November 22, 2011

The Reason Behind Pension Credulity

Justin Katz

In his Sunday Providence Journal column, Ed Fitzpatrick reviews the passage of pension reform, and I have to say that he contributes to my surreal feeling of different realities based on different narratives:

Keep in mind that this isn't Texas: This happened in Rhode Island, a deep-blue state where unions are considered a legendary force at the State House

Keep in mind that this happened under Governor Chafee, the Republican-turned-independent who ran with union backing and is seen by some as being just to the left of Bernie Sanders, the Vermont senator who describes himself as a democratic socialist.

Keep in mind that this happened thanks to Gina M. Raimondo, a Democrat who had a top Laborers' union official on her transition team. It happened thanks to a General Assembly dominated by Democrats; thanks to Gordon D. Fox, D-Providence, who became House speaker amid concerns that he'd be too liberal; and thanks to Senate President M. Teresa Paiva Weed, D-Newport, who has union officials on her leadership team.

Yet, in the end, it wasn't even close.

Wouldn't it be reasonable — no, obvious, obligatory — at least to wonder out loud whether there might be something more going on here than the advertisements and political speeches proclaim? I mean, not only does Paiva Weed have union officials on her leadership team, but they voted for the bill. Senate Majority Leader Dominick Ruggerio (D, North Providence, Providence), who exchanges nepotism jobs with his fellow high-paid union leaders, voted for this pension reform bill. Why does it feel like Anchor Rising is the only outlet in Rhode Island concerned that maybe, just maybe, there are some major catches built into this reform — perhaps so dramatic that the actual "reforms" were boards on a Trojan horse?

I think Fitzpatrick gives a piece of the answer when he subsequently writes:

In short, it was not like Wisconsin, where Republican Gov. Scott Walker engaged in a bitter battle with public employees, [Raimondo] said.

Others in the media have talked about how reform never would have happened with a Republican executive slate. I can't help but wonder — as big government chokes on its weight and proves unable to repair itself nationwide, as the collapse of entitlement programs approaches inexorably, as treasured Democrat-left solutions to economic downturns prove ineffectual and (surprise!) prone to corruption, and as the great beacon of hope, President Obama, disappoints on a historic scale — if pension reform didn't tap a deep need to believe that sitting down and negotiating in order to reach a result that benefits everybody is actually possible, provided a few technocratic figures show the resolve and leadership of demigods.

The Wisconsin comparison is telling for two reasons: First, Rhode Island's pension reform is simply not sufficient to solve the problem, and apparently, it was soft enough to gain support even within the ranks of union leaders, leading one to believe that the payoff, for entrenched powers, will ultimately be greater than the surface sacrifices. Walker's reform efforts were much more substantial and struck much more clearly at the heart of Wisconsin's problems.

Second, a large part of Governor Walker's difficulties can be explained by the act of several Democrats in fleeing the state and short-circuiting the legislative process. I don't believe that Rhode Island Democrats are any less friendly to labor than Wisconsin Democrats, nor do I believe that they are any less capable of dramatic tactics to thwart reforms that they do not like. Rather, I'd suggest that the absence of anything but a few public performances and aggressive letters (leaked or otherwise) is evidence that the reform fell well short of where it should be.

Yes, the unions will sue, in part to prevent legislators in other states from getting the wrong idea about what happened in Rhode Island. Yes, they'll make lots of noise about voting legislators out, mostly as a negotiation tactic to push their agenda through the next session of the General Assembly. But the snarl doesn't reach their eyes. What we've seen in Rhode Island wasn't the objective process of lawmaking as it should work; it was the variation of political theater performed when the powerful backers are ultimately getting what they want. Look to Wisconsin for the variation that one can expect when they aren't.

But for the time being, it appears that the performance has been enough to reinforce belief that a blue vision for government can work. Sadly, even some who ought to know better have fallen for it, too.

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I'm not sure what's funnier, that you think Obama promoted "Democrat-left solutions to economic downturns" or that you're crying in your coffee that the GA didn't publicly flog union members in front of the State House.

Posted by: Russ at November 22, 2011 10:55 AM

Here's Stiglitz...

As I wrote in my new book Freefall, Barack Obama took a big gamble at the start of his administration. Instead of the marked change that his campaign had promised, he kept many of the same officials and maintained the same "trickle down" strategy to confront the financial crisis. Providing enough money to the banks was, his team seemed to say, the best way to help ordinary homeowners and workers...

Trying to "square the circle" between the need to stimulate the economy and please the deficit hawks, Obama has proposed deficit reductions that, while alienating liberal democrats, were too small to please the hawks. Other gestures to help struggling middle-class Americans may show where his heart is, but are too small to make a meaningful difference.

That's center-right neoliberalism, hardly an example of the policies of the left.

Posted by: Russ at November 22, 2011 11:12 AM

This is the ultimate ‘partisan’ debate. The current economic situation is no more proof that the “blue vision” for government does not work anymore than 2008 proved that the “red vision” does not work.

It seems Russ is trying to argue that Obama’s policies haven’t been left-enough. I would contend that the policies he has pursued have been rather left-of-center but the ones enacted have been ‘center-ized” by having to deal with congressional passage. Even the Health Care Bill was not near as left as he likely wanted and that with a ‘super majority”. Rarely does a President get the laws as they want. Quoting a Guardian article is sort of like quoting National Review. Does giving money to the auto makers’ count as “trickle down” or is that considered different because of the UAW? Do you suggest the best way is to have no deficit reductions and no tax increases? Greece anyone?

I’m from Ohio where the voters just overturned legislation that limited collective bargaining. Bottom line is simple; everyone – right-left-center – wants what is best for them.

Posted by: msteven at November 22, 2011 11:59 AM

"Quoting a Guardian article is sort of like quoting National Review..."

Yes, and I picked Stiglitz intentionally as a former Obama advisor and left-economist who was passed over for the Wall Street insiders who continue to run the show.

"The current economic situation is no more proof that the 'blue vision' for government does not work anymore than 2008 proved that the 'red vision' does not work."

I disagree. The blue/red vision clearly didn't and hasn't worked. I took objection to Justin's fantastic theory that third way neoliberalism represents the views of the left not that the Democratic plan was a massive failure except possibly in comparsion to the disaster of the Bush years.

Posted by: Russ at November 22, 2011 12:41 PM

btw, the idea that Obama's bank bailout was forced on him by Congress is just nonsense.

"Stiglitz Says Ties to Wall Street Doom Bank Rescue"

On the bank bailouts...

The Obama administration’s bank- rescue efforts will probably fail because the programs have been designed to help Wall Street rather than create a viable financial system, Nobel Prize-winning economist Joseph Stiglitz said.

“All the ingredients they have so far are weak, and there are several missing ingredients,” Stiglitz said in an interview yesterday. The people who designed the plans are “either in the pocket of the banks or they’re incompetent”...

Stiglitz was also critical of Obama’s other economic rescue programs.

He called the $787 billion stimulus program necessary but “flawed” because too much spending comes after 2009, and because it devotes too much of the money to tax cuts “which aren’t likely to work very effectively.”

“It’s really a peculiar policy, I think,” he said.

Posted by: Russ at November 22, 2011 12:55 PM

Well, if the Nobel Prize winning economist believes that tax cuts have no effect on the economy, I am glad he is a “former” advisor. Of course, there are economists who believe in government spending like Krugman & Stiglitz and also many who believe in tax cuts. Obviously we’d disagree on who to believe.

I do agree that the stimulus package & bank bailouts were bad ideas but again – not just because of the tax cuts – but this is as usual partisan-cherry picking. There is also a side that says that the Bush economy was great until Democrats won Congress in 2006 and the Clinton economy was due to the 6 years Republicans controlled Congress.

Count me among those who believe neither side has a clear claim as proven successful-economic policy. But I’m also a capitalist and while it is not perfect and there are inequities, I do believe it is superior to socialism and I think there is a case to be made that history bears that out.

Posted by: msteven at November 22, 2011 2:18 PM

"Obviously we’d disagree on who to believe."

Yes, yes, but my point being that the Obama administration didn't implement the plan preferred by the left. When center-right is defined as left, the term left kind loses any real meaning.

"But I’m also a capitalist and while it is not perfect and there are inequities, I do believe it is superior to socialism and I think there is a case to be made that history bears that out."

Well, depends on what you mean by capitalism and socialism. I may need to buy Stiglitz's book...

Casual observation would suggest that market socialist economies are not identical to capitalist economies, not even remotely so. The model of market socialism underlying that theorem is seriously flawed.

But our contention is that it is equally important to observe the model of the market economy--underlying not only that theorem but also the fundamental theorems of welfare economics--is seriously flawed. With a bad model of the market economy and a bad model of the socialist economy, no wonder that any semblance of the equivalence of the two could, at most, be a matter of chance.

Posted by: Russ at November 22, 2011 3:22 PM

I agree with your point that the Obama administration did not implement the plan preferred by the left. That plan would not have passed even the Democrat-dominated Congress. The absurdity is that if the same exact plan would have been passed by a McCain administration, we’d be hearing the same things – except from different sides. Partisan rules. I agree that political terms ‘left’ and ‘center-right’ have arbitrary meanings.

I’m not sure what the above means – like what is the difference between socialism and market socialism? But just the fact that you quoted anything from CATO is surprising.

Posted by: msteven at November 22, 2011 3:41 PM

"...what is the difference between socialism and market socialism?"

Section in here on different socialist economic models (short answer, read "Chinese model")...

Posted by: Russ at November 22, 2011 8:16 PM
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