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Matt Taibbi’s Deceptive Hatchet Job on Gina Raimondo

Wednesday, October 02, 2013

 

Whatever valid points that Matt Taibbi makes are discounted by the fact that his article is deceptive through and through, believes Aaron M. Renn.

I’ll admit it. I love Rolling Stone columnist Matt Taibbi. He never fails to entertain and often makes some good points. But his hit job on Rhode Island’s pension reform – and state treasurer Gina Raimondo, its architect – was profoundly deceptive. In it Taibbi tries to discredit the need for pension reform by paint reformers as Wall Street puppets out to steal from poor workers by taking their pensions and handing them over to hedge fund magnates. But all he provides to back that up is innuendo, not evidence. (Full disclosure: I have done freelance writing for the Manhattan Institute, which Taibbi criticizes, though this response is purely my own).

Omitting the Facts

First, who was responsible for Rhode Island’s 2011 pension reform? Taibbi spews forth a fountain of leftist shibboleths like venture capitalist, Goldman Sachs, Bain Capital, hedge funds, Enron, AIG, 501(c)4, the Koch brothers, “Republican-controlled state assembly” (of Ohio), etc. But one word never appears in the piece: Democrat.

Gina Raimondo is a Democrat - as is a large majority of the state legislature that approved the plan. Rhode Island is state of the deepest blue and not exactly a bastion of influence by the array of people from the free market right Taibbi lists. Raimondo is hardly alone among Rhode Island Democrats in pushing pension reform. Providence Mayor Angel Taveras – likely Raimondo’s key opponent in the 2014 Democratic gubernatorial primary – also reformed and reduced pensions. But since he never worked on Wall Street, did reform through negotiation with the unions, and doesn’t believe in investing pensions in hedge funds, Taibbi conveniently omits this part of the Ocean State story.

So step one for Taibbi is to obscure the severity of America’s municipal pensions crisis by portraying reform efforts as driven by right-wing ideology, not legitimate concerns. Hence he has to disguise the fact that many serious mainstream Democrats are facing up to this very real issue.

Where's the Evidence?

Next Taibbi suggests that reform is driven by a desire to enrich financiers, and in fact is actually a nefarious plot cooked up by Wall Street. He directly says that “the dynamic young Rhodes scholar [Raimondo] was allowing her state to be used as a test case for the rest of the country, at the behest of powerful out-of-state financiers with dreams of pushing pension reform down the throats of taxpayers and public workers from coast to coast.” He calls this “a scam of almost unmatchable balls and cruelty.” And also says that “states all over the country are claiming they not only need to abrogate legally binding contracts with state workers but also should seize retirement money from widows to finance years of illegal loans, giant fees to billionaires like Dan Loeb and billions in tax breaks to the Curt Schillings of the world.”

Where is Taibbi’s evidence for this? Somewhat curiously, he has none. He simply throws stuff at the wall to see what sticks, ranging from an ill-considered foray into coin investing by Ohio (prominently labeled as Republican, of course) to the AIG bailout. What any of these have to do with Rhode Island is a mystery.

He only makes two actual attempts to link Raimondo to a hedge fund plot. One is by noting campaign contributions to her from Wall Street linked people and organizations. True enough, money buys influence in politics. But there’s no evidence of a quid pro quo. And if that’s the standard, Taibbi perhaps should have investigated the money trail of the public employee unions, who are a formidable political force in Rhode Island. If he’d done that he’d have discovered that they backed many of the same politicians he berates for failing to fund pensions, and even many of the legislative leaders who voted for Raimondo’s plan, as well as pension reformer Taveras. By Taibbi’s standards, we’d have to conclude that in fact the unions actually did it mostly to themselves.

The second is to juxtapose the amount saved from freezing pension cost of living adjustments to an estimate of fees to be paid to the hedge funds Raimondo invested 14% of the state’s pension assets with. He then quotes a third party to make the link so he doesn’t have to personally make an unjustifiable claim. Taibbi notes, “In Rhode Island, over the course of 20 years, Siedle projects that the state will pay $2.1 billion in fees to hedge funds, private-equity funds and venture-capital funds. Why is that number interesting? Because it very nearly matches the savings the state will be taking from workers by freezing their Cost of Living Adjustments – $2.3 billion over 20 years. ‘That's some “reform,”’ says Siedle. ‘They pretty much took the COLA and gave it to a bunch of billionaires,’ hisses Day, Providence's retired firefighter union chief.”

Missing the Big Picture

Taibbi seems to think if the government is spending money on anything he doesn’t like, from hedge fund fees to the bone-headed state investment in video game company 38 Studios, then the state cut the pensions specifically to fund those bogus expenditures. Spending needs to be scrutinized to be sure, and I’m delighted to see Taibbi taking that on, but the logic works in the other direction too. Why not link cutbacks in services to the ever-expanding appetite of pensions for public funds? In this case, the state would be making its own innocent children suffer in order to keep giving annual raises to retirees, many of whom are now living in comfort out of state. But you won’t see Taibbi make that kind of link.

I agree with Taibbi that having pensions invest in hedge funds is a dubious practice, though I could quibble with his method of using simply fees paid as reason why it’s bad. But that misses the much bigger issue, which is that cutting pension liabilities actually reduces, not increases, the justification for investing in hedge funds.

Taibbi rightly shows how governments systematically underfunded pensions for years and then attempted to deal with the resulting deficits through high risk investment strategies like hedge funds. But if you reduce the liability, you reduce the incentive to gamble with the funds. So it’s absolutely anti-sensical to suggest anyone acting at the behest of peddlers of such risky plans would take action to reduce the very liability that gives any sort of a fig leaf to investing in them. His central thesis is a complete non-sequitur.

Taibbi makes a lot of good and valid points about various abuses and boondoggles in pensions over the year, but nothing that actually supports the main thrust of his piece. It’s deceptive through and through. There’s plenty of blame that should rightly be assigned for how we got in this mess, but in it we are. And serious Democrats and Republicans across the country both get that. Sadly, Taibbi does not.

Aaron M. Renn an opinion-leading urban affairs analyst, entrepreneur, speaker, and writer on a mission to help America’s cities thrive in the 21st century. In his blog, The Urbanophile, he has created America’s premier destination for serious, in depth, non-partisan, and non-dogmatic analysis and discussion of the issues facing America’s cities and regions in the 21st century. Renn’s writings have also appeared in publications such as Forbes, the New York Times, and City Journal. Renn is also the founder and CEO of Telestrian, a data analysis platform that provides powerful data mining and visualization capabilities previously only available in very expensive, difficult to use tools at a fraction of the cost and with far superior ease of use.

 

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Comments:

“In Rhode Island, over the course of 20 years, Siedle projects that the state will pay $2.1 billion in fees to hedge funds, private-equity funds and venture-capital funds. Why is that number interesting? Because it very nearly matches the savings the state will be taking from workers by freezing their Cost of Living Adjustments – $2.3 billion over 20 years. ‘That's some “reform,”’ says Siedle.

Tell us, Mr. opinion-leading urban affairs analyst, is it true or is it not true that the state will pay $2 billion to hedge funds over the next 20 years? The treasurer opted to pay Wall Street ahead of retirees. Plain and simple.

Comment #1 by Edward Smith on 2013 10 02

another yuppie from the elite

Comment #2 by Malachi Constant on 2013 10 02

I am no fan of raimondo but taibbi is a great example of why I wouldn't pay a penny for a mainstream newspaper or magazine.

its all opinion.

the only thing you can believe in virtually all media is the date.

do yourself a favor, stop paying for garbage and maybe big media will get the message.

Comment #3 by john paycheck on 2013 10 02

Aaron

You should do your homework before you Pontificate your clear bias for the working men and women of this State and the Country.

Any time you truly want to sit and go over the facts VERSUS your opinion I would be happy to assist you.

Comment #4 by Donna Day on 2013 10 02

Aaron

Maybe you can get the lists of Engage RI

"Raimondough" Campaign Finance Supporters

And The Hedge FUND Friends and Family List and PROVE with data we are all wrong about the disgusting lack of TRANSPARANCY in Public not Private Funds.

Last time I checked the United States Constitution A Property Right is still just that, Property Right guaranteed by State and Federal LAW.
Stephen T. Day

Comment #5 by Donna Day on 2013 10 02

Aaron

Matter of Fact I challenge you to support your facts and get those lists published for all to see.

Warren Buffett and Mr. Bogel are 100% correct.

Yes that might require you to do your due diligence.

While you are at it look up the Word and the DEFINITION of the word

Fiduciary


Stephen T. Day

Comment #6 by Donna Day on 2013 10 02

"In this case, the state would be making its own innocent children suffer in order to keep giving annual raises to retirees, many of whom are now living in comfort out of state. But you won’t see Taibbi make that kind of link."

Boom. Headshot. This state is awash in outrageous commitments to Rhode Islanders who worked easy jobs for easy money, and never once had to be mindful of their own retirement. Welcome to the reality those of us in the private sector have faced for years. No guaranteed income, no guaranteed retirement. And guess what? I make far less in the private sector than the individuals living high off the hog of John Q. Taxpayer....

Meanwhile, my vehicle excise taxes go through the roof annually to ensure that all of our lovely state workers enjoy retirement in Florida. Screw you. Where's the special-interest tax levied to my benefit? Leaches, all of you.

NO ONE "deserves" a pension. NO ONE "deserves" a retirement plan funded on the backs of others. Get it yourself or don't get it at all.

Comment #7 by Jeff Lavery on 2013 10 02

Jeff

You big BABY "CRY ME A RIVER" must be your favorite song,
that you play over and over because nobody picked you to be on their team at recess.

CONTRACTS ARE CONTRACTS.

The SUN will rise even though your eyes are closed.

But don't grow up you are really funny in such a sorry way no wonder you just cannot cut it.

Comment #8 by Donna Day on 2013 10 02

Jeff

If you think being a Firefighter, police officer, Teacher is easy,

you obviously never worked in those PROFESSIONS.

Sad that "Loser" reeks from negativity.

maybe you should watch more reruns of LOST IN SPACE, might help you find new material.

Comment #9 by Donna Day on 2013 10 02

WAH WAH WAH

Jeffy not a happy camper, today or any day.

Comment #10 by Donna Day on 2013 10 02

Jeffery,

I got it you were the kid who said

"it's my ball and I'm going HOME, so nobody can play!

Guess what, lots of other people have balls Jeffy.

OPM dreamer

Comment #11 by Donna Day on 2013 10 02

Aaron, we have this thing called the rule of law in the U.S. We don't have the right to take property from people on a whim. We get to pay our debts. RI will not escape its public pension COLA contractual obligations.

THE COLORADO LEGISLATURE'S BREACH OF COLORADO PERA PENSION CONTRACTS WILL NOT STAND.

A PENSION COLA IS SIMPLY A METHOD OF DELIVERING A DEFINED PENSION BENEFIT.

USE OF THIS METHOD DOES NOT JUSTIFY BREACH OF PENSION CONTRACTS.

Three years ago, a majority of Colorado legislators decided to attempt to break state contracts to cut the debt of Colorado state and local governments. In 2010, Colorado legislators passed a bill, SB10-001, that attempts to discard the obligation of Colorado governments and the state's pension system, Colorado PERA, to pay cost-of-living (COLA) increases due retirees under their state pension contracts.

Like salary, Colorado PERA pension COLA benefits are compensation for work performed; specifically "deferred compensation," presently earned. When a Colorado PERA member has completed the job, and finished earning her salary, her employer cannot retroactively take that salary from her.

A public pension COLA is simply a method by which a defined pension benefit is provided. There is nothing inherent in this "method" (provision of a pension COLA) that negates its essence as a contractual obligation of Colorado PERA-affiliated employers.

The Colorado Legislature has placed into Colorado law an agreement to provide an "automatic," fixed, pension COLA "escalator" to PERA members upon retirement. When the Colorado Legislature created the Colorado PERA contract in statute, the Legislature could just as well have offered PERA members a higher total pension benefit and no COLA escalator. Instead, Colorado legislators chose to deliver accrued Colorado PERA pension benefits by means of a pension COLA "escalator."

If I buy an annuity from a private insurance company, and I opt to have my purchased income stream delivered via a cost-of-living escalator, does the insurance company that sold the annuity to me have the right to eliminate that purchased COLA benefit after the fact?

The contractual obligation of an accrued pension benefit does not disappear simply because state legislators have agreed to use a particular method of delivering the benefit.

Support public pension contractual rights and the rule of law in Colorado. Contribute at saveperacola.com. Friend Save Pera Cola on Facebook!

Comment #12 by Al Moncrief on 2013 10 02

Donna, err, Stephen, if you want to be taken seriously, as you seem to want when signing a post "fiduciary" while challenging a writer, it would behoove you to not act like a buffoon like you did while addressing Jeff. Just sayin'............

Comment #13 by Patrick Boyd on 2013 10 02

Look what happens when SteDonna's meds run out. Quick, someone toss him/her a subsidy for more!

Comment #14 by Roger Williams on 2013 10 02

Renn thinks 'Democrats' aren't capable of shoveling $$$ to Wall Street associates? Is he even vaguely familiar w/the friendship between 'Democrat' Bill Clinton and the revolving door's Bob Rubin? Getting a superbank approved before it was even legal, and then erasing any impedance a trivial regulation like Glass-Steagall might cause-does that ring a bell, Aaron?!? Five years ago, it brought about a tiny upheaval around the GLOBE...Renn's another right-winger swooping in to snow Rhode Islanders. You know the saying, Renn-if you can't dazzle 'em w/your brilliance, baffle 'em w/your...

Comment #15 by Mark Loomis on 2013 10 02

While Rolling Stone Magazine uses colorful language in their story (what would you expect from Rolling Stone), they are not the only study making these accusations and more. I suggest anyone interested in this issue should google or bing "The Plot Against Pensions" by David Sirota under the auspices of Institute for America's Future. I also notice everyone avoids mentioning Gina's successful pressure on Forbes to censor Ted Siedle. If she has nothing to hide, why did she need to do this and if heavy hitters like Arnold, Bloomberg, Koch Brothers, and Peter Peterson aren't behind this (as alleged in these articles/studies), how did she get Forbes to censor a long-time contributor? Incidentally, aren't these the people holding expensive fund-raisers for her and giving her awards?

Comment #16 by Fruma Efreom on 2013 10 03

And when hose hedge funds crash and burn during the next economic crisis who will take the financial hit; the pensioners or the hedge fund managers who take theirs on the front end while everyone else gets yet another sad excuse. *?*

How about revealing the names blanketed under Citizens United - the obvious front for billionaires to secretly invest in causes, show propaganda ads in markets they wish to control. RI is a test case and it will become pervasive throughout the country in a cookie cutter fashion.

You would have to be born yesterday not to see clearly through this charade. It's like watching a new Ponzi scheme being built brick by brick. The last guy in on the scam, the pensioner, gets nothing and left holding the bag long after those at the top take their cut and run.

Comment #17 by Rob K on 2013 10 03

"There’s plenty of blame that should rightly be assigned for how we got in this mess, but in it we are."

Yes we are. But you and those you serve think it's legitimate to force the pensioners to assume responsibility for the greed, speculation and fraud - and pay for the party on Wall Street.
An awful lot of people made fortunes on the run-up before it collapsed, and most of it was fraudulent. Not only was no one sent to prison, but now you expect the victims to pay the band at the rich man's ball.

Take it from Raimondo's friends -and your's - who stole it. You know which ones I mean, the very people (puppeteers) who groomed, financed, and put the unknown Raimondo forward and assigned her the task to "reform" the pension system.

The people here aren't buying your bullshit.

Comment #18 by Johnny cakes on 2013 10 03

I think the argument about "giving the pension money to Wall Street" is akin to the one-sided Rolling Stone article. Perhaps we don't need to be paying that hefty of a fee--perhaps we could invest our money somewhere where it will earn a high return without those fees--I don't know. I'm a designer, not a banker. But the facts are this: the rest of the money now stands to make some money and I think RI has been twiddling its thumbs on this issue so long that Gina R. needed to find a way to make up some of the losses a lot faster. I don't know any of that for sure, but to me, I think of this whole issue a little like years of credit card debt. It takes some really tough choices and a lot of sacrifice to get back on your feet. As a small business owner and self-employed person who has no pension and very little retirement, I am happy that I won't have these pensions on my taxpaying back any longer.

Comment #19 by Kelly Taylor on 2013 10 03

Kelly taylor, there were many long time state employees that worked for low wages and signed on with the state for one reason.

BENEFITS - including the pension.

that is no longer the case now because the wages are inflated now. but if you worked 20-30 years ago or more for the state, you took a lot of payroll hits to save the state budget so it could provide services to the residents of the state.

in exchange, there was the pension----that was the CONTRACT---

Comment #20 by john paycheck on 2013 10 03

ps ..raimondo runs as a democrat for one reason....its the easiest way to get elected in this state. just ask david cicclini.

Comment #21 by john paycheck on 2013 10 03

@john paycheck-in exchange, there was the pension----that was the CONTRACT---

...the only CONTRACTS sacrosanct by 'Rule of Law' have AIG, Goldman or Bear Stearns in the header...Hank Paulson said so...

Comment #22 by Mark Loomis on 2013 10 03

Hi John. I am not insensitive. I absolutely understand that people made decisions based on information that turned out not to be true. It's terrible. Why is it Raimondo's fault? She took on a systemic problem with a system that others created and her predecessors ignored. What I love about her is that she took it on, even though she knew it may not be politically good for her. Isn't that what a true leader should do. You cannot please all of the people all of the time, but you can do the best thing for the good of all the people and for the secure future of a state.

I would like to hear how you think those pensions should be funded, since they were not sustainable for the long term without taxing people like me, for whom there is no pension or retirement plan other than that which I save for myself. Should I pay for their pensions?

Comment #23 by Kelly Taylor on 2013 10 03

And by the way, put your real name up!

Comment #24 by Kelly Taylor on 2013 10 03

Across the country those who work for wages are being told their pensions are no longer "sustainable,” and neither are their wages or benefits. We are being told that Social Security and Medicare are unsustainable. They also need to cut food stamps, WIC, Head Start and heating assistance - among other things.

Have any of our “representatives” in Washington ever said the war budget is no longer sustainable? Is the trillions of dollars they have spent fighting phantom enemies ever even mentioned?

America has no money for pensions, SS or Medicare or single-payer health care, yet the stock market is approaching a record high. So how do we explain this? Has the GNP output shrunk, it expands every year. The pie is not shrinking; the problem is how the pie is sliced.

So when they say there is no money what they mean is there is no money for you and me - only for them.

Gina Raimondo is not the darling of the haves and have-mores for nothing. She is doing their bidding under the rubric of "reform".

Comment #25 by Johnny cakes on 2013 10 03

Great article, Mr, Renn. Taibbi's piece is classic leftist propaganda with all the proper leftist buzzwords, from Wall Street to hedge funds.

In the leftist world, facts are irrelevant. (I love the omission of the word Democrat in the Rolling Stone article.) You just put out your propaganda and it will stick with enough people to make the effort worthwhile. Factual and revealing rebuttals such as yours will change some minds, but not all. Thus, the propaganda works well enough.

Comment #26 by Art West on 2013 10 03

Aaron, we progressives demand no risk investments and 8% returns... well, at least until the election if over. Doing anything short of that is to be a Wall Street pawn.

(And when the stock market crashes next time, guess who'll be the first to cry, "how could this have happened?")

Comment #27 by Russ C on 2013 10 03

The only SOLUTION to the pension mess is to replace the generous defined benefit plans with defined contribution plans. State employee unions received those ridiculously generous plans from the politicians they supported with campaign contributions - totally corrupt. The bottom line is Government should get out of the pension business completely.

Comment #28 by David Bibeault on 2013 10 03

While Aaron makes some excellent points...the whole discussion drags on with people who are woefully uninformed about pensions and managing money.
Look, the best way is to manage your own pensions any way you like and remove the management of pension funds as a political football is to end defined contribution plans immediately. We have no business as towns and cities managing or more accurately "mismanaging" these honey pots.

take to money out of hedge funds hands , real estate funds hands, providence equity partners hands....let people manage their own defined contribution plans. Why are public workers treated as the elite?

Comment #29 by michael riley on 2013 10 03

News flash Mr. Riley. 401Ks SUCK. As a financial planner, I think you would have known that. Why don't you tell the truth about what is available in a 401K. Or what is not available? The biggest lie sold to the working folk is the 401K. How's everyone posting on here's 401K doing? Have you caught up to the losses in the 90's and 2007? Is your employer matching your contribution? Yeah I didn't think so. There was just a story on cbs the other day, calling 401Ks the big lie. The only people that make out, are the business owner and your broker.

Comment #30 by Stephen DeNinno on 2013 10 03

Stephen Deninno
Plenty of people say what you say. Almost all of them belong to a union and receive guarantees that the other 88% of us mere mortals don't have.
I am a Financial Advisor with a graduate certificate from BU in financial planning. I am also a Registered Investment Advisor, fee only, who manages neither pension funds or 401-k money, I run a hedge fund that doesn't have any retirement 0r pension plan investments In addition I manage two small private equity investment groups that don't have pension fund investors. In my career I have been president of a Company that provide matching 401k plan and I was a managing director at Toronto Dominion Bank , TD securities division. I have been trading and managing money for 35 years. So why dont you tell me how it works?

Comment #31 by michael riley on 2013 10 03

Wow Mr, Riley, you have more degrees than a thermometer LOL. That is why I asked you. And while we are at it, how would a defined contribution plan deal with disability? I know you think they are all phonies, but believe it or not, many of the firefighters I have worked with over the years, have real debilitating conditions. Fractured necks, backs, compound fractures of arms and legs. What are we to do with these workers? Do you want fire and police working until 70 years old? What does this accomplish?

Comment #32 by Stephen DeNinno on 2013 10 04

Stephen
While i am pretty sure the vast majority of disability claims are legit..there are still some indications of problems in some towns. That being said disability policies are an important benefit that I absolutely would maintain (as long as they are audited) . Fire fighters and police deserve to have solid disability coverage paid for by the communities. I have never advocated getting rid of disability compensation. In addition, in my opinion all public safety positions emt, police and fire are extremely important. However, there are many well compensated jobs in the average town that do not require extraordinary benefits.

Comment #33 by michael riley on 2013 10 04

I can't speak to the specifics of his article, but Matt is a guy who always likes to look at things from an obtuse angle, and exceedingly bright. I don't read everything he writes, but he is much more a social commentator, rather than a traditional journalist like his Dad. I haven't seen him in many years, but have occasional email contact with him. He he was a friend and teammate in college. Even then he looked at things from a very unique perspective. I like the wasy he digs into things, even if at times, I may either disagree, or it just may be over my head.

Comment #34 by Price Mason on 2013 11 29

THE "PRICE" IS RIGHT

Aaron is the one with the agenda.

Just Read the report Ted Siedle did and sent to the SEC.

Stephen T. Day

Comment #35 by Donna Day on 2013 11 30

Following up on my original point, I would also be curious to find out how much business Aaron Renn did with, or steered to Pt Judith Capital while he was with Accenture. I've learned that many Rhode Island business people are good at two things, making money for their inner circle and covering their tracks.

Let's see how brilliant a move Raimondo really made when the market corrects from it's current DJIA high of 16,000 down to 11,000. Who takes the haircut then, her new friends on Wall St or the RI pensioner? Any fool can make money in a bull market riding it up from 6,200 to 16,000 since 2009, holding on to gains and reallocating during the correction is skill.

Being an outsider, Taibbi is the more credible source in this debate.

Comment #36 by Rob K on 2013 11 30




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