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Ignoring Lessons of Apollo 13, RI Leaders
Let State Drift Toward Disaster

The Providence Journal Commentary Page
October 2008


by Leonard Lardaro



RHODE ISLAND finds itself mired in its worst economic predicament since the banking crisis in 1991. The parallels to 1991 are many, and the list keeps growing. I don’t think it is necessary to list them; the people of this state have to live with them every day.

At long last, the rest of the country is taking notice of Rhode Island. Not for its beauty, its quality of life, the feistiness (translation: distinctive character) of its population, and the high degree of entrepreneurship possessed by its business people. No, Rhode Island is attracting attention because of its very high unemployment rate, the worst job growth in the nation, and a deepening recession that began over a year ago. A number of persons in the national media that I have spoken to over the past couple of months appear to have a morbid fascination with Rhode Island: Is that what a really bad recession looks like? Could something this bad happen to other states? With publicity like that, anonymity would be a distinct improvement!

Contrary to what our leaders would have us believe, most of our state’s current economic problems are not the result of national economic weakness. While no one individual is directly responsible, our present problems were brought on by ineffective overall economic leadership during the past 20 years in general (since Rhode Island became a post-manufacturing economy), and the last 10 years in particular. Ten years ago, Rhode Island had a budget surplus, very healthy job growth and the ability to complete the work that we all knew had to be done: cleaning up our non-competitive tax and cost structure (taxes, fees, regulations, and problems with K-12 educational attainment); and attaining “critical mass” in technology and growth-oriented industries. Unfortunately, there was no systematic overhaul of our state’s tax and cost structure, although occasional piecemeal measures were undertaken.

What was the route our leaders chose to create success in the post-manufacturing era, as gauged by having a greater proportion of Rhode Islanders earning incomes above the national median (the Rhode Island Economic Development Corporation has targeted 60 percent as the goal versus the current figure of 40 percent)? They chose to start dismantling higher education, failing to integrate it more completely into our state’s economy, and placing access to higher education ever further out of the reach of our population!

I will be polite and say that economists would refer to this as under-allocating resources to investment-oriented uses. Add to this Rhode Island’s strong tendency to over-allocate resources to consumption-oriented uses and what do you get?

If you know anything about economics, you will quickly realize that this policy emphasis has severe economic consequences, most notably in the long term. The obvious result has been less growth than would otherwise have occurred had we made the tough choices and stepped up investment-oriented spending. This, in turn, has resulted in less employment growth and less tax revenue created than we would have enjoyed. And because, given Rhode Island’s meager high-tech presence, sustaining and emphasizing higher education is a necessary condition for our state’s success in the post-manufacturing era, we have allowed ourselves to become highly vulnerable to even the slightest deceleration in national economic activity. I won’t mention what’s going to happen when a national recovery takes place.

So, as the direct result of economic choices and non-choices over the past two decades, Rhode Island’s employment peaked in January 2007, 11 months before the national employment peak, and we entered a recession (according to my Current Conditions Index) in August 2007, well before the national recession. Add to this the consequences of decades of non-sustainable rates of spending, and large budget deficits that made a bad situation worse up to now, and future deficits that will make it much harder for us to emerge from this recession. Are we having fun yet?

To my utter amazement, in spite of all these economic difficulties and the lessons to be learned from our past mistakes, our leaders apparently have yet to see any need to meet or do anything to deal with this crisis. I have even heard several of them say that when the recession is over, they will see what they can do at that time.

Maybe it’s me, but I see in this a parallel to the movie Apollo 13. But in Rhode Island’s version of Apollo 13, instead of the engineers (our leaders) working feverishly to fix the damage and assure the safe return of the vessel (a viable economic future), our “engineers” are celebrating the fact that they even have a vessel in space. According to them, there is no need to do anything at the present time; let things play out and we will see where we go from there (translation: Duck this crisis until after the election). Guess who the crew suffering from the unpleasant conditions is? The people of this state!

All of this reminds me of something I heard years ago. Back when I was in graduate school, we had a terrific basketball team and a pretty bad football team. Our football coach, Lee Corso, gave a talk and said something I have always remembered: “There’s only one thing worse than a lousy football team — a lousy football team that plays conservatively.” So, he started blitzing Ohio State and Michigan on first downs.

The extension to Rhode Island’s current economic crisis should be fairly obvious: There’s only one thing worse than a bad economy — a bad economy with complacent leadership. Calling a series of timeouts is clearly not the appropriate thing to do. So, perhaps the most pressing economic question for Rhode Island at the present time is whether our paropic (parochial and myopic) leaders are capable of being proactive

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