July 31, 2011

Is this the Debt Ceiling Deal That Will be in the News Tomorrow?

Carroll Andrew Morse

Kathryn Jean Lopez of National Review Online has posted an outline of a debt ceiling and budget process deal that Speaker of the House John Boehner sent to the Republican caucus this evening.

Chicago in the White House

Justin Katz

Michael Walsh characterizes President Obama's leadership style as "the permanent insurgency":

Do nothing, lie in wait, and then counter-attack. Never present a plan if you can possibly help it, but deal exclusively in bromides and platitudes as you stake out the moral “high ground” and get ready to ambush the other guy. Think of it as the Permanent Insurgency campaign.

Walsh goes on with the description, concluding:

So the later Boehner walks into the trap, the quicker Harry Reid trumps him, and the sooner Obama can can declare for the umpteenth time that the time for talk is over, emerge as a hero — and get the debt-ceiling debate safely past the shoals of the next election, which is all he really cares about. Because, in case you hadn't noticed, running for office is the only thing the Punahou Kid knows how to do.

Insurgencies emanating from the top executive office in the country seem likely to be especially dirty.

Letting the Government Fill Our Pockets

Justin Katz

As one would expect John Derbyshire inclines toward conservative perspectives on the distribution of government handouts:

Such attitudes are in any case so quaint and fogeyish now, they are as far beyond praise or blame as the wearing of a tricorne hat would be. They are relics of the time before Anglo-Saxon civilization collapsed into hedonism, dependency, ethnic masochism, consumer credit, and trillion-dollar national deficits. In Liverpool today, one household in three is "economically inactive" — that is, contains no working adults. In Britain overall the statistic is one household in eight. No doubt parts of the U.S.A. are as bad.

The rub comes with the fact that he has reached an age at which the governments of the United States and the United Kingdom have both determined that it's time residents are good and bought with handouts: He is now receiving pension payments from the latter and Social Security disbursements from the former. Does that make him a hypocrite?

Whether or not it does, conservatives aren't quite as apt to consider hypocrisy the biggest sin known to man, as progressives hypocritically seem to insist on a regular basis. Personally, I'll be apt to take any money thrown my way. It's not as if my refusing it sends it back to the person from whom it was taken, and especially in my continuing circumstances, my use of it will be lest wasteful than others' might be.

Perhaps it's enough for a conservative to strive not to be dependent on government handouts and therefore not beholden to those who would perpetuate them. That, one suspects, is the main attraction to politicians of ensuring that everybody's got at least a finger in the till.

Generous Benefits Attract Those Who Need Them

Justin Katz

When PolitiFact found Gary Sasse to be truthful about Rhode Island's 52% premium for human-service programs, as compared with the national average, it offered a bit of broader speculation:

The 52-percent figure could mean that the state is being overly generous with its benefits.

Or it could mean that the characteristics of Rhode Island's population require us to spend more to give the same level of service that other states provide.

Or it could mean that the national average is depressed by states that are declining to provide some of the "optional" services, such as hospice care for the poor, that some Rhode Islanders might regard as anything but optional.

I'm not sure that the "or" conjunction is entirely appropriate, in the sense that finding a high percentage of people eligible for benefits would minimize the possibility that the state is too generous. Obviously, more expansive benefits will apply to a greater number of people. Also obviously, greater benefits will attract people who would be eligible for them.

As for the third quoted option, other states' "declining to provide" certain services is merely the flip side of Rhode Island's deciding to provide them.

Whatever the case, considering Rhode Island's position on the wrong side of one national listing after another, from employment to business friendliness to welfare benefits, it ought to be general policy to strive at least for the middle of the national pack when it comes to government spending and pervasiveness.

History Will Begin to be Made this Week

Carroll Andrew Morse

This is very likely going to be a memorable week in the history of self-government and public finance.

In addition to the Federal debt-ceiling issue which needs to be resolved by Tuesday in order for the Federal government to be able to keep paying everything it owes without resorting to various less-than-scrupulous financial gimmicks, the receiver for Central Falls may make an announcement as early as tomorrow that he is filing for bankruptcy. As Philip Marcelo wrote in today's Projo...

The square-mile city would be entering uncharted waters as federal municipal bankruptcy has been rarely tested nationally.
Central Falls is not sui generis; it is an advanced case of a situation faced by many cities and towns across the United States, and what happens with CF is going to contribute very visibly to a body of legal, policy and political knowledge about what to do and/or what to avoid when twenty-first century communities run out of money needed to pay for decisions made over preceding decades.

But the most important thing to keep in mind is that nothing ends this week. The reckoning (to use Matt Allen's word) of the fiscal crisis created by the political and social changes of the past 45 to 80 years, depending upon if you want to place the beginning of the problem with the New Deal or the Great Society or somewhere in between, is just beginning and what our society will look like as a result, for better or for worse, will be decided more by the reaction to this week's decisions than by the decisions themselves.

Finally, one symptom visible in Central Falls of the problem that is nationwide is captured beautifully by the quote from freshman state Rep. James McLaughlin in the Projo's CF story...

"They’re going to file for bankruptcy," said state Rep. James N. McLaughlin, a Democrat who represents a portion of the city and is opposed to [filing for bankruptcy]. "All avenues have not been exhausted. It is a rush because they do not have any money."
If our politics keeps producing a large number of elected officials who believe that just because we have no money doesn't mean we're bankrupt, we're basically doomed.

July 30, 2011

Poverty Discussion Focuses on "Them," Not "Us"

Justin Katz

Victor Davis Hanson makes an excellent point:

Instead [of descriptions of modern "poverty" and examinations of whether government spending works], we hear the rhetoric of Dickensian poverty, usually in terms of relative rather than absolute want, as in the president's constant referencing of "corporate jets" for "millionaires and billionaires" rather than any statistics about average American access to a big-screen TVs, serviceable automobiles, or personal computers. The president made this clear when, during the campaign, he rejected any idea in cuts in capital-gains taxes even if it should lead to greater national and collective wealth, "fairness," he said, being the only issue. (I supposed that meant something like "it does not matter whether I am better off if you are way better off.") And completely absent in the current debate of who gets more and who pays more is any adult discussion over the causes of being less well off than someone else, and whether such criteria can always be addressed and remedied by more government money.

Government's Version of Accountability

Justin Katz

So, U.S. Education Secretary Arne Duncan is threatening to stop enforcing regulations if Congress doesn't modify them to account for the failure of those regulated to comply:

Frustrated by what he called a "slow-motion train wreck" for U.S. schools, Education Secretary Arne Duncan said he will give schools relief from federal mandates under the No Child Left Behind law if Congress drags its feet on the law's long-awaited overhaul and reauthorization. ...

Duncan has warned that 82 percent of U.S. schools could be labeled failures next year if No Child Left Behind isn't changed. Education experts have questioned that estimate.

Still, no one thinks states will meet the law's goal of having 100 percent of students proficient in math and English by 2014. A school that fails to meet targets for several consecutive years faces sanctions that can include firing teachers or closing the school entirely.

Therein lies the problem with repairing government ineptitude with greater and more-centralized government authority: Nobody actually believes government will use the stick against itself or its favored constituencies when the carrots stop working. Government self-regulation is a perpetual bluff.


For those who might be tempted to make the distracting claim that I can't believe what I write because the legislation in question passed during the Bush Administration, I should note that I thought, said, and wrote much the same back when the law was still in the works.

Self-Government's Intrusion on Fantasy Life

Justin Katz

The argument over the value or harmfulness of television is an old one, but Ben Berger brings it to an important insight. He notes that the medium itself has downsides, and that it tends toward content that compounds them:

... Postman and his fellow media guru Marshall McLuhan both insisted that "the medium is the message," that it matters less what we watch than that we watch — watch rather than listen, read, or think in silence. Content is not irrelevant, of course: Watching violent programs in high doses correlates with reduced sociability and increased volatility, especially in youngsters. Watching crime shows and even news in high doses correlates with the excessive cynicism that the late media scholar George Gerbner called "mean-world syndrome," which impedes social trust and public-spiritedness. And a number of economists have found that TV's commercialism makes viewers more materialistic and less satisfied.

And as a medium, it taps into human — and American — tendencies that were already a risk factor to our freedom and democracy:

... Tocqueville captures our present dilemma. TV, like democracy, is a technology of freedom. It provides a window onto many worlds and offers vast amounts of information. It also caters ever more perfectly to the very proclivities — materialism and privatism — that in Tocqueville's view produce dissatisfaction and disengagement, tending "to isolate men from each other."

Therein enters the insight (emphasis added):

... Tocqueville, who would have appreciated the political dimension of our attention-deficit democracy: For those who immerse themselves too completely in their private worlds, self-government can seem an annoying intrusion. Such citizens may be tempted to delegate increasing authority to a centralized administration. Inattentive and inwardly focused, having lost the habit and art of associating, they would be unlikely to notice the erosion of their freedom and unable to stop it in any case. In the end, democracy as a technology of freedom may actually make citizens more dependent: dependent on an overweening administration and on the petty pleasures for which they sacrificed self-government.

This immersion has a further problem that Berger does not note: As the technologies that facilitate immersion advance, they become more dependent upon resources. A book once borrowed or purchased for relatively little expense can entertain for many hours. A movie lasts about two hours and requires a television and often a player or receiver of some kind, perhaps even a service.

So, not only does the private-world of insular and inactive television viewing make the call of town meetings and the voting booth an intrusion, but it creates a lifestyle that political forces can promise to help maintain — or threaten to eliminate.

Disabled (Ha!) Weightlifter: The Prov Ret Bd Did Not Close the File. Why Did the AG Close the Case?

Monique Chartier

Following upon WPRI/Tim White's excellent expose, Providence had ordered that purportedly disabled weightlifting retired "firefighter" John Sauro be examined by a doctor. On Thursday, the Providence Journal reported the results.

Former firefighter John Sauro remains permanently and totally disabled from doing his job in the Fire Department, an orthopedic surgeon has concluded after a special examination.

Attorney General Kilmartin then proceeded to break a land speed record for dropping a criminal probe.

Only problem is, the Providence Retirement Board is not finished with John Sauro, which anyone who read past the FIRST PARAGRAPH of the ProJo article would have learned; to wit:

But the surgeon recommended additional tests to confirm his finding.

The report by Dr. Anthony DeLuise Jr. was submitted Wednesday to the city Retirement Board, which voted to have the additional tests done.

I'm still as mystified as John Depetro and others as to why the doctor issued a determination without doing these tests. In any event, it remains to be seen whether Mr. Sauro refuses these new tests and if that matter then goes to litigation. Certainly, the basis upon which the doctor drew his initial conclusion

an examination of Sauro, a viewing of the video and an analysis of the medical records that were compiled before Sauro was pensioned off

is a disability faker's dream. Accordingly, the thwarting of any attempt by the city to ascertain the man's current physical condition ('cause the human body doesn't heal, does it ...?) becomes Mission Critical to preserving that $5,500 (including health care) monthly kiss in the mail.

In any case, it's clear from the article that the matter is still in the hands of the Providence Retirement Board - not too much pressure here, fellas! - and not the doctor. (Does anyone know, by the way, if the City Council or the Mayor can override the Retirement Board in the event they do something ill-considered?)

So now what happens on the law-and-order front if the tests go forward and the MRI is not helpful to Mr. Sauro? Can the AG re-open the criminal probe? Or has he, with his quick-on-the-draw dropping of the matter, innoculated against any further criminal liability a man who is effectively a welfare chisler?

July 29, 2011

Zapped: Rhode Island Gets Not One, But Two, Artificial Rate Hikes

Monique Chartier

... both in today's Providence Journal; both courtesy a misguided General Assembly.

One hike for the poor.

The Henry Shelton Act, signed into law earlier this month by Governor Chafee, creates a new state fund to help low-income families pay for their heating and electric bills, authorizing the state to develop a new surcharge for utility ratepayers of no more than $20 a year –– or about $1.66 a month. ...

Senate President M. Teresa Paiva Weed, D-Newport, said that for many needy Rhode Islanders, the current utility-bill system was simply “not working.” Households previously faced utility shutoffs if they had any outstanding debt — no matter how small, according to lawmakers.

Another hike for the planet.

When the Rhode Island Supreme Court issued a ruling earlier this month upholding a long-term contract for the sale of power from Deepwater Wind’s proposed wind farm off Block Island, it was a green light for the company to resume work on the project. ...

Because developing offshore wind power is expensive — Deepwater’s proposal, with the transmission cable included, will cost about $250 million and, because no similar projects have been built in the United States yet, such wind farms are considered a huge risk to investors and lenders.

But Deepwater’s contract with National Grid guarantees a source of income for 20 years, with a selling price that starts at up to 24.4 cents per kilowatt-hour. With the deal now in place, a project that was once uncertain becomes something much more attractive to banks and other financial institutions.

Feedback and the Public Sector Exemption

Justin Katz

A recurring theme arose when the Providence School Board voted to eliminate administrator unionization:

[Stephen Kane, executive secretary of the Association of Providence Public School and Staff Administrators] now worries that the fate of each administrator will be left to "the whim of the School Board. Of course, it's going to get personal. It's going to get political."

You can call it "whim" or "judgment," but granting responsibility throughout any organizational hierarchy is the most effective way to ensure efficiency and productivity. Whether the goal is corporate profit or public education, whether consumers react to policies through purchase decisions or taxpayers through votes, administrators must be accountable to policy makers, and policy makers must be accountable to stakeholders.

Unions certainly change the calculation a bit for their members, but not unlike resistors in an electrical circuit, they inherently distort the feedback loop by distributing some of that responsibility onto labor processes. That can have its benefits, but over the long term, it hinders the organization's ability to adjust to the interests of those it ostensibly serves.

And when the organization is a government entity, it can survive by fiat as problems fester.

Government's Disfigurement of American Society

Justin Katz

I've been meaning to highlight the following paragraph, from Kevin Williamson's March 7 National Review consideration of How the West Was Lost by Dambisa Moyo:

The U.S. and Europe have the worst kind of problems: ones that are easy to understand but difficult to solve. Our worst problem is that democratic governments lack the kind of robust fiscal controls that prevent the political class from pillaging the productive economy to feather the nests of its own members and their clients. (China has relatively strong fiscal limitations: a police state and poverty.) The West is in trouble not because Beijing is lending us money, but because of why we are borrowing it: At every level — federal state, local, county, school district, sewage-treatment authority — we have disfigured our institutions such that they function principally as wealth-transfer mechanisms for the benefit of the political class. The word for this is "corruption," and it is at least as much a moral problem as an economic one. We are our own disease.

Williamson oversteps in two respects. A nondemocratic government doesn't have fiscal controls against its own corruption that democracies lack. It just doesn't offer the frustrating promise that peaceful democratic action can thwart the political class's will over the long term. The only option is violent revolution.

Consequently, "our worst problem" isn't the lack of internal government controls, but the deterioration of our culture.

A Frothing Projo Editorial and a Much Needed Policy Reversal

Justin Katz

"House GOP vs. America" — that's quite a headline for an unsigned editorial about the debt ceiling battle. The text below it is the sort of summary of economic assumptions and narrow conclusions about specific issues that is therefore impossible to address without revisiting every particular issue and arguing line by line.

For example, writes the editorial board:

That House Republicans, dominated by Tea Party zealots, still refuse to support raising the debt ceiling after having been offered a deal to cut $3 of spending for every $1 of new tax revenues shows a frightening willingness to wreak havoc with the American economy.

For that one, Jerry Pournelle has already provided the points that I would make:

... What's called a cut is in fact merely a small decrease in the rate of increase, so that "cut" means spending more money. There will be a $1.1 Trillion cut spread over ten years, with a Commission of 12, 6 Republicans and 6 Democrats, to propose more cuts. If 7 of them can agree on a "cut" — which may be an actual cut but is more likely to be a reduction in the rate of increase — then both Houses of Congress have to approve the "cut". This may amount to $2 Trillion spread over ten years, or $200 billion a year.

The government will continue to borrow $100 billion a month. That amount will go up as the deficit rises. We will then be told that gollies, we did everything we could, but it's not working, we have to have more revenue or we are in default, give us more money. When we point out that they promised cuts and didn’t deliver, we will be told that, well, yeah, but look at that guy with the private jet over there! Tax him, tax him! Look, that company made obscene profits last year! Tax them, tax them!

But so it goes, with the Projo's style mirroring a mouth-breathing lefty blogger rather than a respectable publication. From the above-quoted title and the term "Tea Party zealots" to putting "conservatives" in quotation marks to a declaration that it is "nonsensical" to say that letting tax cuts expire, thus increasing the amount that people pay in taxes, is... umm... raising taxes. You know, because the average American family, when plotting out its budget projections for the next decade, has already taken into account the expected increase. Right?

You do account for projected tax policy when you budget for the next decade, don't you?

The key paragraph of the editorial is this one (emphasis in original):

[The Bush years were] years of the partly unfunded Iraq and Afghanistan wars, TARP and other bailouts and the (totally unfunded) Medicare drug benefit, among other things. New policies during Bush years, including the above-mentioned tax cuts, cost $5 trillion. New costs in the Obama administration, including the economic stimulus, totaled only $1.4 trillion.

Although the editors don't bother citing a source for their data, it appears to come from this New York Times chart, which derives from the left-wing Center on Budget and Policy Priorities. Having sifted through CBPP data reports in the past, I'd suggest that we're not looking at an objective fact, but (again) at a series of assumptions and narrow conclusions that are eminently arguable. In other words, by the time you get to a chart that broad, use of the numbers ought to be heavily qualified.

Even this idea of "new costs" illustrates the point. As the Iraq war wound down, President Obama ramped up activities in Afghanistan, yet the chart does not include any such costs. The Projo insists that letting tax cuts expire is not a "new" policy, but the chart does not appear to treat the extension of those cuts in 2010 to be an Obama-era cost.

Next consider that the Bush total is entirely actual results, while most of the Obama total entails projections. How is it possible that "health reform and entitlement changes" can possibly represent an increase of only $152 billion from 2009 to 2017? Be sure to check back on that one in 2020. And be sure to note that roughly $2 trillion of the total "new policies" derives from the failed stimulus spending of which liberals, including at least some of the Projo editors, wanted more. These are the people making righteous declarations about others' hypocrisy?

Another choice bit of the editorial has to do with taxation in general:

Meanwhile, the Republican refusal to let some of the Bush tax cuts expire or to close tax loopholes is nothing short of delusional. Federal tax collections as a percentage of the economy are the lowest they’ve been in over six decades!

While that's pretty much true, collections and percentage of GDP aren't as clearly relevant as the editors imply. As the first chart here shows, since 1960, the federal tax percentage of GDP has consistently been between 15% and 20% — despite changes in tax policy and despite economic booms and recessions. Those of us who've been in the working world for at least 10 years will likely recognize that the two big recent dips in this data point corresponded with two economic contractions.

Indeed, it's interesting to note that tax collections as a percentage of GDP actually increased after the maligned Bush tax cuts. (The Reagan tax cuts show a similar, though more gradual, trend.)

In the context of the debt ceiling two additional points ought to be remembered. First, government expenditures as a percentage of GDP have never been higher. Second, the "tax cuts for the rich" that President Obama insists be part of any debt ceiling deal (which gives him at least as much blame for the Projo's "budget Armageddon" as Republicans) amount to about 15% of the Bush tax cut total — which is a point that the CBPP and Projo alike are not particularly careful about making.

I'll agree with the Projo editors on one thing: "It's time for Republicans to take ownership of their failed policies of the last 10 years and reverse them." Government spending is out of control and must be reined in. Whether it results from policies implemented during the presidency of Obama, Bush, or FDR the size of government must be reduced. If anything, the House Republicans are not being stringent enough.

July 28, 2011

No Debt Ceiling Vote Tonight

Carroll Andrew Morse

Various sources tweeting from Captiol Hill are saying there will be no debt ceiling vote tonight.

Robert Costa from National Review Online: Top GOP member confirms no vote tonight, still working on whip count and changes. Weary mood among leadership. Not lost, but no slam dunk
However, there's some kind of activity with the House Rules committee scheduled for later tonight...
Chad Pergram from Fox News: Rules Committee will convene around 11 pm, per sr. House source.

An apparent correction of the above, the House Rules committee will meet at 11:00 am tomorrow, concerning the debt ceiling bill, not at 11:00 pm tonight...

Chad Pergram of Fox News: Rules to meet at 11 am...to give them the ability to write a new rule tomorrow to govern a tweaked bill. No idea what tweaks are.

Productivity Isn't in the Union Interest

Justin Katz

The budget battle has come and gone, but one section of an op-ed that Independent state Senator Ed O'Neil published in May is worth considering:

George Nee, president of the Rhode Island AFL-CIO, has said publicly that we should give our state workers a chance to improve productivity. They know best how to get the job done. I agree with Mr. Nee on this point.

Operational excellence is a natural outcome of people working as a team. Everyone needs an oar in the water to get our costs down. A new day has dawned, and Rhode Islanders are beginning to realize that we need to work together to get our state operations lean. That means better thinking, better systems, better tools, and better leadership.

Employees may "know best" how their workplace functions, but it isn't in their interest to be more efficient. In the business world, employees at least know that increases in their pay require expansion of their employers' revenue or dollars freed up through productivity. They also know that their jobs are at risk if the financial reality goes the other way.

In the government world, increases in pay are tied to political leverage. It doesn't have to be that way; super-productive workers could lead to low-cost government that satisfies more recipients of government services while not causing excessive pain to taxpayers, thus accruing credit to elected officials, but decades of maneuvering by bureaucratic administrators and labor unions have left us in an untenable position.

Citizens are paying so much, often for services that they don't want, that a correction is necessary. Therefore, employees would be far down the line in profiting from the efficiencies that increased productivity would create — after decreasing debt and eliminating deficits and after decreasing the cost of government to residents. Organized union entities have even more reason to undermine efficiency: An employee might stand to profit if his or her high efficiency eliminates the need for the public to hire additional workers, but the union to which he or she belongs would stand to lose dues and political clout.

Whom Do the Public and Private Sectors Serve?

Justin Katz

Yesterday, I noted a couple of differences between the public and private sectors when it comes to the calculation of hiring new employees, prompting commenter Michael (himself a public employee) to write:

The big difference between the public sector and the private sector is the most important. The public sector exists for service and the private sector exists for profit. Government exists to service the people, hence the public sector.

It wouldn't be a semantic game to reply that Michael's distinction is awfully fine. The restaurant across the street exists serves the public, as do the convenience store and the mechanic's garage, the funeral home and the wedding planner, the insurance agent and the bank. Moreover, as the healthy economy around Washington, D.C., throughout the entire recession illustrates, the people who work within and operate government clearly profit by the activity. Indeed, much of the revelation about the public sector, over the past decade or so, has been that there isn't much (arguably any) financial sacrifice involved in the vocation of government service.

Until very recently, I might have ceded the point that the government is at least like a non-profit organization in that it doesn't need to show a profit beyond salaries for the sake of an owner, partners, or stock holders. But even that is beginning to seem like an assumed — that is, not accurate or real — difference. Consider:

... at least one credit rating agency has already made it clear that unless that agreement includes at least $4 trillion in budget cuts over the next decade, the country's AAA rating could be lost. Right now, the proposals under discussion cut around $2 trillion or less. ...

JPMorgan's Belton said clients have started asking how markets will respond if the U.S. loses its AAA rating. A drop to AA will mean permanently higher borrowing costs for the U.S. government, he said. And because government lending rates act as a floor for other lending rates, mortgages, student loans, corporate debt and other types of loans will become more expensive.

Add this to the general consensus that the government must allow itself to continue borrowing money so as not to default on interest payments to people who've invested in the government by buying bonds, and it begins to appear that the feds are really in the business of offering a low-risk investment opportunity. Corporate stockholders invest their money in the expectation that the company will be successful enough in serving the public that people will continue to pay profitable rates for its services. Government bondholders invest their money in the expectation that the government will continue to be successful enough in offering its own services that the public will continue to tolerate its tax bills.

Of course, with forty cents of every dollar that the government spends being borrowed, the federal government really isn't that far off from the Madoff scheme of paying prior investors with money from new investors. Also of course, the government doesn't have to be but so efficient in its service offerings, because those who receive them are for the most part not those who pay for them.

This lesson of the debt-ceiling debate comes close on the heals of the lessons of the stimulus program, which amounted to hugely expensive insulation of government entities and their employees from the effects of the recession. What we're learning is that the United States government and its subsidiaries exist primarily to ensure well paying and astonishingly secure employment to those on the public-sector payroll and a secure profit to those investing in the ability of American governments to impose taxes on the people whom they ostensibly represent.

Public Sector and Politics

Justin Katz

Last night, Monique reviewed some Anchor Rising posts with guest host Tony Cornetta on the Matt Allen Show. Stream by clicking here, or download it.

July 27, 2011

Loan Guarantees: Another Gimmick That Won't Spark Business Activity

Monique Chartier

Further to Justin's post, we learned yesterday that

A dozen companies – half of them out-of-state businesses looking to relocate to the Ocean State – are lining up to take advantage of the same controversial loan-guarantee program that drew Curt Schilling's video game company, 38 Studios LLC, to Providence.

Loan guarantees by the state are no way to lure and keep business here. It is simply not feasible for the state to expose itself to the amount of risk involved in backing a sufficient number of such loans to make a difference.

The pertinent correlation, of course, is between Rhode Island's abysmal business climate and its poor economy and corresponding employment figures. A spark to the latter will not ignite until Rhode Island's real EDC decides to step in and address the former with substantive regulation and tax/fee reform rather than continuing to sit on the sidelines with the rest of us watching the gimmick parade.

Private and Public Sector Differences in Calculation

Justin Katz

The intention of the City of Providence to hire 72 new firefighters would make an interesting case study for anybody learning about public administration:

When an hourly employee in the private sector quits, it is not unusual for the employer to put off hiring a replacement. Instead, the employer has another person pick up the slack on overtime pay. ...

But that is not what the City of Providence is going to do in the Fire Department. ...

According to [Administration Director Michael] D'Amico, the initial crop of new hires would cost the city $2,195,000 a year but overtime would be reduced by an estimated $1,872,000 in fiscal year 2013 and then by an estimated $3,744,000 annually. ...

The second crop would not save on overtime costs because those hired would replace firefighters who are expected to retire. But the new group would be paid lower wages than the senior people they replace, so the city will save an estimated $270,000 in fiscal year 2016, according to D'Amico.

Two critical differences between the private and public sectors, changing the calculation for each, are that private-sector companies don't necessarily hire at the bottom rung, because experience is critical. New hires in the fire department therefore stand to make much less than current employees, especially current employees on overtime.

The second difference is that private sector companies don't tend to be bound in their quest for efficiencies by "minimum manning" requirements that force them to have a certain number of employees on the job. That's a separate debate, but it does give companies more latitude to adjust to their changing workforces.

One big omission from the article, and perhaps the hiring decision itself, is the calculation of pensions and other retirement benefits (such as healthcare). In keeping with the discussion that we've been having about the use of pensions to hide the real cost of public labor. It may be cheaper right now to bring on new firefighters, but as we're learning, the accumulation of retirees can create a substantial annual burden.

Malkin on the Denouement of the Wu Drama

Monique Chartier

Michelle Malkin's opening paragraph about Congressman Wu's announcement yesterday made posting her column irresistible.

Wu-hoo! Welcome to another freaky ethics fiasco brought to you by the D.C. den of dysfunctional Democrats. This one comes clothed in a Tigger costume, wrapped in blinders and bathed in the fetid Beltway odor of eau de Pass le Buck.

She has a good point about the timing of his departure, by the way.

Liberal David Wu is a seven-term Democratic congressman from Oregon who announced Tuesday that he'll resign amid a festering sex scandal involving the teenage daughter of a longtime campaign donor. He won't, however, be vacating public office until "the resolution of the debt-ceiling crisis." Translation: Call off the U-Haul trucks. Wu's staying awhile.

On School Budget Confusion and Arbitrary Authority

Justin Katz

Trying to follow public policy debates — particularly those having to do with the transfer of government money — is like trying to make sense of an incoherent dream. Whenever you hear or read that there is "confusion" or "ambiguity" related to a particular law, it's a reasonable assumption that one or more parties are doggedly asserting false conclusions based on irrelevant information. Such appears to be the case with a recent disagreement between the Warwick School Committee and City Council concerning legislation that allowed towns to reduce their contributions to their schools during the recession.

Normally, towns must follow "maintenance of effort" provisions in the law that require at least the same amount of local money to be appropriated for the schools each year, with some allowance for reduction based on shrinking enrollment. In 2009, the legislature added the following language to the relevant statute:

Provided, that for the fiscal years 2010 and 2011 each community shall contribute to its school committee in an amount not less than ninety-five percent (95.0%) of its local contribution for schools for the fiscal year 2009.

The clear and plain reading of that language would allow a town to hold the schools to 95% of their 2009 local contribution for 2010 and 2011 without regard to the rest of the statute. The fiscal 2012 requirement brings back the requirement to contribute at least as much as "the previous fiscal year." Careful reading of the article (which is confusing, and which, for some reason, doesn't cite the relevant law) suggests that Warwick allocated $123.9 million in local funds for schools in FY10 but took the legislature up on its offer to reduce that amount in FY11, to $117.7 million.

The Warwick School Committee is asserting a legal right to at least the FY10 amount for its FY12 budget. Since the law makes no mention of reverting back to 100% of older budgets, however, it is clear that "the previous fiscal year" (FY11) would be the new baseline. That is, the Warwick City Council is entirely within the law to hold to the $117.7 million, and the leaders of both chambers of the General Assembly have chimed in to confirm as much.

School Committee Chairwoman Bethany Furtado cites a letter from Commissioner of Education Deborah Gist justifying the schools' position and, no doubt, in true Rhode Island fashion has some behind-the-scenes assurances from the Department of Education. Although I can't find the text online, having read a few such "rulings," I'd expect it to be the legal equivalent of mumbling in one's hand before asserting an arbitrary decision. Unfortunately, these things aren't decided by the clarity of the law, but by the willingness of the parties to keep rolling the dice at each successive stage of legal review, up through the Department of Education and then the judiciary.

That's all pretty standard, though. The disturbing aspect is what tends to get lost in these narrow debates and, through accumulation, in civic discourse more generally:

"She is the commissioner of education and she's our boss," Furtado said. "I honestly don't know where we're going to find the money; we're already down to the bone."

Deborah Gist is not the boss of the Warwick School Committee; the people of Warwick are. Too often, elected officials join with the education bureaucracy to conspire against their communities' taxpayers. Rather than muddying the legal waters with strained analysis, Furtado and her committee ought to set about finding a way to live within the restraints that they have insisted must be imposed. Many of the people of Warwick are surely "down to the bone," as well, and very few of them have $150 million annual budgets to comb for savings.

Gimmicks Won't Spark Business Activity

Justin Katz

The Economic Development Corp. is limited in the scope of the activities in which it can engage (and its board members are appointed by local politicians), but I didn't want to let this article slip through the cracks as I catch up with things because it so well illustrates the futility of usual practice in the face of Rhode Island's problems:

... Businesses are fighting over space in Massachusetts, prompting Babineau to tell those people to take a look at Providence.

"And they said, 'Really? We didn't know,' " Babineau said. "I said, 'That's our fault.' "

Board members kept returning to that idea. Daniel Sullivan Jr., president and CEO of Collette Vacations Inc., said the EDC and state must market and sell what Rhode Island offers. Referring to Babineau's encounter, he urged, "We've just got to get in front of them."

Somehow, I don't think businesses would be flocking to the worst-bar-none business environment in the United States but for the failure to market to them and hold conferences. At this point, the EDC's singular focus should be... let's say... educating Rhode Island's political class about the damage that it has done and continues to do to the state.

July 26, 2011

The Privilege of One-Party Rule

Justin Katz

Throughout the legislative session just ended, the Providence Journal has been checking in with four freshman legislators, one of them being North Kingstown Republican Doreen Costa. This snippet, from the end-of-session iteration, points to one of Rhode Island's major political problems, and the consequence of indomitable one-party rule:

Lesson number two: Don't "question or argue" with the speaker, "privately, or on the floor."

"You just don't," she said. "You know you're not going to get anywhere if you argue with the speaker."

It just isn't right, nor indicative of a healthy political culture, for legislators to feel that way.

The Kaleidoscopic Arguments Against Democracy

Justin Katz

Last week, in Tiverton, the committee tasked to create an alternative to the financial town meeting (FTM) held a hearing on its proposal. Basically, the budget process would follow the same steps, with the Town Council and School Committee submitting budgets to the Budget Committee, which puts together a final request for the consideration of the electorate. However, rather than having a few hundred voters (many with direct financial interest in the outcome beyond their tax bills) gather together in the high school gymnasium and offer amendments before voting on final approval by a show of hands, residents would be able to stop by a polling place for an all day referendum during which they would vote on the budget using a private ballot.

The Town Council and School Committee could place alternatives in front of voters, as could any resident, with the signatures of at least 50 people. If no option wins a majority of the vote, either a run-off referendum would decide between the two highest vote getters or the previous year's budget would remain in effect for another year, depending which version of the proposal the current Town Council and special-election voters approve.

Not surprisingly, the most interesting aspect of the hearing was the series of objections offered by members of the Democratic Town Committee, most of whom have been active advocates of the policies that have doubled property taxes in the past decade. Joanne Arruda — a former Town Council member, current Budget Committee member, and plaintiff in a lawsuit apparently intended to punish the leader of a local taxpayer group for his civic activities — complains that (in the reporter's paraphrase) "anyone could get 50 signatures and put a budget before the voters." (Over course, with the FTM, anyone can do the same without any signatures.) And current Town Council member Brett Pelletier thinks it should remain the job of elected representatives to prepare the budget. In short, the referendum would be too democratic.

Meanwhile, Carol Herrmann, currently a member of the School Committee (and herself a public-school teacher, in Westport, MA, I believe), complains that voters will only be able to vote on the budgets as presented on the ballot. That is, the referendum would not be democratic enough.

My favorite commentary is in the "not democratic enough" wing of the attack and comes from former Town Council member Louise Durfee, herself a plaintiff in the aforementioned lawsuit:

"There's an elephant in the room and no one is talking about it," she said. "Both of these proposals give the Town Council power over the budget that it has never had before."

By eliminating the FTM, she said, just two members of the council would have veto power over any budget that goes over the cap, a possibility she saw on the horizon as pension contributions squeeze town and school budgets.

"Despite all the claims that this [referendum proposal] can increase participation, unstated and not disclosed is the other fact that under these proposals the budget control passes to the town council," Ms. Durfee said.

The only reason that's even arguably true is that her Town Council used every trick in the Rhode Island insider playbook, with some help from connections in the state bureaucracy, not to follow the plain meaning of the tax cap legislation. The referendum would close the loophole that allowed the Town Council to squeak by without taking the required 4/5 vote to exceed the tax cap, so the town would have to follow state law. In Durfee's political view, that constitutes a power grab.

The best part is that her justification is a professed need for future money grabs: She expects the pension crisis to drive tax increases well above the state cap and wants as few hurdles as possible to ensuring that residents, not the town government, have to downsize their budgets.

With a referendum, Durfee and her crew would have to dominate town government or at least gather 50 signatures to place a massive tax increase on the ballot, persuade a majority of residents to vote for it, and convince six of the seven sitting Town Council members to let the people's vote stand. With the FTM, as currently practiced, they can just follow their annual strategy of scaring a couple hundred town employees and heavy users of town services into taking a couple of hours to force their will on the other 15,000 of us.

NEARI's John Leidecker Rallies the Troops Against the South Kingstown School Committee ... and South Kingstown Children

Monique Chartier

The following e-mail was sent out recently, presumably to all members of the NEARI.

Background: South Kingstown's teacher contract expires at the end of August. Daniel Kinder, referenced in the e-mail, is the attorney advising the South Kingstown School Committee. Here is what the School Committee said recently about negotiations between the town and the NEA-SK. You will also glean from the e-mail that the NEA-SK filed a complaint against the SK SC with the State Labor Board, accusing the Committee of bargaining in bad faith and "surface bargaining".

Bigger picture, the NEARI (which incorporates the word "education" in its name) is fighting, in South Kingstown and around the state, the shift away from seniority authorized by Education Commissioner Deborah Gist. Why? How exactly does the hiring and retention of teachers basis seniority rather than merit ensure that students receive a good education?

Dan Kinder is at it again and we need your help.

Here is the background:

The South Kingstown School Committee has refused to bargain with the teachers over seniority, transfer, assignment, layoff and recall. This, after the teachers agreed to significant concessions. We have filed an unfair labor practice charge for bad faith bargaining and surface

This past Wednesday, Dan Kinder filed a complaint for Declaratory Judgment before Judge Savage. The complaint, in short, asks the judge to declare that Title 16 (Education law) supersedes Title 28 (Collective Bargaining). If we lose that, we will no longer be able to bargain seniority, transfer, assignment, layoff and recall.

These same questions are pending before other bodies at the moment. The Providence Teachers Union has asked the Board of Regents to respond to the Commissioner's statements on seniority. And, again, we have the bargaining issue before the Labor Board.

Kinder failed to include the Labor Board as a party in the complaint, despite specifically requesting a ruling that would end the Board's authority. Judge Savage said she would not set a briefing schedule unless all the parties were before her. We are supposed to be back in her court this coming Thursday.

The link is to CitizenSpeak and we are trying to pressure the SK School Committee to withdraw the suit. Your help is greatly appreciated. I'm copying this to our Sisters and Brothers at the RIFTHP, since it is of obvious significance to them.

Here's the link:



John Leidecker
Assistant Executive Director

Who Is Talking About Fairness

Justin Katz

I'm beginning to wonder whether all of the stories are like this or whether there's some other reason so many of the people who step forward to be faces of the pension crisis seem unlikely to evoke sympathy. Here's one from the hearing at which Central Falls Receiver Robert Flanders asked public-sector pensioners to agree to a cut in their benefits:

Michael Long, a retired police sergeant who said he suffered a neck injury when he was run over during a shooting, got a big round of applause and later a standing ovation when he asked Flanders, "Where is the fairness?"

Long, now a practicing lawyer, said that the retirees are being asked to surrender up to $20,000 of their pensions that are in the $35,000 to $40,000 range. Bankruptcy, he suggested, might be a better option.

"We will take our chances," he said.

Well might Long take the risk of bankruptcy, considering that he's got another income as a lawyer. According to this posting Long was on the force for just eleven years, and as reported in the New York Times, he's 54 and lives in Attleboro, Massachusetts.

A reasonable guess would be that Long has already collected his pension for about twenty years, perhaps twice the number of years that he worked as a police officer. Justifiably, he used the resources offered to build a new career as a lawyer (and moved or remained outside of the punitive state from which his pension is drawn). So where's the fairness for the Rhode Islander who cannot find work and has no tax-free disability pension to support a change of occupation? Where's the fairness for those who expect never to be able to retire at all thanks to the government albatross dangling from the economy's neck?

July 25, 2011

Letting the Spinners Get Away with Economic Baloney

Justin Katz

It's getting kinda hard to take the spin that permeates economic reporting. Reporter Kate Bramson and her headline writer mainly adopt RI Department of Labor and Training Director Charles Fogerty's line that the statistics show "slow, steady progress." The headline and lede are, "Rhode Island unemployment dips slightly, to 10.8 percent, Still, 10.8% an improvement over numbers for December," and the story deepens with this:

Job growth in Rhode Island is one of the positive trends in the first half of the year. Although the number of jobs dropped from May to June by 1,500, Rhode Island had 4,200 more jobs in June than in December. That six-month growth is an increase of 0.9 percent -- which Fogarty said is "outpacing the nation."

A quick glance at the accompanying table, mostly taken from the U.S. Bureau of Labor Statistics' page for Rhode Island unemployment, shows that, while the number of unemployed Rhode Islanders dropped by 4,891, the number of people working also dropped, by 5,362. That is, the overall labor force shrank by 10,153 and hasn't been this small since September 2009.

As for the increase of "jobs based in Rhode Island" since December, a closer look at the month-to-month statistics (which are all that are easily found) suggests that the uptick is mainly in construction and accommodation and food services, which can be expected to increase in Rhode Island this time of year.

Two Candidates by the Issues

Justin Katz

I've been approaching with similar skepticism the two new faces to the RIGOP, both running for high-profile national offices based mainly on various news reports. A look at their campaign "issues" pages, however, does point to some distinctions — not necessarily huge distinctions on the stances that they take, but certainly in the extent to which they appear simply to be the anointed representatives of a well-connected political faction.

Congressional candidate Brendan Doherty's page reads like the typical political wave of the intellectual hand. He's for everything good and nothing bad.

  • "I intend to be a strong voice..."
  • "It is imperative that RI leaders work together in a bipartisan manner..."
  • "This must be accomplished in a balanced and measured, bipartisan effort by finding common ground with fiscal responsibility."

And so on. The healthcare riddle will be solved by addressing "fraud, waste and corruption," so only the pro-fraud, -waste, and -corruption crowds need fear the candidate... and them only mildly, inasmuch as he offers no concrete steps. Energy must be "clean and renewable" (and "embraced"). Education reforms must come with a "focus" on "goals and strategies."

Even immigration, which would represent a good place for a law-and-order candidate with a police background to nod toward the conservative base that he would court, comes with the usual "moderate" coloring. Doherty wants to "secure our borders," yes, and remove "criminal aliens and illegal reentries" (emphasis mine), but he advocates a "path to citizenship" for illegal aliens who merely went about chasing the "American dream" in "the wrong way." "Legal immigrants," he asserts, "are the cornerstone of this state and country." What that makes the rest of us, I'm not sure.

On same-sex marriage, he takes the everything-but-the-word approach. On foreign policy, he wants to bring the United States military home. And on abortion, he says simply, "I am pro-life," which would be wonderful except that it doesn't appear to be true — or at least accurate. According to the Providence Journal an elaboration of his position includes the belief that abortion is "a legal right" and that Roe v. Wade should remain in effect. In other words, he's pro-choice.

Based on the above, it is clearly reasonable to be suspicious that Doherty is just another insider going for an easy win of a glamorous job. Senatorial candidate Barry Hinckley is another matter. His bullet points are much more concrete, contain links to his elaborations, and, for the most part, conservative:

  • "I'll work to get Washington out of the way so small businesses can create jobs and economic prosperity for all Americans."
  • "I support a Balanced Budget Amendment to the U.S. Constitution."
  • "I support term limits..."
  • "Repeal Obama Care..."

He goes on, through simplifying the tax code, emphasizing the Tenth Amendment (which asserts states' rights), and "enforc[ing] a plain English law standard." For Hinckley, energy independence doesn't mean embracing popular green alternative fuels, as it appears to do for Doherty, but "exploring America's own abundant natural resources through offshore drilling."

Conservatives will note that Hinckley's foreign policy suggestions mark him as a bit of an isolationist libertarian, but that group remains well within the political right and is at least subject to intellectual debate. Heck, I met him in the audience when John Derbyshire's spoke to the Providence College Republicans. Indeed, the debate between a mainstream conservative and Hinckley would sound a lot like the core debates that our elected officials would be having if our politics were sane.

Abortion provides an excellent example of what I mean. Here's Hinckley:

If I were the father of an unborn child, I would urge my partner to NOT terminate the pregnancy. However, I respect and support a woman's right to make this choice for herself and I support existing Rhode Island law on this issue.

One does wonder what sort of "partner" Hinckley might impregnate, but at least he acknowledges that the existence of an unborn child would make him a father. What he does not state might be more important, inasmuch as it leaves open the possibility of cooperation at the national level: namely, that Rhode Island law isn't the main problem; it isn't even all that relevant to the abortion debate. Given his emphasis on federalism, elsewhere, it's possible that pro-lifers wouldn't necessarily have to count Hinckley as opposition in an effort to push the matter back to the states.

Of course, the statement that women have the right to kill their unborn child ought to raise the usual concern about libertarianism's incomplete nature. From whence does Hinckley believe all of the individual rights that he espouses derive? In the absence of the principle that all people are "created equal" and endowed with unalienable rights to "Life, Liberty, and the pursuit of Happiness," libertarianism is mainly a philosophy by which the advantaged can claim their Darwinian due.

Human life is unarguably "created" at the point of conception, and if a mother and her doctor may arbitrarily end that life — if one's life is not an inherent right — then the basis of all subsidiary rights must come into question because they necessarily derive not from the person simply on the basis of being a person, but from the political will of a majority of voters.

But that's a matter of legitimate debate. The point with which I'll close is that at least one of the two new Republican candidates in Rhode Island has developed a clear political philosophy that he's willing to lay out at the word "go," permitting voters to judge whether to support him or not. The other seems mainly just to want the job.

July 24, 2011

An Interesting Whisper from the Governor to the Receiver

Justin Katz

This one nearly slipped through the cracks, inasmuch as I haven't noticed its being developed into a larger story:

The overseer of deficit-plagued Central Falls could be replaced just five months after he was appointed to steer the city through its dire fiscal straits.

Governor Chafee told public radio station WRNI that he is considering replacing the current state receiver with someone who has experience in municipal administration. Chafee appointed retired Supreme Court Justice Robert G. Flanders Jr. to manage Central Falls' finances in February.

You'll recall that Chafee bumped Flanders into the Central Falls dictator role as part of his overhaul of the previously reform-minded Board of Regents for the state's public schools. Interesting that the governor would let this little bird fly just a couple of weeks before Flanders was to bring down the big hammer on the public sector workers retired from the city that he's now running.

Crediting the Good, While Debiting the Bad

Justin Katz

It's come up in the comment sections, but I've been meaning to comment on Michael Morse's essay describing the ghosts that haunt the urban firefighter-EMT's dreams after twenty years on the job since I first read it in early June. Michael puts those who focus on the affordability of public-sector pay and pensions in a delicate position — deliberately, I imagine. Who could look such a man in the eye and balance tax rates against the trauma of his experience?

Such balances have to be made, however, and both sides of public policy questions have to be weighed. Were resources unlimited, and were human nature less complex, we might be able to assess the value of every job based on the case that its practitioners could make for themselves. As it is, we have to be a bit more circumspect about various measurements of value.

For one thing, firefighters and EMTs are not solely rewarded through their pay and benefits. Michael provides a bullet list of dramatic scenes — murders, suicides, child abuse, and accidents — but (for this particular essay, at least) he places his hand over the other side of the ledger. How many days did he drive home justifiably feeling heroic? How many lives has he had the opportunity to save? People to help? His twenty years haven't been a long slog of death and unavoidable failure, and while one can place a dollar value on neither the strain of helplessness nor the euphoria of defeating death and destruction, at some abstract and variable point, they would surely balance without any monetary compensation at all to make up the difference.

The careful reader might note a mild contradiction in Michael's text: When speaking of the passage of time between his early days on the job and the present, he writes that "20 years passed in the blink of an eye." Yet, a few sentences later, "20 years in firefighter time is a long, long time." That's hardly an "a-ha!" catch on my part. "The blink of an eye" is a mere turn of phrase, and the reference to "firefighter time" evokes the fullness of the days, weeks, and months. An important point hides within the contrast, though.

Michael's twenty years have been rich in experience, and despite the tone of his essay, not all of them have been haunting and negative. Some midlevel corporate functionary who's trudged through the same length of time among gray cubicle walls bathed in florescent lights pushing numbers along some process watching his body soften and sag every time the computer screen goes blank won't have the smell of charred infants in his nostrils, but neither will he know the pulse of a revived heart beneath his palms. Time is slow, indeed, for those with no cause to blink.

Even with life affirmation and a sense of purpose somehow factored into the equation, it may very well be that twenty years is too long for some men and women to spend battling flames and injury in particular environments. If that's the case, it still isn't obvious that the solution is twenty to thirty years of retirement, particularly when the cost thereof threatens the very solvency of the local civic structure. Perhaps the solution lies in the opposite direction — removing the incentive to linger on the job for so long, making firefighting an experience shared by more people, earlier in their lives. Or perhaps the necessary changes needn't be so dramatic.

Whatever the case, I can only encourage Michael to enlist the memories of his victories in the fight against his demons. An unsustainable pension system can in no way substitute for the strength that he has within.

July 23, 2011

There is No Explanation

Monique Chartier

... for an act of pure evil.

A gunman who opened fire on an island teeming with young people kept shooting for 90 minutes before surrendering to a SWAT team, police said Saturday. ...

At least 85 people were killed on the island ...

Andresen, the acting police chief, said the suspect was talking to police.

"He is clear on the point that he wants to explain himself," he told reporters at a news conference.

Yet Another Prod for Pension Reform: Fitch Cites West Warwick’s High Unfunded Pension Liability

Monique Chartier

Andrew pointed out yesterday that Speaker Fox is leaning against taking up binding arbitration in the special legislative session this fall. That would be a good thing because, last week, a Fitch rating emphasized the need for the focus to be on pension reform.


--[West Warwick] has managed its operating expenses and achieved positive results in fiscal 2010, helping to increase its reserve levels but pension contributions remain well below actuarially required levels.

--Unfunded pension and other post employment benefit (OPEB) liabilities are very high.

West Warwick, of course, is not the only municipality facing this situation; in fact, the unfunded pension liability for Rhode Island cities and towns totals $2 billion. This is in addition to a $3.6 billion shortfall for promised-but-not-funded post-retirement health care coverage also referenced by Fitch and excludes the multi-billion dollar shortfall on the state level.

All of these shortfalls have been exacerbated by the absurdly early age at which public employees have been permitted to retire. Neither a pension nor "lifetime health care coverage" is remotely sustainable when the amount of time that an employee works is equalled or exceeded by the length of his or her retirement.

Cranston Mayor Allan Fung warned this week that, in the absence of pension reform, Cranston would have to choose between city services and pension payments; i.e., between the present and the overburdened past. Indeed, as Donna Perry points out, Cranston will not be the only municipality compelled to make such harsh choices.

Fung spoke for city and town leaders across the state when he urged the panel to understand that community budgets will break if modifications to benefits for existing retirees are not recommended.

A Note on Posting Productivity

Justin Katz

I'm finally sorting through the piles of papers and magazines with stories about which I'd intended to post. Put together, the stack would be fully two feet high, and the dates on some of the papers provide evidence of something that surprised me, although of course I knew it to be the case on some level: I've been hacking my way through a jungle of responsibilities for more than a full calendar quarter.

In the way of life's ebbs and flows, every aspect of life swelled in activity and difficulty, this spring — family, work, hobbies, finances, and so on. I offer this not as a complaint, but as an explanation for those who might have wondered why my posting habits have suffered. How long it will take me to get everything back on track, I don't know.

Whether my priorities will prove to be the same when I'm done, I also don't know. Something has to be adjusted, and although I continue to leave open the possibility that a greater freedom to research and write political commentary will be that something, I have to admit that such an outcome has fallen from an intention to a hope. Indeed, it looks increasingly likely that the adjustment to my political activities will be in the opposite direction.

For the time being, I'll continue cleaning off my desk and reordering my surroundings.
As I type, I can hear a thunderstorm rolling in across the bay. What weather we'll find on its other end is never as certain as meteorologists would have us believe.

July 22, 2011

Understanding the Debt Ceiling

Carroll Andrew Morse

0. Just like any other organization, the Federal Government is subject to laws of economics, probability and mathematics that it can’t change.

1. Every organization, including the Federal Government has a cash flow, related to but different from an annual summation of revenues and expenditures. For example, your local bridge club may have $600 in revenues and $600 in expenditures for the year, but if the revenue comes in at a rate of $50 per month and $300 has to be paid for the big event in February, the bridge club needs to find a way to get extra revenue up front.

2. Of course, if you have $600 in revenues and $800 in expenses each year, your organization has more than just a cash flow problem; it has a structural imbalance in its budget. Eventually, the organization will run out of money to pay for anything. If no one is watching carefully, the structural imbalance will show up as a cash-flow problem in the bridge club’s day-to-day operations, even though the problem is bigger than just the cash-flow issue.

3. On August 2, 2011, according to all reasonable estimates, the Federal Government’s cash flow will go negative, i.e. there won’t be enough money in the U.S. Treasury to cover the government’s debts. A group called the Bipartisan Policy Center, which was founded by a respectable mix of graybeards and who seem to be doing reliable and understandable work, has published a day-by-day analysis by major line item of what is expected to come in and what is scheduled to be paid out in August.

4. The anticipated August cash-flow crunch does not mean that the Federal government will immediately default on its loans. Working from BPC numbers, the government is expected to have $172.4 billion in cash available in August after the 2nd, while interest payments on debt will amount to about $29 billion. In total, the Federal government is expected to have enough money to pay only 56% of what it owes in August. Raising the debt-ceiling would allow the government to borrow the money to cover the immediate cash-flow problem. For how long would be determined by how high the limit is raised.

5. If the debt ceiling is not raised, we are into uncharted territory. Does the Federal government pay off bills in some kind of "order that they come in" until the money runs out, or does Congress or the executive branch make decisions about who gets paid?

6. If you examine the historical numbers in the bipartisan report (pg. 13), you see that the cash-flow deficit (minus borrowed or other up-front money) in this particular August is not significantly different from previous recent Augusts. This means that if the only thing that happens in the next couple of weeks is a raising of the debt ceiling, government will just keep paying out more than its takes in, until the same cash-crunch as a symptom of a structural imbalance recurs, but with an even larger debt. Borrowing forever and never paying it off cannot be infinitely sustained, even by the government; see point 0 as to why. Raising the debt ceiling in isolation, aka the David Cicilline Providence plan of keep-borrowing-then-run-away, is not a viable solution.

7. According to the BPC’s numbers and various news reports, the $111 billion dollars in spending cuts in the “cut, cap and balance” plan passed by the House (but rejected today by the Senate) – even if it all could be implemented in a single month, which is doubtful -- would patch less than one month of the government’s current cash flow problem (score one for commenter jgardner03). However, the fact that big spending cuts would be needed to bring the budget into balance is not a reason to say nothing should be cut.

8. Here’s the outline of a possible solution I would tend towards at the moment: Raise the debt ceiling enough to cover the next six-months of cash flow for the government, in conjunction with the $111 billion “cut” in spending and implementation of the GDP-based spending “cap” passed by the House. Then, over the next six months, Congress would work on a program to start hitting the spending caps, and to pass a balanced budget amendment. No further increase in the debt ceiling would be on the table, unless one or maybe both of the preceding were passed by Congress.

Accountability Matters

Carroll Andrew Morse

Ted Nesi of WPRI-TV (CBS 12) has the scoop on the Rhode Island Speaker of the House's position on binding arbitration…

House Speaker Gordon Fox says the outpouring of opposition to binding arbitration last month was even louder than to Governor Chafee’s sales tax plan – and makes it highly unlikely the issue will come up again during this fall’s special legislative session.

The speaker’s office received about 2,200 emails opposing the binding arbitration bill in June and was lobbied to block the bill by mayors and town councils from across Rhode Island, Fox said Friday during a taping of WPRI 12′s "Newsmakers."

Outcomes are different, when government officials are accountable to the people -- and when they take their opportunities to get involved with the process.


Ian Donnis of WRNI (1290 AM) has an interview with Gordon Fox, where the Speaker discusses his position on binding arbitration in principle, as well as with regards to the General Assembly session scheduled for the fall.

A Connection of the New RIGOP Wave

Justin Katz

Seeing a conspiracy would go a bit far, but this does suggest that the two new faces of the RIGOP are taking similar guidance from local sources:

[Republican Congressional Candidate Brendan Doherty] also paid $10,786 to the same Vermont fundraising consultant, Darcie Johnston, working with Barry Hinckley, the Newport Republican hoping to unseat U.S. Sen. Sheldon Whitehouse, D-R.I. Doherty paid Johnston Consulting for "mailing of solicitation letters" and other unspecified fundraising services.

Such similarities are certainly not evidence of anything nefarious, but it is interesting to see two first-time-candidates — not previously familiar faces in the RIGOP circuit, but both running for high-profile offices — making some of the same decisions.

Oh, the Pain - Warwick Disability Pensions: Fire Exceed 40% (Don't Forget the Police @ 20%)

Monique Chartier

Looks like the Warwick Beacon has been doing some digging at City Hall.

More than 40 percent of retired Warwick firefighters and 20 percent of retired police are on disability pensions. The pensions are tax-free and also ensure that their children and spouse are entitled to free tuition at state colleges. There has never been a case where they have been brought back to work, according to the recollection of City Personnel Director Oscar Shelton.

The killer is how the disability pension becomes permanent: all the employee has to do is complain about pain.

Shelton says the scenario he offers is typical:

A firefighter is injured on the job and is put on injured leave at full pay. After a time, the firefighter seems to be better, but complains of pain. Bringing him or her back for a job less physically demanding would make sense, but the individual could still complain of pain. Doctors’ opinions vary and there’s no definitive test.

Meanwhile, firefighters covering for the absent member cost the department overtime while the disabled officer gets full time pay. The chief looks to reduce costs and knows placing the firefighter on disability pension would cut costs by nearly 33 percent immediately. The chief makes his recommendation to the Board of Public Safety. The firefighter goes on disability pension.

“It’s a short term solution for the department but long term cost to the city,” said Shelton.

No kidding. If you don't check, lots of people are going to jump on the gravy train - at least, until it hits the bankruptcy abutment.

The Senate Still Scamming

Justin Katz

It would appear that the U.S. Senate is in need of some major upsets, the next election cycle:

The plan, released this week by the bipartisan "Gang of Six" senators, punts on many of the most difficult issues, leaving it to congressional committees to fill in the details later. But supporters say it provides a framework to simplify the tax code, making it easier for businesses and individuals to comply while eliminating incentives to game the system. ...

The plan would simplify the tax code by reducing the number of tax brackets from six to three, lowering the top rate from 35 percent to somewhere between 23 percent and 29 percent. That could provide a windfall for wealthy taxpayers because the 35 percent tax bracket currently applies to taxable income above $379,150.

To help pay for lower rates, the plan would reduce popular tax breaks for mortgage interest, health insurance, charitable giving and retirement savings. Other tax breaks would be spared, including the $1,000-per-child tax credit and the earned income tax credit, which helps the working poor stay out of poverty.

All told, the plan would amount to a $1.2 trillion tax increase over the next decade, which means that it's all just a political trick. Worse, it's a trick that would increase taxes on productive, charitable middle class families while decreasing them for the wealthy. (Although, the article hints that capital gains taxes might be in for an increase down the road.)

The Senators are hoping, no doubt, that they'll be able to confuse voters with talk about cutting taxes and simplifying the tax code. If that's the case, however, I think they're underestimating the extent to which Americans are now paying attention to such Rhode Islandish schemes.

July 21, 2011

Bruce Sundlun, 1920-2011

Carroll Andrew Morse

WPRO radio (630 AM) is reporting that former Rhode Island Governor Bruce Sundlun died earlier this evening.

Not Careless Planning, but Political Calculation

Justin Katz

The lengthy comment-section discussion appended to my pension post, from yesterday, is worth following, but I wanted to tease out one suggested made by Providence firefighter Tom Kenney:

The reason these systems are in such financial disarray? The state and the municipalities have continually deferred their expected (and required) contributions so much that the systems are going broke. In other words, careless planning and budgeting by the politicians who control the purse-strings are the real reasons we’re now facing such a shortfall.

Variations of this have been the preferred explanations from the general treasurer on down. Gina Raimondo blames abstract politics; Kenney blames vague politicians, many of whom have now moved on to other things and are no longer within reach of political consequences for their decisions (even if the public were perspicacious enough to impose them, which it is not).

And that was pretty much the point: Promising public employees golden lives through their golden years was a way of reaping political rewards without having to pay for them. The planning wasn't careless; it was a result of the incentives that unions created with their negotiating techniques and political heft.

Look, the money that ought to have gone to pensions in the past didn't just evaporate. Either it went to other government expenditures (whether to buy more votes or actually fulfill obligations) or it never really existed in the first place. If Kenney's politicians had fully funded their pension promises, they wouldn't have been able to fund other promises, and the reforms that are now on the table, or something like them, would have been necessary decades ago.

Personally, if I were relying on a pension for my retirement (which, in reality, I'm not expecting ever to experience anyway), I'd be paying close attention to the subject, and anybody who's watched private-sector pensions disappear, with the remnants slipping toward government subsidization, should have seen this coming. In part the failure to do so was born, in part, of an expectation that government can always confiscate more revenue through taxation. In larger part, it probably derived from the assumption that more-informed people would make everything work out, somehow.

Well, that should have been the politicians, and it should have been the union leaders — the very people with incentive not to face such issues head on, honestly, and in a transparent manner.

The Signs of RI's Doom

Justin Katz

Matt and I discussed the forces affecting Rhode Island's politics on last night's Matt Allen Show. I expressed skepticism that the General Assembly will actually do much to reform pensions, referring to the four horsemen of Rhode Island's apocalypse — that is, the four groups that have locked in power in RI, and which the General Assembly must strive to appease to maintain the current balance. Stream by clicking here, or download it.

July 20, 2011

"Rhode Island's Rising Pension Tide" Video

Carroll Andrew Morse

The Providence Republican City Committee has posted the complete video of Gary Morse's presentation on "Rhode Island's Rising Pension Tide" on their YouTube channel. You can view the first part by clicking below:

Since Roland Lavallee, who made the official recording for the Providence Republicans, got much better sound quality than I did, I will repost my list of some of the interesting and informative highlights, with links cued to take you right to the video of the subjects described...

1. The meaning of "the discount rate" and its value.Video
   The troubles with the discount rate, including spiking.Video
   How much does spiking cost the taxpayers?
2. The changes to pension law and pension practice that occurred in 1991 and 2006.
3. How what has happened in a place called Prichard, Alabama could impact Chapter 9 bankruptcy proceedings in a place called Central Falls, Rhode Island.
Video (1); Video (2)
4. Some suggested reading, if you're interested in how the courts might decide the pending Council 94 lawsuit.
5. The role that debt played in the Suez crisis of 1956, and its parallels to today.
6. A not-very-rosy prediction for everyone's future.Video

What is Cut, Cap and Balance?

Carroll Andrew Morse

The Republican "Cut, Cap and Balance" plan for addressing the tendency of government budgets to increase towards infinity passed the House yesterday. President Obama has said he would veto at least an earlier version, and Rhode Island Representatives James Langevin and David Cicilline both voted against it.

Title I of the bill is the cut, which would be an immediate cut in the 2012 Federal spending total Various news reports place the size of the cut at $111 billion. The direct language in the bill says that spending on Social Security, Medicare, veterans’ benefits, net interest on the debt would be exempt from cuts, and spending on the global war on terrorism would have its own cap.

In March, Brian Riedl of the Heritage Foundation, using numbers from the Office of Management and Budget, estimated a total of $3.7 trillion in outlays to be made by the Federal government in 2012 (including interest on the debt). According to his numbers, the exempted programs account for about $1.8 trillion, which means that the $111 billion in cuts will have to come from a total of about $1.9 trillion from the remaining programs, a cut of about 6%.

Title II is the cap: An annual federal spending cap, as a percetange of total GDP, would be phased in. The schedule would be...

21.7 percent for fiscal year 2013;
20.8 percent for fiscal year 2014;
20.2 percent for fiscal year 2015;
20.1 percent for fiscal year 2016;
19.9 percent for fiscal year 2017;
19.7 percent for fiscal year 2018;
19.9 percent for fiscal year 2019;
19.9 percent for fiscal year 2020;
19.9 percent for fiscal year 2021.
If I understand blogger and former director of the President's National Economic Council Keith Hennessy correctly, the caps would be enforced by (almost) across-the board reductions in Federal spending needed to hit the targets, if an initial budget was submitted that exceeded them. It is "almost" across the board, because payments for military personnel accounts, TRICARE for Life, Medicare, military retirement, Social Security, veterans, and net interest would be exempt from the automatic reductions.

Title III is the balance: An increase in the debt-ceiling of the United States would be triggered by the passage of a balanced-budget constitutional amendment by both houses of Congress. (It would not become the law of the land, of course, until ratified by 3/4ths of state legislatures after that).

Arguably, the "balance" is a radical approach to the problem, at least in a procedural sense -- asking for a constitutional amendment to solve an immediate problem is a tall order. But that issue aside, what's radical about the "cutting" and "capping" provisions?

The Cop-Media Connection

Justin Katz

The Rupert Murdock media eavesdropping controversy in England illustrates the general risk of giving an organization broad access to information and spy technology... even if that organization is the saintly Big Government:

Scotland Yard's assistant commissioner resigned Monday, a day after his boss also quit, and fresh investigations of possible police wrongdoing were launched in the phone hacking scandal that has spread from Rupert Murdoch's media empire to the British prime minister's office. ...

The crisis has roiled the upper ranks of Britain's police, with Monday's resignation of Assistant Commissioner John Yates - Scotland Yard's top anti-terrorist officer - following that on Sunday of police chief Paul Stephenson over their links to Neil Wallis, an arrested former executive from Murdoch's shuttered News of the World tabloid whom police had employed as a media consultant.

It's one thing if a private company offers a service that collects information. Misuse of that information could result in complete collapse of the business and its stocks. When government's involved, a few folks lose their jobs, but for the most part, the bureaucracy keeps on rolling.

Lack of Sympathy for the Pensioner

Justin Katz

Time will tell whether I'm an isolated cold heart or part of a growing swell, but I'm having trouble mustering the sympathy that the preferred storyline implies I should feel for public-sector pensioners. The "human angle" that the Providence Journal tried to emphasize in an article yesterday provides an excellent example:

In fact, [Donald] Cardin, 46, who retired [from the Central Falls fire department] in 2008 after 22 years as a firefighter, needs to work to pay the bills. He formed his own company, D'Amico Painting Contractors, in North Providence. He climbs ladders, scrapes shingles and spreads on new coats of latex because he can't live on an annual pension of $36,000, which breaks down to $28,800 after taxes.

I have no problem stipulating that anybody who "retires" at 43 should have to continue working in some fashion. At that age, the money that the pensioner receives shouldn't be more accurately described as "residual income" from a previous job, or somesuch. And Cardin may consider that guaranteed $36,000 "peanuts," but one must wonder how many of the painters with whom he competes have such a nice cushion, including (it must be noted) his completely free Blue Cross & Blue Shield.

That's the perspective that ought to dominate during meetings of General Treasurer Gina Raimondo's pension advisory board. Instead, we get reports of this:

Some panel members questioned whether state and local plans are meeting professional recommendations that retirees should receive anywhere from 65 to 80 percent of their salaries when pensions, Social Security (if applicable) and personal savings are added up.

Alicia H. Munnell, former assistant to the Treasury secretary under President Bill Clinton and head of the Center for Retirement Research at Boston College, said she is worried that people are not in the habit of putting money into savings, and that public pension plans need to take this into account.

By the time one retires, one should have saved enough and paid off enough of their mortgages and so on to scale back on expenditures once they're no longer employed. In the private sector, with its absence of official retirement ages, readiness is part of what determines whether a worker can stop working. There's no reason public sector employees should be any different just because they can band together in powerful unions that help elect the people who make decisions about their income.

Moreover, if "people" are not saving enough in general, then it makes little sense to take more money out of their paychecks in order to fund defined benefit pensions for folks retiring well before they've truly exhausted their working years. That's why, when I read such statements as this, I remain unmoved:

"One can debate whether it's good or bad, fair or unfair policy, but legally it makes no difference," contended Tarantino. "We've read and heard a lot about 'broken promises,' and there's a visceral reaction to that. In the world according to John Tarantino, people should keep their promises."

Granted, lawyer John Tarantino was laying some sympathetic gauze over his argument that the state should be able to change the terms of existing pensions, but this stuff about "promises" ought to be considered more specifically. When most of the pension "promises" that are strangling our towns, states, and nation were made, I was just beginning to work and not of voting age. I didn't even live in Rhode Island. Why should I insure public employees against the possibility that they didn't save enough to retire comfortably in their forties and fifties?

July 19, 2011

Stephen Iannazzi Will Bravely Scrape by Without His (Second) 3% Raise

Monique Chartier
Why stay in college? Why go to night school?

Talking Heads, "Life During Wartime"

Late this afternoon, the ProJo's Kathy Gregg broke the latest development in the matter of the Senate Majority Leader's degree-less Special Assistant.

Stephen Iannazzi, the $88,112-a-year aide to Senate Majority Leader Dominick Ruggerio who became a focus of public ire over legislative staff raises, has turned down the latest 3-percent raise that went to most other state employees on July 1.

Senate President M. Teresa Paiva Weed's chief of staff sent an e-mail, conveying that information, to every member of the Senate Tuesday, after Iannazzi was described, in a Journal editorial, as the poster child for a political system "that seems designed to reward insiders and special interests.''

The author of that editorial is Ed Achorn, who helpfully pointed out today that Mr. Iannazzi was slated to make a cool $90,755 per annum - plus bennies of $4,352 - with this second-in-six-months 3% raise for state workers. Mr. Achorn also referenced an item that is undoubtedly completely unrelated to the circumstances of Mr. Iannazzi's pay and employment.

Could it be because Stephen is the son of Donald Iannazzi, business manager for Local 1033, the Laborers’ International Union affiliate that employs the senator’s own 30-year-old lawyer son, Charles Ruggerio? (Senator Ruggerio himself works for an arm of the Laborers’ union.)

However, with today's announcement, Mr. Iannazzi's salary will fall back to its post-first raise level of $88,112. How fortuitous then, that, in an e-mail appeal today, Travis Rowley and the RI Young Republicans had started a whip-round for young Mr. Iannazzi. All the more will it be needed now ...

Rowley, however, insists that 90,755 is still not enough. So the RI Young Republicans are organizing a charitable campaign for Iannazzi. "Stephen needs more of the taxpayers' money. It's that simple." Rowley continued, "Listen, it's our responsibility to take care of the most vulnerable in our community. When a neighbor is struggling, we should help him out." ... Interested Rhode Island taxpayers with any money left should contact the RI Young Republican offices.

Working Towards Pension Enlightenment

Carroll Andrew Morse

In his Monday tip-sheet, Ian Donnis of WRNI (1290AM) reviewed some of the details coming from the second meeting of State Treasurer Gina Raimondo's "pension advisory panel". The second item from the post includes a quote from panel member Robert Walsh, Executive Director of the Rhode Island chapter of the National Education Association...

The math is still the math. A defined benefit pension system is still the most affordable way to provide retirement security.
But in any meaningful fiscal sense, "affordability" is a dubious choice of criterion for describing the advantages of a defined benefit retirement system. Defined benefit plans differ from defined contribution plans in the assumption that DB plans have access an outside pool of money that they can draw upon at will, in order to pay a guaranteed benefit level. That pool of money doesn't appear "for free" -- it is part of the pension costs to the taxpayers.

Both types of plans depend on the investment growth of money in the plan. So why should defined benefit plans be assumed to be more "affordable" than a defined contribution plans? Is it that funds in a DB plan should be assumed to grow faster than the funds in a collection of DC accounts? The presenter at last week's Providence Republican City Committee's pension forum, Gary Morse, suggested that this is not automatically valid...

If you had invested in a balanced portfolio, when you came in as a teacher in 1980, you would have outperformed the investment rate that you got from the state.
Perhaps there an assumption being made that poor choices by a collection of individual DC investors will depress the ideal rate of return. OK, that assumption could be built into a forecast -- but then, to be fair, you have to consider that "managers" (both financial and political) of a DB pension system will make non-ideal choices too. In fact, several generations of DB system "managers" have combined to make decisions that have been so bad, they have brought the system to the brink of collapse. So, if the idea that individuals allowed to invest their own retirement money will make bad decisions is going to built into the analysis of DC plan, then doesn't the potential -- and the reality, by the way -- of bad decisions of the kind that can and have put the current system on the path to bankruptcy have to be considered in the analysis of DB plans?

(And all of this still doesn't begin to address the problem of retirement security for people who want to change jobs and/or careers during their lifetimes. Shouldn't people who don't decide on the career until later in life, or who actively choose to try a few careers over their working lifetimes, have the same shot at a decent retirement as those who decide early on what it is they want to do for the next 30 years?)

Finally, Robert Walsh offered other interesting remarks to Ian Donnis...

Well, certainly we’re going to have to bring them [on the other side] into enlightenment...

I think that folks like [Mayor Allan Fung] and some of the city and town leaders are going to come around to understanding that things like re-amortization have to be part of the final answer here because so much of the problem is the unfunded liability.

A positive relationship between reamortization and enlightenment is difficult to establish, however. Reamortization is the passing the costs of mistakes made by past generations on to future generations. That is not enlightenment -- enlightenment begins with cleaning up our own mistakes, and passing as clean a slate as it possible to the next generation. We cannot achieve that, by forcing people yet to be born to pay for our screw-ups, at a time when they will be working hard to make lives of their own.

Ted Nesi of WPRI-TV (CBS 12) also has a report on the meeting, available here.

The Latest Wave of RI Republicans

Justin Katz

Somehow I don't find this surprising:

He is running as a Republican, but most of former State Police Colonel Brendan Doherty's biggest supporters are major Democratic donors, according to a GoLocalProv review of his first campaign finance report, filed last week. ...

* Nearly two thirds of the donors did not donate to a single Republican statewide candidate in the 2010 election cycle.
* Of the remaining third that did, all but a handful poured much more money into Democratic campaigns than Republican ones, donating to one or two token GOP candidates.
* About a third of the donors backed Democrat Frank Caprio in his bid for governor.

Add in this:

Barry Hinckley, a Republican candidate for U.S. Senate, has a new — and for now, unpaid — press secretary: Nicholas Cicchitelli, of Jamestown.

Cicchitelli, interestingly, comes with some Democratic credentials: he was an executive assistant to former state General Treasurer Frank T. Caprio and volunteered on Caprio's failed bid for governor last year. Before that, he volunteered on then-North Providence Mayor A. Ralph Mollis' successful 2006 bid for secretary of state. Farther back, Cicchitelli says, he interned in the D.C. office of U.S. Sen. Jack Reed.

RI's Republicans will have to take careful looks at their candidates during primary season.

Training for Jobs That Don't Exist

Justin Katz

Under normal circumstances, this program might be an unalloyed positive, and I do believe that every student should have some familiarity with construction and trades:

On Olmsted Way, a short street across from the Wanskuck Mill on Charles Street, 10 graduates of the YouthBuild Providence program are at work this summer, renovating 24 apartments in two buildings at the Olmsted Gardens affordable-housing complex. ...

In the YouthBuild Providence program, www.youthbuildprov.org, part of the national YouthBuild network, low-income youths ages 16 to 24 work to earn their GEDs or high school diplomas while also learning job skills by building affordable housing. Marques said the 10-month educational program includes alternating weeks of classroom work and on-the-job training.

The money for the program appears to come, ultimately, through the federal government, in part (one infers) by paying for the projects, which thereby operate with the inexpensive labor. But are public dollars spent on training for a flailing industry really a good idea?

The organization's Web site calls construction "a booming industry in our state that is poised for substantial growth." Another article in Sunday's Providence Journal, however, describes the industry's employment position as follows:

In building construction, slight job gains in commercial and industrial construction are being swamped by losses in residential, where foreclosures, tight credit and depressed prices have taken a toll. In June, residential and commercial building companies employed 1.2 million workers, down 15,900, or 1.3% from a year earlier, according to the Labor Department.

Back in October, Rhode Island led the nation in its percentage of construction jobs lost, and I haven't seen any evidence that much has changed. That means that job training programs focusing on building are adding low-end labor to an industry that already has a great deal of downward pressure on employment and salaries. And a 10-month program does so relatively quickly.

That sounds like a blueprint for stagnation for older workers and disappointment for new entrants to the trade. Were it a (gasp) for-profit program — with enrollees paying for their training — it would have to adjust to economic trends. With government funding, the folks making the financial decisions aren't those who stand to gain or lose by graduates' success or failure, and the bureaucracy in place to funnel the funds generates its own motivation.

July 18, 2011

If You Are Not Careful, You Can Eventually Hit Your Head on a Debt Ceiling

Carroll Andrew Morse

There are about a half-a-dozen things I could comment on, in reaction to the announcement by Borders Books today that it is going all-the-way out of business. For now, following on from Justin's post earlier today, I will simply note this passage from the Wall Street Journal story on the subject...

Borders filed for bankruptcy-court protection in February. It has since continued to bleed cash and has had trouble persuading publishers to ship merchandise to it on normal terms that allowed the chain to pay bills later, instead of right away.
...and ask why Borders' current ownership didn't simply show the publishers that they had raised their debt ceiling, so that everything could continue as before. After all, that's a solution good enough for the finances of the Federal government (in the minds of some), right?

"Rhode Island's Rising Pension Tide": Some Questions for Gary Morse

Carroll Andrew Morse

At the conclusion of the Providence Republican City Committee's event on "Rhode Island Rising Pension Tide" last Thursday, I was able to ask presenter Gary Morse (no relation) a few questions about specific numbers and predictions for the future.

Question: I've heard the claim made the pensions are superior to 401(k)-type plans, because aggregating all of the money into one place allows for a higher rate of return. Is that true or not?

Gary Morse: "...if you had invested in a balanced portfolio, when you came in as a teacher in 1980, you would have outperformed the investment rate that you got from the state..." Audio: 39 sec
Q: Earlier in your talk, you mentioned the lowering of the discount rate from 8.25% to 7.5%, and some skepticism about 7.5% being accurate...
GM: "...the State Treasurer's office polled their investment advisors, and they said there's only about a 42.5% chance that they're going to make 7.5%..."Audio: 35 sec
Q: Knowing both the numbers as you do and being aware of the politics of the situation, if there was one thing, one message that you could give to everyone who is participating in this debate and make sure that they really knew, what would that be?
GM: "The message is, we needed an inspector general..."Audio: 1m 4 sec
Q: What is a reasonable expectation that people should have about the planned legislative session fall where pension issues are supposed to be addressed?
GM: "I don't think we are going to see anything substantive come out of the General Assembly this fall".Audio: 34 sec

Maybe If the Kitchen Table Is on a Yacht... with Servants

Justin Katz

This AP analysis — or whatever you would call such an essay — by Calvin Woodward and Martin Crutsinger is dumb to the point of being offensive. Woodward and Crutsinger try to put the debt ceiling debate in terms of family finances, and the lede that the Providence Journal gave to the story captures the error:

The choice in simple terms: Borrow more while fixing the budget, or refuse more debt, leave some bills unpaid and risk upheaval

Perhaps I'm not alone in thinking that the politicians' preferred option would actually be to borrow more without fixing the budget and then make the same threats and doomsday predictions when the problem comes around again. And what about the unmentioned option of living within one's means in the first place? President Obama offers a typically erroneous comparison:

"A family, if they get over-extended and their credit card is too high, they don't just stop paying their bills," he said. "What they do is, they say, how do we start cutting our monthly costs?

"We don't stop sending our kids to college, we don't stop fixing the boiler or the roof that's leaking. We do things in a sensible, responsible way."

The idea that our bloated government is so trim and efficient that the next cut will have to be to the roof maintenance budget is ridiculous on its face. But frankly, if a household is to the point at which it has to borrow forty cents of every dollar it spends, then it really has to think about selling the house and (contrary to the essay's authors) selling some assets is really not an extreme step.

Necessitating a Drug War Surge?

Justin Katz

This is certainly good news for a couple of Providence communities:

The Providence Police Department's success in turning around two neighborhoods notorious for blatant drug-dealing and crime has made it a model in the Obama administration's national drug policy this year. ...

The 2011 National Drug Control Strategy, released Monday, singles out the Providence police for their work in disrupting the two neighborhoods' drug markets and significantly lowering crime rates, while improving relationships with residents.

It's encouraging to hear that residents feel safe again, but one has to wonder: Did the demand for illegal drugs actually shrink? The article describes the concerted, targeted effort required to achieve the improvements and alludes to the need to maintain them:

[Lt. Michael] Correia cautioned that the initiative isn't a cure-all. It works best in defined neighborhoods, he said. The police and the residents need to be committed to making it work. And, there'll always be "maintenance work," Correia said, as drug dealers move on the edges.

Of course, there wouldn't be drug pushers if their efforts didn't expand the market, so to the extent that they aren't out in a particular neighborhood, demand will shrink — or at least not grow as quickly. And the more police raise the risk (and therefore the cost) of participating in the drug market, the less activity there will be.

Still, the unanswered questions are whether and to what extent such activity increased in nearby neighborhoods and what the cost is in tax dollars and liberty. (The article mentions street-level security cameras.) Expanding this initiative would necessitate something not unlike the Iraq surge, whereby police would win one neighborhood and expand their efforts across the entire country, increasing the scope of their activities in those neighborhoods that have already been won.

On the broader scale, America has to address the underlying causes of drug use and trade, and most of those are social, cultural, and economic.

July 17, 2011

Debt Ceiling Stand-Off: White House Budget Director Declines to Give Priority to Social Security Checks

Monique Chartier

White House Budget Director Jacob Lew appeared on CNN's State of the Union with Candy Crowley. Kudos to Real Clear Politics for picking up on this part of the interview and transcribing it.

Note that the White House no longer contends that there wouldn't be enough money to issue these checks in the event of a shut-down. Now the question is, are they a priority for the President if such a fiscal triage becomes necessary. Mr. Lew, presumably speaking for his boss, declined five times to indicate that they are.

CNN's Candy Crowley, HOST: "More immediately, you'd have to make some spending priorities -- payment priority decisions: Social Security benefits, and federal worker pay, and defense contractors. What are your priorities should the debt ceiling not be raised on the 2nd, when you have the bills that immediately come due? Social Security checks, federal worker pay, defense contractors?"

Jacob Lew, WH Budget Director: "Our plan is for Congress to do its work and the President to sign into law legislation that will make it possible for the United States as it always has, to keep its obligations. We'll be ready to deal with whatever happens. There is no plan other than meeting our obligations."

CROWLEY: "Surely you must have discussed priorities, though, we have to pay this?"

LEW: "The truth is this is a different situation the United States has ever faced. We've never gone into a situation where we didn't have enough money to pay our bills. We borrow 40 cents on a dollar right now. And if the time comes when we lose the ability to pay our bills, there will be a cash flow issue that is very real, and that's why it's critical that Congress take action before August 2nd."

CROWLEY: "Would you allow it to happen that those the Social Security checks would not go out? Would you allow that to happen?"

LEW: "As the President has indicated, it's not a question of what we allow and what we don't allow --"

CROWLEY: "But you get to decide priorities. There will be some money --"

LEW: "There will not be enough money to pay all the bills."

CROWLEY: "Of course not, that's why I'm talking about priorities."

LEW: "I think that once someone gets into the business of trying to ask about setting priorities it misses the question. Which is that it's unacceptable for the United States to be in a place whether it's Social Security recipients, or a soldier or somebody who is just owed money by the government can't be paid because we have not done our job."

Not One But Two Rhode Island Cities Make List of "14 Cities That Are Being Eaten Alive By Public Sector Workers"

Monique Chartier

Business Insider compiles the latest national list of dubious distinction to contain Rhode Island - in not one but two spots. This is especially not good when the list is only fourteen finalists long.

Public employee costs account for a large share of municipal budget woes. While worker compensation accounts for just 30% of state spending, personnel costs tends to eat up between 70% and 80% of local government funds.

Skyrocketing employee costs — the result of overly generous union contracts, an aging workforce, and bad pension investments — are now pushing several municipalities to the brink of fiscal ruin. Without union concessions or substantial reform, these cities will edge closer to insolvency while residents pay higher taxes for deteriorating public services.

Paging down, I expected to find Centrals Falls on the list, inasmuch as the direness of its fiscal problems is such that the city was recently the subject of national coverage in the AP, the New York Times and NPR. But coming also upon Providence was a bit of a shock.

Here's a partial list of the reasons. (The article cites a Ted Nesi post from June as the source of the info, by the way.)

A large part of Providence's structural deficit is caused by city retiree costs, which eat up 50% of the city's tax revenues.

The city-run pension system is only about 34% funded and has an unfunded liability of at least $829 million. The city has made its full annual pension contribution only three times since 1995.

No wonder Providence Mayor Angel Taveras was way out on a political limb Friday, along with Mayor Scott Avedisian and Mayor Allan Fung. From a Barbara Polichetti article in yesterday's Providence Journal with the headline, "3 R.I. mayors agree: Current retirees must be part of pension fix".

“The truth is that unless we address existing pensions, we’ll be back in this situation shortly,” said Taveras. Otherwise, he said, the cost to taxpayers and current public employees still paying into state and local pension plans will be “unsustainable.”

“The retirees have to be impacted,” Fung said. “It’s a fundamental fairness question. We cannot keep putting [pension costs] on the backs of our current employees and the taxpayers.”

Their remarks came as part of a special pension forum held for alumni and guests of Leadership Rhode Island Friday morning in the auditorium at The Providence Journal.

(Side note: a scheduling conflict prevented the mayor of Central Falls from attending the forum: he was busy giving a seminar entitled "Board-Up Bonanza: How to Rip Off Property Owners While Your City is Flying Off a Fiscal Cliff" ...)

July 16, 2011

Debt Ceiling Stand-Off: What Does Compromise Look Like When We Already Borrow 43 Cents of Every Federal Dollar Spent?

Monique Chartier

This staggering item stands out from Mark Steyn's (characteristically excellent) column of today.

When the 44th president took office, he made a decision that it was time for the already unsustainable levels of government spending finally to break the bounds of reality and frolic and gambol in the magical fairy kingdom of Spendaholica: This year, the federal government borrows 43 cents of every dollar it spends, a ratio that is unprecedented.

What an absurdly irresponsible and dangerous position this and the prior Congress and President have placed us in.

President Obama, around the same time he made it clear that he would cut social security checks for seniors and the infirm before he would cut funding for high speed rail (and other boondoggles) or welfare benefits for the healthy, called for compromise.

Setting aside that legislative "compromises" got us to this point, how can there be talk of compromise when 43% of your annual operating funds are borrowed? Doesn't any kind of "compromise" still leave us in the area of unsustainable spending?

July 15, 2011

"Rhode Island's Rising Pension Tide": The History that Makes the Future

Carroll Andrew Morse

At a forum sponsored last evening by the Providence Republican City Committee, Gary Morse (no relation), the primary advisor to 2010 Republican Gubernatorial candidate John Robitaille on the subject of pension issues, delivered a talk titled "Rhode Island's Rising Pension Tide". The Providence Republicans promised that this would be a non-partisan forum, and Mr. Morse delivered.

Mr. Morse used a significant portion of his speaking time to go into serious detail about the evolution of pension law and of pension systems in the US, and the resulting constraints that will shape the possible choices as we move forward...

1. The meaning of "the discount rate" and its value.Audio: 1m 11 sec
   The troubles with the discount rate, including spiking.Audio: 1m 54 sec
   How much does spiking cost the taxpayers?
Audio: 32 sec
2. The changes to pension law and pension practice that occurred in 1991 and 2006.
(1) Audio: 1m 19 sec; (2) Audio: 1m 56 sec; (3) Audio: 2m 58 sec
3. How what has happened in a place called Pritchard, Alabama could impact Chapter 9 bankruptcy proceedings in a place called Central Falls, Rhode Island.
Audio: 2m 45 sec
4. Some suggested reading, if you're interested in how the courts might decide the pending Council 94 lawsuit.
Audio: 42 sec
5. The role that debt played in the Suez crisis of 1956, and its parallels to today.
Audio: 1m 45 sec
6. A not-very-rosy prediction for everyone's future.Audio: 1m 32 sec

July 14, 2011

Iowahawk's Twitter Imponderables for the President

Monique Chartier

Last week, President Obama held (I'm appalled to type the phrase) a Twitter Town Hall.

Below is a sampling of the questions posed to the President by Iowahawk. (Regrettably, the President offered answers to none of them.)

Would you get tougher with Iran if you knew they were working with Scott Walker?

If we reneg on the debt, where's the best place to hide our stuff from the repo men?

If ATMs are so bad, why do you keep treating me like one?

If Eric Holder gets indicted in Operation Fast & Furious, should he get a civilian trial?

If we eat the rich, what do we get for dessert?

if punishing employers results in more employment, can you also punish beer makers?

Not last and certainly not least,

When you create jobs, why do always create them for Texas?

Liveblogging “Rhode Island’s Rising Pension Tide”.

Carroll Andrew Morse

Good evening. I will be liveblogging the presentation being made by Gary Morse (no relation) this evening on the subject of Rhode Island’s pension problems, sponsored by the Providence City Republican Committee…

Gary Morse speaking:

Rhode Island is number 50 in unfunded pension liability.

Mr. Morse wants to dispel the notion of the greedy state worker and the greedy teacher.

Retirements pre-1990 in the private sector were much better than in the public sector.

In 1985, Bank of America created a cash-balance pension plan. The structure, however, violated age discrimination laws.

As a result, one sentence was added to Federal law, making BoA’s practice legal. After this law was passed, companies began replacing their defined benefit pension plans with cash-balance plans.

The big money was in rolling people from defined benefit plans into the new cash benefit structure. People were told they would get their pensions, if they made it to age 65 -- and then bunches of them get laid off in their 50s.

In 2006, the Federal government allowed anyone to convert a pension plan into a cash-balance plan. Benefits are not based on the final three years, but what you’ve earned over your entire career.

Still, up until 2007, public private pensions were clearly better than public sector deals. (Backfill: The correction here was a pure typo)

Actuaries are overlooking the effects of end of career spiking in their calculations.

The discount rate will go even lower than 7.5%.

Spiking of 10% in the final years leads to a 25% bigger taxpayer contribution.

(The MERS plan disallows spiking, by the way. That’s why it is in better shape than other pension plans).

Mr. Morse discusses Central Falls.

Based on the case of Pritchard, Alabama, it is possible that CF pensioners could not receive their checks for a year or more. In CF there is almost no money in the pension fund. A judge can terminate their payments, after they declare chapter 9.

What will the headlines read, if retirees have their pensions terminated? Will the GA step up and find the money for them? What ever the answer is, CF will likely be the precedent.

I’m pausing, while Mr. Morse is taking various and sundry questions…

Pension liability is 10% of GDP GDP per-capita in Rhode Island. The US average is 4%. (Backfill: Thanks to the speaker for pointing out my error here)

So what can we do about this problem?

If Rhode Island had maintained a basic pension system without the extra perks, this problem would not have been created. The system needs to be stripped down to a basic pension plan.

End spiking.

We have to assume slow investment growth, and adjust the discount rate accordingly.

There isn’t enough money in the Rhode Island economy to carry our current debt load.

Mr. Morse is taking more questions from the audience. More detail to follow...

The Meaning of Corruption

Carroll Andrew Morse

Commenter Michael responded to Justin's statement from earlier in the week concerning "the faulty attitude under which the public sector has become corrupted" by saying…

The public sector is not corrupted. These generalized comments, written as fact are what prompts me to draw the proverbial line in the sand and defend the public sector without participating in any worthwhile debate due to the preconceived "fact" that my employment status and ethics are questionable, and my work and compensation tainted.
I'm going to cover a fair amount of ground in a short space, so there may be a gap or two...

To understand the rift that has opened between public sector organizations and the public, the meaning of corruption has to be understood in its broadest sense. The term corruption as used in news reports usually denotes acts of thievery and dishonestly committed by a public officials or employees. Corruption, however, also suggests something that happens before the corrupt act, i.e. how it is that surrendering to temptation might change a person.

The theologian Reinhold Niebuhr succinctly and poignantly discussed what he called "the corruption of self-interest" in his essay on the realism of St. Augustine...

It is this powerful self-love or, in modern terms, "egocentricity", this tendency of the self to make itself its own end or even to make itself the false center of whatever community it inhabits, which sows confusion into every human community....
(What, you mean Reinhold Niebuhr and St. Augustine aren't the first sources you think of, when discussing public labor tensions in Rhode Island?)

Humans are susceptible to the temptations that arise not only from the self-interest expressly highlighted by Niebuhr, but also from an interest in helping those who immediately surround them. Most obviously, personal interests widen to take into account an individual's family and immediate friends. In the case of many public employees, the widening beyond strict self-interest frequently takes another form. When someone regularly deals on a firsthand basis with people in need of real help -- and in the case of public safety workers, people who are in real danger -- it is natural to prioritize the needs of those making or answering calls for help ahead of the monitions raised by people not immediate in distress, who are asking for relief from the strains they feel are being created by publicly-imposed obligations. But just like self-interest is not inherently bad, but leads to problems when pressed too far, so too can the impulse to help those whom we have most direct contacts with create problems and confusion, when effects of our actions on people outside of our personal interactions are too severely discounted. No human being is immune to this, which means no human system is immune to this. (Well, maybe DMV clerks are immune. Whether you are right in front of them or completely out of their sight and mind seems to make no difference to how they treat you).

The social and political environment that individuals live in will either enhance or dissuade the potential for the corruption of self-interest that exists in all of us. We have learned from history that the potential is greatly enhanced when one person or group is given power over others to say that we're taking from you what we deserve, that we will tell you how much you owe us, and that there's nothing you can do to alter how much we are going to take. This is a dynamic that has created lots of turmoil throughout history. To maintain a functioning society that does not succumb to that turmoil, political institutions need to be designed to dissuade more than enhance this tendency of one group of people to try to take from another in pursuit of their personal interests. The emphasis is on the political here because political institutions are the most easily changed. Social systems can be changed too, but more slowly and with more unpredictable results. The laws of economics cannot be changed, no matter what liberals and progressives may think.

Unfortunately, right now in the United States, we live under a number of governmental processes that do more to enhance than to dissuade the inescapable potential for corruption that is part of the human condition. For a small example, consider the mischief with disability pensions from Rhode Island's recent past. Were the people who took advantage of this flaw in the system granting them early "retirements" fundamentally different from people now? Are we going to confidently claim that we are significantly more honest than our predecessors from just a decade or two before? I think a more reasonable answer is that a badly designed system allowed the worst impulses that exist in everyone to be enhanced and acted upon.

For a more important example, consider the period of time where the union representatives on the City of Providence retirement board were allowed to vote themselves benefits, regardless of what the representatives accountable to the entire community might decide. The union reps voted themselves huge benefit packages, without regard to how paying for those benefits would impact the community. They didn't outright want to hurt others, but since the union reps felt the positive effects of their decisions directly, while the negative impacts were on people they weren't directly connected to, they didn't care. This is a crystal-clear manifestation of Niebuhr's concept of the corruption of self-interest sowing the seeds of confusion into the community.

To prevent the corruption of self-interest from running rampant through our government, we need to restore some basic checks and balances into our political systems that insure that government being responsible to all of the people. We cannot let one group of citizens make extreme long-term claims on a piece of the livelihoods and property of others, without expecting some very negative consequences. We cannot leave a future generation encumbered by circumstances they are not responsible for. It is our responsibility, as citizens in a democratic society, to design a system that passes along to the next generation as much of the stuff we know about making government work despite the limitations of human nature, while not saddling the next generation with our mistakes. Right now, we have a political system that too often exhibits an unfortunate tendency to do the opposite.

Debt Ceiling Stand-Off: So President Obama Wants Republicans to Undertake What Democrats Refused to Do (Raise Taxes)

Monique Chartier

I'm not a big fan of Karl Rove. But he's got a point here.

Mr. Obama has offered no evidence since becoming president that he wants to restrain the upward trajectory of government spending. He does want higher taxes to pay for significantly higher federal spending. But he wants Republicans to deliver the tax increases, since Democrats couldn't pass them last year despite controlling both chambers of Congress.

The President's lack of specificity as to spending cuts also does not do much to enhance his credibility in this matter. The headline on Tarpon's Swamp describes the President's approach perfectly.

I’ll Gladly Cut Spending On Tuesday For a Tax Increase Today

Raimondo: Disability Pension record keeping not so good

Marc Comtois

General Treasurer Gina Raimondo reveals that the RI Disability Pension record-keeping system hasn't been up to snuff (via ProJo):

In 2009, 18 percent of the 559 disability files lacked paperwork that is supposed to be filed yearly showing that the worker is still disabled and how much money they have earned in addition to their pension, according to an auditor's report.

"Among the years we examined, that was the best result," said Boyd Foster of auditing firm Sullivan & Company, headquartered in Providence.

Other years had about 40 percent of the paperwork missing while some had none or virtually none of the required paperwork, Foster told the board.

"There were clearly some holes there," he said.

Almost like people were hiding something.

July 13, 2011

My Kinda Starlet

Marc Comtois

I know Mila Kunis from watching a few episodes of That 70's Show and Family Guy (both funny, but I'm not a "fanboy"). In general, she's always struck me as a cute, funny actress with a genuine one-of-the-guys/little sister vibe (hey, I'm over 40 now!). I haven't seen it, but she also gained some critical acclaim for the recent movie, Black Swan. Regardless of her talents, she went up a couple notches in my book when she accepted a Youtube date request from a Marine in Afghanistan.

As seen in the second video, she's been out promoting her new movie Friends with Benefits with co-star Justin Timberlake. She also did a recent interview in GQ where she addressed the concept of "friends with benefits".

GQ: Your new movie is called Friends with Benefits. Ever been in one of those relationships?

Mila Kunis: Oy. I haven't, but I can give you my stance on it: It's like communism—good in theory, in execution it fails....

Agree and agree. So, another couple notches....and by the way, she's also a Trekkie, which may raise her even higher in the estimation of some people around here.

Mayor Menino: Grand Theft Auto Is Fine (As Long As It's Committed By Undocumenteds)

Monique Chartier

The mayor of Boston is trying mightily to expand the list of crimes that undocumented immigrants are (tacitly) permitted to commit. (H/T Howie Carr.)

Boston Mayor Thomas Menino is now reversing course and threatening to withdraw from the Secure Communities program.

That's a big change for Boston, where police Commissioner Ed Davis had been a strong supporter of the program, wich shares the fingerprints of everyone arrested by local police with federal immigration authorities. ...

But now Menino says he'll pull out of the program if US immigration authorities don't limit deportations to serious criminals.

This was supposed to be on issues like homicides, major crimes, and they were taking this too far. A guy steals a car, they do the fingerprints, send it to Washington, have the person deported. That's not the Boston I want. I want Boston to be a city that welcomes immigrants,” Menino said.

... so immigrants won't feel welcomed if they're not permitted to steal cars??? Or are you saying, Mr. Mayor, that only immigrants steal cars? Also, please advise at what point car theft became an unserious crime.

In any case, keep talking, Mumbles. Though your campaign manager is undoubtedly hiding under a desk right now knocking back the aspirin, your foot-in-mouth disease is a considerable source of amusement to the rest of us.

July 12, 2011

Coincidence or Cause? SK Teachers Union Returns to Table When Binding Arbitration is Taken Off It

Monique Chartier

Let's not allow this little turn of events to go unnoticed as we transition from the crazy last days of the legislative session to a lovely, hazy summer.

South Kingstown's teacher contract expires in August; accordingly, the School Committee and the NEA-SK have been working on a contract renewal. When binding arbitration got cranked up towards the end of the GA's 2011, however, and there was a distinct possibility it was going to get passed, the union cancelled three meetings with the School Committee.

We need to pause here to note that one of South Kingstown's legislators - Senator Sue Sosnowski - took the opportunity to helpfully point out how this turn of events demonstrated the "need" for binding arbitration.

"We have a disaster in town, and I was hoping we'd have something like this that would help the situation."

Sosnowski is referring to a dispute over the South Kingstown teachers contract, which expires Aug. 30.

That's interesting because no South Kingstown official agrees with her that binding arbitration would "help the situation". In fact, both the Town Council and the School Committee, along with most (all?) other councils and committees around the state, signed resolutions in opposition to its passage.

Fortunately, they, rather than the senator from District 37, got their way when the House refused to follow the Senate over the cliff. Binding arbitration was dead, at least for this session.

And lo and behold, the NEA-SK has returned to the bargaining table.

Causation or curious timing? We report; you decide.

It's the cuts, stupid

Marc Comtois

It's tedious to follow the debt ceiling/budget deficit wrangling, I know. Around here, we have the ProJo trumpeting tax increases as the "obvious fix" and telling the Republicans "to do what grownups do" while explaining that "the health-care reform law passed last year would have begun to kick in its projected savings for the government" by 2015. Just trust Obama, right? After all, he's proposing $3 in cuts for every $1 in tax increases (or something like that). Really (and a second source)?

Sen. McConnell has been in talks with Obama and Democrats. We wanted to do something serious and big. Yesterday, he asked point blank how much the Biden-led deal would actually cut from next year's budget. Sen. McConnell has been in talks with Obama and Democrats. We wanted to do something serious and big. Yesterday, he asked point blank how much the Biden-led deal would actually cut from next year's budget. The answer he received was $2 Billion, and it's all smoke and mirrors. In exchange, [Democrats] want $1 Trillion in tax hikes. It's not the kind of deal we're at all interested in. We won't accept guaranteed tax hikes in exchange for fantasy future spending cuts. It's not going to happen. We're going to fight like hell to do what we've said we want: Real spending cuts and caps, a vote on a Balanced Budget Amendment, and real entitlement reform. ">The answer he received was $2 Billion, and it's all smoke and mirrors. In exchange, [Democrats] want $1 Trillion in tax hikes. It's not the kind of deal we're at all interested in. We won't accept guaranteed tax hikes in exchange for fantasy future spending cuts. It's not going to happen. We're going to fight like hell to do what we've said we want: Real spending cuts and caps, a vote on a Balanced Budget Amendment, and real entitlement reform.
Got that? $1 trillion in tax hikes now and $2 billion in budget cuts. Yeah, seems fair.

Pensions Are an Example, Not the Whole Problem

Justin Katz

I'm skeptical that anything substantial will come of the current push for pension reform among elected officials, but even if some positive change results, I'm concerned that elected officials and the public alike will wipe their hands together with a collective "problem solved." This article explaining that growing pension costs promise to eat up whole increases in school budgets for the next fiscal year, for example, doesn't offer any hint that labor costs have been doing just that for years, decades.

But let's start with the faulty attitude under which the public sector has become corrupted:

"In some regards the state Retirement Board made its adjustments in a void without thinking about the wealth of the communities in the state or conflicts with the tax levy cap," Peder A. Schaefer, assistant director of the [Rhode Island League of Cities and Towns], said.

The only consideration that the Retirement Board ought to make when setting payment requirements is what reasonable predictions should be applied. The fact that the promises of elected officials will be difficult to requite does not lead to the conclusion that the state ought to pretend otherwise, which is what Schaefer is ultimately suggesting.

The executive director of the Rhode Island Association of School Committees, Tim Duffy, gets a little closer to my main subject, though:

"Hopefully the pension review commission will address this major problem," Duffy, from the school committee association, said. "Otherwise we have a situation that doesn't even allow for critical decision-making by school committees. "They won't even have the ability to weigh what [programs] are most important to student learning because basically they'll have budgets that are just funding a retirement system."

This dynamic is nothing new. Schools have been ending programs (like music) and forcing parents to pay separately for sports precisely because school budgets, which almost never actually decrease, whatever enrollment may do, are basically just funding the salaries and benefits of the adults employed within them. Pensions are unique because they were future payments that administrators didn't have to slip into the system on an regular basis, as they have had to do with salaries and more immediate benefits, like healthcare.

Even with those, though, the game is stacked in the unions' favor, with steps, longevity, and the arsenal of budgetary tricks that make voters believe that they have no choice but to pay up. We don't need structural changes just for pensions. We need them for our entire school system.

July 11, 2011

Re: Who Is Pulling the Trigger?

Monique Chartier

Further to Justin's post, perhaps the most exasperating aspect of the mainstream media's studious disinterest in Operation Fast and Furious is the patent lack of consistency. If this had been an operation initiated by the ATF under a Republican president, the coverage would have been wall to wall. Assuredly, more than one MSNBC program host would have required a paper bag and then sedation to ease the hyperventilating.

One exception, however, was the Daily Show. Jon Stewart pretty thoroughly shredded the operation. Check out minute 1:20, for example, to learn about the ATF's cringe-making explanation as to how the tracking of the guns into Mexico got botched - hint: it involves Radio Shack. (You heard that right: Radio Shack.) He also points out (minute 5:15) the ... er, cooperation demonstrated by the Department of Justice - i.e., Attorney General Holder, whose "resignation" Justin is correct to call for - to the Congressional committee investigating the operation.

Canada did it

Marc Comtois

Michael Barone points to a piece by Fred Barnes (sub req'd, but Barnes has mentioned this before) that explains that helping an economy by reducing spending can be done. Barone summarizes:

In the 1990s Canada’s Liberal party government reduced its national debt and revived its economy by, among other things, reducing federal employment by 45,000 jobs, 14% of the total. The ratio of spending cuts to tax increases was nearly 7-1. Overall Canada’s economy, which grew by less than 1% annually between 1989 and 1993, grew by an average of 3.4% between 1994 and 2006.

Who Is Pulling the Trigger?

Justin Katz

Given that the mainstream media has appeared less interested in this story than in such critical events as royal weddings and the accuracy of Republicans' references to history, Anchor Rising should help in the effort to prevent it from slipping through the cracks:

In Fall of 2009, the Obama Administration conceived Operation Fast and Furious, in which the ATF sold thousands of advanced weapons to Mexican drug cartels in order to track them once they were used in crimes. This policy perfectly dovetailed with Obama's gun control arguments. First of all, by selling guns to the cartels that the ATF could definitely trace back to the US (because they were bought from the ATF), the percentage of guns used in Mexican crimes traceable to American guns would increase. ATF supervisors rejoiced at their success when they found that these guns were being used for violence in Mexico.

At the very least, Attorney General Eric Holder, who is knee deep in this operation, should be forced out of office. The political repercussions for the Obama administration should also reach all the way up to the top office.

July 9, 2011

Big Brother Hacker is Watching???

Monique Chartier

Though I didn't quite know how to react at first - technically, isn't an Apple store a public place? - this man's actions were undoubtedly weird, if not creepy.

The US Secret Service has raided the home of an artist who collected images from webcams in a New York Apple store.

Kyle McDonald is said to have installed software that photographed people looking at laptops then uploaded the pictures to a website. ...

Kyle McDonald's images were uploaded to a page on the blogging site Tumblr.

In the description of People Staring at Computers, the project is described as: "A photographic intervention. Custom app installed around NYC, taking a picture every minute and uploading it if a face is found in the image.

"Exhibited on site with a remotely triggered app that displayed the photos full screen on every available computer."

The site features a video and series of photographs, apparently showing shoppers trying-out computers.

So if this had been Apple security making sure that people weren't prying and pocketing pieces of their laptops, that would have been one thing. But because this was a private individual doing the ... er, surveillance, it's a problem. (Right?) Even if it was For The Sake of Art ...

Notes on Summer Reading in Rhode Island

Carroll Andrew Morse

Last evening, during a visit to a bookshop, I took a quick look at the table labeled "summer reading". I am not 100% sure that "summer reading" referred specifically to a high-school reading list, but two of the titles on the table were The Catcher in the Rye by J.D. Salinger and Slaughterhouse Five by Kurt Vonnegut, and I doubt that these books would place near the top of anyone's summer recommendation list in the absence of their reputation as books that students are supposed to read. Also, I've never understood why high-school English teachers believe that the literary theme of the misanthropic jerk (in Salinger, expressed directly through the main character, in Vonnegut, through the author's tone) is essential to the summer reading experience.

If there is any momentum for replacing Vonnegut with something good from the science fiction genre instead, I would like to recommend Do Androids Dream of Electric Sheep by K.W. Jeter (known best as the book that the movie Blade Runner was based on, and a very good novella in its own right).

Anyway, following from the eminently reasonable assumption that no one has read Salinger or Vonnegut in at least the last 20 years or so because they actually wanted to, suggesting that the titles on the summer reading table were indeed recommendations for students, I was a little surprised to see A People's History of the United States by Howard Zinn included -- which must mean, more than anything else, that I'm a little behind the curve, on how history is being taught in our high schools. Then again, there is evidence that a non-Marxist view of American history is catching up with the curriculum in some places, as Amity Shlaes' The Forgotten Man was on the table too.

But the best antidote to the reflexive because-America-has-been-strong-it-must-be-wrong radicalism of Howard Zinn lying on the summer reading table may have been Orson Scott Card's sci-fi novel Ender's Game. Ender's Game, which has made official high-school summer reading lists for several years now, explores themes of the morality and the consequences of the use of force in ways I suspect have a much bigger impact on many teenage minds than old-line Marxist historicism will. Just ignore the little coda at the end of EG, where the author forces a bridge between Ender's story and the next couple of books in his "Speaker for the Dead" series.

(The fact that links are included to all books mentioned in this post should not be interpreted as a suggestion to buy all of them).

Despite it all...

Marc Comtois

...one of the reasons we love this crazy, mixed up state is days like this. So enjoy it!

Have a nice weekend!

July 8, 2011

NEA Convention Wrap-ups

Marc Comtois

I touched on some of the goings on at the NEA convention earlier in the week. Stephen Sawchuk of Education Week and Patrick Riccards at Eduflack have summaries up about the now-wrapped NEA convention and what came out of it. Some points from Sawchuk:

* [T]he NEA removed the sentence from its resolution on compensation that prohibits performance-based pay or merit pay. Make sure to read this important update, which potentially gives the union more flexibility in how it handles compensation changes.

* On the Common Core State Standards Initiative, NEA President Dennis Van Roekel told me that the union is fully supportive of the effort and hopeful that the new generation of tests will be much more sophisticated. He said he has, however, gotten some queries about teachers uncertain of what to do because they are now expected to teach to the new standards, while their students are being assessed on the former ones....At the same time, Van Roekel acknowledged that stopping annual testing until the new assessments are in place could jeopardize students who have gotten more attention under the NCLB-required disaggregation of data.

* [T]he chair of NEA's Commission on Effective Teachers and Teaching, Maddie Fennel, made a short presentation to delegates....Fennel said the best and most successful teachers should work with the toughest students, just as the best doctors see patients with the most challenging symptoms. Will the NEA as a whole go along with that idea? Stay tuned.

* The union is now pushing for regulatory relief from elements of the No Child Left Behind law (like the 2014 deadline, the sanctions cascade, and the "highly qualified teacher" designation), but without the strings that the Obama administration plans to attach.

And from Riccards:
* NEA moved to condemn, but not call for the ouster of, U.S. Education Secretary Arne Duncan (most notably for his support of teacher firings in Rhode Island and presumably for his defense of the tying student performance data to teachers in Los Angeles), yet then turned around and endorsed President Barack Obama for 2012. If there was ever a cabinet secretary in tune with his president, it is Duncan. So are we truly upset with Duncan or truly content with Obama's leadership? And if it is the latter, are we endorsing his work in issues like the economy and healthcare, and setting aside concerns with his Administration's education policies? And was endorsing Obama in 2011 an apology for waiting so long to endorse him in 2008?

* NEA officially placed Teach for America on its public enemies list. For years, union leaders have tried to discount the role that TFA does or should play in public education. In recent years, union cities like Boston have complained about TFA teachers taking away previously union jobs. So now the NEA has a policy stance that matches its rhetoric regarding the TFA movement. But what about those TFA teachers who are members of their local unions? How do they show up at the next union ice cream social?

* NEA approved the use of test scores to evaluate teachers, with one important caveat. Yes, the NEA said, student test scores should be one of the elements used to determine the effectiveness of a teacher. The catch? NEA says that there are no current student tests that meet the standard for the tests allowed under the new NEA policy. Essentially, we will gladly be measured by student test scores assuming the test meets our criteria. But since no current tests do (and we assume the new ones being developed through RttT Assessment grants won't either), I guess you just can't use test scores to evaluate teachers.

Regarding the $2 Trillion in "Cuts" for the Proposed Raise in the Debt Limit Ceiling

Marc Comtois

CATO has put out a simple video explaining that the "drastic cuts" being bandied about ain't no such thing, they're just the typical political cuts (ie; a reduction in the previously projected rate of growth) (h/t):

"Unexpectedly" Bad Job Numbers

Marc Comtois

Glenn Reynolds has been noting the "unexpectedly" bad job reports for many months now. In other words, for some reason, news outlets, pundits and the government all seem to be surprised that the job market continues to stink. Month after month, they've amped up hopes that unemployment is going to go down while new job numbers leap up. Today's report was no different and also revealed that the past two months were--you got it--"unexpectedly" worse than originally thought.

The nation's unemployment rate ticked up to 9.2 percent in June from 9.1 percent the month before as businesses and government agencies added only 18,000 jobs to their payrolls, the Bureau of Labor Statistics just reported.

The number of Americans classified as unemployed rose to 14.1 million from 13.9 million in May...."The change in total nonfarm payroll employment for April was revised from +232,000 to +217,000," BLS reports, "and the change for May was revised from +54,000 to +25,000.

Recovery Summer!

Government: Where Popular Services Are a Problem

Justin Katz

Here's an excellent indication that something is askew in our way of government operation:

Charles Odimgbe, chief executive officer of RIPTA, said he was aware of the problem [of insufficient beach-bound buses] but that his hands are tied.

"We have a deficit of $4.6 million," Odimgbe said. "I do understand there are way too many people wanting to go to the beach. But the riders need to understand about the funding constraints we are going through."

Odimgbe said reserve buses would cost money. "I don't see how we could compound our deficit by adding more service," he said.

"It's a beautiful day, sunny. People want to get to the beach, I understand that," he said. "But this is about all we can afford."

So, a government agency offers a service with predictably high demand, but since it loses money with every person who uses the service, it must ration it to stay within budget. Perhaps RIPTA should partner with a private company that is able to charge able-bodied, employed people for their charter to the shore.

The article mentions a federal grant that "reimburses" RIPTA for offering free bus rides on days of poor air quality but doesn't explain why that wouldn't apply to reserve buses. Readers can only guess why it is better to leave people standing at the curb for hours on such days than to charge them for the bus ride for which they're waiting.

And then there's the curious coincidence of a week-old cessation of reserve buses with a week-old doubling of parking fees for state beaches. Conflicting currents of distorted interests is big government.

Mayor Baby Daddy

Marc Comtois

Expecting politicians to act with sexual propriety is loser's bet, I know. And you can call me an up-tight, un-modern Puritan prig or whatever, but it just isn't good when the Mayor of the largest city in the state--someone who is, correctly and properly, a role model for minority youth--reveals he is having a child out of wedlock.

The baby with live-in girlfriend Farah Escamilla, a legal assistant for a Providence law firm, is Taveras' first. The due date is Jan. 4 or 5, almost exactly a year after he became the city's mayor.

He began dating Escamilla, who Taveras said is from Providence, shortly after his inauguration and subsequent break-up with [a] longtime girlfriend.... Taveras said he and Escamilla were friends for more than four years before they began dating.

Although the baby was not planned, Taveras, 40, said he and his family are "really excited." He and Escamilla don't know the baby's sex yet, and the mayor didn't say whether marriage was in his future.

Obviously, Mayor Taveras is excited. Look, there are "oopses" in life, I get it, and he still has time to "make it right" as they used to say. I just don't think he should get a pass for a lack of judgment and discretion.

Civics in an Evolving Society

Justin Katz

The topic of conversation, when Andrew spoke with Tony Cornetta on the Matt Allen Show, last night, was constitutional principle and the wise structure of our government. Stream by clicking here, or download it.

July 7, 2011

Extrapolating (Possibly Unscientifically) the Extent of Voter Fraud in Rhode Island from Rep Williams' Experience

Monique Chartier

Though I was as surprised as Justin at its passage, bravo that Rhode Island has put a voter i.d. law on the books.

Arguments were made against the measure right until and even after Governor Chafee signed the bill, however. Rep Larry Valencia went so far as to say that we would be fixing a problem that doesn't exist. Inasmuch as he sits near a victim of voter fraud in the House of Representatives, someone who also is the mother of a victim of voter fraud, it is completely unclear how the rep can make this assertion.

Such inattention aside, let's do some numbers.

Rhode Island has 702,000 eligible voters.

In 2006, Rep Anastasia Williams and her daughter went to vote and were told that they had already voted. Their votes had been stolen from them. (She's the colleague whom you want to inform, Rep Larry, that voter fraud doesn't exist.)

Rep Williams is one member of a 113 member body. 1 / 113 = .009

[Feel free to correct any of this math.]

So the percentage of General Assembly members who have been victims of voter fraud (that we are aware of) is .9%. That becomes our multiplier.

Final step: 702,000 Rhode Island voters X .009 = 6,318

Accordingly, presuming the rate of voter fraud victimization is the same for the general population as it is for members of the General Assembly (one in 113), there have been 6,318 instances of voter fraud in Rhode Island, with the caveat that the multiplier and the total for the state change considerably if even just one more member of the G.A. has been a victim.

How Does New Medicare-eligible retiree Reform Affect Your Community?

Marc Comtois

WPRO's Bob Plain piqued my interest with his story on how the new law (PDF, pg. 145 of file) allowing cities and towns to shift municipal retirees’ from private health care plans to Medicare will save Providence about $11.5 million.

I haven't heard what sort of savings this could mean for my hometown of Warwick's budget numbers, though a look at the 2012 Warwick City Budget (pg.85 of file) shows that there are approximately $6.88 million earmarked for retiree health care for municipal, police and fire retirees (Warwick schools don't pay for retiree health care). Now, this doesn't mean that all of that money can vanish from the books. There are plenty of contingencies built into the new law:

Every municipality, participating or nonparticipating in the municipal employees' retirement system, may require its retirees, as a condition of receiving or continuing to receive retirement payments and health benefits, to enroll in Medicare as soon as he or she is eligible, notwithstanding the provisions of any other statute, ordinance, interest arbitration award, or collective bargaining agreement to the contrary. Municipalities that require said enrollment shall have the right to negotiate any Medicare supplement or gap coverage for Medicare-eligible retirees, but shall not be required to provide any other healthcare benefits to any Medicare-eligible retiree or his or her spouse who has reached sixty-five (65) years of age, notwithstanding the provisions of any other statute, ordinance, interest arbitration award, or collective bargaining agreement to the contrary. Municipality provided benefits that are provided to Medicare-eligible individuals shall be secondary to Medicare benefits. Nothing contained herein shall impair collectively bargained Medicare Supplement Insurance. {emphasis added}
So cities and towns (ie; mayors and city councils) don't have to do this and current collective bargaining agreements may prohibit them from doing so, anyway. It'll be interesting to see who takes advantage of the new law, who ignores it or who makes excuses.

RE: Voter ID Surprise

Marc Comtois

Justin wonders if there's a catch with the ease with which voter ID sailed through the legislature and the Governor's inbox. Here's a theory for you: RI GOP Chair Ken McKay was in for WHJJ's Helen Glover this morning and had on someone from GOLOCALProv touting their story about the disparity between census data and voter rolls in traditional Rhode Island "vacation" communities. They didn't go over specific numbers, but here they are:

A comparison of the new U.S. Census data with public voter registration records revealed significant discrepancies in at least four communities in 2010:

■ Block Island had 888 year-round residents aged 18 years and older recorded in the Census while 1,468 people were registered to vote—a difference of 65 percent.
■ Jamestown had 362 more registered voters than residents.
■ Little Compton had 236 more voters than residents.
■ Westerly had 2,289 more voters than residents—a discrepancy of more than 15 percent. (See below chart for the complete breakdown.)

Admitting he was cynical, McKay tied Voter ID into it and wondered if GOLOCAL was tipped off to the disparity by someone looking to suppress conservative-leaning, shoreline property owning (and property-tax paying) out-of-staters from voting in Rhode Island. As McKay pointed out, RISC started as the Rhode Island SHORELINE Coalition (since renamed the RI STATEWIDE Coalition) and advocated for voting rights for those who owned property in Rhode Island. He also prompted the GOLOCAL editor to give RISC a call for their thoughts. Further along in the piece, the possible repercussions are raised:
[T]he new state law on voter ID could have an impact on the number of vacationing New Yorkers and others voting in Rhode Island elections. The law mandates that voters show a photo ID at polling places. “If they produce a New York license that doesn’t work because you can’t have a New York license that has a Rhode Island address,” said the former state election official.

Instead, out-of-state voters would have to bring a passport, birth certificate, or other form of ID in order to satisfy the new rules.

Overall, the estimate is that there are around 10,000 out-of-state voters voting in Rhode Island. They can vote here if they declare RI as their legal residence and don't vote elsewhere.

Voter ID Surprise

Justin Katz

Voter ID legislation moved along with surprisingly little fanfare, so much so that opponents weren't sure that Governor Chafee had signed until three days after the fact. Perhaps I'm just too cynical, but I can't help but feel as if I'm missing something.

The bill text is somewhat light on details, so I suspect that the ID cards will be easier to get than most Anchor Rising readers would like. Strictness and enforcement will also be critical aspects to watch. But still, the legislation looks promising.

This being Rhode Island, though, I can't help but wonder what the catch is or what other piece of legislation was bought with this coin.

July 6, 2011

Gimme that Old-Tyme Constitutionalism!

Carroll Andrew Morse

The passage of the state budget, followed by a flurry of bills passed and not passed in the last week of the 2011 Rhode Island General Assembly session, were clear demonstrations of the value and the wisdom of two foundational principles of American constitutional governance.

1. The Division of Powers, more commonly referred to as the "Separation of Powers": In American-style constitutional systems, the Governor and the legislature both have a role in the making of laws, and it was this division of the lawmaking power that prevented an executive elected only by a plurality from imposing a tax policy that was unpopular with the majority. The legislature did their job of representing the 64% of the population who didn't vote for the current Governor or his program, accurately reflecting the fact that the Governor's high-profile taxation proposal was not popular or desired by the citizens of Rhode Island.

2. Bicameralism, Baby! The structure of two legislative chambers, neither of which owes its power to the other and both comprised of members who are electorally accountable to the people, was key in slowing down or stopping some of the legislation (the I-195 bill, binding arbitration) that otherwise would likely have been passed into law without appropriate time for public deliberation. Think how much different the outcome of the legislative session might have looked, if one individual like Majority Leader Dominick Ruggerio could extend the power he holds over the Senate to the entire legislature. It is the bicameral structure of the legislature that prevents this from easily occurring.

There are often feelings that "old" structures of governance have only limited application in the modern world, but sometimes the structures of a venerable and tested system are exactly what is required to keep government responsive to the people.

Federalist 51 hits both the principles of the division of powers and bicameralism, for anyone interested in further thoughts on the subject.

Rhode Island: The Business Underdog (of our own making)

Marc Comtois

Toray has been in Rhode Island for over twenty years. They are looking to expand. They also have a facility in Virginia. The Rhode Island facility is bigger, but the costs are higher. Virginia looks pretty good. #50 business friendly Rhode Island is now competing with #1 business friendly Virginia to woo a business it already has.

[Toray CEO Richard] Schloesser is looking to make his decision by the end of the year, said he’d prefer to expand here. But he’s concerned about the cost of doing business in Rhode Island. “It’s a very expensive state to do business in,” he said....One of Toray’s big concerns is energy. The company is the largest consumer of electricity in the state, and it went to court to appeal the power-purchase agreement between National Grid and Deepwater Wind, which plans to build wind farms in the waters off Rhode Island. Toray contended the agreement would drive the price of power too high.

In an interview last week, Schloesser said the court’s decision will have “some impact” on the company’s expansion plans.

On Friday, the Rhode Island Supreme Court upheld the power agreement, ruling against Toray and fellow plaintiff Polytop Corp. Schloesser could not be reached for comment Tuesday....[Earlier] Schloesser said he is worried about the long-term economic climate in the state. He said some of Chafee’s tax proposals, particularly a 1-percent tax on manufacturing equipment, could have been a deal-breaker for Toray. But that idea never made it through the General Assembly.

“We’d like to have the expansion here, but we have questions about what will happen to the state. Is this going to be a good place to do business in the next five years?”

Because the overall business environment in this state stinks, the Economic Development Corporation is forced to try to make up for the shortcomings by offering one-time, sweetheart deals.
[EDC Executive Director Keith] Stokes aid Toray might be able to qualify for tax credits under the state’s provisions for manufacturing research and development, and another for job creation. He said officials from the Quonset Development Corporation have also been involved in the discussions about land acquisition.

“Companies are making their decisions based on costs,” Stokes said. “It’s not lifestyle. It’s not loyalty. It’s costs.”

Stokes said certain costs –– utilities, health care, land and taxes –– are higher in Rhode Island than in other states. What the EDC is trying to do for Toray, he said, is come up with a package to make Rhode Island cost-competitive....Stokes said that in a perfect economic world...[r]ather than a whole set of incentives and inducements, Rhode Island would be better served by a lower corporate-tax rate, a stable budget and a predictable business climate.

But, said Stokes, we’re not living in that perfect world. Stokes said that when it comes to economic development, keeping existing companies, particularly an expanding company, is even more important than luring new ones.

Stokes said the incentives under consideration for Toray are not “deals,” but ways of compensating for the higher fixed costs of doing business in Rhode Island.

It's no way to do business.

Different Is Not Equivalent

Justin Katz

State Senator Donna Nesselbush (D, Pawtucket) gets to the heart of the civil unions/same-sex marriage matter:

Nesselbush said she initially planned to support [civil union legislation] "as a step forward," but changed her mind because of language — added on the House floor — that exempts religious groups from recognizing a civil union or treating such couples the same as they would treat married couples.

In her comments on the Senate floor, Nesselbush said those who support the bill are "essentially institutionalizing inequality."

"So while extending valuable rights, if passed, this legislation would essentially establish a separate status, and separate is never equal," she said.

The bottom line is that separate and unequal are entirely appropriate when two groups are not similarly situated. Unless one takes the extreme radical view that men and women are not differentiable — that they are entirely the same — then there will remain the possibility that it's reasonable to treat the relationships that they have with each other as unique.

What activists like Nesselbush wish to do is to disallow society from observing the uniqueness of intimate relationships between members of our species' two genders, which by their nature have the capacity to generate new human beings. Judgment might be different were our government not so pervasive in its regulation of everyday life — were it possible for social institutions to make the substantive statement of behaving as if their beliefs are actually true.

The religious exemption in the civil union bill at least preserves that ability in some minimal (albeit insufficient) way. Every individual and organization ought to be empowered to treat marriage between a man and a woman as uniquely worthy of recognition, and our government ought to do the same.

July 5, 2011

Counterfactual alert: A Conservative Case for Raising Taxes?

Marc Comtois

Just throwing it out there. From Steven Hayward:

one problem with our current tax policy is that at the moment the American people as a whole are receiving a dollar of government for the price of only 60 cents. (I don’t say a “dollar’s worth of government,” but let’s leave that snark for another time.) Any time you can get a dollar of something at a 40 percent discount, you are going to demand more of it. My theory is simple: if the broad middle class of Americans are made to pay for all of the government they get, they may well start to demand less of it, quickly.

There’s corollary point to this. Back in the Reagan years, there was a vigorous internal debate about whether to resist tax increases because “starving the beast” would hold down spending. But evidence is now in: this strategy doesn’t work. {here's the source he cites-ed.}

Since starving the beast didn't work, how about over-feeding it?
Right now the anti-tax bias of the right has the effect of shifting costs onto future generations who do not vote in today’s elections, and enables liberals to defend against spending restraints very cheaply. Time to end the free ride....more to the point, the argument should be cast in terms of a creating pro-growth tax reform. Froma Harrop of the Providence Journal has a typically idiotic column out today saying Americans want higher taxes. It is not even worth the bother of debunking. There is one highly useable sentence in it: “Today, high-tax Sweden has only 7 percent unemployment, while ours is 9 percent. How come? Before the 2008 economic meltdown, Sweden prudently maintained a budget surplus equal to 3.6 percent of its economy.” Never mind that Sweden isn’t exactly putting its shoulder to the wheel in the fight against terrorists (or anything else), and just focus your mind on one fact: yes, it is a high tax country, but its corporate income tax rate is one-third lower than the U.S. rate (26% for Sweden; 39% for the U.S.). So, my opening bid is—yes. By all means let’s emulate Sweden’s tax rates, starting with a one-third cut in our corporate income tax rate, and a hike in middle class income tax rates. Deal? I didn’t think so.
Yeah, not so sure this is gonna fly, but interesting.

Providence used as example of how "Compensation Monster [is] Devouring Cities"

Marc Comtois

Steve Malanga looks at the national problem of cities in over their heads (particularly because of pension promises) and uses Providence (and New Haven, CT) as examples:

Cities are also running out of fiscal alternatives to deal with their deficits. Like states...many cities have used one-shot revenue deals, hidden borrowing, and other gimmicks to bolster their finances. The weak economy has lasted so long, though, that these techniques have been exhausted. To balance its 2010 budget, for example, Providence, Rhode Island, borrowed some $48 million (using its fire stations and headquarters as collateral); it also drained most of its reserve fund, which shrank from $17 million to $2 million in just one year. Moody’s Investors Service and Fitch Ratings subsequently downgraded the city’s bond ratings by two notches, essentially ending its ability to use fiscal gimmicks. But Providence still faces a budget squeeze because its retiree costs amount to 50 percent of tax collections.
Nationally, the rate of growth of such local expenditures outpaced state and federal:
Local governments also helped bring on their current budget nightmares by carelessly expanding hiring and wages in recent boom years. In the decade leading up to the 2008 financial crash, the number of workers for cities, towns, and schools increased 16 percent, even though the country’s overall population grew just 12.5 percent. Wages also increased, and, of course, the hiring frenzy made those pension obligations even worse. The result: over the same decade, the total in wages and benefits that public schools paid to teachers and noninstructional staff (to take one category of public-sector worker) jumped an amazing 72 percent, despite moderate increases in student enrollment.
As Ted Nesi highlighted, albeit over a longer period, local government payrolls increased while state payrolls went down. Some argue that the cuts in state jobs have led to the increases at the local level. But, looking at Nesi's chart, it's obvious the local growth doesn't equate to the state reduction.

Looking for One Time Fixes: Any Indian Temples in RI?

Marc Comtois

Just dreaming:

In Southern India a story that sounds like the plot line of a Hollywood adventure film is unfolding. Over the past week, on orders from the country's Supreme Court, a panel has found a treasure estimated to be worth $22 billion in the underground vaults of a Hindu temple in Trivandrum, India.
Anyone checked the Legislative "vaults" lately?

Stimulus = $278,000 per job

Marc Comtois

You know they're trying to hide something when they release a report on the Friday afternoon of a long holiday weekend.

[T]he White House’s Council of Economic Advisors, a group of three economists who were all handpicked by Obama...reports that, using “mainstream estimates of economic multipliers for the effects of fiscal stimulus” (which it describes as a “natural way to estimate the effects of” the legislation), the “stimulus” has added or saved just under 2.4 million jobs — whether private or public — at a cost (to date) of $666 billion. That’s a cost to taxpayers of $278,000 per job.

In other words, the government could simply have cut a $100,000 check to everyone whose employment was allegedly made possible by the “stimulus,” and taxpayers would have come out $427 billion ahead.

Of course, that would have removed the ability of bureaucrats and friends of "O" to skim off the top.

ADDENDUM: There was a second part to this post that got "lost" in the interwebs. Honest, I included it first time around. Here it is:

Jake Tapper tweeted that the White House isn't happy with the way the report is being framed, quoting Liz Ozhorn, "a White House spokesman for the stimulus bill":

[T]he Weekly Standard report “is based on partial information and false analysis. The Recovery Act was more than a measure to create and save jobs; it was also an investment in American infrastructure, education and industries that are critical to America’s long-term success and an investment in the economic future of America’s working families. Thanks to the Recovery Act, 110 million working families received a tax cut through the Making Work Pay tax credit, over 110,000 small businesses received critical access to capital through $27 billion in small business loans and more than 75,000 projects were started nationwide to improve our infrastructure, jump-start emerging industries and spur local economic development. The nonpartisan CBO has confirmed that the Recovery Act delivered as promised, lowering the unemployment rate by as much as 2 percent, boosting GDP by as much as 4 percent and creating and saving as many as 3.6 million jobs."
Countering this, Reuters blogger James Pethokoukis tongue-in-cheek tweeted "But what about multiplier effect?" (reference) .

UPDATE: Jim Geraghty notes that, taking the White House "corrective" into account, and using higher employment estimates, then it comes out to $185,000 per job. So much better! Geraghty also notes that the White House is following a new rounding standard:

Also note that the White House does some convenient rounding of their own. In their defense, they state, “The nonpartisan CBO has confirmed that the Recovery Act delivered as promised, lowering the unemployment rate by as much as 2 percent, boosting GDP by as much as 4 percent and creating and saving as many as 3.6 million jobs.”

Actually, that stretches what the CBO actually said. Their report puts the maximum impact on the unemployment rate at 1.8 percent and as low as .6 percent, and that it boosted “(inflation-adjusted) gross domestic product (GDP) by between 1.1 percent and 3.1 percent.”

I'll stress it again: if it was all good, they wouldn't have released it on a Friday afternoon before the holiday weekend. It would have been a prime time speech on July 4th right before the fireworks!

NEA Disapproves of and Supports Obama

Marc Comtois

Anyone who keeps abreast of education issues knows that teachers are not particularly enamored with President Obama's education reform: Race to the Top (RI Ed. Commissioner Deborah Gist certainly takes heat for her local championing of this national policy), school turnaround models (think Central Falls) or expanding charter schools are just a few policies that rank-and-file teachers regularly castigate in comments sections at various blogs (education or political) or newspapers, for instance.

That's why it was no surprise when, in a recent address to the national convention of the NEA, Vice-President Biden was greeted with loud applause when he stated that, according to the AP, "there's widespread unhappiness among teachers for the Obama administration's education policies."

That's the same AP story explaining that the NEA has already endorsed President Obama for re-election. (No word yet if the RI tactic--tacitly endorsed by the silence from NEARI leadership--of having six-figure union leaders harass and bully* political opponents will be part of the national effort of the NEA).

I suppose the argument is that the NEA has no where else to go, right? It's too bad the rank and file have put themselves in the position of removing half of the electorate from political consideration. You'd think an organization composed of people who deal with all types of kids and their parents would be a little less inclined to have such an attitude. Maybe be a little more open minded. After all, conservatives are generally the ones who support more local control for education (instead of the imposition of, we're oft told by teachers, unrealistic, idealistic education mandates from above). Federal guidelines are inherently less flexible than those controlled locally. Local entities can more easily put pressure on local politicians and bureaucrats to effect change (for good or ill), whether that pressure is applied regarding teacher pay and benefits or the more important education quality and student-centric issues.

But it's pretty obvious that pedagogy and policy really are second-tier concerns. Actions indicate that the real concern of the rank and file--as the binding arbitration legislation shows and no matter the "for the children" gloss that is put out--is pay and benefits (not surprising nor meant to be damning--we all have our fiscal self-interests). I guess the NEA leadership is banking that the Democratic Party still provides the best chance for being "taken care of" as far as monetary compensation while "job quality" issues (ie; federal mandates and student-centric reform) take a back seat. The lack of dissent amongst the rank and file regarding the Obama endorsement indicates the NEA leaders' political calculations are correct.

*Incidentally, remember the big anti-bullying push in schools this year? Glad NEARI is setting an example.

A Legislature Shouldn't Be Speaker Plus Advisers

Justin Katz

We're all rightly pleased that binding arbitration for teachers didn't make it into law, but there's something in the Rhode Island Statewide Coalition's post-victory press release that taps into a disconcerting aspect of the process:

"We commend Speaker Fox for giving this legislation the burial it deserves in the final hours of the session but we also recognize the 17 Senators who truly began the momentum to kill this bill with their courageous votes against it on the Senate floor Wednesday," states RISC Executive Director Harriet Lloyd.

As much as we may want a particular bill to go away, we'd do well to avoid acceptance of the the lopsided power of Rhode Island's Speaker of the House. The Providence Journal story on the bill's death calls it "his decision," and one wonders why legislators were shielded from a vote. Just as higher profile candidates spread political contributions around to lesser allies, the Speaker appears to have determined that he had some political capital to expend.

It's not, by the way, just a question of the Speaker putting aside a bill that he believes needs better vetting (and better timing for the outcome that he likely favors). The aspect appears again in this Providence Journal summary of the legislative session's final days (emphasis added):

"My staff and I worked extremely hard to reach a compromise on the health exchange legislation and I am hopeful that we can work things out for potential passage in the future," House Speaker Gordon D. Fox, D-Providence, said Friday. "However, I was unwilling to accept the Senate version of the bill, which included the pro-life language."

To make the process look even worse, the article describes a period during which the House's computers weren't able to access the bills and "lawmakers complained they were being asked to vote on bills they could not see." One wonders whether it's appropriate for legislators to read bills just before voting on them, anyway. Shouldn't they have at least a basic familiarity with them before the debate begins?

On the other hand, given the dynamics of the General Assembly's leadership team, it's a question whether legislators really need to read the bills, at all; they allow a small group so much power to control their activities. In that regard, another ally of the the center-right movement also offers disconcerting remarks:

"I can walk out that door and feel proud that we did what needed to be done for this state," [Warwick Republican Joe] Trillo said. "It is your leadership, Mr. Speaker. You have stepped up to the plate. You have proven that you understand what this state needed."

Bull. The legislature did was it always does and squeaked through with a budget that solves no real problems and ratchets the damaging regulator and taxation regimes just a bit more, in ways direct and indirect. Here's one of the latter, with a bit of guffaw-worthy rhetoric from the majority leader:

Republicans criticized the potential surcharge on electricity and natural gas bills to fund the [low-income utility aid] plan. "Let's be honest. We are voting on a $7-million tax increase," said House Minority Leader Brian C. Newberry, R-North Smithfield. "Let's call it what it is and vote it up or down."

Responded House Majority Leader Nicholas Mattiello, D-Cranston: "Twenty dollars per year per ratepayer. Do you consider that a tax increase? I don't. That is our obligation to take care of those amongst us that are meek."

Rhode Island so loves its meek that it has developed a civic structure and employment environment that makes it unduly difficult for them to cease being meek. Consequently, those who wish to improve their station in life must go elsewhere. Until legislators address that problem, we'll continue down this road of annual difficulties — annual attempts to slow our decline. Perhaps substantive, positive change can come at the behest of unreasonably powerful legislative leaders, but more likely than not, they'll have to be knocked down a few pegs before the system receives the hard shakes that it so desperately needs.

July 4, 2011

Happy Independence Day...

Carroll Andrew Morse

...remembering too that it is a very serious day.

(The crazy-looking guy in the black hat is Stephen Hopkins of Rhode Island).

When the Lender and Supplier Is Another Nation

Justin Katz

Now, this is a curious development:

Last year, the U.S. Navy bought 59,000 microchips for use in everything from missiles to transponders and all of them turned out to be counterfeits from China.

Wired reports the chips weren't only low-quality fakes, they had been made with a "back-door" and could have been remotely shut down at any time.

If left undiscovered the result could have rendered useless U.S. missiles and killed the signal from aircraft that tells everyone whether it's friend or foe.

I'm a free-trade kind of guy, but sometimes, you have to wonder whether we forget that nations are still independent and self-interested entities. We wouldn't send our most top-secret documents off to a Chinese plant for copying and binding, would we? (Would we?)

All in the Judiciary's Hands

Justin Katz

The precedent that this ruling out of Michigan, related to a constitutionally created ban on affirmative action, sets is astonishing:

The 2-1 decision upends a sweeping law that forced the University of Michigan and other public schools to change admission policies. The 6th U.S. Circuit Court of Appeals said the law, approved by voters in 2006, violates the 14th Amendment's Equal Protection Clause.

The court mostly was concerned about how the affirmative action ban was created. Because it was passed as an amendment to the state constitution, it can only be changed with another statewide vote. This places a big burden on minorities who object to it, judges R. Guy Cole Jr. and Martha Craig Daughtrey said.

It sounds as if "equal protection" is being expanded to mean that minorities must have as much chance of changing a law as majorities. That remains the case, of course, inasmuch as minorities need only convince a majority to side with them, but this is something more targeted — like an affirmative action for democracy.

And if the ruling stands, think of the role that the judiciary will then play in our system. If the people's representatives pass a law that a judicial elite doesn't like, judges will strike it down as unconstitutional. If the people write it into the constitution, judges will strike it down as too difficult to change by democratic or judicial means.

July 2, 2011

"Cleaning Up": the Second Tell-Tale Action in the Story of the Socialist and the Housekeeper

Monique Chartier

Following upon the results of some slightly tardy due diligence on the part of the prosecutor’s office, the credibility of Dominique Strauss-Kahn’s accuser is now in tatters and she has exposed herself (my opinion only here) to, minimally, perjury charges on about six different fronts. Strauss-Kahn’s bail was lifted yesterday and the dropping of all charges appears the inevitable next and final step of the case.

When the story first broke, however, it was he-said-she-said. Naturally, one looks at all kinds of details to bolster one story or the other, including the actions of those involved.

Ben Stein early on strongly condemned the almost universal presumption of Strauss-Kahn's guilt. (Let the record reflect the broadmindedness demonstrated here of a right leaning capitalist defending a socialist.) Conversely, Strauss-Kahn’s action immediately following the incident (whatever comprised it) compelled me to take a different view.

Strauss-Kahn fled the hotel, they said, leaving behind personal articles, including his cell phone. He was seated in a first-class seat on a Paris-bound Air France flight when police arrested him.

He was so anxious to decamp that he was willing to leave behind his cell phone??? He must have done it! Of course, in retrospect, other reasons - flight from blackmail, escaping of false charges - for such a hasty departure suggest themselves. At the time, in the absence of strong counterveiling evidence, however, it was confirmation of his guilt.

In the same vein but more acutely telling, from my perspective, is the newly corrected statement by his accuser of her actions immediately following the incident (whatever comprised it).

Prosecutors said the woman lied to a grand jury by testifying she immediately alerted a supervisor about the assault.

The maid actually cleaned a neighboring suite on the 28th floor and then scrubbed Strauss-Kahn's room before she reported the incident to her boss.

No. It strains credulity to breaking that a woman who had just suffered what her attorney termed a "terrible sexual assault" would simply pick herself up and proceed to clean two rooms, including that of her assailant, before advising her supervisor of the alleged assault.

Prosecutors have also determined that, less than two days after the alleged attack, the accuser called her boyfriend and told him

Don’t worry, this guy has a lot of money. I know what I’m doing.

It appears that after she calmly cleaned the two hotel rooms, she intended to clean up again - this time, in a very different way.

Should We Even Be Celebrating Independence?

Justin Katz

Mark Steyn's Fourth-of-July-weekend column is a doozy:

Big Government on America's unprecedented money-no-object scale will always be profoundly wasteful (as on that Williamsburg flight), stupid (as at the TSA) and arbitrary (as in those waivers). But it's not republican in any sense the Founders would recognize. If (like Obama) you're a lifetime member of the government class, you can survive it. For the rest, it ought to be a source of shame to today's Americans that this will be the first generation in U.S. history to bequeath its children the certainty of poorer, meaner lives — if not a broader decay into a fetid swamp divided between a well-connected Latin-American-style elite enjoying their waivers and a vast downwardly mobile morass. On Independence Day 2011, debt-ridden America is now dependent, not on far-off kings but on global bond and currency markets, which fulfill the same role the cliff edge does in a Wile E Coyote cartoon. At some point, Wile looks down and realizes he's outrun solid ground. You know what happens next.

One could go quite a bit farther. The retiring generation has left the rest of us a decaying culture after decades of knocking chips from its foundation. Arguably, the lunge of government into this disconnected realm in which budgets are optional and unimaginable debt defines the new baseline for spending is a crass manifestation of the broader collapse.

It might be a manifestation that we could actually repair, though... if only so many Americans weren't dependent on government profligacy in one way or another.

July 1, 2011

Do Legislators Really Not Know How It Works?

Justin Katz

So they've gone and passed the budget. Rhode Islanders should not find it encouraging, though, that the architects of public finances apparently think in this way, speaking about the new 7% tax on insurance awards:

Dion says the burden falls on the insurance company, not the consumer: "When you total your car or have your car stolen, you file a claim with your insurance company. Your insurance company would determine the value of your totaled or stolen car and issue you a check for that value plus the sales tax on that amount, which you can then use to purchase a replacement vehicle," he said.

"So if your totaled or stolen car was worth $10,000, ... under the proposed change, the insurance company would issue you a check for $10,700 to cover the value of the vehicle plus the sales tax and leave the insured whole."

Sounds to me as if the cost of an insurance award just went up for the company, which will just plug that number into its calculation of its premiums. As a rule of thumb — voters and consumers — you always pay.

ProJo Editors Frack it Up, Trust NY Times

Marc Comtois

Like the ProJo, I've actually supported the idea of having an LNG terminal somewhere in the region. But their latest attempt to boost the idea by editorializing against "fracking" of natural gas in shale deposits is misinformed and relies too much on a much criticized, recent NY Times investigative piece. For instance, as the ProJo editorial states:

One problem is that well production in many fields is declining much more rapidly than expected. For instance, wells in the Barnett Shale, underlying Fort Worth, that had been projected to have a 20-30-year life or longer, will become financially unviable in half that time, The Times reported. Indeed many in the industry bank on rising energy costs to keep the industry afloat.
However, as Christopher Helman of Forbes wrote a few days ago:
The shale play that started it all, the Barnett of northern Texas, is today producing more than ever (5.6 billion cubic feet per day) despite there being half as many rigs working the land than there was two years ago (when production was 5.3 bcfd). As analyst Dan Pickering of Tudor, Pickering & Holt wrote in a note this morning, “If wells are declining faster than expected, the Barnett would not be at record production with reduced rig count.”
And so on. Setting this acute issue aside, the real problem is that the ProJo editors appear to be following a real "old media" path here: relying on the New York Times as the "paper of record" when there a multitude of sources available--with just a couple mouse-clicks and a search engine--that would help add some nuance and additional perspectives to the story.

For In-State Tuition, Show Us the Taxes

Justin Katz

William Dimitri, of Johnston, makes an interesting suggestion regarding in-state tuition for illegal immigrants, in a Providence Journal letter that does not appear to be online:

On the one hand, those fortunate enough to earn in excess of $250,000 already pay a substantial amount of taxes, but that fact seems to escape the grasp of the ... proponents [wish to increase those taxes].

On the other hand, it is highly unlikely that those illegal immigrants whom Diaz, Pichardo and the other "immigrant advocates" want to benefit have ever paid income taxes.

How about requiring that those illegal immigrants provide copies of their tax returns for every year they have been in Rhode Island before granting them the privilege of paying in-state tuition rates (which would make the idea more palatable to those who do pay taxes and tuition, like me) and leave those who work legitimately and pay taxes alone and in peace.

Honestly, I don't know the statistics for illegal immigrants and income taxes, and even were such requirements included for in-state tuition, I'm can't say I'd be for it. How about requiring people to follow the proper procedures for entering and remaining in this country? Especially with in-state tuition, which amounts to government-subsidized higher education, following the rules for becoming a legal resident seems the least one can do.