Pawtucket Mayor Don Grebien pleads for the municipal aid package as Gov. Chafee listens.
In an Economist article entitled “Bankruptcy in Rhode Island“, Governor Lincoln Chafee is quoted as saying “We’ve hit rock bottom in this state”. And, frankly, I don’t know how to take it.
The article is about the municipal budget problems that are cropping up across the Rhode Island. Essentially, as we well know, Rhode Island is undergoing austerity, and in ways that of course fall mostly on those that can least afford it (as Rolling Stone‘s Matt Taibbi has pointed out, austerity only applies to regular people). The recent showings in Greece and France, where anti-austerity forces triumphed and expanded (turning Europe back towards fascism and communism as it did in the post-WW1 era), provide continued support to my thesis that austerity overthrows its own enactors. And that’s to say nothing of Italy, where in local provincial elections, an anti-austerity political party set up by a comedian thrashed the parties in government.
The problem for Gov. Chafee is that he and the General Assembly are largely responsible for Rhode Island’s austerity crisis (indeed, the General Assembly can only blame themselves). But for the small caucus of progressives in both the House and Senate, even most Democratic legislators are pro-austerity.
Rhode Island is not even blessed with an anti-austerity third party (the Moderates are pro-austerity). Certainly, that party would be hamstrung by its lack of association with a viable national political party. Since anything coming out of the right would be DOA, any such party would have to partly modeled on the Vermont Progressive Party. And let’s face it, large swathes of political players in Rhode Island are completely tied to the current model of politics as it is now; changing that threatens much of the work that’s done to understand and operate in the system that many, many organizations have built up. The work towards change is largely focused on working within the Democratic dynamic, which leaves progressives particularly open to co-optation by the demands of various party factions when they come to power.
But even that sort of wishful thinking ignores what Gov. Chafee said. Rhode Island is at rock bottom, and if the Governor is wrong, it’s only because we have further to fall. We’re completely shot through, economically, we’re devastated. And yet, the policy makers, like a man stuck at the bottom of a very deep hole, can only find ways to chew off their own hands rather then reach for ways out. If you’re not convinced, read URI economics professor Len Ladardo’s blog, which has been positing that Rhode Island is struggling to prevent a double dip recession for a while now (Mr. Ladardo is now telling RIPR’s Ian Donnis that Rhode Island needs deep structural changes). Or you could read GoLocalProv’s recent no-duh inflammatory headline. Yet the reality is that no matter whether you’re a conservative or liberal, objectivist or socialist, no one has a clear way forward out of our economic disaster. I particularly find “let the free market sort this out” arguments entirely unconvincing, because the free market got us into this mess.
What is striking to me, and maybe this is due to editing on the Economist’s part, is that there’s no sugar-coating on the Governor’s words. There isn’t even a “but Rhode Islanders have the strength to pull through.” It’s a grim statement, because the reality is very, very grim. Luckily we have Hope in this state. And we’re going to need it.
I just LOVE the stretch here.
“The Moderates are pro-austerity.”
And you then must be anti-jobs and pro-Great Depression.
If you want me to meaningfully engage in a discussion here, drop the hyperbole and gotcha-journalism BS and have a debate.
Concern with regional tax competitiveness is in no way linked to austerity – but you already know that – or if you don’t you shouldn’t be so far out over your skis in terms of what you are writing about.
Sam, what do you think austerity means, exactly? Austerity requires we reduce spending, does it not. Has this state meaningfully reduced what it spends?
I was just thinking yesterday how abused the word “austerity” has become by progressives and the like. Returning to 2007 spending levels is not “austerity.” Maintaining current spendng levels is not “austerity.” Nothing even close to austerity has been implemented in Rhode Island or the United States. Apparently “austerity” means anything other than following Paul Krugman’s advice to quadruple government spending.
“Concern with regional tax competitiveness is in no way linked to austerity…”
So tax cuts don’t result in cuts in services or declines in employment or benefits in the public sector, and proponents of those austerity measures don’t often regard cuts in services or and in publlic employment not just as side-effects but as the actual goals of those cuts? Now that’s a stretch.
“I particularly find “let the free market sort this out” arguments entirely unconvincing, because the free market got us into this mess.”
I suppose this is true if you mean that Rhode Island was unable to compete with other states that were more business-friendly and free market and did a better job of attracting productive workers and discouraging anti-productive forces from capturing the political process in their states.
Pink -
When did RI implement a tax cut? The change that lowered the marginal rate to 5.99% has actually driven an *increase* in tax revenues – probably due to the loss of a lot of exemptions.
Speaking for myself – in no way are my concerns over regional competitiveness linked to a desire to see cuts to necessary social service programs – but I am already well on the record as far as that is concerned.
That’s simply incorrect. Here’s last week’s PBN…
“According to Weiss, during the period July 1, 2010, to June 30, 2011, there was only one city business that became a new enterprise-zone member. The decline in new businesses – there were 19 the previous year – might be due to the change in personal income tax code, [Herb Weiss, economic and cultural affairs officer for Pawtucket] said…
The governor wants to let that reform play out before changing any part of it,” [Chafee spokesperson Christine Hunsinger] said. “Nearly all [enterprise-zone] credits were eliminated to pay for the rate reduction to the margin of 5.99 percent, to pay for the lost revenue.”
Clearly a case where tax cuts for the rich equal cuts in services and employment for the poor.
When did RI implement a tax cut? Hmm. Tough one. There were the Almond cuts in 1997, the capital gains cuts of 2001, the flat tax cut of 2006, and this doesn’t count the historic and film tax credits, nor the huge variety of business tax credits since 1992.
Its an important story and quite discouraging that a Governor would characterize our economy in such a way.
I agree with the criticism that the post is way too glib about “Moderates are pro-austerity” but the post is also way too exaggerated that in any real way Europe is returning to post-ww1 communism or facism.
RTW exaggerates too, there has been some real austerity in RI. Examples include real cuts to develomentaly disabled, library hours cut back, reduced # of auditors, inspectors, enforcement officials in state government; public higher education cuts (apparently down to just 8% of the URI budget) declining support to RIPTA (due to gas tax receipts falling, loss of RITE-Care assistance) and loss of real income by many state/local employees. But there was little choice, regional competitiveness is a real factor. (However it does seem the austerity has not hit the who-you-know-insider political class.
I think RTW also exaggerates the role of ”anti-productive forces” capturing the state and hurting the business climate. After all, Republicans have had the governorship for the last 16 years and appointed all the people who run the agencies and most of the regulatory bodies. And supposedly business-friendly states (e.g. NV, SC) were also hurt by the recession. Most fundamentally I think the Rhode Island economy has been hurt by “free trade” which has resulted in off-shoring a lot of our jobs, especially in manufacturing. Unlike other states, we don’t have the natural resources or the agricultural economy to easily make up for that loss. Free trade with low-wage autocratic countries helps investors, and it helps consumers with good jobs, but for much of the labor force, and even some small business, it is a disaster, not just in lost jobs but by driving down wages/benefits and reducing purchasing power. That is what really hurts the business climate.
However, being near Boston helps a bit!
I’ll agree that the cuts you list are “austerity” measures if progressives will agree that the level of those public services was “extravagance” before the recession.
Conservatives coin the term while insisting on cuts then knock progressives for using the frame… classic.
See “David Cameron: The age of austerity.”
Yes, progressives, unless you agree with everything David Cameron has to say don’t even quote him.
I have no problem with the term, but it should be used responsibly and correctly.
Ahhh, in that case I’m with those irresponsible types like Taibbi:
“The point is, when people talk about ‘austerity,’ they only ever talk about the pain the general population should voluntarily accept, in the form of reduced services and curtailed ‘stimulus.’No one ever says the financial services sector should have to cut back on its access to easy money, and there hasn’t been much in the way of serious plans to restore some sanity and prudence to the lending and investing business…
But if pain’s coming, it can’t just be regular people who pay. Bankers have to find new ways of making money that don’t just involve betting the hot table and taking out instant billion-dollar profits. They have to go back to building real businesses and being content with gradual returns over time. If there’s going to be austerity, it has to be for everybody.”
btw, here’s how austerity works for Cameron (must be tough).
The issue is more complex. The effort to build a RI meritocracy infrastructure vs what is in place today that could allows for a truly competitive environment could be a beginning step to attract businesses. But to implement this infrastructure would require a complete cultural DNA overhaul. Must find creative solutions that work within the cultural limitations.
This is a very good point. Rhode Island, like Greece in many ways, has gotten itself into a hopeless place where the deep reforms that are necessary are beyond any political or cultural reality for the state. I had an economics professor who told me about a lecture series he gave in Eastern Europe shortly after the collapse of the Soviet Union. The students approached him afterword and refused to believe that things worked the way he described in America. They didn’t believe that you could order something and have it shipped to your door because they thought the truck driver would steal it first, or your neighbors would steal it when it was left on your doorstep. They thought this because that is the reality they knew under the iron curtain. There have to be certain norms and institutions in place before a market-based approach can be successful, otherwise it will just facilitate the kleptocracy in place. In Rhode Island, you have to know a guy in government to get a job or get something pushed through, everybody is in effect a special interest, and companies get special contracts and tax privileges from the elite. It’s all so engrained in the culture that there is little hope for a successful turnaround.
“There have to be certain norms and institutions in place before a market-based approach can be successful, otherwise it will just facilitate the kleptocracy in place.”
It’s hilarious that you have no understanding of the practical consequences of what you are saying.
This one statement of yours completely undermines all libertarian philosophy and all free-market ideology.
That isn’t true at all, and the fact that you think that only demonstrates that you have no real understanding of the serious work of free-market economists. No free-market economist would argue that culture and institutions are irrelevant to the ability of markets to function – in fact they spend much of their time arguing the opposite. Why do you think they’re always stressing the importance of trust in institutions and respect for property rights?
Libertarian philosophy is based on the non-aggression principle, and nothing I’ve discussed runs contrary to that principle. It’s a belief system about the way things “ought” to be. Recognizing that some cultures are more successful than others is consistent with that.
“the importance of trust in institutions and respect for property rights”
They don’t discuss these things. They assume them.
”the non-aggression principle”
Completely false. Libertarianism is rooted entirely in property rights, which cannot be established without violence.
You’re either trolling or you don’t have the slightest clue what you’re talking about. Either way, there’s no point in continuing the conversation.
Well argued.