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Friday, February 11, 2011

Weekly Politics Fix Part I : Maine Goes Red, and Rhode Island Deep in the Red


In 2010, For the first time since 1964, Maine Republicans captured the governorship, the senate, and the house​ for the first time since 1964. Was it the anti-Obama tsunami at work ? Acutally, it was the maturing of antitax groups that had been organizing for the better part of a decade, as private sector job growth stagnated and the percentage of personal income from government sources reached 36% (compared to neighboring New Hampshire's 24%).  Maine's citizenry was also activated (or aggravated ?) by the legislature's 2009 proposal for tax reform, which, while lowering the state income tax to 6.5% from 8.5%,  would have created 102 new taxes.

For the details, read  Conrad Kiechel's 'Downeast Is Red : The revival of the Maine GOP'  in THE WEEKLY STANDARD.

Rhode Island's long-term obligations compare unfavorably with just about any other state, and that's saying a lot. An evaluation of state finances by the Daily Beast recently ranked Rhode Island the state most likely to go bust because of the combination of its budget deficit, outstanding debt and unfunded pension liabilities relative to economic capacity. Moody's, which recently issued a report on combined municipal debt and outstanding pension obligations for the states, ranked Rhode Island among the most troubled states on a variety of metrics, including combined liabilities as a percent of GDP and as a percent of state revenues.

The state's spendthrift political culture infects its local governments. A recent audit revealed that Rhode Island's biggest city, Providence, has been spending more than it budgets throughout the recession and depleting its reserve funds in the process, to the point where the city is almost out of cash. Last year alone the city overspent its budget by $13.9 million, bringing its reserve down to just $3.5 million, barely one-tenth of where it should be. The city council has approved borrowing some $48 million this year to cover its deficit.
If you listened to Chafee's inaugural address last month you didn't get much of a sense of these manifold and urgent problems, including a $300 million deficit on a $7.8 billion budget and an 11.5 percent unemployment rate. Vaguely referring to challenging times the state faced, the governor mentioned prominently only two specific initiatives, his rescinding through executive order of a program requiring employers to check whether new hires are eligible to work in the United States, and a bill to allow gay marriage in the state. Chafee touted these moves as part of his prescription for reviving the Rhode Island economy by creating a ‘civil state' of diverse interests. That, he said, would "do more for economic growth in our state than any economic development loan."
A member of the Providence Journal editorial board observed that the governor did not use the words ‘jobs' or ‘deficit' once in his inaugural speech and "did not spend much time expressing concern for the middle class struggling to get by."

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