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Red Flags Over Connecticut


Chief Executive Magazine, a publication read by national and international Chief Executive Officers (CEOs) of major and minor firms, has just released its list of best and worst places to do business in the United States.

Connecticut ranks four spots from last on the list. Three comments from CEOs were far from reassuring:

“A difficult tax structure like the ones in New York or Connecticut makes incentive-giving easy, but penalizes existing businesses,” said one. “The climate for coming is better than the climate for staying.”


“Connecticut,” said another “is a horrible state for business. The governor is anti-business and the economic environment he creates is confrontational. The roads and highways are in poor condition, and the state is fundamentally broke. The cost of living continues to rise and the governor raises taxes and spending and does not work to lower expenses.”

And a third sourpuss said, “Have manufactured in Connecticut for 106 years. If I could leave, I would.”

Susan Bates, the policy director for the Yankee Institute for Public Policy, weighed in with a column in CTNewsJunkie. Apparently, according to Mrs. Bates,  the usually unruffled, mild-mannered folk at Connecticut Business And Industry Association (CBIA) are straining at the tether:

“CBIA, the state’s largest business association, called an emergency meeting yesterday with stakeholders from across the state to discuss ways to push back. Joe Brennan, the association’s president, has come out strongly in opposition to the legislature’s budget.

“’The stuff I’m hearing is scary,’ he said. ‘I hear every day about investment going out of Connecticut.’”

These fluttering red flags follow by almost two years a shattering piece written by Jim Powell for Forbes Magazine inauspiciously titled “How Did Rich Connecticut Morph Into One Of America's Worst Performing Economies?” Mr. Powell’s opinion piece gathers in one place the relevant statistics supporting his view that Connecticut is indeed one of America’s worst performing economies. Dotting Mr. Powell’s "i”s  and crossing his “t”s, it should be noted – as CEOs across the nation certainly have noticed – that Connecticut STILL has not recovered from a malingering recession that nearly every other state in the nation has shucked off years ago.

Mr. Powell years ago told us why:

  • Connecticut ranks #50 – the worst — in annual economic growth.  According to the Department of Commerce’s Bureau of Economic Analysis, Connecticut’s economy contracted for the second year in a row.  “Connecticut is the laggard,” reported Connecticut Department of Labor economist Daniel Kennedy.
  • Between 1996 and 2006 – before the financial meltdown and recession — the number of Connecticut small businesses declined by 2.2 percent, while the average experience of all 50 states was a 10 percent increase.  Only Ohio and West Virginia did worse than Connecticut.  Its small businesses account for about half of the state’s private sector jobs.
  • Government spending is out of control.  Two years ago, Connecticut Governor Dannel P. Malloy signed a $1.8 billion tax hike, the biggest in the state’s history, that supposedly would generate enough.  But it wasn’t enough for the next budget, enacted this year.  It was balanced mainly with gimmicks like shifting some $6 billion of Medicaid spending off-budget.
  • State Budget Solutions, a think tank monitoring state finances, reported that among the 50 states Connecticut has run up the fourth largest pile of debts per capita — $27,540. This includes unfunded liabilities for government employee pension funds.  The total is almost double the per capita debts of financially-strapped California.  Higher debts imply higher taxes in the future.
  • Barron’s considered Connecticut to be in the worst financial shape – with debt and pension liabilities a higher percentage of GDP (17.1) than any other state.  The financially strongest state: South Dakota where debt and pension liabilities are only 1 percent of GDP.
  • Connecticut has one of the worst business climates in the country.  Factors affecting a state’s business climate include the individual income tax, corporate income tax, sales tax, property tax, unemployment insurance tax and security of private property.  For example, as the Tax Foundation reported, “Connecticut imposed a temporary 20 percent surtax on top of its flat 7.5 percent corporate income tax, in effect raising its rate to 9 percent. This 20 percent surcharge is an increase on a supposedly temporary 10 percent surcharge that has been in place since 2009.”
  • The American Legislative Council, in its annual Rich States, Poor States study, ranks states two ways – economic performance and economic outlook.  The economic performance ranking is based on a state’s GDP trend, migration trend (in or out) and non-farm payroll enrollment trend.   The economic outlook ranking is based on 15 factors including the top marginal personal income tax rate, the top marginal corporate income tax rate, property tax burden, estate tax burden, public employees per 100,000 population, state liability system survey and whether a state has a right-to-work law.  Connecticut is ranked #46 for economic performance and #43 for economic outlook.
  • The Connecticut Business & Industry Association reported that “70 percent of executives believe the value they receive for their tax dollars is extremely low considering the amount they pay in taxes.”
  •  The Cato Institute gives Connecticut Governor Dannel P. Malloy an F grade for his economic policies that throttle investors and entrepreneurs.  Malloy “creates a more hostile climate for business, but then tries to compensate for the damage with tax incentives.”
  • Connecticut’s probate court system seems to have gained a reputation for loading unnecessary costs on estates and sometimes arbitrarily nullifying wills, a practice that’s hard to distinguish from looting.  Yale Law School professor John H. Langbein declared that “Connecticut probate is a national scandal.”

A recession is a slowdown in business activity. Connecticut’s malingering recession fairly shouts at any thoughtful person, among whom we may number the many folk who write editorials for Connecticut’s newspapers, that the prescriptions for recovery followed by Governor Dannel Malloy and the Democratic dominated General Assembly – namely, more taxes, more crippling regulations, more straws heaped on the camel’s sagging back, an adamantine refusal to adopt policies that cut spending in the long term, a benefice for the state’s unions  – have not cured the patient.    

In the midst of the state’s death throes, the Democratic dominated, progressive-minded budget writing committee in Connecticut’s General Assembly has just produced a “straw that breaks the camel’s back” budget – more taxes, more regulations, more of the same economically criminal measures that will consign the state to penury for many more years to come. It is as if the progressives in the state Democratic Party will not be satisfied until Connecticut drops to last place in the Chief Executive Magazine rankings. Why settle for 44th place?

If only the sailors of the ship of state were drunk, the course plotted by Mr. Malloy and the union-captive Democrats in the General Assembly would be understandable, if not forgivable. Insobriety may be offered as a mitigating factor. But these are folks who are stone sober. Their intent – like the intent of Einstein’s madmen, who repeat over and over again actions that produce predictable results, all the while hoping against hope for a different outcome --  is commendable. But the end they hope to secure, which is prosperity, cannot be achieved by the means they propose. Prosperity wants a field unencumbered by high taxes, excessive regulations and solicitous, chest-thumping, tax consuming politicians.

Still, the progressives in Connecticut persist against a headwind that drives them continually backwards, and they call this striving, this pointless thrashing about in chains, progress. If the results of such ego-driven, walleyed, ideological madness were not inevitable – richer politicians, poorer people – we all could laugh ourselves silly at the comedy. But it hurts to laugh.

It hurts.

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