ST. THOMAS — Gubernatorial candidate and economist Warren Mosler said he wants to change the way the territory sees its financial problems.
Mosler, who claims to have founded a new school of economic analysis in “Modern Monetary Policy,” compared correcting perceptions of the way the local economy is viewed to putting on a new pair of glasses.
“We’re looking through some very cloudy glasses at what we have,” he said. “But our economy is obscuring our vision of what’s going on.”
Mosler ran for lieutenant governor in 2014 with Soraya Diase Coffelt, and has since constructed and operates a private ferry service between St. Thomas and St. Croix. He’s a hedge fund manager, onetime sports car engineer — he sold the assets of Mosler Automotive company in 2013 after 28 years — and a full-time economist. He briefly filed to run for president in 2009 before dropping out in 2010 to seek a Connecticut Senate seat (he lost). He currently runs Valance Co., Inc., headquartered on St. Croix.
Mosler is also actively engaged in philanthropic endeavors on St. Croix.
He holds a bachelor of arts degree in economics from the University of Connecticut, and an honorary doctorate from Franklin University in Switzerland, and has taught economics in Italy.
Mosler sees his background of relative privilege — he’s a multimillionaire — as an obligation to help others, which is why he’s seeking the governor’s office, he said in interviews with The Daily News.
“I feel like I act on a matter of conscience,” he said. “The example I use is if you see somebody who’s drowning, and you’re a good swimmer, you offer to help.”
The financial position of the territory prior to the storms has slowed recovery from Irma and Maria, Mosler said.
“We went in with no reserve funds, we went in with $60 million in payables and no money in the checking account,” he said. “We’ve been living off the emergency disaster loan, and we’ve taken out payday loans to get us to the election, and we don’t know if we’re gonna make it or not. We may still bounce checks before the election, if there is an election, because under emergency powers, we might not even have an election, right?”
The territory’s weak financial position means resources couldn’t be deployed where they needed to go, Mosler said.
“Nobody was ready,” he said. “Mona Barnes was head of VITEMA. Not prepared. None of the systems were prepared, none of the systems were tested. Could anybody else have done that given the fact that there was no budget to have anybody do the testing? Maybe not. Could Mona Barnes have done a good job if she’d had the budget? Maybe not. We don’t know.”
The problem boils down to management, Mosler said.
“It’s not a problem with the institutional structure, it’s a problem with how it’s managed and how it’s staffed and how it’s motivated,” he said. “Just basic public administration is not being followed. It was bad before the storm and it’s only gotten worse.”
Mosler was also critical of the emphasis placed on infrastructure construction in the wake of the storms.
“When you talk about all of these hundreds of millions and billions, there’s not a penny for operating expenses in there,” he said. “Oh, we got brand new poles and power lines, it’s really nice, but the average person’s WAPA bill went up. It’s not helping his lifestyle any.”
That same critique applies to other sectors of recovery, Mosler said.
“I don’t think anybody thinks new schools — how many billions of dollars for that? — is going to cause our education to go from the worst to the best, because we’ve got the best buildings,” he said. “Or our medical care. Does anybody think it’s going to be better because we have a new hospital? I don’t think so.”
Mosler was also critical of multiple federal agencies’ seeming requirement for hired consultants — many with Federal Emergency Management Agency experience themselves — to help procure access to federal disaster relief.
“Why didn’t FEMA just tell us that?” he said. “Why will they only do it if we pay $50 million a year to ex-FEMA people?”
The Government Employees’ Retirement System isn’t in as much trouble as is widely assumed, Mosler said. Re-evaluating budgetary shortfalls — and the interaction between the territory’s tax code and financial analysis — is a key component to Mosler’s approach to the territory’s finances.
For example, the unfunded liability likely isn’t as high as the $2.6 billion figure frequently cited by GERS officials, Mosler said. The disconnect stems from the fact that unlike other jurisdictions, income taxes paid on pensions come back to the government, Mosler said.
“If we pay $2.8 billion out to retirees, maybe a billion comes back in taxes,” he said.
The tax money then goes to the government’s General Fund and is then distributed for use in other areas, Mosler said. If officials instead focused on recapturing tax revenues and allocating them to GERS, solvency could improve, Mosler said.
In the short term, officials would transfer about $600 million in rum cover-over bonds directly to GERS, which would double the pension system’s assets, Mosler said.
“They’re secured by the remaining rum revenues, which again would have come to the General Fund,” he said. “That almost doubles the money in the retirement fund from $600 million, $650 million to a billion three.”
Employees wishing to take out their contributions and leave the territory behind would also be bought out, Mosler said.
“It costs the GERS $200,000 of investments to be able give somebody all of those payments,” he said. “By giving them $70,000 we’ve dropped our unfunded liability by $200,000. Yes, the funds under management go down, but our liability goes down.”
GERS could also buy delinquent property taxes from the government, which would entitle the pension system to the 8 percent penalty paid by property owners, Mosler said. Unlike the government, the pension system has a natural disincentive for eviction, Mosler said.
“They’d rather wait 30 years, let it get sold, accrue their 8 percent, and get paid at the end,” he said. “So it solves a big social problem, which is people getting thrown out of their homes for delinquent property taxes.”
Mosler said he wants to gut local laws relating to the growing, sale, and consumption of marijuana.
“I don’t think we should have any local marijuana laws,” he said.
His position doesn’t necessarily mean an endorsement of marijuana itself — Mosler said he opposes marijuana use — just that police arrest and criminal prosecution likely aren’t the best solutions to the issue. He does favor a minimum age consumption law for marijuana, though he said the penalty for breaking it shouldn’t be incarceration.
“It’s not that I favor legalizing,” he said. “I just don’t want it to be illegal. I just don’t believe it’s a problem for the police department. I want to do something about it, but I don’t want to send the police after them and send them to jail.”
For example, if employees are shown to be drinking or using drugs on the job, employers should be allowed to fire them, Mosler said.
He cited anti-tobacco advertising as a possible way to counteract a more laissez-faire approach to regulation.
“Everybody used to smoke, now almost nobody smokes,” he said. “We need to fund that and fund that properly to support it.”
Asked if he would support abolishing other local laws pertaining to cocaine or heroin, for example, Mosler said he’s uncertain.
“I’m on the fence,” he said. “I definitely think marijuana laws don’t belong on our books, period.”
Federal pre-eminence in drug prosecutions would likely eliminate the need for local enforcement, and police resources could be better used serving in emergencies and preventing other crime, Mosler said.
Revenue from marijuana isn’t likely to generate much money, apart from drawing tourists back to the island, Mosler said. Money isn’t a reason marijuana should be legalized anyway, he said. “From a position of social equity and our way of life, I don’t think it should be a police matter,” he said.
Mosler said he would improve government transparency by taking politics out of the equation. Transparency has been a part of his business practice since he started investing, Mosler said. His approach to government would be no different, he said.
“I don’t mean to be flippant, but whatever takes,” he said. “If I know any information, you’re going to know it. If I get numbers on my computer, you can have screen sharing and see them at the same time. I just don’t work by secrecy or by people not knowing what I’m doing.”
Mosler said he’s not opposed to firing commissioners or anyone else who fails to follow transparency laws.
“I’ll go to them, and they’re working at the will of the governor and this is our policy,” he said. “There’s just no way around this, as far as I’m concerned. Maybe it might mean replacing someone who refuses to comply.”
Mosler also said he’d try to move the attorney general’s position out of the reach of both the governor and voters. Mosler said he favors a scenario in which the territory’s judiciary provides a list of candidates to the Legislature, who would decide whom to approve.
What else …
The same approach to redefining the GERS problem could apply to other sectors, Mosler said.
For example, the territory has a natural incentive to welcome satellite health providers into the territory to improve service, Mosler said. The providers earn profits, and pay taxes, which then go into government coffers. Recapturing taxes on medical payments and returning them to the hospital could also increase hospital solvency, Mosler said.
For example, a $10 million insurance payment might result in $10 million paid to doctors, Mosler said.
“Now they have no money for Band-Aids, no money for WAPA bills,” he said. “The 10 million they paid, maybe $3 million comes back as income taxes to the government, and the hospital is government, so if you pay 10 and you get 3 back, you only paid 7. You’ve got $3 million for Band-Aids and WAPA bills.”
The ability to retain income taxes also means creating incentives to draw high-income companies and individuals to the territory, he said.
“We can do things like, you go to the large charitable institutions, the American Cancer Society, the Heart Association, who have 100 major cities in the U.S., have chapters,” he said. “Go to your high-income people ... and say, ‘We’ll put you up for six months of the year at a villa in St. John. You stay at this villa in St. John and we’ll donate half of your income taxes to the American Cancer Society.’ Now he becomes a big hero.”
Public school students could attend local private schools for scholarships at half the cost of a public school education, Mosler said. Offering government-funded scholarships to students who qualify for local private schools is a potential way to reduce the costs associated with education while improving access, Mosler said.
Mosler also criticized the recent Limetree Bay agreements, which he characterized as a “payday loan.”
“Well, if you’re behind on your rent, you’re behind on your electric bill, you owe WAPA $40 million,” he said. “Now all the sudden you get $500 in because you won the lottery or something, it’s like, ‘Oh, I’ve got money to spend.’ No, you don’t. You’ve got to pay your bills first.”