RI – What Went Wrong: The Carcieri Effect

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.”

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.