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The Blue Mutiny: Providence Cuts Pensions to Stay Afloat

Much of the country is watching the Democrats’ attempt to save the blue model in Wisconsin’s recall election today, but in Providence, Rhode Island, it is the Democrats themselves who are taking on big blue. Mayor Angel Taveras’s proposed deal to modify the pensions of government workers in order to save the city from bankruptcy follows up on earlier mandates and is currently under consideration by union leaders. The deal would cap future pensions and permanently dissolve the annual increases traditionally allotted to public workers such as police and firefighters.

Providence’s need for fiscal relief is dire, as Bloomberg reports:

The agreement is the latest to scale back public-worker benefits in states and cities from California to Maine seeking to curb pensions as costs have ballooned and investment returns have soured even as retirees live longer. Providence needs almost $1 billion to fulfill its contract promises after failing to make required contributions to its retirement system.

“We believe that this is the deal that will save the pension system and save the city of Providence,” Taveras, a Democrat elected in 2010, said by telephone yesterday. “We obviously think that this is a good deal and are cautiously optimistic that it will be approved.”

In deep blue Rhode Island, where Obama won by a 27.8 percent margin in 2008, we find another Democrat dealing a blow to the blue model. In joining the ranks of fellow Democrats Andrew Cuomo and Pat Quinn, Mayor Taveras is facing up to the reality that the politics of “more” no longer works. As the pension and union burdens become ever more unsustainable, forcing more, and more dire, cuts on services that Democratic voters want and need, watch for others on both sides of the political aisle to follow suit.

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  • thibaud

    Is this a crisis of survival for entitlements generally, or just the effects of an actuarial problem made worse by poor governance?

    In Wisconsin at least, the evidence is that the public sees it as the latter. Here are the latest results from Marquette U’s survey in WI: the same voters who favor Walker by a 50-44 margin also have a significantly more favorable view of unions (40% favorable for public unions, 44% for private unions) than of the Tea Party (only 32% favorable).

    The Tea Party/Norquist silliness isn’t the right alternative. The way to deal with unsustainable pension liabilities is through better governance, not destroying them altogether in favor of unicorns about “innovation” and magical economic growth delivered by 3D printers, Kickstarter etc.

  • Kenny

    Good post, Mr. Mead.

    But extend the thought and have Via Meadia do a thought exercise.

    As you point out, even hard core Democrats are finally clamping down on public sector excesses … but they’re doing so not out of conviction for good governance but rather out of absolute financial necessity.

    So just imagine (or try to calculate) how much economic resources has been wasted over the years by over compensating and over staffing the public sector.

    Imagine what could have been done if those resources were not so wasted.

  • Jacksonian Libertarian

    I don’t know why you talk up the Democrats being forced by bankruptcy to face up to the failing blue model, when it’s the Republicans that are taking the bull by the horns and doing the fiscally responsible thing by dealing with the failing blue model before it leads to bankruptcy, and being fought tooth and nail the whole way by the Democrats (see the recall election in Wisconsin).

    The Democrats are blue model enablers, irresponsibly digging the Nation, States, and Local communities into deep holes of economic hardship and suffering that will require decades of long hard effort to get back out of. Just looking at the Democratic strong holds of California, and Illinois and their headlong rush into economic disaster, makes me sick to my stomach. That an already bankrupt town in tiny Rhode Island, is being forced to confront economic reality, doesn’t fill me with much hope that Democrats are going to become fiscally responsible except when left with no other choice.

    The Democrats are irresponsible spend-o-holics and they need to be fired before they can do any more damage or even destroy us.

  • thibaud

    Our fiscal mess is in large part due to the extraordinary wastefulness of our employer-based Frankenstein health insurance non-system. This more than any factor is why US companies are not hiring and expanding their operations, hence US-based profits, hence taxes paid in the US.

    Apple’s vast tax evasion operations are the reductio ad absurdam of this phenomenon, but there are thousands of other firms which are not hiring and expanding here in the US in large measure because the marginal cost of hiring has been blown out by the private health insurers’ exorbitant rate increases.

    These increases do not translate into better care or service, only more and more administrative armies dedicated to figuring out ways to deny people benefits.

    Until/unless we sever the link between employment and health insurance, we will continue to see more and more of this nation’s public resources devoured by pointless insurance administrative costs.

  • tobias took

    Eventually you run out of other people’s money.

  • Kevin

    I’m not sure I would include Pat Quinn as one who is seeing reality. He may make a few sympathetic noises but IL is still heading for the fiscal cliff at full speed.

  • Rich K

    Necessity, not change of idiology is the only thing happening in blue america. When and if the money starts rolling in again the claims for “fairness” will ring from the rooftops of public sector heaven.Tides rise and fall and unions are always first to the trough.This is just a short term blip for them to ride out.Remember that we in the private sector dont get to focus on these issues 24/7 but the public sector and all who encompass it do and they will make sure the fatted calf is fed.A short fast is easy to ride out.

  • Kris

    Rich@7: “When and if the money starts rolling in again the claims for ‘fairness’ will ring from the rooftops of public sector heaven.”

    What? I don’t understand. I thought that Keynesianism was Good, and it consists of increasing government spending during difficult economic times, and decreasing it during good times! I am so confused.


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