Wherever there are large amounts of ordinary people’s money, you can be sure that greedy wealthy people are eying it and thinking up clever ways to siphon it away into their own pockets. Money for public schools, pension funds, and Social Security are the prime targets for their rapacity. The assault on the first has been going on for some time with charter schools being a prime vehicle for diverting funds.
In the October 10, 2013 issue of Rolling Stone Matt Taibbi exposed what has been going on with public pension funds. The basic idea of how the looting occurs is fairly simple. The initial opening is created by politicians underfunding their payments to the pension funds and instead using that money to pay for their campaign promises, and fund their pet projects or to give tax cuts. When the pension funds run dangerously low and cannot meet its obligations, they then call for pension ‘reform’. (Here’s a tip: Whenever politicians and their oligarchic masters call for ‘reform’ in some major public sector like schools or pensions or Social Security or taxes, you can be sure that the public is going to get swindled.) They argue that benefits should be cut and that the pension funds that had been invested conservatively be given over to hedge funds that promise high returns in order to recoup the shortfall. But hedge funds are notoriously risky and pay out huge funds as fees to the hedge fund managers, who are the main beneficiaries of this arrangement.
The whole article gives details of how the oligarchs are looting pension funds this way across the nation but the starting story of what a former venture capitalist named Gina Raimondo did in Rhode Island is illustrative of an even deeper problem. Look for the twist at the very end.
In the final months of 2011, almost two years before the city of Detroit would shock America by declaring bankruptcy in the face of what it claimed were insurmountable pension costs, the state of Rhode Island took bold action to avert what it called its own looming pension crisis. Led by its newly elected treasurer, Gina Raimondo – an ostentatiously ambitious 42-year-old Rhodes scholar and former venture capitalist – the state declared war on public pensions, ramming through an ingenious new law slashing benefits of state employees with a speed and ferocity seldom before seen by any local government.
Called the Rhode Island Retirement Security Act of 2011, her plan would later be hailed as the most comprehensive pension reform ever implemented. The rap was so convincing at first that the overwhelmed local burghers of her little petri-dish state didn’t even know how to react. “She’s Yale, Harvard, Oxford – she worked on Wall Street,” says Paul Doughty, the current president of the Providence firefighters union. “Nobody wanted to be the first to raise his hand and admit he didn’t know what the fuck she was talking about.”
Soon she was being talked about as a probable candidate for Rhode Island’s 2014 gubernatorial race. By 2013, Raimondo had raised more than $2 million, a staggering sum for a still-undeclared candidate in a thimble-size state. Donors from Wall Street firms like Goldman Sachs, Bain Capital and JPMorgan Chase showered her with money, with more than $247,000 coming from New York contributors alone. A shadowy organization called EngageRI, a public-advocacy group of the 501(c)4 type whose donors were shielded from public scrutiny by the infamous Citizens United decision, spent $740,000 promoting Raimondo’s ideas. Within Rhode Island, there began to be whispers that Raimondo had her sights on the presidency. Even former Obama right hand and Chicago mayor Rahm Emanuel pointed to Rhode Island as an example to be followed in curing pension woes.
What few people knew at the time was that Raimondo’s “tool kit” wasn’t just meant for local consumption. The dynamic young Rhodes scholar 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. One of her key supporters was billionaire former Enron executive John Arnold – a dickishly ubiquitous young right-wing kingmaker with clear designs on becoming the next generation’s Koch brothers, and who for years had been funding a nationwide campaign to slash benefits for public workers.
Nor did anyone know that part of Raimondo’s strategy for saving money involved handing more than $1 billion – 14 percent of the state fund – to hedge funds, including a trio of well-known New York-based funds: Dan Loeb’s Third Point Capital was given $66 million, Ken Garschina’s Mason Capital got $64 million and $70 million went to Paul Singer’s Elliott Management. The funds now stood collectively to be paid tens of millions in fees every single year by the already overburdened taxpayers of her ostensibly flat-broke state. Felicitously, Loeb, Garschina and Singer serve on the board of the Manhattan Institute, a prominent conservative think tank with a history of supporting benefit-slashing reforms. The institute named Raimondo its 2011 “Urban Innovator” of the year.
The state’s workers, in other words, were being forced to subsidize their own political disenfranchisement, coughing up at least $200 million to members of a group that had supported anti-labor laws.
And here’s the twist. You would be excused for thinking from the above description that Raimondo was your typical extreme, right-wing, rapacious, Republican exploiter of the poor and the middle class. And you would be right, except for one item in that list. Last night she was elected governor of Rhode Island. As a Democrat.
And Democrats wonder why ordinary people are not enthusiastic about getting out to vote for them. With Democrats like these, who needs Republicans?