You miss the connection to the pension situation.

When judges / justices examine the ultimate RI reasonableness claims in the use of “police powers”, you can bet they will weigh all matters to judge just how far RI really was in a financial corner.

I agree with you premise that ordinary people might look at this and say that it is in everyone’s best interest not to pi$$ off the bond market.

However, courts do not look at these matters in the same way ordinary people measure them.

To equivocate pension obligations with bonded moral obligations is to fall so wide of the mark in terms of their scope, purpose, and effect on the state budget, that it is to be considered irresponsible. A pension is a legal agreement. If it can be negotiated upward, as Rhode Island unions have proven historically adept at, and it can certainly be renegotiated downward, especially when such an exclusion would quite certainly bankrupt the state. Moral obligation bond programs are entities that provide low cost borrowing to essential service providers or economic stimulators/job providers. One doesn’t have to look far in New England to find what successful moral obligation programs look like. Maine, Vermont, and New Hampshire have operated such programs benefitting hospitals, colleges, local municipalities, and small businesses for decades without a single default. The difference? Strong oversight.

38 studios was clearly a state lending scheme gone far astray, but to suggest that the answer is to default is to completely and purposefully ignore the benefits that these programs have provided. The bond market is nothing but a system of lenders and borrowers. To default on the 38 studios bonds will inevitably increase the borrowing rates for any small or medium businesses in the future and send a message to the lenders that Rhode Island is a bad investment. Barro, not sufficed with just the baby, would punt mother out with the proverbial bath water for all Rhode Islanders.

The so called “role model” brilliance of Bill Clinton held that we could throw away all those lowly jobs to 3rd world countries because we were now an information society.

What he never figured on was that the info age would be done in isolation (e.g. Palo Alto) leaving all the Central Falls of the world in the keyboard dust.

That column by Barro from a few weeks ago was very good, thanks for the link.

I think it’s even *worse* than his despressing column, though. Looking beyond RI, look at the parts of Mass or CT most similar to Providence. In Mass, Worcester, Lowell, New Bedford are all old manufacturing cities about the same distance from Boston as us — and all of them are economic disasters too. CT towns like Bridgeport, New London, New Haven are not doing well either.

The current economic hotspots are mostly a few major cities with some mix of a high-tech cluster, a lot of financial firms, strong universities (especially sci-tech), or a few growing regional hubs not located right next to a major metro (e.g., Charlotte). Old-line manufacturing cities that are basically secondary centers located near a major metro hub are doing poorly all over the country, from Worcester, MA to Tacoma, WA or Gary, IN.

I don’t think anyone in the country has found a formula that works well for cities in positions like Providence. Does anyone have any good role models? Add in the fact that we are too small a state (vs Gary or Bridgeport being a small part of their states) and I really don’t see how you get out of the death spiral.

As a state, we now find ourselves in some strange moral dilemmas’s. More than half our population finds itself living in a municipality likely to be in receivership soon defaulting on their own moral obligations.

And the General Assembly this week will be debating whether or not to bring another money losing taxpayer subsidized initiative under the EDC’s wing being the East Bay Energy Consortium.

Will we ever learn that “politics as usual” is what got us here?