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No time to celebrate: the coming new Age of Austerity

November 6, 2011

As pension overhaul heads into the home stretch at the State House, the rhetoric on both sides has heated up. RIPR political analyst Scott MacKay reminds us that all sides in this crucial issue need to dial down the volume and forge an agreement that won’t make anyone happy.

Tone matters in politics. Now more than ever, the Smith Hill crowd and business and labor leaders ought to understand that when it comes to   public employee pensions, there is a crying need for civility and mutual respect.

As the day of reckoning nears at the General Assembly, there have been some disturbing thrusts from both organized labor and General Treasurer Gina Raimondo, the primary architect of   changes designed to bring solvency to the public employee pension systems.

Paul Valetta, a Cranston firefighter, fired away at Raimondo, asserting at a State House hearing that she “cooked the books’’ and is using the pension issue as a launching pad for a campaign for higher office.

As for Raimondo, she had been careful for months to avoid denouncing union leaders or state employees for creating the red ink in the pension system. But more recently Raimondo was the star of a State House rally sponsored by the business-financed EngageRI group, where her smiling fist pump was captured by the media.

That  image didn’t sit well with labor leaders; to them it looked as if Raimondo was engaged in the political equivalent of an end zone touchdown dance.

Raimondo’s spokeswoman says that the treasurer’s intent was not celebration and that Raimindo was merely displaying how passionate she is about pension reform..

This is no time for labor to lob personal attacks at Raimondo.  And it is not wise for Raimondo to start cheering.

There should be no triumphalism in a pension overhaul that hurts retirees, taking money out of their pockets by eliminating cost of living adjustments. State workers did everything they were asked to do, including payment of some of the nation’s highest pension contribution rates.

The media and some in the political swirl make the case that the pension issue ought to be one of shared sacrifice. Yet few people outside of organized labor point out that in recent years state government has cut state income taxes for those making over $250,000 a year while slashing aid to cities and towns and allowing communities to hike property taxes on homeowners and cars worth less than $6,000.

Maybe a generation of extravagant politicians should be forced to buy billboards on Route 95 and very publicly apologize to public workers and retirees.

The billboards could say, sorry but we blew it. Perhaps former governor Edward DiPrete, who expanded pension benefits to buy political support, would sign on. Or former House Speaker Matthew Smith, who pushed middle-of-the night special pension bills. Or former Providence Mayor Buddy Cianci, who brags in his book about giving city retirees better benefits that those granted state employees.

Or the Smith Hill insiders whose failure to regulate state-chartered credit unions caused the banking crisis of 1991 and led state government to withhold payments to the state pension fund.

Not every Rhode Island politician participated in the unfunded liability fiasco. Former Governor Lincoln Almond won a modest increase in state employee contributions that looks even better in hindsight then it did when he did it in 1995. Gov. Don Carcieri was able to win concessions that made pension benefits more realistic. And former state treasurer Nancy Mayer nearly two decades ago sounded alarm bells that nobody wanted to hear.

Reporters documented the special pension deals that the politicians doled out to favored friends; the Providence Journal ran story after story (many by veteran State House scribe Katherine Gregg) about the impending implosion. Again nobody listened.

It is sad that Rhode Island’s politicians neglected the pension red ink for so long. Just about every state and European nation faces problems similar to our state. And it is lamentable that the Wall Street titans whose debt drunkenness and reckless casino bets tanked the stock market and state pension funds have never had to face the music.

Rhode Island’s liabilities, unfortunately, are worse than most other states.

I n Massachusetts the legislature is close to approval of  a measure that raises the age of retirement for public employees but affects only future hires and doesn’t hurt current retirees or workers.

This is not a time to dwell on the past. The Central Falls bankruptcy should be an ice water shower for lawmakers and labor leaders. For once, state lawmakers must grow some spine and do the best they can in the worst of times by forging a pension compromise that makes the system affordable to taxpayers and limits as much as possible the pain to loyal state employees and retirees. This new Age of Austerity isn’t going to be fair or fun.

4 Comments leave one →
  1. November 6, 2011 10:25 pm

    The credit unions failure (scheme) was intended all along. It would be good to know when they were incorporated, if they were created to default.
    The Providence Journal’s column headlining Edward DiPrete as an Everyman still makes me seethe. The current financial problems are the rot of corruption.

    Art Toegemann

  2. Craig permalink
    November 7, 2011 12:17 pm

    Thank you, Scott. Not enough people are pointing out that the state “doled out” the favors to the rich while also neglecting to act responsibly on pensions.

    Why are we only asking working people and retirees to pay the price, essentially transferring the income of middle class families into the pockets of the wealthy elite?

    Why are we not demanding accountability from the bankers and the Wall St speculators who cost the RI pension system $1.8 billion in 2008 alone?

    There is no doubt in my mind that what is being proposed is class warfare, and while of course we need changes to the pension system moving forward, we must not force working people and retired people to “share the sacrifice” while asking nothing of those who have profited enormously from government decisions over the past 20 years.

  3. Mister Guy permalink
    November 8, 2011 1:19 am

    “Paul Valetta, a Cranston firefighter, fired away at Raimondo, asserting at a State House hearing that she ‘cooked the books’ and is using the pension issue as a launching pad for a campaign for higher office.”

    Did she “cook the books”? I don’t think so, but it’s obvious that Raimondo is aiming for higher office that RI General Treasurer. She’s too young & well-connected to the business elite to max out at that low level in state politics. I don’t see any reason to not state the obvious there.

    “As for Raimondo, she had been careful for months to avoid denouncing union leaders or state employees for creating the red ink in the pension system”

    …which is great, since they’re not the ones that created the so-called “red ink in the pension system.”

    Did unions or state employees not make their required payments to the pension system in the past? Nope.

    Did unions or state employees give sweetheart deals to judges (that make six-figure salaries but apparently, until recently, didn’t have to contribute a dime to their pension plans)? Nope.

    Did unions or state employees cause literally the worst economic downturn in our country’s history since the Great Depression? Nope.

    “But more recently Raimondo was the star of a State House rally sponsored by the business-financed EngageRI group, where her smiling fist pump was captured by the media.”

    LOL…her link to that business front-group is well known by now, as are her recent, dramatic increases in her campaign coffers. Pay-for-play…pure & simple…people aren’t as dumb as she & her business buddies think.

    “Or the Smith Hill insiders whose failure to regulate state-chartered credit unions caused the banking crisis of 1991 and led state government to withhold payments to the state pension fund”

    …which were paid back eventually…but without interest!

    “This is not a time to dwell on the past.”

    Sure it is, since without an understanding of how one got into a particular situation, one can never effectively get out of that same situation. History is *always* instructive.

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  1. Rhode Island Tip Sheet: Trickle-down austerity « On Politics

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