House Minority Leader Brian Newberry is suggesting that the need to pay $12.5 million each year for the next decade is going to be a political winner for the RI Republican Party. The thinking, as Newberry explained to me on Twitter, is that legislators who are held relatively blameless for spending the money in 2010 will be judged by their votes in 2013 and 2014; going into November 2014, General Assembly members who voted “Aye” twice are going to have spent $15 million of the state’s money to pay back bondholders who were already covered with insurance in the event of 38 Studios going bankrupt and the State refusing to pay.
The problem with default is that Moody’s has actually threatened Rhode Island that the rest of its bonds will suffer should it choose to utilize the insurance option. Given that we can’t find anyone (except Ted Siedle) to study the impact of default, I still think we should take Moody’s at their word. After all, we have Lehman Brothers as proof that they’re stupid enough to do it.
But I think Newberry is wrong when he says that 2014 will be the year that the Republicans ride 38 Studios to victory. First, it assumes that the General Assembly passes nothing that might buoy the incumbents’ popularity in 2014. Second, just because someone hates their current Democratic representation doesn’t necessarily mean they want a Republican instead.
We’ve had scandals in the past that brought down Democratic leadership; only to have it replaced by another set of Democratic leadership (scandal used to be the typical method of succession among Speakers of the House). The Republican caucuses in the GA are small enough that they skew rightwards, and if you only look at the population of the places they’re from (not their districts represented) they come from towns that make up less than a third of all Rhode Islanders, mostly more rural and suburban areas. When close to 6 out of 10 Rhode Islanders live in an urban area, I simply don’t see how Republicans are supposed to appeal to these voters with the flagship policies pushed by their current legislators.
But beyond that, Republicans are also to blame for not being great enough critics of the deal at the time. Going into the 2010 election, 38 Studios was an unpopular deal with voters, and had Republicans wanted, they could’ve assaulted the Democrats for it. Except that that would’ve entailed going after Gov. Donald Carcieri, who was the leading shepherd of the deal as well as ignore that its primary beneficiary was Republican Curt Schilling, baseball hero.
The problem is that 38 Studios is a bipartisan boondoggle. The money was appropriated by Democratic and Republican legislators to be given by a Republican governor to a Republican businessman (I use that last term loosely). There’s an old saying, “an ounce of prevention is worth a pound of cure.” That’s the situation legislators find themselves in. What gets people riled up is that the deal should not have happened. Now that 38 Studios has gone belly up and the bill has arrived on our doorstep the subsequent vote each year for funds isn’t going to be a referendum on whether you support the original deal. It’s whether you think Wall Street is bluffing or not, and whether Rhode Island can afford to take the risk to find out.
So 38 Studios isn’t a hammer for the Republicans to use against the Democrats. It’s a sickness in the state budget that politicians on both sides are going to have to figure out what the appropriate cure for it is.