Rhode Island Policy Reporter

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A look at the lousy situation Rhode Island is in, how we got here, and how we might be able to get out.

Budget Demystification!
Fiscal Derring-Do!
Economic Jiggery-Pokery!

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RIPR is a (paper) newsletter and a weekly column appearing in ten of Rhode Island's finer newspapers. The goal is to look at local, state and federal policy issues that affect life here in the Ocean State, concentrating on action, not intentions or talk.

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whole site RIPR back issues

Available Back Issues:

  • Aug 09 (38) - How your government's economic policies have worked against you. What a fake nineteenth century nun can teach us about the tea party protests.
  • Jun 09 (37) - Statistics of optimism, the real cost of your government. Judith Reilly on renewable tax credits. Review of Akerlof and Shiller on behavioral economics.
  • Apr 09 (36) - Cap and trade, the truth behind the card check controversy, review of Governor's tax policy workgroup final report.
  • Feb 09 (35) - The many varieties of market failures, and what classic economics has to say about them, review of Nixonland by Rick Perlstein.
  • Dec 08 (34) - Can "Housing First" end homelessness? The perils of TIF. Review of You Can't Be President by John MacArthur.
  • Oct 08 (33) - Wage stagnation, financial innovation and deregulation: creating the financial crisis, the political rhetoric of the Medicaid waiver.
  • Jul 08 (32) - Where has the money gone? Could suburban sprawl be part of our fiscal problem? Review of Bad Money by Kevin Phillips, news trivia or trivial news.
  • Apr 08 (31) - Understanding homelessness in RI, by Eric Hirsch, market segmentation and the housing market, the economics of irrationality.
  • Feb 08 (30) - IRS migration data, and what it says about RI, a close look at "entitlements", historic credit taxonomy, an investment banking sub-primer.
  • Dec 07 (29) - A look at the state's underinsured, economic geography with IRS data.
  • Oct 07 (28) - Choosing the most expensive ways to fight crime, bait and switch tax cuts, review of Against Prediction, about the perils of using statistics to fight crime.
  • Aug 07 (27) - Sub-prime mortgages fall heaviest on some neighborhoods, biotech patents in decline, no photo IDs for voting, review of Al Gore's Against Reason
  • Jun 07 (26) - Education funding, budget secrecy, book review of Boomsday and the Social Security Trustees' Report
  • May 07 (25) - Municipal finance: could citizen mobility cause high property taxes? What some Depression-era economists had to say on investment, and why it's relevant today, again.
  • Mar 07 (24) - The state budget disaster and how we got here. Structural deficit, health care, borrowing, unfunded liabilities, the works.
  • Jan 07 (23) - The impact of real estate speculation on housing prices, reshaping the electoral college. Book review of Blocking the Courthouse Door on tort "reform."
  • Dec 06 (22) - State deficit: What's so responsible about this? DOT bonding madness, Quonset, again, Massachusetts budget comparison.
  • Oct 06 (21) - Book review: Out of Iraq by Geo. McGovern and William Polk, New rules about supervisors undercut unions, New Hampshire comparisons, and November referenda guide.
  • Aug 06 (20) - Measuring teacher quality, anti-planning referenda and the conspiracy to promote them, affordable housing in the suburbs, union elections v. card checks.
  • Jun 06 (19) - Education report, Do tax cut really shrink government?, Casinos and constitutions, State historic tax credit: who uses it.
  • May 06 (18) - Distribution analysis of property taxes by town, critique of RIEDC statistics, how to reform health care, and how not to.
  • Mar 06 (17) - Critique of commonly used statistics: RI/MA rich people disparity, median income, etc. Our economic dependence on high health care spending. Review of Crashing the Gate
  • Feb 06 (16) - Unnecessary accounting changes mean disaster ahead for state and towns, reforming property tax assessment, random state budget notes.
  • Jan 06 (15) - Educational equity, estimating the amount of real estate speculation in Rhode Island, interview with Thom Deller, Providence's chief planner.
  • Nov 05 (14) - The distribution of affordable houses and people who need them, a look at RI's affordable housing laws.
  • Sep 05 (13) - A solution to pension strife, review of J.K. Galbraith biography and why we should care.
  • Jul 05 (12) - Kelo v. New London: Eminent Domain, and what's between the lines in New London.
  • Jun 05 (11) - Teacher salaries, Veterinarian salaries and the minimum wage. Book review: Confessions of an Economic Hit Man
  • Apr 05 (10) - Choosing a crisis: Tax fairness and school funding, suggestions for reform. Book review: business location and tax incentives.
  • Feb 05 (9) - State and teacher pension costs kept artificially high. Miscellaneous tax suggestions for balancing the state budget.
  • Dec 04 (8) - Welfare applications and the iconography of welfare department logos. The reality of the Social Security trust fund.
  • Oct 04 (7) - RIPTA and DOT, who's really in crisis?
  • Aug 04 (6) - MTBE and well pollution, Mathematical problems with property taxes
  • May 04 (5) - A look at food-safety issues: mad cows, genetic engineering, disappearing farmland.
  • Mar 04 (4) - FY05 RI State Budget Critique.
  • Feb 04 (3) - A close look at the Blue Cross of RI annual statement.
  • Oct 03 (2) - Taxing matters, a historical overview of tax burdens in Rhode Island
  • Oct 03 Appendix - Methodology notes and sources for October issue
  • Apr 03 (1) - FY04 RI State Budget critique
Issues are issued in paper. They are archived irregularly here.

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The Rhode Island Policy Reporter is an independent news source that specializes in the technical issues of public policy that matter so much to all our lives, but that also tend not to be reported very well or even at all. The publication is owned and operated by Tom Sgouros, who has written all the text you'll find on this site, except for the articles with actual bylines.


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Mon, 31 Jan 2005

Hubble bound for early demise

The Hubble space telescope, already the source of more scientific discoveries than almost any other space program ever, is doomed, in need of repairs and without an active shuttle fleet to service it. There's talk of using robots to fix it, but apparently the administration has other plans, and its budget is slated for serious slashing, according to the Congressional Quarterly.

And "airline security fees"—which presumably we're supposed to regard as "not-taxes"— are to go up by $5-$8 per ticket under the President's budget. Shall we be the first to say the President will be lying about taxes if he says they won't go up on his watch? Ok.

21:54 - 31 Jan 2005 [/y5/ja]

Cost-effectiveness of welfare

Tom Coyne, the proprietor of www.ripolicyanalysis.org, had a column in yesterday's journal. The gist of it was that RI is generous, but we get little for it. Over here, he'll get agreement that, compared to other states, RI is generous towards the poor. But his analysis is a bit funny.

Tom Coyne: R.I.: Lots for poor, to little effect

THE STATE of Rhode Island spends much of its general-revenue budget on helping the needy -- more, in fact, than the federal government mandates.

For fiscal 2006, the governor's proposed budget for human services is $1.2 billion. This covers spending by the departments of Children, Youth and Families; Elderly Affairs; Health; Human Services; and Mental Health, Retardation and Hospitals. An analysis by the Barrington School Department estimated that in fiscal 2003, Rhode Island school systems spent an additional $362 million on special education. We thus appear to be spending roughly $1.6 billion a year to help Rhode Island's neediest.

Special education is not aid to the poor. There is a correlation between special ed and poverty: poor communities have lots of special ed students. But there are plenty of special ed children whose parents are not poor. I count a few among my neighbors here in a perfectly "nice" neighborhood.

The rest of the column is equally confusing. For example, he complains that our high welfare spending goes with a high level of teen pregnancy. Our response is just confusion. Perhaps he maintains that generous welfare benefits cause teen pregnancy. Some have. The ones who do typically subscribe to the economists' view of human motivation. Very roughly, they see free benefits as an incentive to pregnancy. But this view of human nature is pretty bizarre, and most economists only use it because there isn't anything systematic to replace it yet. Ask yourself how many of the things you've done in the past (especially in matters of sex) were done because of the cost-benefit calculations you made.

Logically, this raises two questions: How much is Rhode Island spending in comparison with other states, and how effective is this spending?

It's fine to ask these questions, but the fact is (or should I say "logically") that people disagree about how to measure the effectiveness of welfare spending. Over here, we believe (all of us) that the effectiveness of a welfare program should be measured by the quality of life of the people it is meant to help. Less poverty equals more effective.

Mr. Coyne claims, as do many others, that the measure of a successful program is the number of people who are no longer on the welfare rolls. But this is a warped definition of success. It's fine to be guardedly pleased when the demand for welfare goes down, but to use the decline in rolls as the important measure of the program's success is to overlook the many other reasons that the rolls might decline.

What a lot of policy analysts don't realize is that for almost everyone on it, going on welfare is a choice: you can always eat dog food. The point of welfare is to preserve some dignity and quality of life even for the people who have no money, and to help those people through a difficult time in their lives. That's what the program is for. To the extent that people who need it can't use it, it is a failure. It is conceivable that Rhode Island can't afford a successful program. This is a testable proposition, and might be true for all I know, but I'm not aware that it's really been tested. But measuring the success of the program by the number of people it doesn't serve is a strange choice.

There are a million Rhode Islanders, leading a million different lives via a million different paths. Many of those paths take people down into unpleasant circumstances, some for bad reasons, others not. Unfortunately, the people who craft our social policy tend toward limited imaginations, so our welfare policies tend to have only a few solutions. Too bad one size doesn't always fit all.

11:17 - 31 Jan 2005 [/y5/ja]

Sat, 29 Jan 2005

Attorney General Alarm, pt 2

It appears RIPR is not alone in our distaste for the Attorney-General-designate and his contribution to making torture an official policy of the US government. Click on the first link to see all the blogs who agree. So call your Senator, again.

14:00 - 29 Jan 2005 [/y5/ja]

Fri, 28 Jan 2005


We're going to save most of our budget analysis for the print newsletter, but this couldn't pass without comment. The Governor's FY06 budget proposes to save $2.1 million with welfare rules changes, such as halving the time FIP recipients have to find work, and making work plans a requirement to receive the first check.

It's one thing to promote welfare rules change because you think this is a better way to run such a program. We can debate that, and debate the purpose of the program and how best to run it and so on. It's an entirely different thing to tighten rules because you need to balance the budget. There are two reasons for this:

  1. It makes it abundantly clear who loses when the budget gets tight. That Carcieri refuses to ask for another dime from his economic peers is appalling when he takes it out on the people so poor they have to be on welfare.
  2. The rules he's talking about are there to change people's behavior. Either they change, in which case the dollar figure estimates are no good, or they don't, in which case, the rules are simply punitive, and no good comes of them.
Saving $2.1 million in this fashion is taking real money from people who badly need it. Is that the best we can do?

13:10 - 28 Jan 2005 [/y5/ja]

FY06 Budget

The FY2006 budget is out, as of yesterday. The Governor deserves some praise for addressing at least one of the important problems facing towns: rising pension costs. On the other hand, the way he chose to address it isn't so terribly wonderful, but it's better than neglect he offers to the rest of their woes. It's not too harsh to complain that the biggest problems the state and the towns face are the rising cost of health insurance and the distribution of the tax burden for all our public services. Not everyone agrees with RIPR about the second one, but you can confirm the first by asking any town administrator what's their biggest budget problem. On these counts, there seems to be virtually no word from the Governor. (But it's a big budget and our analysts are still reading. Maybe he'll surprise us on page 423.)

Our prediction, which is sort of like predicting some more cold weather before spring: if this budget passes, expect big property tax increases. So far, the Governor seems to think all he need do is give the towns less money and command them to lower their expenses. The previous two Governors thought so, too, and it didn't work. What makes Carcieri think they'll listen to him? Does it cross his mind that they might love to do what he's asking, but can't? Can he really think all 39 towns are run by incompetents or con artists?

Editorial note: Our management should have been following this more carefully, but wasn't. The budget date has advanced from previous years, when it was introduced in February. We're rearranging the articles planned, so the next issue will be the budget issue. Why not subscribe now?

12:32 - 28 Jan 2005 [/y5/ja]

Thu, 27 Jan 2005

Hidden parts of the federal budget

From the Congressional Quarterly:

Bush wants to extend to all federal agencies personnel rules similar to those recently developed for Homeland Security and Defense, OMB announced yesterday. Those rules give the government greater flexibility, which Deputy Director for Management Clay Johnson III told reporters improves employee management and helps attract skilled workers.

But federal employee unions have called such rules an affront to employee rights. National Treasury Employees Union (NTEU) President Colleen M. Kelley said OMB's proposal to go government-wide was "appalling" considering the new DHS and DOD rules have yet to be implemented. In fact, DHS announced its final rules yesterday, and the NTEU promptly announced it would sue to block them.

You can find a brief of the issues here. In a nutshell, the Homeland Security employees have been given the appearance of collective bargaining rights (per the bill establishing the department), but little of the reality. HS employees are to be subject to firings at will, without hearings of evidence against them, a pay system separate from the GS system used by everyone else, the denial of a union representative at administrative proceedings where an employee's job might be at risk. Location and assignments of work and subcontracting are specifically exempted from collective bargaining, and the director retains the right to override pretty much all of it with agency-wide directives.

These rules are now proposed for everyone else.

10:58 - 27 Jan 2005 [/y5/ja]

Wed, 26 Jan 2005

Open Government

Over the past several years, I've spent a lot of time on the phone to government agencies around the country, and it's interesting how consistent my experiences have been with certain states. When I call governments in the South, I inevitably wind up talking to a woman who won't let me hang up until she's sure I've got the information I need. When I ask, publications come flying my way in the mail, usually for free. When I call the Pacific Northwest states, I almost always wind up talking to a guy who's been involved in some innovative planning project or recycling program, and who makes me feel like I'm from some distant and backward planet. Then he sends me some fabulous report filled with all the information I needed.

But when I call people in Rhode Island, to ask for public information, the inevitable response is first, "Who are you?" Once they're satisfied that I've properly identified myself, they say "You'll have to check with the public relations department." (Or legal counsel, depending on the department.) About half the time, that department makes me put the request in writing. This is simply a matter of course: the way that routine questions about public records are handled. The questions involved have been about such high-security information as the state unemployment rate, traffic accident statistics and pollution data.

Some departments are better than others, and are less likely to seem so tight with public information. Labor and Transportation are bad, Human Services is good. Education is good, Economic Development horrible. But the variations are around the same theme: the information is ours, and we want to control where it goes. This is simply the way it works here.

People around here have come to expect this, and suppose it to be the way government works everywhere. But I'd like to report from my own experience, that ours is the only state where this kind of thing happens at all, and it happens routinely here. Open government laws are one thing, but changing the culture of the state government would help much more.

23:21 - 26 Jan 2005 [/y5/ja]

Governor's pension proposals

More e-news from the Governor:

Governor Carcieri today proposed a pension reform plan which will help avert a crisis if it is enacted this year. It will save Rhode Island taxpayers a total of $256 million over the next five years and, in the next fiscal year alone, it will save the state and local communities $44 million.

You can often find harsh words here for the Governor. So the room filled with pleasant surprise as the staff learned that the plan proposed is not substituting a defined-contribution pension system for the state's current defined-benefit pension plan for state employees. (There is no word about whether this is what the Governor really wants, or if this is what he thinks he can get, but mind-reading is poor practice, and what is actually done is what's really important.)

The four prongs of the Governor's plan struck us as harsh, but honest, unlike a lot of snake-oil pension reform. There's plenty to criticize. There will be an article about the state pension system in the next issue (why not subscribe now?), and I expect there will be plenty to criticize. I suppose it's a sign of the times when proposals as harsh as these seem like cause for relief, but these are the times in which we live.

13:00 - 26 Jan 2005 [/y5/ja]

Tue, 25 Jan 2005

Attorney general alarm

This publication tries to be specifically about policy, rather than politics. We're most interested in what government does rather than the usual inane speculations about how this or that "will play." Further, most of my expertise is about matters of domestic affairs, and my inclination is not to go where I don't have experience. Property taxes, land use, clean water, food safety are the stock in trade around here, not religious strife, throw weights, supply chains and body armor.

But it doesn't seem like much of a stretch to say that I am appalled that our country has, to all appearances, officially sanctioned torture. I don't mean that we have spokesmen out there claiming that torture is a good thing. There don't seem to be any of those. But official spokesmen are just as often covering for official policy as they are explaining it. Perhaps more so.

By now we do have an assembly of evidence (here's some), including legal opinions and memos, official reports about torture and the prisons we've set up in Cuba, Afghanistan, Iraq and who knows where else. Not to mention those pictures. What's in that evidence shows that the US has effectively condoned torture and prisoner abuse, operates secret prisons whose locations we don't know, with occupants whose names we don't know charged with crimes we don't know.

The breadth of the evidence makes it embarrassing that Specialist Charles Graner has been prosecuted for atrocities and yet no one above him seems likely to suffer even a subpoena, let alone an indictment. We have a country where criminals aren't just walking free; they aren't even regarded as criminals by the people we expect to enforce the law. Which brings up the final point: It is astonishing that anyone involved with the formulation of these terrible policies could ascend to become the nation's chief law enforcement officer. It's even more astonishing that any of our nation's Senators wouldn't consider a vote on Alberto Gonzales to be a vote of conscience rather than strategy. Call yours now.

Update: Gonzales's response to the Foreign Affiars Committee indicates that his understanding is "cruel, inhuman and degrading" interrogation tactics are legally justified both by our constitution and by international law (e.g. Geneva conventions against torture). (Link to story here.)

23:47 - 25 Jan 2005 [/y5/ja]

An ad

The ad at the right is a link to thereisnocrisis.com, an organization devoted to refuting the conventional view that there is a funding crisis in Social Security. We haven't done ads yet, but there's a first time for everything. This one is unpaid, though we hope others won't be. RIPR exists to provide a counter to the conventional "wisdom" and so, it seems does thereisnocrisis.com.

From the site:

America promises that those who work hard and play by the rules deserve a secure retirement. For 70 years, Social Security has made sure we kept that promise. Social Security is in a healthier financial situation now than it has been for most of its history. Even the most pessemistic of economists agree it will remain solvent for decades. There is no crisis.
The current RIPR issue has an article explaining how some can claim that Social Security will go broke in a few years while the Social Security trustees think there won't be a crisis for decades. Why not subscribe?

15:16 - 25 Jan 2005 [/y5/ja]

Governor raised, child care providers call

In a press release last April, Governor Carcieri said:

Let me reiterate that our appeal has nothing to do with child care providers, or their right to unionize. I respect the important work that they do, as well as their right to organize. This case is about one thing: the Labor Board's breathtaking and unprecedented decision to unilaterally create 1,300 new state workers.

According to organizers at SEIU 1199, legislation has been prepared for introduction that will provide recognition of the state's day care providers right to organize, though will not call them state employees. Grace Diaz in the House and Juan Pichardo in the Senate are planning to introduce it.

With the Governor presumably behind it, doubtless the legislation will have no trouble passing.

14:17 - 25 Jan 2005 [/y5/ja]

Mon, 24 Jan 2005

Dollar woes: We're giving away our security

Here's a story in the Financial Times about how Asian central banks are now central to the US administration's fiscal policy. That is, the vast majority of bonds we sell don't go to individual investors, they go to central banks in other countries.

In 2003, the most recent year with full international statistics, central banks financed 83 per cent of the US current account deficit, with Asian central banks accounting for 86 per cent of flows.

A similar picture is emerging for 2004. Despite a good start to the year, when the private sector was a large net purchaser of dollar assets, central banks came to the rescue again. The People's Bank of China has let it be known that China increased dollar reserves by $207bn (€159bn) in 2004, financing nearly a third of the US current account deficit, estimated at $650bn.

There's a saying that if you owe the bank $100,000, then the bank owns you, but if you owe the bank $100 million, then you own the bank. The Asian banks holding our bonds can't sell it all without tragic consequences to their own economies, and one could justifiably suspect that this is what keeps our own fiscal engineers from lying awake at night. But the article goes on:

Self-interest has supported much of this flow of cash. The US has lapped up cheap finance to fund its unquenchable appetite to spend. Asian governments have until now been keen to oblige, in order to keep their currencies from appreciating. But all investors have their limits and they may start worrying about their degree of exposure.

Once Asian central banks begin to question why they hold so much US debt, who else will buy it? To be quite clear: you can only run a deficit if someone is willing to loan you money. The article goes on to note that the Bank of Thailand plans to lower its dollar holdings, as do bankers in Russia and OPEC countries.

Which would be another fine reason not to punt on the debt to the Social Security trust fund, as appears to be the assumption of the Bush administration. At the rate we're going, pretty soon we'll have no market for US bonds, except for the Social Security trust fund.

23:48 - 24 Jan 2005 [/y5/ja]

Wed, 19 Jan 2005

The Governor's state of the state, translated. Pt I

The Governor:

To do that, I am developing a five-year tax reduction plan. This plan will be broad-based, benefiting as many Rhode Islanders as possible.

I will also propose that new lottery revenues be dedicated to direct property tax relief.

Translation: we will see no property tax relief, though we might see a modest increase in state aid to towns this year.

But we might see an income tax cut, which is what he means by "broad-based." A 10% income tax cut will provide a family who earns $50,000 a year a cut of around $125. A 7% property tax cut, which would be about the same amount of money statewide, would probably net that same family around $525: four times as much. A property tax cut is harder to do, since it requires changing the relationship between the states and the towns in a fundamental way. But a property tax cut is worth much more, and we continue to wonder why he doesn't care to take it on.

11:09 - 19 Jan 2005 [/y5/ja]

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