In his farewell New York Times column today, David Leonhardt talks about what we do and don’t know about the American economy circa 2011.

We know a market economy with government intervention works best, he says. We know rising levels of education are vital. We know the federal government has overextended itself and will need to cut spending and raise taxes. We know health care is far more expensive here than elsewhere. We know the planet is warming. We know finance is still powerful. We know the middle class is having a tough time.

“We are too often occupied with distractions, rather than trying to answer a simple question: What works?” he writes. “What economic policies have succeeded before and are most likely to lead to the best life for the largest number of people?”

“What works?” could be the slogan for Rhode Island’s new “pragmatic progressives,” as WRNI’s Ian Donnis calls Treasurer Gina Raimondo and Providence Mayor Angel Taveras. Rhode Island may be Washington’s polar opposite right now – ideology hasn’t been playing much of a role at all in policy, with a Rockefeller Republican for a governor and Democrats driving hard bargains with organized labor. It will be interesting to see how long this moment lasts.

Today on Nesi’s Notes:

> Raimondo and other RI officials are warily watching Washington’s battle over the debt ceiling

> Jack Reed: Everything is ‘much more bitterly debated’ in DC now compared with 20 years ago

> Chafee for President in ’12? Some Washington Post readers like the idea of a third-party bid

> CVS CEO Larry Merlo testified before Congress today to ask for a lower corporate tax rate

from Tim White:

> The firefighter Target 12 videotaped weightlifting is still too disabled to work, a doctor says

(photo: Wikipedia/Dennis Mojado)

General Treasurer Gina Raimondo and other top Rhode Island officials are keeping a close eye on Washington’s bitter battle over the federal debt ceiling as they wait to see how it will get resolved – and how that will affect the state.

“My office is closely monitoring the debt ceiling debate,” Raimondo told WPRI.com in a statement Wednesday, and Treasury officials are “hopeful” President Obama and congressional leaders will reach a deal.

“If deadlines are not met, the state is currently in a strong liquidity position and will be able to cover its August payments,” the treasurer said. “Treasury will continue to monitor the state’s cash position closely as events unfold and the markets react to the eventual resolution of the situation.”

House Republicans and Senate Democrats remained at loggerheads Wednesday afternoon over how to move forward, with U.S. Sen. Charles Schumer calling House Speaker John Bohener’s latest proposal “a nonstarter” that President Obama would veto.

State agencies are being surveyed to find out how they might be impacted if the federal government stops making some payments because the debt limit is reached, State Budget Officer Tom Mullaney said, but it’s unclear which programs would be impacted.

The immediate impact on Rhode Island of a failure to raise the ceiling could be similar to a federal shutdown, leaving officials here to decide whether to use state dollars to fund federal programs such as food stamps or unemployment insurance until Washington comes through.

The debt fight was “the major topic of conversation” at a National Governors Association meeting earlier this month, Gov. Lincoln Chafee said Tuesday during a taping of WPRI 12′s “Newsmakers.”

Chafee said he agreed with conservative Republican senators Tom Coburn, Mike Crapo and Saxby Chambliss that revenue increases need to be a part of any deal to reduce the federal deficit.

“One of the reasons I left the Republican Party is we were always the party of fiscal responsibility, and when I was there I saw complete irresponsibility – spending sprees, wars, prescription drug benefits – and at the same time, tax cuts that favored the wealthy,” Chafee said. “It made no sense.”

U.S. Sen. Jack Reed said Tuesday a failure to raise the debt ceiling “could exacerbate Rhode Island’s fiscal and unemployment woes at a time when the state is still coping with the recession.”

“It could have a profound impact on people’s retirement savings and result in higher interest rates for families, businesses, and local governments,” Reed said in a statement. “It would also increase the deficit itself because it is estimated that every 1% increase in interest rates will raise the deficit by $1.3 trillion over ten years.”

Reed’s statement warned specifically against a default; some reports have suggested the U.S. Treasury would try to avoid a technical default by paying debt service on bonds ahead of other bills such as Social Security payments or military contractors’ invoices. The latter decision could conceivably impact companies in Rhode Island’s defense sector on Aquidneck Island.

WPRI 12 reporter Tim White contributed to this report.

Update: Chafee’s office issued a statement late Wednesday saying the governor and the cabinet “have been monitoring the situation closely and are preparing in a manner consistent with the lead-up to the possible federal government shutdown.” He also called for a deficit-cutting plan that includes more tax revenue.

He’s only been governor for six months, but already some people are looking to give Lincoln Chafee a promotion.

Chafee is one of eight politicians picked by readers of The Washington Post’s The Fix blog as a possible third-party candidate for president who could take the White House in 2012.

“A Republican senator turned independent after his 2006 loss, Chafee has praised the idea of a centrist third party presidential candidate and frequently criticized both parties,” The Post’s Rachel Weiner writes.

Fix commenter JacksonEuler said he backed Chafee because the governor is an “honest, brave … and reasoned man who seeks to do what is best for RI and would do the same for the country.”

The other seven third-partiers are Bill Ackman, Chuck Hagel, Jon Huntsman, Russ Feingold, Sarah Palin, David Petraeus and Bernie Sanders. An eclectic list, to say the least.

Chafee endorsed President Obama in 2008 and voted for President George H.W. Bush (the first one) in 2004. The governor is on the fence about whether to endorse Obama in 2012, he told me earlier this year.

(photo: Matt H. Wade/Wikipedia)

Larry Merlo, who succeeded Tom Ryan as CVS Caremark’s president and CEO earlier this year, is set to testify before the Senate Finance Committee this morning.

The topic of the 10 a.m. hearing is “CEO Perspectives on How the Tax Code Affects Hiring, Businesses and Economic Growth.” The chief executives of Wal-Mart, Kimberly-Clark and PMC-Sierra are also scheduled to take part.

This isn’t the first time CVS and taxes have been on Washington’s radar. At a House hearing earlier this year, a witness testified that the Woonsocket-based company pays one of the highest effective corporate tax rates in the country, at 38.8%, mainly because most of its business is conducted here in the United States.

Update: Merlo will tell the committee the U.S. tax code is bad for business, according to Bloomberg News. “Without a consequential rate reduction, tax considerations will have to be an even more significant component of our overall investment analysis,” he’s quoted as saying.

(h/t: The Hill)

During my January trip to Washington to cover the State of the Union, Senator Reed and I sat down for a half-hour interview inside the Capitol. I didn’t get around to writing up most of his comments at the time, but our discussion of polarization seemed timely this week amid the deadlock over the debt ceiling. Enjoy.

WASHINGTON – There’s no doubt in U.S. Sen. Jack Reed’s mind that Capitol Hill is a more toxic place than it was when he arrived here two decades ago as a freshman congressman.

“Over the last 20 years, everything has been much more bitterly debated – not just how to do things, but what is the proper role of government,” Reed said.

The senior senator cited a number of reasons for the Beltway’s increased polarization, including a 24/7 media environment, a shift to nonstop campaigning and a breakdown of the ideological consensus that prevailed in the postwar era.

Reed – a West Point graduate – also thinks it matters that far fewer current members of Congress served in the military than was the case with previous generations.

Those former soldiers “had a certain camaraderie, in that you had a common experience in the government that was successful,” he said. “So the notion that government doesn’t work, that there’s nothing government can do, was not as prevalent.”

Reed was unapologetic about the legislation passed during President Obama’s first two years in office, including health care reform, the Dodd-Frank finance reform law, Race to the Top and changes to the federal student loan program. Many of those laws would have been a big deal in normal times, he said, but they were “totally overshadowed” by the financial crisis.

With so many issues on Washington’s plate, though, there is a risk that a problem brewing under the radar doesn’t get the attention it deserves. ”There’s an issue of capacity with every government,” Reed said.

“One of the reasons, frankly, President Bush spoke about being blindsided by the economic collapse, is because he was obsessed with getting it right on foreign policy and the War on Terror,” he said. “That was his focus.”

“That’s what makes it so challenging for the president,” Reed continued. “It’s hard for us, but more so for the president. You not only have to deal with the crisis at the moment, but you’ve also got to have a sensitivity to what’s happening out there.”

Reed described President Obama as possessing “a remarkable personality, because he has the ability to maintain a focus and a demeanor in the worst circumstances that is truly incredible.” But the president has faced the same challenges as his predecessors.

“He’s learned a lot,” Reed said. “It’s the toughest job in the world, and it’s a job that – as well prepared as you may be – you’ve got a learning curve. You’ve got to learn a lot quickly.”

For a Rhode Island leader, no issue is more pressing than the weak economy and the state’s ongoing jobs crisis. Reed said he’s focused on maintaining the state’s defense sector and directing federal resources here, citing Quonset Point as a success story. “Infrastructure is so important,” he said.

Reed and Gov. Lincoln Chafee, another infrastructure proponent, have discussed ways they can work together on projects like the expansion of passenger rail service. ”He understands,” said Reed, who served with Chafee in the Senate. “He has a very collaborative personality. He wants to get some things done. We do, too.”

Reed also said it’s important that the state’s remaining manufacturing firms receive support. “The manufacturers in Rhode Island that have been able to hold on are terrific,” he said. “We have to expand that.”

Such a comment may not sound controversial today, but prior to the financial crisis the idea that industrial firms would continue to play an important role in the American economy wasn’t as common. Many people thought the nation could get by with financial products and leave manufacturing to other nations.

“I think one of the things that we recognized over the last decade or more is that, frankly, a country is what it produces – tangibly produces – and sells to the world,” Reed said.

“We have to recognize that there are still an extraordinary amount of talented Americans whose talents are mechanical,” he added. “If they don’t have a job, it’s not because they’re not talented; it’s because their skills aren’t in abstract thinking and computer programming. … That’s reality.”

Epilogue: Reed issued a statement last night warning of the consequences of default if the U.S. debt ceiling isn’t raised. “A federal default would be a self-inflicted wound that could exacerbate Rhode Island’s fiscal and unemployment woes at a time when the state is still coping with the recession,” he said.

“It could have a profound impact on people’s retirement savings and result in higher interest rates for families, businesses, and local governments,” he continued. “It would also increase the deficit itself because it is estimated that every 1% increase in interest rates will raise the deficit by $1.3 trillion over ten years. So simply put, we cannot afford to default – it’s bad for jobs and it’s bad for taxpayers.”

Is a master’s the new bachelor’s? The New York Times thinks so:

Call it credential inflation. Once derided as the consolation prize for failing to finish a Ph.D. or just a way to kill time waiting out economic downturns, the master’s is now the fastest-growing degree. …

Not only are we developing “the overeducated American,” [Richard K. Vedder, professor of economics at Ohio University and director of the Center for College Affordability and Productivity], says, but the cost is borne by the students getting those degrees. “The beneficiaries are the colleges and the employers,” he says. Employers get employees with more training (that they don’t pay for), and universities fill seats.

I’ve seen evidence of this myself. I know people who’ve considered getting a master’s degree primarily because they’d become disillusioned by their experience in an awful job market. That’s probably not the best reason to pursue one, but it’s an understandable decision.

If a master’s was inexpensive, this wouldn’t be much of an issue – who cares if you spend a few more years in school and learn a bit more, even if you don’t wind up using the degree? The problem is, degrees can be very expensive, and many people are already burdened with big debts from their undergraduate years.

If you get an advanced degree in a topic you love, but then have to take a job you don’t like to make your loan payments, are you really better off?

Today on Nesi’s Notes:

> John Loughlin hopes to keep the GOP CD1 nod from Brendan Doherty with an inside game

> Wine tastings, lakeside R&R and other perks of a $10,000 weekend with Sen. Whitehouse

> Will retirees take to the streets over pension reform this fall, à la the 1990s RISDIC crisis?

> The French are even more depressed than Americans are, according to a new WHO study

(photo: Wikipedia/Dennis Mojado)

Sacrebleu. The French are giving us Americans a run for our money as the most depressed people on earth, Bloomberg reports, based on a survey of more than 89,000 people in 18 countries:

The study, sponsored by the World Health Organization, found that 21 percent of people in France and 19.2 percent of people in the U.S. reported having an extended period of depression within their lifetime. …

Depression affects nearly 121 million people worldwide and is the second leading contributor to shorter lifespan and poor health for individuals 15-44 years of age, according to the Geneva-based WHO. …

Researchers took into account both clinical depression, a biological condition that leads to low self-esteem and loss of interest in otherwise enjoyable activities, and types of mild depression, which can be situational or caused by environmental influences. The latter was likely the cause of higher rates in the U.S. and France, Kessler said.

The only silver lining, perhaps, is that the growing prevalence of depression may be reducing the stigma that used to be attached to mental health conditions. Butler Hospital in Providence offers a free online Mental Health Screening that you can take here.

Looking through our photo gallery of the late Bruce Sundlun’s life and times last week, I was struck by this photo showing protesters angrily criticizing the former governor for freezing their accounts during the banking crisis.

Here’s how The New York Times described the outcry in a January 1992 article:

Tonight hundreds of depositors still waiting for their money held a candlelight vigil outside the Statehouse here to mark the anniversary of the crisis.

With their arms around each other, depositors lined the steps of the marble-domed Capitol and waved signs demanding, “We Want Our Money Back Now.” …

Last August, in a protest with symbolic links to the Boston Tea Party in 1773, depositors dropped 3,000 teabags in front of the Governor’s office. “We wanted the Governor to know how close we have come to a citizens’ revolt,” Mr. McKenna said.

Seeing and reading all this leaves me wondering whether we may see something similar this fall if state leaders move to make major cuts in the pensions currently being collected by state and local workers. How will they respond? Would there be demonstrations in the streets or in the Statehouse? Maybe a better question is, what are the odds there wouldn’t be protests?

If the second-quarter fundraising results are any indication, John Loughlin is going to be at a serious financial disadvantage in his campaign against Brendan Doherty for the Republican 1st District nomination.

But Loughlin spokesman Mike Napolitano likes to point out that John Robitaille came in second in last year’s gubernatorial race despite being vastly outspent by Lincoln Chafee and Frank Caprio. And he is working to ensure Loughlin’s has non-financial advantages as he courts Rhode Island’s GOP faithful.

One sign of that came Monday, when the Loughlin campaign announced a Sept. 25 fundraiser that will be “sponsored by a vast majority of the Republican city and town chairs in Congressional District 1″ – 16 by my count – and will feature House Minority Leader Brian Newberry as its keynote speaker. Doherty’s spokesman told WRNI his candidate “hasn’t even met most of these people.”

Then there was last week’s Providence Phoenix report that the Republicans will vote in October on whether to close next year’s primary to independents. That could lead to a small electorate choosing the Republican nominee, and give a boost to the more conservative Loughlin.

There’s also policy preferences. House Republicans’ austere “Cut, Cap and Balance” plan – which got a shoutout from Speaker Boehner in his nationally televised speech last night – won immediate praise from the Loughlin campaign but a cool reception from Doherty.

The former state police colonel’s aides are well aware of these challenges. It will be interesting to see how they navigate them.

Update: “It is disappointing that these Republican chairs appear to be throwing their support behind Mr. Loughlin even before they have had an opportunity to meet with Colonel Doherty,” spokesman Dante Bellini tells the Phoenix.

“How would you like to spend a weekend at one of the more beautiful spots on Earth, ensconced at a fine resort with access to powerful national leaders and able to enjoy a wine tasting and dinner at a spectacular ranch owned by one of Nevada’s most prominent businessmen?”

That’s how Las Vegas Sun political reporter Jon Ralston begins his dispatch about the $10,000-a-head fundraising event Senate Majority Leader Harry Reid’s PAC is holding next month to benefit our own Sheldon Whitehouse and his Senate colleague Ben Nelson of Florida. Here’s the invitation [pdf].

It sounds like a nice time: a wine tasting and dinner at a ranch in Lake Tahoe, a Saturday morning briefing and Q&A with the trio of senators, and a whole lot of relaxing by the lake. You can read Ralston’s full item here.

Not that Whitehouse is hard up for cash. The first-term Democrat had $2.2 million in his campaign war chest as of June 30; his only declared Republican opponent, Barry Hinckley, had $58,260.

Of course, if the debt ceiling doesn’t get raised and all hell breaks loose, Reid and company may be otherwise occupied Aug. 12-14.

(photo: Hyatt Corp.)