Aaron Regunberg: Who’s Being Selfish?

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Friday, October 28, 2011

Aaron Regunberg, GoLocalProv MINDSETTER™

Last Saturday the New York Times published an article about Rhode Island’s pension problem and General Treasurer Raimondo’s campaign to reform the system. Although I must admit I always feel a twinge of guilty pleasure when I see Lil’ Rhody’s name in the national news (even, strangely, when it’s there for the wrong reasons), there was one part of the article that really rubbed me the wrong way.

First, though, I want to make it clear that I know relatively little about the pension issue and am certainly not well-versed in the numbers—one reason I’m so thankful for the research and clear explanations offered regularly by Tom Sgouros, who (I think we can all agree, whatever your political persuasion) spends way more time analyzing pension-related information than is healthy.

So again, I’m no expert. But my problem with the current pension debate, and particularly with Ms. Raimondo’s rhetoric, is not about the data or any particular analysis of it, but rather about the narrow and—in my opinion—self-serving way the problem is presented. Take this exchange between a public sector employee and the General Treasurer as reported in Saturday’s New York Times piece:

“Mr. Valletta boomed from the back of the hall, ‘You’re going after the retirees! In this economic time, how could you possibly take a pension away?’Someone else in the audience said Rhode Island was reneging on a moral obligation. Ms. Raimondo, 40, stood her ground. Rhode Island, she said, had a choice: it could pay for schoolbooks, roadwork, care for the elderly and so on, or it could keep every promise to its retirees. ‘I would ask you, is it morally right to do nothing, and not provide services to the state’s most vulnerable citizens?’ she asked the crowd. ‘Yes, sir, I think this is moral.’ “

Not an Honest Choice

Ms. Raimondo makes the case that there are only two options—either pension promises can be kept, or services must be cut. Given that choice, as someone who works on a daily basis with low-income students and wants those schoolbooks, I would certainly prioritize services for ‘the state’s most vulnerable citizens’ over full pension benefits for (lower-) middle-class retirees.

But that is not an honest choice. There’s a third option beyond either cutting services or forcing state workers to give up the modest pensions they have paid into throughout their careers: our state could ask a little more from its most fortunate citizens, the wealthiest Rhode Islanders who, of all three options, are in far and away the best position to pay their fair share.

Now, I know what you’re going to say—what right do we have to tax Rhode Island’s 20,873 millionaire households? They work hard for their money!

I would agree with this; most of these people do work hard for their money. But I would argue that most public employees do so, as well. I haven’t met every teacher, police officer, and firefighter in RI, but all the ones I’ve talked to are very hard workers. They chose professions that they knew would not make them very wealthy, because they wanted to serve the public good, even if it meant at best a modest lifestyle and a moderate (but dignified) retirement. So it’s hard for me to understand the logic that taking money from them is ‘moral’ but slightly increasing the marginal income tax rate for the wealthy is not.

Why Not Tax the Rich

Alright, I know what you’re going to say next—if we tax Rhode Island’s wealthiest families, then they will just up and leave!

That’s what millionaires keep telling us. And of course they’re going to tell us that; if convincing us that it’s true means that they won’t be taxed, why would they say anything different? Fortunately, we have more precise methods of discovering the validity of this claim: peer-reviewed scientific studies, which show very clearly that this ‘flight of the earls’ myth is just that—a fairytale. I won’t bore you with a comprehensive survey of the academic literature, but as a great example, Google the 2011 study from Stanford and Princeton, “Millionaire Migration and State Taxation of Top Incomes: Evidence From a Natural Experiment,” in which researchers analyzed the effect of a millionaire tax in New Jersey over four years and found that it caused little to no high-earner migration, despite New Jersey’s relatively small size and proximity to many neighboring states (just like Rhode Island).

So we can tax the rich. But the powers that be won’t. What we’re left with is a system that doesn’t have enough money and a bunch of rich people who own a greater share of the state’s wealth than they have since the Roaring Twenties.

Put Your Money Where Your Mouth is

Given this, I find it pretty problematic that a wealthy woman like Ms. Raimondo is traveling around our state telling public employees that they have to give up the promise of a dignified retirement in order to preserve services for the poor and elderly. Seriously? After a decade of state and federal tax breaks for the rich, you are going to tell struggling working-class families that they are being selfish for expecting the modest pensions they’ve been paying into for years?

I’m all for resolving our unfunded pension liability. But let’s do so in a balanced way, by asking everyone to share in the pain instead of just those who can least afford to take the hit. And let’s be very clear about what our options are. This is not an issue between working-class pensioners and the state’s most vulnerable citizens, and it is dishonest for a wealthy woman like Ms. Raimondo, or a rich man like Lincoln Chafee to present pension reform in this way. Public employees may, indeed, have a responsibility to give up more of their benefits (as they’ve already done multiple times over the last decade), but not before the folks who can so easily afford to pitch in a bit more for “schoolbooks, roadwork, care for the elderly, and so on”—like the Governor and the General Treasurer—are willing to put their own money with their mouths are.
 

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