On Monday, General Treasurer Gina Raimondo kicked off her campaign to be the Democratic nominee for governor by announcing a broad platform. Among them, rebuilding public school buildings, an assault weapons ban along with tougher gun control, college loan forgiveness, raising the minimum wage and indexing it with cost-of-living-adjustments, providing universal pre-K, allowing undocumented workers access to drivers’ licenses, utilizing social impact bonds to fight poverty and social problems, and holding Wall St. accountable.
Had it been announced by any other candidate it would’ve been hailed as the most progressive platform laid out by a RI gubernatorial candidate in a generation.
Even the campaign of Mayor Angel Taveras, who is running for governor in the same primary, didn’t fault it. When asked by The Providence Journal if they disagreed with a single point, Taveras’ campaign manager replied, “no.”
But progressives didn’t hail it as a high-watermark in years of their organizing and work. As architect of the 2011 pension cuts that wreaked havoc on public sector employees in the midst of Rhode Island’s stalled “recovery” from the recession, the general treasurer still has light-years to go to win back the unanimous left-wing support she enjoyed when she waltzed to victory in 2010. Since ushering pension cuts through the General Assembly, the treasurer has remained remarkably out of sight with the exception of a few financial literacy courses and support for payday lending reform. The effective use of the bully pulpit that she displayed in 2011 was noticeably lacking in 2012 and 2013. Her most high-profile media appearances have been to defend pension cuts or argue for the repayment of the moral obligation bonds secured for the 38 Studios fiasco (another of the many dark clouds that hang over Rhode Island politics).
The 2011 pension cuts have been characterized by national critics such as Ted Siedle and Matt Taibbi as a Wall St. cash-grab, and so local progressives seized upon the under-the-radar concept of social impact bonds (SIBs) to tie the treasurer more closely to Wall St. Longtime fiscal policy observer Tom Sgouros asked in his evaluation of the concept whether Raimondo intended “to promote the public good, or sell it?”
Social impact bonds are easy to tar and feather. First, they contain the word “bond” and Rhode Islanders have seen a string of negative implications of what happens when bondholders come looking for money. The reality is that the treasurer used language out of step with the U.S. federal government. The Feds have used the more accurate “pay-for-success contract” to describe the concept. If the bond doesn’t produce success, there’s no payment from the government; which is why this is attractive to governments. The risk falls on the private investor, rather than the public purse. And unlike the 38 studios bonds, if a SIB fails to register satisfactory results, investors don’t get their money back. They lose it.
Second, their pedigree includes Goldman Sachs. Yes, the investment bank was a major backer of an initiative by New York City Mayor Michael Bloomberg to use the bonds to reduce recidivism among 16-18 year olds leaving Rikers Island. But the concept was initially begun at HMP Peterborough in the U.K. There the backing was from a collection of philanthropies rather than an investment bank. Other U.S. attempts have used a blend of charity and private funding. The left-leaning Roosevelt Institute suggested that SIBs “have the potential to be an important tool in the poverty-fighting arsenal.” Harvard’s Kennedy School of Government even has a guide for state and local governments on how to manage SIBs.
Third, the concept has been so low-key in Rhode Island that even our paper of record, The Providence Journal, suggested that Raimondo “had introduced a new concept to Rhode Island’s political lexicon.” In reality, the idea had been consigned to business reporting until Raimondo mentioned it Monday. Rhode Island’s very own Social Enterprise Ecosystem Economic Development (SEEED) has been exploring SIBs already (and bringing them to the attention of both Raimondo and Governor Lincoln Chafee). Master’s students at Brown’s Taubman Center also researched the concept focusing on recidividism.
So it’s neither a bond (at least not as we’ve become accustomed to them in Rhode Island), nor created by Goldman Sachs, nor a concept unique to the treasurer and her venture capital background. We may be entering a new Raimondomania. Whatever comes out of the treasurer’s mouth is instantly controversial. You can count on the media to cover it, and you can count on progressives to denounce it if they’re not familiar with it; usually with the words “Wall Street” to boot.
Yes, the treasurer is deserving of tough criticism. She’s repeatedly made it clear that our contract with the workers who built our state is less important than our contracts with bondholders who were already insured against losses. She made a previously backwater office a major part of the political landscape, achieved a stunning legislative success, and then squandered the next two years by not vociferously pushing the progressive agenda she was elected on. All of the treasurer’s platform ideas could’ve been pushed for and passed in the General Assembly throughout her current term. She rarely lent her weight to these causes. And there’s no EngageRI to provide muscle to rebuild public school buildings or offer college-loan forgiveness.
But the progressive response to Raimondo’s progressive platform is typical of the left-wing infighting that all too often prevents success. Instead of achieving the 99% of things they agree upon, the left will slaughter one another over the remaining 1%, stymieing progress and allowing conservatives to win policy changes they needn’t have.
Social impact bonds are a prime example of this. Yes, the optimal outcome would be for the state to invest in the solutions and save itself the maximum amount of money possible, to be reinvested elsewhere. However, our state legislators have proven unwilling to do the heavy lifting themselves, preferring instead to look towards business for solutions. Social impact bonds aren’t ideal, but they’re better than doing nothing. If they fail to work, they cost the state nothing. Most importantly, they achieve the progressive goal of helping people immediately rather than in some fantastical future when progressives control both chambers of the General Assembly and the governor’s office and are able to pass their agenda without resistance. Perhaps social impact bonds will be the kick that makes our legislators realize they could just save all this money instead of passing a share of the savings on to private investors.
There is a very real possibility that Raimondo will win the primary and then go on to being the first elected Democratic governor since Bruce Sundlun. Should that come to pass, progressives will have a duty to fight Raimondo if and when her agenda damages the economic health of our state and hurts our people. But when a Governor Raimondo’s agenda aligns neatly with the progressive agenda, then it’s time to applaud and support it. If progressives can’t recognize that even the most controversial part of Raimondo’s platform moves Rhode Island closer to alleviating societal ills then how can they lay claim to being the champions of the downtrodden and dispossessed?