Tom Sgouros on getting organized in the Time of Trump

History's call to action

Tom Sgouros

I don’t know about you, but I find it hard to concentrate these days, while what seems to be the ashes of my nation’s ideals settle around my ankles as I read the news. From the words in the U.S. Constitution to the words on the Statue of Liberty, so much of the text of our nation seems to be rejected by people who have the effrontery to call me and my friends unpatriotic. It’s infuriating but also enervating, in no small part because it’s so hard to see what might be the most constructive way to push back.

But it turns out that lots of people have felt the same way in the past, and lots of them found ways to act nonetheless. This is why I so enjoyed Erik Loomis’s new book, “Organizing America: Stories of Americans Who Fought for Justice.” It’s easy to remember the famous Americans who led successful fights for justice: Martin Luther King, Jr., Rosa Parks, Cesar Chavez, and Mother Jones. But what lessons do such heroic figures have for me, now?

The answer is more than I thought. The evidence is in Loomis’s book, where he tells the stories of other Americans who found themselves in the fight for human rights: against slavery, against lynching, for labor unions, for women’s suffrage, for gay rights, and more. Some of these are names you might have heard -- Ida B. Wells, Eugene Debs, Daniel Berrigan -- but many are not. 

Maggie Walker was an entrepreneur in the Black community in Virginia, Frank Little was a union organizer in Montana mines, Robert Williams was a not-terribly-peaceful civil rights activist in both North and South, and Richard Oakes participated in the American Indian struggles of the 1960s and 1970s in New York and California.

Erik Loomis is a historian at the University of Rhode Island. In addition to his duties there, he participates in writing the excellent Lawyers, Guns, and Money blog, where he writes a series he calls “Erik Visits an American Grave,” which is more or less exactly what it sounds like. He visits graves of the famous, infamous, and almost famous, and writes short biographies of the people he finds there, with almost 2,000 visits under his belt, and still going. 

Tom in 2012

His writing is straight-ahead, nothing fancy, but pleasurably propelled by both the subject matter and his exhilaratingly frank evaluations of the people he writes about. He is willing to call a hack a hack (Supreme Court Justice William Rehnquist), a fascist a fascist (U.S. Senator David Reed), and a legend a legend (Bluesman Willie Dixon). My favorite is when he writes about a grave in Arlington where Jack Miller is “buried on the confiscated grounds of the traitor Lee,” a formulation that strikes me as undisputably factual and admirably so.

EDITOR'S NOTE: Since we first published a column by Tom in February 2012, we've carried just under 60 of his always interesting essays on Rhode Island's politics and economy. 

Tom Sgouros: Landlords, Inflation, and Market Regulation

When landlords charge "what the market will bear," at what point does it become gouging?

Tom Sgouros

I live in North Kingstown, and a friend of mine, a retired police officer, rented the downstairs half of a house down the street from me. At least he did until last year when his landlord told him the rent wasn’t nearly as high as the market would bear, and raised it again. 

When my friend moved in in 2019, he was paying $1350 a month, and he left in 2024 when the rent went to $2500. This is a guy who never missed his rent and helped make repairs to the house. So he left, but had to leave town to find something he and his wife could afford.

My friend’s story is hardly unique. In Rhode Island and much of the country, rents are up. At the end of 2024, the median asking rent in Providence was up 12.6% over the previous year. Average rents were up 2.5%. According to the Joint Center for Housing Studies at Harvard, the metro area that covers about 3/4 of Rhode Island has 176,000 households that are either “cost burdened” (paying more than 30% of their monthly income for rent) or “severely cost burdened” (more than 50%). This is 45% of all households, for those keeping count.

People routinely blame the rising costs on "supply and demand," and sure, a housing supply that isn’t keeping up with increased demand is a big part of the story, but that lets a lot of people off the hook way too easily, including my friend’s landlord.

The thing about inflation is that it’s a matter of choice. Prices go up when someone decides to raise them. Lots of economists like to imagine the economy as a series of auctions where supply and demand find their magic balancing point, but that’s not the way the world works. 

In the real world, there are power imbalances between buyers and sellers that are different in different markets. Big buyers have a lot of power in commodity markets, for example, and that’s why our country has agricultural price supports to keep farm prices up. But in today’s rental housing market, the sellers have the high cards. Landlords have pricing power that tenants simply do not.

This is not to say that landlords’ costs do not rise. Property taxes go up, but they are limited to 4% per year. They are usually less than a quarter of a landlord’s expenses, so a 4% increase in taxes is certainly less than a 1% increase in overall costs. Few towns hit the limit every year, and North Kingstown certainly has not. Insurance rates are going up, too, but they are generally around 5-10% of a landlord’s costs. 

Even when costs rise, there is a question of how much is enough. If you’re clearing $400 a month on an apartment you rent and your costs go up $200, are you justified in raising the rent $200 to make up for it? Do you *deserve* all of that $400 per month?

The case for Diossa

“Economic development” or economic development?

By Tom Sgouros in UpRiseRI

Through years of watching changes in Rhode Island economic development personnel, I’ve noticed that a successful career in the field is not necessarily related to a successful economy. I was reminded of this recently when I heard Stefan Pryor, candidate for General Treasurer, express pride that Rhode Island came back from the COVID slump second-most quickly among all states.

People who follow the local economy recognize that as a statistic that is likely true, but doesn’t mean at all what Pryor wants you to think. It was a weak economy that COVID upended, and if you can’t fall far, you won’t have far to climb back: this is the same reason toddlers don’t bruise while learning to walk. A look at the detailed data bears this out; right after us in that list are Nebraska, South Dakota, and West Virginia, none exactly economic powerhouses. Should we be proud to be a competitor of West Virginia?

This is how you succeed (personally) as an economic development professional: by learning to make a sow’s ear sound like a silk purse. 

In truth, the economic development industrial complex rests on a mirage everyone agrees to see: that lasting prosperity can be created by directly affecting the location and investment decisions of rich people and large corporations. Time and again we see the fleeting nature of these deals, where a corporation extorts a government by moving somewhere or promising to hire people. But when the tax breaks expire, usually the benefit does, too. This kind of “economic development” often seems little more than a game by which rich people and corporations suck money from the public treasury.

As neighbors of Massachusetts, we are accustomed to saying its economic success is due to all those universities and research, but think what that says: patient investment in higher education led to prosperity. Over recent decades, Massachusetts also made similarly long-term investments in elementary and secondary education and public transportation. With patience, they built a middle class proportionally much larger and more prosperous than Rhode Island’s. Boston booms, while Providence… doesn’t. This was not the result of “economic development” but it certainly was economic development.

So sure, you can criticize Stefan Pryor’s multi-state record: as Deputy Mayor of Newark, he oversaw an economic development agency so troubled its auditors recommended it simply stop making loans; as Connecticut Education Commissioner he was so controversial he resigned rather than threaten his governor’s reelection; and as director of CommerceRI, Rebuild RI tax credits were managed so they cannot possibly meet the original goals, according to a study by Pryor’s colleagues at the Department of Revenue. But the real danger here is a fundamental misunderstanding of economic development. Rhode Island doesn’t need more “economic development” that are just bad tax deals, we need fundamental reform of how our government thinks about our economy. We need real investments in education, in public transit, in housing, in making the lives of Rhode Islanders better. And we need the patience to see that work make good.

The job of state Commerce Secretary is mostly about being nice to businesses that want to grow here. But by Stefan Pryor’s telling, he’s in charge of the Rhode Island economy. My advice is if you think that our state’s economy is fine — if you think he built the conditions for long-term growth — vote for him. Otherwise consider James Diossa, who is familiar with struggle and has managed a city with near-zero resources to great effect. Diossa understands that government exists to help people who need help, and to make those long-term investments that will pay off — in a permanent way. That’s why I’ll vote for Diossa.

EDITOR'S NOTE: As on many other things, I agree with Tom in his comparison of James Diossa to Stephan Pryor. I too support Diossa whole-heartedly. He took Central Falls from the deepest hole possible and helped to make it a liveable city again. CF was such a write-off that the state tried to pay Pawtucket to absorb the city - and Pawtucket refused. Diossa involved the community and built a great team to bring the city back from beyond the fringe. And he modestly credits others rather than take the credit he deserves.

Stefan Pryor, on the other hand, takes almost sole credit for everything he even comes near. Sure, he was involved in some high profile efforts, such as the rebuilding of lower Manhattan. But that's not so hard when you are running a project with limitless cash and national priority. Pryor's campaign is now throwing rocks at James for "not being ready" for the job of General Treasurer because he "only" saved Central Falls, while Pryor is clearly an ubermenchen. 

No thanks, Stefan. I'm voting for James.     - Will Collette

A billion dollars and we don’t know what to do with it

RI’s legislature lacks policy staff, and that’s a problem

By Tom Sgouros in UpRiseRI

Hell will freeze over before this guy makes a decision

It seems the state is still sitting on over a billion dollars of money from the federal government, and still has no plan for it beyond a tentative plan for spending a tiny fraction of it on housing. 

The need for housing, food, and other social services has never been higher, the deferred maintenance and infrastructure needs are huge, and it’s not as if there aren’t dozens of excellent policy ideas other states are adopting that could work here. But we can’t have any of that, apparently. How is it that something so crazy seems to be happening? 

Congress passed, and President Biden signed, the American Rescue Plan Act back in the spring. This provided billions of dollars to address the economic gasping caused by the pandemic. It seems to have worked, and the United States economy has rebounded faster and higher than any other advanced economy in the world. A victory for policy, but not everywhere. 

Lots of states have been spending this money for months already, but Rhode Island has just been kind of hanging onto it. Why? 

Well Governor Daniel McKee bears some of the blame for making one of his first acts in office an attempt to spend $5 million on an absurd consulting contract for friends of his. If that’s the way he wants to conduct policy, why should anyone trust him or his administration? 

And that’s a real problem, because the legislature has nobody they can trust to come up with a plan for this money. The General Assembly has only a small handful of policy people on their staff, and their hands are already full. 

It ends with a dark money whimper

The failed recall effort in North Kingstown

“How does the story end? With a dark money whimper,” writes Tom Sgouros. “Tuesday was the deadline for turning in signatures, and none were turned in at all. The word in town is that in the end Brimer and company had gathered fewer than 700 signatures, not even close to half the signatures they needed.”

By Tom Sgouros in UpRiseRI

The news you may not have heard on October 12 was about what didn’t happen, and how one of the most effective illusions in Rhode Island politics was pierced.

Some background: In August of this year, 50 North Kingstown citizens, led by Mary Brimer, Republican member of the Town Council, filed a petition to force a recall election against School Committee member Jennifer Lima, an outspoken advocate for diversity and equity in the schools.

Running on her experience founding Toward an Anti-racist North Kingstown (TANK), Lima got more votes in November 2020 than any other town candidate, which wasn’t bad for her first election.

But that didn’t stop a committed band of (mostly) Republicans from filing to recall her for “publicly stat[ing] an opinion that does not reflect the views of her constituents.” (This is a quote from their petition, which can be found here.)

According to the town charter, when presented with such a petition, the Board of Canvassers must respond with official signature sheets. The recall proponents then had 60 days to gather 3102 signatures to force an election. If recalled, Lima would have been replaced with one of the Republicans she beat last fall.

This was, of course, just a cynical move to undo an election Republicans could not win fairly. They calculated that they had a better chance in a low-turnout election of angry voters than in the general election.

So they began angering people to gather signatures, making up stupid lies about “critical race theory” and the wounded self-esteem of little children being taught they are all equal. And Marxism. Lima was described as radical, dangerous, and a communist puppeteer orchestrating all manner of evil from deep behind the scenes.

It was all laughable until the money showed up. Late in August, the Gaspee Project, an affiliate of Mike Stenhouse and his Center for Freedom and Apple Pie, decided that Lima was public enemy number one, and they focused statewide attention on her and North Kingstown.

A bad bargain then, a bad bargain now

Let’s talk about education. McKee proposes $911 million for local public school aid, a 3% bump, but also proposes charter schools get a 9% bump

By Tom Sgouros

Tom Sgouros

It is budget season in Rhode Island, and the discussions at the state house are perhaps a little less panicked since the Biden administration has come through with some badly-needed aid. 

You can tell there is breathing room because we now hear how we don’t really need to revisit our tax policy. For the record, the state plans to spend $100 million on a tax cut this year, but only to people whose cars are worth over $4,000. 

And both the new Governor McKee and new Speaker Shekarchi seem interested in ignoring the issue of taxes, letting the car tax cut stand and resisting the call to restore income taxes on high incomes. 

Let’s talk about education. The Governor is proposing to spend $911 million on local public school aid. This is about a 3% bump up from last year, which is certainly not awful. Charter schools get a 9% bump, though. 

Time for some history. What $911 million actually means is that we may finally reach the education funding levels of… the Almond administration. The 2003 budget of Lincoln Almond, not exactly a profligate spender, gave $904 million (in 2020 dollars) to fund local public schools. After him, Governor Carcieri pretty much level-funded education until he slashed it mercilessly when the financial crisis hit in 2008. 

The story was not all bleak. Over his term, Carcieri managed to triple the state budget for charter schools. And between 2008 and 2011, when our traditional public schools were seeing a 20% cut in state aid (again, correcting for inflation), charter schools saw a 33% increase. 

Governors Chafee and Raimondo managed to restore some funding, but not nearly what was lost. (Though they did manage to triple charter school funding again.)  

Over the past two decades, we have cut a truly devastating amount from traditional public schools. Had we only kept pace with inflation since 2003, we would have spent more than $1.8 billion more on supporting our schools over that time. 

But we didn’t do that. We gave away money instead. Aside from the hugely expensive car tax cut. There was a capital gains tax cut in 2001, then the “flat” tax slashed tax rates (only for the rich) every year from 2007 until 2012. 

It’s raining NOW

Mattiello’s plan to increase rainy day funding is austerity economics

By Steve Ahlquist 

RI House Speaker Nicholas Mattiello has introduced an amendment to the Rhode Island State Constitution that would double the funding of the budget reserve account, aka the “rainy day fund” and impose limits state spending. 

A bill introduced by the Speaker, which was intended to accomplish much the same purpose legislatively, has been withdrawn.

Increasing the rainy day fund might be a fine idea in times of economic plenty, but in a time of a decreasing state revenues and increasing costs due to the COVID-19 pandemic, Mattiello’s plan is exactly the wrong tactic, unless you’re plan is to defund social services.

“Now is our rainy day,” said State Senator Samuel Bell (Democrat, District 5, Providence) in response to a query from Uprise. “Now is not the time to be diverting more revenue away from our budget. Pushing this now means deep cuts that will hurt our recovery.”

The Economic Progress Institute (EPI) agrees. In testimony presented to the House Finance Committee last week it was estimated that Mattiello’s proposal would “take close to a half-billion dollars of revenue out of the regular budget and appropriations process, including tens of millions of dollars before Rhode Island has fully emerged from the current economic crisis.

“These funds,” continued EPI, “are urgently needed for critical public services, including housing, healthcare, workforce development, and transportation. In better times, the state can start putting aside additional funds; there is no good reason to mandate this right now.”

Riding the bus

With climate change looming, why is Rhode Island making public transportation less convenient?

By  Tom Sgouros

Waiting for the bus in Charlestown, one of the ONLY
towns in Rhode Island with NO direct access to RIPTA

RIPTA and state executives are making progress in disassembling the central bus hub that serves thousands of people every day. 

It’s hard to understand why the system seems dedicated to making use of the buses less convenient for everyone, but RIPTA executive director Scott Avedisian was on the radio last week, on WRNI, and spoke about Kennedy Plaza. In answer to one question, he said, 

“… the multi-hub system has been in the planning process now for 10 years. And the goal has always been, um, with that $35 million bond issue: service in Kennedy Plaza, more service at the train station, and service in the Garrahy court complex area. That was, from the very beginning, those were the — the locations that were proposed.” 

This is a very disturbing characterization of what is going on here. There has long been a plan to establish better bus service at satellite hubs. 

Lots of people go to the train station and Rhode Island Hospital and improving services to those sites, as well as the Garrahy Courthouse should be part of improvements to bus service. 

But the proposal before us is to virtually eliminate the important bus hub at Kennedy Plaza, move some of that activity to the Garrahy Courthouse and scatter the rest among bus stops along Dorrance and Eddy Streets and that has certainly not been on the table for 10 years. 

This is a change that will make bus transportation much less convenient for thousands of regular riders. I’ve ridden the bus for years, and watched as schedule cutbacks and shifts have made the bus successively less convenient. 

EARTHQUAKES! Plus radiation, drug overdoses, charity, food, jobs, a comet and more

A spicy plateful of Charlestown Tapas

By Will Collette

Run and hide! It’s an earthquake!

There were at least five small earthquakes recorded on Monday near Plainfield, CT approximately nine miles west of Coventry. The largest one was between 3.3 and 3.1 on the Richter Scale – large enough to be felt but not large enough to cause serious damage. 

Reports of shaking came in from as far away as New Bedford and Framingham in Massachusetts, South Kingstown and all over eastern Connecticut.

The Weston Observatory at Boston College monitors area seismic activity and says that small quakes are common in New England. They said there were two smaller quakes also around Plainfield that showed up on their instruments last week.

Coincidentally…

For the first time since I can remember, the Westerly Sun ran a major piece on problems at our local nuclear power plant, Millstone, which is just outside of New London. The piece ran in the Monday edition of our newspaper of record but actually comes from the Associated Press.

The article notes concerns, and growing impatience, by nuclear regulators with Millstone’s operators and their apparent lack of effective action to resolve chronic problems with their cooling pumps. These pumps are the main thing that keeps the nuclear reactors at Millstone from melting down, a la Fukushima (there's an item further down you should read on the Fukushima disaster).

Fukushima’s meltdown was the result of Japan’s cataclysmic 2011 earthquake knocking out the plant’s cooling pumps – a 9.0 quake, or roughly 500,000 times more powerful than our little Plainfield quakes. But nonetheless, as we're discovering at Millstone, it doesn’t take an earthquake to make those life-saving pumps fail.

Overdoses

Sgouros picked as senior policy advisor to General Treasurer Seth Magaziner

Best wishes Tom Sgouros, new adviser to Seth Magaziner

By Mark Binder in Rhode Island’s Future

EDITOR’S NOTE: it’s no secret that I was a strong supporter of Seth Magaziner to become General Treasurer and was very happy when he won. Seth has started off on a great foot by picking Tom Sguros to be his senior policy advisor, a perfect spot for Tom. Tom’s columns have frequently been re-published here in Progressive Charlestown (click here to see them). His recent series on conservative hysteria over RhodeMap RI are choice pieces of social commentary. I hope Tom will get to keep writing. - WC

It’s always gratifying when one of the best and most deserving folk actually get a position in government where they can make a powerful difference. We recently learned that RI Future contributor Tom Sgouros has been appointed as senior policy adviser to Seth Magaziner, the new treasurer of Rhode Island.

Tom was himself a candidate for the office of treasurer in 2010 but dropped out early in the race that Gina Raimondo would go on to win. He is known for his incisive, well-researched and often sarcastic insights into the economics and policies of Rhode Island.

In addition to writing for RI Future, Tom recently started — and will suspend — an excellent column in the Providence Journal. Which is a shame, but a fair tradeoff for honesty and transparency in government.

Pigs Fly

RI Tea Party endorses government regulation

By Tom Sgouros in Rhode Island’s Future

In a stunning turnaround, the RI Tea Party today made a full-throated endorsement of some of the most intrusive government regulations on the books. 

In a fundraising email, the group called on its supporters to “…rise up against this assault on everything you’ve worked your entire life to earn” — by defending existing zoning and land-use regulations throughout the suburban and rural parts of our state.

For years, suburban communities in Rhode Island (and elsewhere) have stood firmly against affordable housing through land use regulations demanding such things as minimum lot sizes, height restrictions, and prohibitions on multi-family housing.  

Making it perfectly clear that land-owners’ rights to property are not absolute, these zoning regulations set very clear limits on what can and cannot be built on a piece of land, the key reason it is such a surprise to see these restrictions endorsed by the RI Tea Party and other “property rights” defenders.

There is demand for affordable housing in almost every community in Rhode Island. Were the housing market a free market, it would be built, and there would be affordable housing all over the state. But in the suburban and rural communities, local land use regulations often prevent such housing from being built anywhere in town. 

RhodeMap RI hysteria spreads….it’s like we all caught Eboli from somebody who visited Benghazi

RhodeMapRI forces state to burn your house!

By Tom Sgouros in Rhode Island’s Future

In yet another breathless press release from The Center for Freedom and Apple Pie, I learned that the controversial RhodeMapRI plan will call for the incineration of yourhouse. Right down to the ground.

Be afraid. Very afraid.

Yes, it’s true, your nice comfortable suburban house, the one you dreamed about for years, is to be sacrificed to build an affordable housing skyscraper in its place.

RI conservatives have found their own version of BENGHAZI!!!

RhodeMapRI opponents fear future plans, affordable housing

"Communist plot...tyranny...BENGHAZI!!!"

By Tom Sgouros 

EDITOR'S NOTE: Locally, the Charlestown Citizens Alliance (CCA Party) is part of the right-wing circus that's going crazy over this. Late news Wednesday was that a planned meeting to move the plan along was postponed, apparently in response to the hysteria. - WC

We’re apparently supposed to be afraid, very afraid, of Lincoln Chafee’s “Rhode Map” for economic development. Since the election there seems to be a coordinated effort to scare the state about this plan for future growth.

Gary Morse, wrote a fairly confused screed in the Providence Journal Monday that complains the RhodeMap RI, well, I’m not really sure what is the problem with it. Maybe that its development was partly funded by the US Department of Housing and Urban Development?  He writes:

“[W]hat RhodeMap RI is really all about is HUD’s demand that low-income housing, particularly low-income rental housing, be implemented side-by-side with existing housing in every neighborhood across America.”

Shocking, I know. But he can’t quote anything in the report to support this kind of claim because it doesn’t say anything like it anywhere in the report. Go ahead, search it right here.

Raimondo lacks the character to be Governor

Gina Raimondo’s lack of leadership

By Tom Sgouros in Rhode Island’s Future

EDITOR’S NOTE: In 2010, Tom Sgouras announced his intention to run for Treasurer before Raimondo did but later withdrew in her favor. Tom was, far and away, my first choice, and that of my then colleagues on the Charlestown Democratic Town Committee. We also bought Raimondo’s bill of goods and have regretted it ever since.  - WC

Almost four years ago, I endorsed Gina Raimondo to be Rhode Island’s General Treasurer. Since then, a lot of water has flowed under the bridge, and now a new election campaign is before us. Gina, the fundraising juggernaut that she is, is now facing better-than-decent odds in a quest for the Governor’s office.

Four years ago, when Raimondo first ran for office, she had no record at all to judge. Anyone who voted for her was voting for a promise, or maybe an image. Though lots of voters will always go for the image regardless of the reality, it is no longer necessary. We have three years of record with which to judge her. So what do we learn?

When I first sat down with Gina in 2010, she said that the issue that concerned her most was income inequality. She said it without hesitation, almost the first thing after “Hello, how are you?” (and in front of a witness, too). Well, fine; creating an economy that is good for everyone is one of the central economic issues of our time. But when did she speak out on the subject in public?  Was it before it became popular to do so this year?

"Heartless and cruel"

Rep. Palumbo version of sympathy for immigrant children

Peter Palumbo: a disgraceful example of a human being

By Tom Sgouros in Rhode Island’s Future

In a letter to Governor Chafee, Rep. Peter Palumbo (D-Cranston) reports that he has “nothing but sympathy” for the immigrant children flooding our southern border. He apparently means that quite literally. And his sympathy extends only as far as telling his press liaison to type those words for him in a letter he, ahem, wrote to the governor. The children in question are apparently worth zero expense or effort beyond that, in his eyes.

So what, exactly, is his sympathy worth? And why does he bother to express it this way? 

The Sales Tax Cut Fairy Tale

Don’t cut sales tax based on flawed economic model

By Tom Sgouros in Rhode Island’s Future

A few months ago, I wrote about the intellectual bankruptcy of the economic model called STAMP, for State Tax Analysis Modeling Program, created by the Beacon Hill Institute (BHI), and beloved of the Rhode Island Center for Freedom and Apple Pie (CFAP). 

The good folks at the CFAP have been heavily promoting some of the results of this model, that predict that Rhode Island will enjoy a tremendous economic boom if only we would eliminate our sales tax.

As I detailed in that article, the RI STAMP model is flawed not only by a host of questionable assumptions, but also the laughable attempt to obscure those assumptions under an absurdly over-complicated presentation of the relevant equations. Really, there is no reason to do what they do except as a conceptual bulwark against reporters who are easily cowed by that sort of thing.

Now comes the Institute for Taxation and Economic Policy (ITEP) to say the same thing as me. In an epic takedown (summary here, report here), they cite STAMP’s many assumptions that either cannot be justified by the research literature or are completely contradicted by that literature or by experience. 

Subsidizing bad employers

Insuring unemployment ensures unemployment

By Tom Sgouros in Rhode Island’s Future

EDITOR'S NOTE: closely related to the problems Tom describes is
this our current UI rate system taxes good employers to benefit
bad employers. Click here for Ted Nesi's article. In his chart, above,
every bracket of RI employer pays more in unemployment insurance
costs than benefits paid out EXCEPT the last bracket which
includes those employers who lay off the greatest number of
workers. They pay $13 million less in UI costs than their 
workers collected, a cost that is borne by everyone else.

It is outrageous to have millionaires collecting unemployment insurance payments, according to a Golocal article in which I am quoted. Maybe Golocal is on to something?

Certainly their employer paid a premium to be insured against a layoff, but it’s also unlikely that they are actually in as dire a need for the assistance as someone who has been laid off from a lower-paid job. 

But the real problem with UI is the I. That is, unemployment is structured as an insurance program: your employer pays a premium and when unemployment happens, you can make a claim. Why is that a problem?

In structure, it’s just like property and casualty insurance. You pay a premium, and if your house burns down, you can make a claim to the insurance company. The difference is that only criminals incorporate burning down houses into their business strategy, while layoffs have become an accepted part of corporate management in the United States.

Nick goes to Wall Street

Mattiello is meeting with ratings agencies, but what will he learn?

By Tom Sgouros in Rhode Island’s Future

House Speaker Nick Mattiello is in New York today meeting with representatives of Standard and Poor’s and Moody’s, the two biggest of the credit ratings agencies. (No word on how Fitch feels about the snub.) It’s not perfectly clear what he thinks he’s going to get from this trip. Perhaps he’s going to look into the Moody’s representatives eyes and “get a sense of his soul” the way George W. Bush did with Vladimir Putin? That went well, didn’t it?

So what will Mattiello find when he meets with these guys? I predict he will find earnest, intelligent, kind, and solicitous people. They will make sympathetic noises about the awkward plight of our poor state and the unwise choices made by our previous governor and speaker of the House.

They will understand immediately the ramifications of our difficult position. But they will point out all the worst-case scenarios, because they are also people who believe very strongly that the end of western civilization will be nigh if a state is allowed to renege on a commitment they imagine it to have made.

Essential reading in the 38 Studios bond debate

38 Studios bond only one way Wall St. treats states unfairly

By Tom Sgouros in Rhode Island’s Future

One of the things I admire most about the debate over whether to repay the 38 Studios bonds is the way that we’re supposed to ignore the plain meaning of legal language. On the front page of the prospectus for the 38 Studios bonds, in capital letters, there is a paragraph that reads:

THE 2010 BONDS AND THE INTEREST THEREON DO NOT CONSTITUTE A DEBT, LIABILITY, OBLIGATION OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN A SPECIAL OR LIMITED OBLIGATION OF THE ISSUER) AND NEITHER THE FAITH AND CREDIT NOR THE TAKING AND TAXING POWER OF THE STATE OR ANY POLITICAL SUBDIVISION OR MUNICIPALITY THEREOF IS PLEDGED TO THE PAYMENT OF THE 2010 BONDS OR THE INTEREST THEREON. THE ISSUER HAS NO TAXING POWER. THE OBLIGATION OF THE STATE TO MAKE PAYMENTS FOR DEPOSIT INTO THE CAPITAL RESERVE FUND IS SUBJECT TO ANNUAL APPROPRIATION BY THE STATE GENERAL ASSEMBLY.

As if this isn’t enough, the paragraph is repeated verbatim (also in solid capitals) in the body of the document, on page 2, and again on page 11. And there are other sentences to reinforce it, too. So my question is which other sentences in the prospectus are to be ignored? Is there some secret legal code that says that if it’s repeated three times in all caps it doesn’t count?

Rhetoric versus reality

Debating the Heritage Foundation

Stephen Moore, conservative economist 

who doesn’t understand Rhode Island.

By Tom Sgouros in Rhode Island’s Future

Stephen Moore, the Royal Economist at the Heritage Foundation came to town last Saturday, to debate me in an event sponsored by the Rhode Island Center for Freedom, Prosperity, and Apple Pie. Was it an educational experience?  Well, possibly.

I did learn, for example, that Moore knows pretty much nothing about Rhode Island politics, economics, the history of its manufacturing sector, or even the legislative history of the past 25 years.

And he admits it, too, though he very much wants our state to take his advice. For example, he made repeated references to the way we “demonize” business owners and tax them at high rates without being able to be specific about what he meant, or to contradict the long list I gave him of tax cuts for rich people we have enacted over the past 20 years. In fact, the number of broad-based tax increases enacted by the state legislature since 1993 is zero, while taxes were cut for rich people in 1996, 1998, 2001 (twice), 2005, 2006 and 2010.