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Thu September 26, 2013
Rolling Stone Calls Pension Cuts a Wall Street Giveaway; Raimondo's Office Fires Back
Here's how a Rolling Stone headline sums up muckraker Matt Taibbi's story on the pension overhaul championed in Rhode Island by state Treasurer Gina Raimondo in 2011: "Looting Pension Funds. All Across America, Wall Street is grabbing money meant for public workers."
The first comment from Raimondo comes eight pages into the story, the equivalent of an 11-page printout, after Taibbi presents his case in his signature profanity-laden style.
Elsewhere on the media front, the treasurer gets glowing treatment from Ozy, a new online magazine started by a former MSNBC anchor, in a story headlined, "Everybody Loves Raimondo" It credits her with single-handedly doing away with nepotism on Smith Hill, saying, "That’s just the way things get done in the Ocean State, or should we say used to get done before Gina Raimondo came on board as General Treasurer."
With Raimondo gearing up for a run for governor next year, in a Democratic primary with Providence Mayor Angel Taveras, the Rolling Stone article seems bound to be part of how opponents will try to label her as a Wall Street Democrat -- a counter-narrative to the headlines she's received for making RI's pension plan more sustainable.
In a statement, Raimondo's spokeswoman, Joy Fox, says the Rolling Stone story "is clearly a political propaganda piece driven by the critics of pension reform, including those who are paid by local labor leaders to discredit the state’s reforms and its investment policies. The author does not appear to have a clear understanding of the 2011 pension process and its goals, and conveniently omits many important facts."
Fox adds, “The Treasurer stands by the work of the General Assembly to provide retirement security for hardworking public employees and retirees. This story also unfortunately glosses over what actually happens to people when leaders do not make tough choices. The retirees of the City of Central Falls saw their pensions cut in half. Leaders do not want the same to happen again to public employees and retirees in the state system."
Here are the main elements of Taibbi's story:
-- He says Raimondo has allowed Rhode Island "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."
-- Taibbi argues "the siege" of public pensions began in 1974, when the Employee Retirement Income Security Act passed by Congress didn't cover public pensions in its protections. "Politicians quickly learned to take liberties," he writes, by using money from public pensions for other needs.
-- He notes how hedge fund billionaire John Arnold, who contributed to Engage RI, the pro-pension group whose creation was encouraged by Raimondo, became a quasi-odd ideological bedfellow for the Pew Charitable Trusts. Taibbi argues Arnold and Pew combined to blame underfunded pensions on overly generous benefits for workers, rather than the real culprit, which he identifies at one point as "a deadly combination of unscrupulous states illegally borrowing from their pensioners and unscrupulous banks whose mass sales of fraudulent toxic subprime products crashed the market."
Taibbi includes this comment, in part, from Raimondo:
When asked to respond to criticisms that the savings from COLA freezes could be seen as going directly into the pockets of billionaires, treasurer Raimondo replied that it was "very dangerous to look at fees in a vacuum" and that it's worth paying more for a safer and more diverse portfolio. She compared hedge funds – inherently high-risk investments whose prospectuses typically contain front-page disclaimers saying things like, WARNING: YOU MAY LOSE EVERYTHING – to snow tires. "Sure, you pay a little more," she says. "But you're really happy you have them when the roads are slick."
As part of his conclusion, Taibbi writes in part, "The bottom line is that the 'unfunded liability' crisis is, if not exactly fictional, certainly exaggerated to an outrageous degree."
In her statement responding to the article, Joy Fox added, “In 2011, Rhode Island had a choice. It could have done nothing and been dishonest about its problem. Instead, Rhode Island leaders came together, courageously put politics aside, and made the tough decision to protect the retirements of hard working public employees and retirees.”
Fox says it's important to remember the following points:
- The treasurer fought to always keep a defined benefit pension, and always respected collective bargaining.
- Reform passed overwhelmingly in a Democrat-controlled General Assembly
- There were countless hours of labor-attended pension advisory group meetings, legislative hearings and town hall-style meetings with the Treasurer and Governor
- All but one vote to approve the hedge funds were unanimous. The only vote to approve hedge funds that was not unanimous was due to one abstention – again, showing strong SIC [State Investment Commission] support to execute this investment strategy.
This post has been updated.