Today's democracy heroes are in the fiscal trenches
The West's years of unsustainable promises on spending are hardly a model of democracy. When elected leaders, such as Rhode Island treasurer Gina Raimondo, tell the truth on how to rein in costs, they are democracy's heroes.
The spread of democracy worldwide has stalled in recent years. One reason is obvious. Economic woes in Europe and the United States have revealed an unsettling fact: Politicians in many democracies have made unaffordable promises on spending.Skip to next paragraph
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Ask officials in China or any authoritarian country about the lure of democracy and they point a finger at the huge public debt of obligations caused by elected leaders from Greece to Washington to California over the years.
Why, they ask, move toward democracy if it means drowning in the red ink of unsustainable government benefits?
The recession, like a receding tide, has exposed some giant financial boulders. Democracies now need a new kind of hero, one that can “unpromise” past obligations to fit a new global economy and end this valid critique of democracy.
One unlikely hero is Gina Raimondo, the state treasurer in Rhode Island, the smallest of America’s 50 states by land mass. Over the past year, this Democrat has been sought out by many American politicians after she pulled off one of the most difficult fiscal reforms in a Western democracy.
She showed that transparent, realistic, and inclusive politics can tackle the most serious political challenge. Just two years ago, Rhode Island was among the worst states in the level of unfunded pension gap for public employees. Now it’s a model.
Elected in 2010, Ms. Raimondo was able to persuade various interest groups and finally the legislature to approve unprecedented reforms, not only for future state workers but current ones. She did it by revealing the real “math” about state spending, working with public unions, and by telling voters the consequences of inaction, such as lower spending on schools.
State pensions are among the largest costs facing democratic governments. For American states, they are estimated at between $2 trillion and $3 trillion. In Illinois, pension debts are now among the worst, with Democratic Gov. Pat Quinn even seeking a federal guarantee, or a potential bailout.
Since the 2008-09 Great Recession, most states have been forced to reduce these benefits to some degree but not nearly enough to satisfy financial markets or younger voters who will bear the burden in decades ahead. Still their limited reforms put to shame the political gridlock in Washington as it heads toward a “fiscal cliff” by year’s end.
Rhode Island’s pension reform stands out, not only for being comprehensive – moving state workers toward 401(k)-style retirement accounts and raising the retirement age to 67 – but in how it was achieved. “In this day when so many people have lost their faith in government,” said Raimondo, a former venture capitalist with a Yale law degree, “I like to think that we showed the way.”
Tackling fiscal challenges isn’t only an economic issue. It also restores faith in democracy, and not just for those who live in one but for those wondering if they want to live in one.