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Monday, October 24, 2011

The Future Of America Could Be Rhode Island: Broke

By Susan Duclos

A simple piece pointing to three must-reads which will explain how the financial disaster facing Rhode Island, is America's future if we do not learn from the mistakes that are right in front of us.

NYT Teaser:

After decades of drift, denial and inaction, Rhode Island’s $14.8 billion pension system is in crisis. Ten cents of every state tax dollar now goes to retired public workers. Before long, Ms. Raimondo has been cautioning in whistle-stops here and across the state, that figure will climb perilously toward 20 cents. But the scary thing is that no one really knows. The Providence Journal recently tried to count all the municipal pension plans outside the state system and stopped at 155, conceding that it might have missed some. Even the Securities and Exchange Commission is asking questions, including the big one: Are these numbers for real?

“We’re in the fight of our lives for the future of this state,” Ms. Raimondo said in a recent interview. And if the fight is lost? “Either the pension fund runs out of money or cities go bankrupt.”

All of this might seem small in the scheme of national affairs. After all, this is Little Rhody (population: 1,052,567). But the nightmare scenario is that Ms. Raimondo has seen the future of America, and it is Rhode Island. As Wall Street fixates on the financial disaster in Greece, a fiscal wreck is playing out right here. And the odds are that it won’t be the last. Before this is over, many Americans may be forced to rethink what government means at the state and local level.

Then head over to Walter Russell Mead's Blog piece titled "Rhode Island: Athens of America?"


Rhode Island is looking more and more like Greece, and not in a good way. That is one message of this important piece by Mary Williams Walsh in the New York Times. Years of blue social policy have wrecked local and state government finance in the country’s smallest state, and now the bills are coming due. Services are being cut to the bone and elderly retirees are losing money they thought was secure.

In Rhode Island, it is Democrats, not nasty union-hating Republicans, who are doing the dirty work. Democratic mayors are telling their unions that there isn’t any money — not because they are vicious corporate stooges who hate working people and want to see them suffer, but because There. Isn’t. Any. Money.

Because Rhode Island listened to timeserving blue politicians too long, and union leaders and public sector workers lost their grip on any mathematical realities beyond the numbers at the ballot box, the pension system grew more and more out of control. State and local governments lurched into a crisis. Vote yourself a raise, vote yourself a pension: why not?

But there is financial math as well as political math and in any war with financial arithmetic, the money numbers win. If there isn’t any money, the checks won’t clear. Ultimately, you will have to fire existing workers, stop paying pensions or a mix of both. That is where Rhode Island is now: its economy can’t generate the revenue to support its existing governance system and to pay its pension obligations.

Last but not least,we have a Reuters' piece with the headline "U.S. rating likely to be downgraded again: Merrill."


The United States will likely suffer the loss of its triple-A credit rating from another major rating agency by the end of this year due to concerns over the deficit, Bank of America Merrill Lynch forecasts.

The trigger would be a likely failure by Congress to agree on a credible long-term plan to cut the U.S. deficit, the bank said in a research note published on Friday.

A second downgrade -- either from Moody's or Fitch -- would follow Standard & Poor's downgrade in August on concerns about the government's budget deficit and rising debt burden. A second loss of the country's top credit rating would be an additional blow to the sluggish U.S. economy, Merrill said.

"The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan" to cut the deficit, Merrill's North American economist, Ethan Harris, wrote in the report.

As Rhode Island goes, so goes America unless we get our fiscal house in order.

As a country we are borrowing money at an alarming rate just to pay for government spending and there are clear choices to be made about which direction will get us back on track, a track which 75.8 percent of the country believes is heading the wrong way now. (Numbers at that link change as new polls are released)

(Click to enlarge)

Republicans want to cut taxes, slash spending and scale back regulations they say are strangling private-sector job creators.

Democrats are pushing proposals designed to create jobs by increasing spending and raising taxes.

The 2012 elections will be the most critical of our time. The country must decide to follow it's present course under Obama or force a change by removing him from office.

Voters must decide if they are part of the nearly 76 percent that believe the country is on the wrong track or the nearly 18 percent that think we are heading in the right direction.

Then they need to vote accordingly in 2012.