the Chesapeake Bay.

We model four paired scenarios using a constrained optimization model. In the first pairing we held the level of nutrient reduction constant and compared cost effectiveness of the two subsidy allocation methods. In the second pairing we held the level of program investment constant and compared nutrient reduction outcomes. In both pairings, PFP was far superior – delivering identical nutrient reduction outcomes at less than half the cost in the first and delivering two to three times the amount of nutrient reduction for the same budget allocation in the second. CSE is now seeking partnerships with federal, state, and local governments as well as non-profits to investigate the feasibility of PFP for a wide range of programs that provide public financial support for sustainable land management practices.

To download the PFP publication, click here.

Coal vs. Wild Salmon: The Chuitna Mine Should Never See the Light of Day

In this late stage of the global warming crisis, it is hard to imagine why the Obama administration and decision makers in Alaska continue to push hard to approve a five thousand acre coal strip mine that will pump over 900 million metric tons of carbon dioxide into the atmosphere. Yet PacRim Coal LP’s Chuitna Coal Mine project is alive and well with the Army Corp of Engineers leading the federal National Environmental Policy Act (NEPA) process. The tragic consequences of this project on the Earth’s climate are bad enough. But what is being lost on the ground is equally disturbing.

According to the Chuitna Citizens Coalition, “the mine will set a dangerous precedent for the State of Alaska by permitting the destruction Middle Creek (stream 2003) by the complete removal of 11 miles of streambed and more than 300 feet of underlying soil and rock strata.” Middle Creek is a valuable fishery supporting chinook and coho salmon, rainbow trout, steelhead, and Dolly Varden trout. It provides roughly 20% of the silver salmon for the entire Chuitna River system and would be utterly destroyed by the mine. Existing uses of the stream and its watershed would also be lost: hunting, fishing gathering wild foods, sportfishing and recreation.

In 2009, the CCC took a novel approach for protecting Middle Creek against the catastrophic impacts of the mine and maintaining these existing uses. CCC used a provision of Alaska law that allows citizens to petition to reserve instream flow rights for fish, wildlife, and recreation. As part of the adjudication process, the Alaska Department of Natural Resources (DNR) must determine whether or not the proposed reservation is in the public interest. Quantifying economic benefits are key to this determination. In a hurried, back of the envelope calculation completed in the spring of 2015, DNR has determined that this pristine wilderness is worth, at best, only $10,600 per year. That’s the dockside value of 1,789 coho salmon the river supports. But what about all the other uses this watershed supports as well as the inherent values Alaskan’s place on preserving this refugia for native biological diversity?

Working with Cook Inletkeepers, CSE conducted a review of the DNR approach and conducted a preliminary ecosystem service valuation of the Middle Creek watershed left in its natural state. Unlike DNR, CSE incorporated all known information about the economic values the watershed supports. What we found is that ecosystem service benefits of the Middle Creek watershed are likely to be in the range of $55.4 million to $134.2 million each year, or a present value of $1.4 billion to $3.5 billion over 50 years. Instream flow benefits are a sub-component of ecosystem services provided by Middle Creek. These are the benefits associated with direct uses of the river. The literature on instream flow benefits per acre-foot suggests an annual value of instream flow on Middle Creek to be in the order of $7.1 million to $17.0 million each year, or a present value of $183.4 million to $436.6 million over 50 years.

By concentrating on a single benefit – the dockside value of a single species of fish – DNR has drastically underestimated Middle Creek’s economic values and, thus, has biased its decision making process against instream flow protection. CSE’s analysis has now been submitted to DNR for consideration in the adjudication process and submitted to the Army Corp for consideration in the NEPA process. Cook Inletkeeper, CSE and partners in Alaska hope this will force these agencies back to the drawing board to consider the true worth of this pristine Alaska wilderness.

For a copy of CSE’s Middle Creek valuation, please visit our Chuitna Project Page here.

Forest Liquidation in Quartz Creek

quartzFew rivers are more vital to the health and wellbeing of communities along their banks than the McKenzie River as it flows off the high Cascades through the Eugene-Springfield metropolitan area to its confluence with the Willamette. But deforestation and degradation of private forestlands in the McKenzie River watershed poses a direct threat to the ecological health of the river.

What is happening in Quartz Creek – one of the McKenzie’s major tributaries – is emblematic of the scale and scope of the problem. The situation is worsening as Rosboro Lumber Company – the prime landowner – seemingly liquidates its holdings. CSE is a partner in the World Resources Institute’s Global Forest Watch Program (GFW), which provides users access to real time satellite imagery and data depicting forest loss and forest gain over time.  The GFW’s online interactive mapping tool permits users to take a look not only where logging is taking place but also its pace over time in relation to forest cover gain so that the sustainability of timber harvests can be assessed.

CSE conducted a GFW analysis of logging and regrowth trends in the lower Quartz Creek Watershed. The results are alarming. Our analysis reveals a pattern of forest liquidation that will be reflected in a watershed largely stripped of forest cover for decades to come. Since 2001, nearly 7,200 acres (2,913 ha) of forest cover (trees at least 5 meters high with 30% canopy closure) have been lost to extensive clearcutting while only 2,576 acres (1,043 ha) have been gained through natural afforestation or reforestation. In other words, logging has exceeded forest regrowth by a factor of 3.

But these figures underestimate the problem. First, there has been extensive new clearcutting in 2014 and 2015 not reflected in the data. Secondly, what is lost is typically more biologically diverse than what is gained since tree plantations are far less capable of supporting many of Quartz Creek’s endowment of native fish and wildlife. Third, the figures do not reflect longer term damages that arise from clearcutting and roads that will manifest in the form of degraded water quality, increased susceptibility to flooding and drought, declining site productivity, and fragmentation of intact forests on nearby federal lands. The GFW analysis only measures the sustainability of timber harvests through the lens of forest gain and loss. Bad as the figures are, the on-the-ground reality is much worse.

The situation with Quartz Creek underscores the imperative of reforming Oregon’s antiquated Forest Practices Act. CSE is

The acceleration of unsustainable and destructive logging in the Quartz Creek watershed underscores the urgent need for reform of the OFPA. CSE and our partners are working to achieve four major clusters of reform. These include:

  1. Forest diversity standards: This would entail greater restrictions on the size and placement of clearcuts to reduce fragmentation and maintain forest cover as well as new standards for retention of “biological legacy” such as residual trees, snags, and downed logs.
  1. Water resource protection standards: All streams and streamcourses should be protected with no-cut buffers adequate to protect water quality, temperature, and flow and provide habitat and migration corridors for fish and wildlife species that depend on aquatic ecosystems. Clearcutting should not take place at all in watersheds that provide domestic drinking water and coldwater fish or on steep, unstable soils prone to landslides.
  1. Economic incentives: Timber taxes unwisely rescinded in 1999 should be reinstated to help cover the costs unsustainable logging imposes on public finance. Harmful types of logging practices should be taxed at the highest rate. Foresters who truly implement sustainable forest practices and mill their wood in the state should be exempted from these taxes and instead given subsidies like payments for ecosystem services and carbon storage and preferential treatment in public contracting and procurement. Conservation easements, parks, and protected area acquisitions should be ramped up to provide those who want to protect their forests the means to do so.
  1. Public participation and enforcement: The ability of the State Forester to approve or disapprove of major logging operations should be reinstated. Cynically, this authority was rolled back in 2003 to help shield timber companies and the State Forester from lawsuits over endangered salmon and other imperiled species. Forest management plans demonstrating a commitment to sustainability should be required for all major timberland owners. DEQ should be empowered to authorize or disapprove logging operations that affect water resources. All stakeholders should have the right to challenge logging operations detrimental to public health and their communities and negotiate changes before logging commences.

With these reforms in place, the OFPA can move closer to internationally accepted standards for sustainable forestry and help the forest industry become a driver for prosperity of people, communities, and other species with whom we share this landscape.

For a copy of the Quartz Creek report, please click here to visit our Oregon Forest Practices project page.

Portland Safe from LPG Export Terminal, For Now

pembina blogIn a stunning reversal, Portland’s Mayor Charlie Hales withdrew his support for the proposed Pembina LPG export terminal and pulled a final vote on the proposal off the City Council’s agenda for early June with no plans to reschedule. The move comes on the heels of an unprecedented outpouring of opposition to the project from a diverse coalition of community leaders and climate activists and experts in the fields of public health, sustainable economics, and disaster modeling. From the standpoint of land use and economic development policy, Mayor Hales’ decision was a smart one.

Center for Sustainable Economy provided expert testimony on these policy issues twice during the planning process. In our filings, CSE noted that the City’s intent to bend the rules of its land use code to accommodate the $500 million project was seriously out of sync with both economic development and climate action plans put in place after extensive public involvement over the past decade. We argued that using scarce Port of Portland lands to facilitate a $6 billion-a-year foreign company’s exports of fracked gas in order to help China be more competitive in production of plastics could not be further from Portland’s recently achieved title of ‘climate champion,’ or further from the City’s vision of sustainable and equitable economic development.

We also noted serious deficiencies in the environmental, economic, social and energy analysis (EESE) prepared for the proposal. For example, no actual environmental impacts were quantified and addressed in the EESE and not a single negative economic consequence (like increased costs of policing and disaster response) was discussed even in a qualitative sense. Oregon’s land use laws contain unambiguous requirements for a balanced treatment of impacts, both negative and positive in the EESE. But official filings from both Pembina and the Port instead read like an ad for the project rather than an objective analysis.

Apparently, the lopsided environmental analysis along with public safety and climate concerns were enough to persuade the Mayor to change his mind. Although the Mayor was a strong supporter of the project early on, he did say from the beginning that he was concerned about the safety of the export terminal and whether the project meets Portland’s environmental standards. In a statement provided to the Oregonian, Hales said “I think both the Port and Pembina have failed to make the case.”

It remains to be seen whether Pembina will find a way around the Mayor’s opposition and the land use protections that now preclude the proposal. For now, Portland is safe from this major threat. But stopping new fossil fuel infrastructure is just the first step towards addressing a problem that spans decades – the extensive network of mines, wells, pipelines, export terminals and distribution systems for coal, oil and gas that keep us locked into a pattern of fossil fuel extraction and consumption that must be drastically curtailed. Ultimately, and in light of scientific consensus that we need to leave at least 80% of proven fossil fuel reserves in the ground, CSE believes that we should begin the process of dismantling and cleaning up this fossil fuel infrastructure to reduce public health and safety threats and make room for sustainable economic development. Adding to it is simply not an option. We will be pursuing this goal in Portland and other cities as they update and refine their climate, land use, and economic development strategies in the years ahead.

Media coverage:

Guardian – “Portland mayor pulls support for fracked gas terminal amid protests”

Oregonian – “Mayor Charlie Hales ‘urges’ Pembina to withdraw plans for North Portland propane terminal.”

Hawaii’s FARM Center Showcases Innovative Model of Agro-Forest Restoration

farm-hawaiiCenter for Sustainable Economy (CSE) is pleased to announce a new partnership with the Hawaii-based Forest Agriculture Research Management Center (FARM) to propagate an innovative model of forest restoration designed to manage watersheds as successional agro-forests. FARM Center’s mission is to assist in the recovery and vitalization of our planet’s varied forest ecosystems by protecting healthy watersheds and cultivating biological and cultural diversity. The restoration model FARM Center is demonstrating is the agro–successional restoration (ASR) system. ASR holds great promise throughout the arid tropics because it combines restoration of native flora with the need to enhance food security. In Hawaii, restoration of native sandalwood forests can be co-mingled with staple foods such as taro, sweet potato, manioc, yacon, banana, papaya, pineapple, and certain vegetables and legume crops suitable for polycultures that provide microclimate and income while the young sandalwood trees develop.

But ASR is not just applicable to the arid tropics. CSE is keenly interested in promoting this kind of model in many regions of the US where collapsing and unsustainable industrial agriculture and forestry systems have replaced natural forests and woodlands. In Oregon, for example, the Willamette Valley once supported over 400,00 acres of while-oak savanna – a habitat that is now just hanging on by a thread. For thousands of years, Native Americans actively manipulated these habitats to produce high yields of foods like acorns and mushrooms, plant medicines and materials for building and basketry.  A restoration strategy for white-oak savannas can be used to replace agricultural systems with high carbon and water footprints that pollute rivers and streams with both nutrient and temperature pollution to ones that provide food for local consumption while providing habitat and shade, reducing erosion, and mitigating an increasingly hot micro-climate.

CSE is providing fiscal sponsorship to the FARM Center, and will be collaborating with their experts as we continue to build out our Wild and Working Forest Program in the years ahead to promote a vision of ecological restoration. Short-term goals for the FARM Center include:

  • Developing bio-regionally appropriate ecological education networks.
  • Assisting in the R&D of relevant Agro–Successional Restoration (ASR) systems supported by ecologically, culturally and economically appropriate crops.
  • Educating and training interested communities in the implementation of ASR systems in a manner that is culturally sensitive and reinforces an ecological paradigm integral for the long-term system maintenance.

For more information about the FARM Center, please click here

Baltimore’s Stormwater Management Plan Will Generate Significant Social and Economic Returns

bsmIn December 2014 the City of Baltimore released an ambitious management plan for reducing stormwater pollution from nearly 24,000 acres of pavement within City limits. Nitrogen, phosphorous, and sediments contained in this stormwater are responsible for recurring hypoxic “dead zones” in the Chesapeake Bay devoid of fish, crabs, and other aquatic life. Stormwater runoff from cites accounts for 10-20% of the load of these pollutants entering the Bay. Although efforts to control pollution from other sources are beginning to pay off, pollution from urban runoff is still growing. Baltimore’s Stormwater Management Plan (SMP) will play a role in reversing this trend.

The SMP was created to meet Baltimore’s obligations under the Clean Water Act and is based on implementation of a variety of best management practices (BMPs) designed to reduce runoff and filter out pollutants from at least 4,240 acres of paved surfaces. Major BMPs will include expanded mechanical street sweeping, stream restoration, bioretention ponds, artificial wetlands, and converting impervious pavement to open space and forest.

Many, including Maryland’s new Governor Larry Hogan (R) have expressed concerns over the costs jurisdictions like Baltimore will face implementing their SMPs and over the stormwater fees collected to pay for them. But from an economics standpoint, the point is not how much it costs but whether or not the benefits generated by these SMPs exceed costs and how they can be configured to maximize such benefits. CSE’s preliminary analysis of Baltimore’s SMP tackles these questions by using Baltimore’s Genuine Progress Indicator (GPI) as a framework. The results are encouraging. In particular, our analysis found that:

  • The SMP has the potential to generate nearly $20 million in economic benefits each year with no special emphasis on GPI-enhancing design features. Major annual benefit categories include those related to ecosystem services of streams, wetlands, parks and open space as well as volunteering, employment, and water quality.
  • If GPI-enhancing design features were added – features like local hiring preference, greater emphasis on green infrastructure, and location of BMPs in residential areas – then the SMP’s annual economic contribution would rise by 29% to over $25 million per year.
  • Over a 20-year period, the SMP as currently configured is likely to generate over $22 million in net benefits with a benefit-cost ratio of 1.08 and a social return on investment of over 8%.
  • With GPI-enhancing features added, net benefits could be substantially larger. Our analysis shows that 20-year net benefits could be over $107 million with a benefit-cost ratio of 1.40 and social a return on investment of nearly 40%. This underscores the importance of paying attention to design features of the SMP as it is implemented on the ground and recognizing that some design features will pay off far better from a social, economic, and environmental perspective than others.

As more precise economic data on both costs and benefits of projects and programs to implement the SMP become available, CSE’s preliminary analysis can also be refined and updated. So too can the list of GPI-enhancing measures. Doing so will help decision makers implementing the SMP to choose options that maximize its social and economic returns – an important goal recognized by the Environmental Protection Agency in its new Integrated Municipal Stormwater and Wastewater Planning Approach Framework, adopted last summer. That framework recognizes that communities can “manage stormwater as a resource, and support other economic benefits and quality of life attributes that enhance the vitality of communities.” As shown in CSE’s preliminary analysis, the GPI provides a useful analytical tool for achieving this goal.

For a copy of CSE’s preliminary analysis, click here to visit our GPI project page

Plum Creek’s Illegal Logging Certified as Sustainable

Plum-Creek-Illegal-LoggingIn many states it’s three strikes and you’re out. Harsh penalties for repeat offenders. But in Oregon, you can be cited eleven times in six years for violating laws meant to protect soil and water from clearcuts, slapped with trivial fines, and walk out the door to do it again. And despite your recklessness with the law, you can still win a sustainability seal of approval from the Sustainable Forestry Initiative (SFI). As an organization that promotes sustainable brands as a way to reduce humanity’s footprint, CSE feels compelled to fight this flagrant abuse of green labeling.

The Center for Sustainable Economy has filed a formal complaint with the Sustainable Forest Initiative (SFI) for breaking its own rules by continuing to provide its seal of approval to Plum Creek Timberland, LP in Oregon despite a pattern of willful non-compliance with the law and clearcuts that have left extensive resource damage on the ground. “A sustainability certification should be reserved for practices that meet the highest standard of excellence, not those that warrant jail time,” said Dr. John Talberth, the Center’s President and Senior Economist. “Plum Creek and the Sustainable Forestry Initiative are doing a grave disservice to consumers and investors alike who want to make responsible buying and investment choices but are instead told that illegal logging is somehow good for the Earth.”

In the past six years, Plum Creek has received 11 civil penalties from the Oregon Department of Forestry for violations related to clearcut size, logging in riparian zones, and improper notifications of impending logging operations. Detailed satellite imagery provided by Google Earth and appended to the complaint shows that these illegal practices have left Plum Creek lands scarred by major landslides and streams filled with debris.

In its complaint, CSE has asked for an immediate suspension of SFI certification for Plum Creek, an investigation into the full extent of legal violations, and notifications to both the Federal Trade Commission and Securities and Exchange Commission about Plum Creek’s unwarranted use of the SFI label in connection with its Oregon operations. CSE has also asked SFI to disqualify Bureau Veritas Certification North America, Inc., as a credible SFI auditor of Plum Creek timberlands for failing to conduct due diligence in researching Plum Creek’s record of consistency with SFI principles or compliance with the law in Oregon.

For a copy of CSE’s Plum Creek Inconsistent Practices Complaint, click here to visit our project page.

The Economic Benefits of Baltimore’s Climate Action Plan

eco-benAll too often we hear how climate action will put a drag on economic growth. But in a new analysis of Baltimore’s Climate Action Plan (CAP), Center for Sustainable Economy demonstrates just how wrong that assumption really is. Once fully implemented, Baltimore’s Climate Action plan is likely to generate a significant boost to the City’s Genuine Progress Indicator (GPI), an overall measure of economic wellbeing adopted in Maryland and now being road-tested in Baltimore.

Annual benefits are likely to range between $548 million and $720 million per year, an increase of 4 to 5% over a business as usual scenario. This means that if the CAP were in place today, Baltimore’s GPI could rise from $13.94 billion to as much as $14.66 billion each year. The most significant benefits will be generated by the reduced costs of greenhouse gas emissions and associated air and noise pollution. These benefits are likely to amount to nearly $358 million per year. Air and noise pollution benefits will be associated with a 25% reduction in vehicle miles traveled.

New transportation, water, and household infrastructure in the form of cool rooftops, solar panels, efficient appliances, weatherization, energy saving streetlights, bike lanes, and electric vehicles will generate between $129 million and $235 million in benefits per year. Income freed up by energy savings as well as income generated by new jobs will boost household spending and Baltimore’s GPI by $19 million to $36 million each year. New jobs will help push down the costs of underemployment by nearly $6.6 million. Other significant annual benefits will be associated with decreased dependence on fossil fuels ($17 million – $65 million), less traffic congestion ($13 million) and an enhanced urban tree canopy ($5.9 million – $7.4 million).

While most conventional economic metrics – like gross state product – overlook these important benefit categories, they are central to the GPI and central to the concept of economic wellbeing. This is why the State has established the GPI as an important measure of economic performance, and why CSE is working with the City of Baltimore to establish its own local variant. Once formally in place, and as demonstrated in our CAP analysis, Baltimore’s GPI can be an important tool for informing major policy initiatives such as those related to living wages, climate, stormwater, and infrastructure. The GPI can also serve as a guide for setting budget priorities that maximize economic wellbeing for Baltimore’s residents.

For a copy of CSE’s analysis of Baltimore’s CAP, click here to visit our project page.


Baltimore’s Genuine Progress Indicator Shows Healthy Economic Growth

Baltimore-GPIIn the first city-level analysis of its kind in Maryland, the Center for Sustainable Economy (CSE) found Baltimore’s economy well on the way to economic recovery taking into account social and environmental costs as well as the benefits associated with consumer spending, infrastructure and unpaid labor. The analysis utilized the first iteration of the Genuine Progress Indicator (GPI) for Baltimore, a metric adopted by Governor O’Malley in 2010 at the State level to measure economic performance in a more comprehensive manner than conventional approaches. Using the GPI, CSE found that between 2012 and 2013, economic wellbeing of Baltimore’s households grew by nearly 5% – a rate much higher than the growth in gross domestic product (GDP) per capita, which hovered around 1.5% during the same period for the Baltimore-Towson metropolitan area.

According to Dr. John Talberth, lead author of the study, “Baltimore’s economy is heading in the right direction by bolstering the economic wellbeing of households while reducing environmental and social costs. The City’s innovative policies on climate, stormwater, and living wages are helping to reduce the resource intensity of economic activity while improving livelihoods. This is reflected in the GPI’s robust growth rate.”

As an example, the GPI tracks the costs of depleting nonrenewable energy resources including oil, coal and gas by calculating what it will take to replace them with renewable energy substitutes. Because the share of renewable energy consumption increased and the amount of fossil energy consumed by vehicles and power plants dropped the costs of this line item decreased by 5.47% between 2012 and 2013. On the benefits side, the GPI’s increase was based in part on the benefits of leisure time, which rose from $4,182 per capita in 2012 to $4,668 in 2013, an increase of over 11.5%. “As the economy recovers, people can afford to drop that second job and enjoy time with friends and family,” Talberth continued.

While the GPI’s growth was encouraging, the report also identified places where Baltimore needs to improve. The costs of commuting rose by over 14.5% as more vehicles clogged the roads. There were also big jumps in the costs of crime, underemployment, solid waste pollution, and what are known as “defensive and rehabilitative” expenditures. These are items – like medical care and household security systems – that reflect underlying problems like worsening health and less neighborhood safety and as such, reflect spending that households would like to reduce in the future.

CSE will be using the Baltimore GPI to demonstrate how the metric can be used at the county and city level throughout Maryland to inform policy decisions and monitor economic performance.

For our report and related materials, please click here to visit the project page.

Maryland’s Minimum Wage a Big Boost for Genuine Progress

pay-too-lowRaising the minimum wage is a big win for workers, communities, and business. Decades of experience with state-level wage increases bears this out well, but often this reality is drowned out by the clamor of corporate profiteers who have done a pretty good job so far at showing their disdain for low-wage workers and thwarting federal legislation. Think tanks like the Economic Policy Institute have helped inform this far too contentious debate with solid economic analysis – EPI estimates that raising the federal minimum wage to $10.10 by July 1, 2016 would raise the wage of about 28 million workers by about $35 billion and create about 85,000 new jobs. But these conventional metrics only scratch at the surface of deeper economic benefits better captured in more comprehensive metrics like the Genuine Progress Indicator (GPI).

The GPI was adopted in Maryland by Governor O’Malley in 2010 to provide a more meaningful measure of economic performance than gross state product (GSP), the state-level variant of gross domestic product (GDP). Unlike GSP, the GPI takes the costs of inequality into account as well as a wide range of environmental and social costs and benefits that have bearing on the economic wellbeing of American households.

Using the GPI as a framework for analysis, CSE has just released a study analyzing the economic benefits of Maryland’s new Minimum Wage Act (HB 275), which raises the wage floor for most employees to $10.10 by 2017. We found that benefits of HB 275 will likely top $2 billion a year. These benefits take the form of reduced costs of inequality, underemployment, and crime as well as enhanced consumer expenditures and services from household capital as lower-wage workers earn enough to make improvements to their homes. While there will be a small offsetting effect on the income some business owners may bring home and some increases in state and government payrolls, such costs pale in comparison with any of the benefits we quantified.

Two key messages emerge from this exercise. First – congratulations to the 2014 Maryland General Assembly. Raising the minimum wage is a significant tool for accelerating the economic recovery and addressing the inequality crisis head on. Let’s hope federal decision makers can follow your leadership. Second – let’s stop buying into conventional economic analysis when it comes to major legislative initiatives. Alternatives like the GPI have a lot to offer in bringing to light significant economic benefits that would otherwise be lost in the debate.

Most states now rely exclusively on “fiscal notes” to evaluate legislative proposals in terms of their effect on government finances. Analysis of most federal legislation doesn’t go much deeper, usually limited to effects on GDP growth and other antiquated measures. Because of this, legislation with big economic payoffs has been shot down when a deeper economic analysis would have quieted the critics. Replacing or supplementing fiscal notes at the state level and GDP at the federal level with more meaningful and comprehensive metrics like the GPI will go a long way towards bringing clarity to economic policy debates often tragically muddled by ideological rhetoric.

To access the GPI Note for the Maryland Minimum Wage Act, please visit our project page at:

Project page