It may be hard to remember now, but ten years ago, Rhode Island’s unemployment rate was below the national average. Today, of course, it’s the second highest in America. Only Nevada has a worse jobs picture. Clearly, something went very badly wrong. The question is what.
In a multi-part series that will be published throughout this week, I’ll get into the weeds on the specific reasons Rhode Island fell behind. A common theme will be how so many (but not quite all) of the problems originated with the man who is now, as Scott MacKay puts it, “retired in his Saunderstown manse by the sea, hiding from the media and the taxpayers he so avidly fleeced.”
- Rhode Island and U.S. unemployment rates. Data from Bureau of Labor Statistics, via Google Public Data.
Donald Carcieri
A cursory glance at the unemployment rate graph points to a likely culprit. What is perhaps most striking about Rhode Island’s decline is just how closely it corresponds with the tenure of Donald Carcieri. In his first few months, Rhode Island performed reasonably well. As America surged to the peak of the first Bush recession, unemployment jumped half a percentage point between January and June of 2003, but in Rhode Island, unemployment inched up by only 0.2 percentage points.
But giving Carcieri credit for his first few months makes about at much sense as blaming Obama for losing jobs during his first few months. The real test of a leader is how the economy performs once their policies have had a chance to take effect. In mid-2003, things began to turn around. Although America’s recovery was relatively anemic, with the unemployment rate falling by only 1.9 percentage points from the peak of 6.3% in June of 2003 to a low of 4.4% in March of 2007, things went much worse in Rhode Island. During that period, unemployment in our state dropped by only 0.7 percentage points, from 5.5% to 4.8%. In June of 2005, we crossed the national rate. Our jobs picture has been below average ever since.
Up through early 2007, Carcieri’s Rhode Island was in a slow, but not unprecedented, decline. State economies fluctuate, and our slide in the mid-2000s was nothing out of the ordinary. But things were about to get worse. A lot worse. In late 2007, the bottom fell out of the Rhode Island economy, and unemployment soared. Surprisingly, much of the damage was done before the broader US economy began to collapse a little less than a year later.
By April of 2008, when the second Bush recession began in earnest, Rhode Island’s unemployment rate was already at 6.9%—far above the national rate of 5%. Over the next few years, that gap widened from 1.9 percentage points to a peak of 3.3 percentage points in April 2012, but most of the damage was done before the national recession even began. Clearly, something very, very bad happened in Rhode Island in 2006 or early 2007 to spark this collapse.
There is no magical fairy who pummels the economy whenever conservative Republicans find themselves in office. What devastates the economy is the policies they enact. Tomorrow we’ll begin to dig into the details of those policies and why they were so destructive.
Don who? Those budgets had to be passed by two bodies of the legislature, if I am informed correctly.
I sure hope this doesn’t turn into a look into the past when the real problem (s) still sit in their seats.
The bottom line in Rhode Island is you can’t blame any governor entirely for the poor performance in this state. It just so happens ‘the Don’ is a Republican so it makes for a convenient talking point to obfuscate the real problem with this state…one party rule.
Who knew the big Don had so much unchecked power?
“Key Democrat lawmakers in Rhode Island have concluded that to keep the state competitive, they need to overhaul the state’s tax system, including going from a progressive to a flat-rate income tax for high-income earners.
House Speaker William Murphy (D-West Warwick) and fellow Democratic lawmakers announced in February they believe the state’s progressive income tax must be reformed. That reform is part of a package of nine tax initiatives Democrat leaders have offered. Rhode Island’s income tax rates range from 3.75 percent to 9.9 percent, one of the highest state income tax rates in the country.
High-income earners would be given the option of paying taxes under the existing tax structure, with its multiple tax rates and income tax deductions and adjustments, or under a new flat-tax structure that eventually will go to a 5.5 percent tax rate without income adjustments available under the existing system.”
Rhode Island Revelation
That’s right, last week Ocean State Democratic leaders proposed an optional flat rate income tax of 5.5% as an alternative to the current “progressive” tax schedule, which imposes rates ranging from 3.75% to 9.9% for the highest earners. The flat tax is part of a more comprehensive reform plan that would also include a sales tax holiday weekend in August and a full week of relief on “energy efficient” items in March 2007 from the state’s 7% sales tax.
online.wsj.com/article/SB113953993179670364.html
Thanks for the comments. If you don’t have a Wall St. Journal subscription, you can access that article via google: http://bit.ly/SpiBB3
I encourage everyone to read the article because it drives home a very important point, one that I will be emphasizing more in later columns in this series. Although the General Assembly is nominally a majority-Democratic body, the economic views of its members display a conservative fervor rivaled only in the reddest of states.
There will be more on the role of conservative Democrats in the General Assembly in tomorrow’s column, which describes the income tax cuts for the wealthy. These tax cuts were the initiative of House Democrats, although they were partially the product of the supply-side mentality encouraged by Carcieri, and it is hard to see someone like Lincoln Chafee signing on to such drastic cuts.
The mayor of central Falls gets two years for colluding with a buddy on the boarding up of abandoned property. The full projo treatment, your Eye in the Sky, the whole nine was dumped on that fellow for his major transgression–and, of course, it was a transgression.
Carcieri walks way from 38 Studios on his own terms, questions about pesky bridge contracts never materialize, his four ethics violations were the stuff of dismissive jokes only, and poor, illiterate truckers were fined thousands for not being able to read bridge signs.
Hello, Rhody Shuffle.
Didn’t anyone ever tell you that it’s about power, not politics.
If Carcieri had been a Dem, he would have been ridden out on a rail by the bigtime dj’s, by fellow Democrats, and by the seven or so remaining Republicans.
But he’s not, so he wasn’t. Time will pass; he’ll be big in some pursuit where bs and connections reign supreme. The corrupt markets love a blubbery stooge.
While the body of the post makes mainly just a statistical correlation between Carcieri’s reign and the poor RI economy, I think the headline blaming the latter on Carcieri is as misleading as right-wing posts blaming the bad economy solely on the Democratic dominance of the legislature, ignoring the string of 16 years of GOP Governors who appointed most of the people who run the state.
Rather than blame, what would be more enlightening is analysis of the policies that led to RI falling behind the rest of the states which all had the same “free trade” rules to contend with, and most of them had a similar war against public employees.
I completely agree. My point here is just a statistical correlation, which is undeniably strong. When you get into the specific policies, you find that conservative Democrats in the General Assembly bear much of the blame, especially when it comes to the income tax cuts for the wealthy.
Barry is certainly right that the policy analysis is the critical part. That’s why most of the rest of the series focuses on specific policies and aspects of the economy. The next column in the series focuses on the effect of austerity measures. You can find it here.
While the war on public employees is not a problem unique to Rhode Island, few states have seen it pursued with such ferocity and effectiveness. Indeed, in this study from Governing, which ranks states by per capita public sector job losses, Rhode Island had the second worst pubic sector losses of any state between January 2008 and April 2012, and the bleeding in the Ocean State dates back long before then–to a few months after Carcieri assumed office, in fact. It is true that this trend has largely reversed itself since the 2010 elections, with Rhode Island easing up on layoffs and the whole rest of the Northeast stepping on the gas. It is no coincidence that this has development has been followed by falling unemployment in Rhode Island and rising unemployment in every other Northeast State. If these trends continue for much longer, New Jersey may soon take our place as the state with the second highest unemployment.
In an economy of which 70% is driven by consumer spending, what would anyone expect to be consequence of downsizing of state and local government employment (many jobs which could have been funded federally) and spending at the same time that private sector spending is dropping due to recession? Sasse is an economist? Really?