Saturday, October 03, 2015

Crony Capitalism, One Party Rule, Not A Solution To State Debt

The juxtapositions are jarring.

According to one story, Governor Dannel Malloy has spent “$1 Million To Lure 16 Jobs to Stamford.” Mr. Malloy is lending MC Credit Partners $1 million at a two percent interest rate, and the company will be able to convert half of the loan into a gift “if it adds 10 people by 2018 and maintains 26 employees through 2020. If it only adds five workers, $250,000 of the loan will be forgiven.”

Connecticut -- for all practical purposes, a one-party state -- has now become a gambling den for crony capitalists. The sixteen jobs for which Mr. Malloy paid nearly a million were filched from New York City, whose crony capitalist governor, Mario Cuomo, would happily pay an equivalent amount on jobs he may in the future manage to filch from Connecticut. Mr. Cuomo recently put in a bid for General Electric (GE) jobs after the company’s CEO, Jeff Immelt, expressed profound dissatisfaction with Connecticut’s chronically out of balance and business-hostile budget. The budget included a new unitary tax that, applied against GE, might result in taxes paid to Connecticut on GE’s out-of-state entities. We all know it takes two to crony: a crony politician offering special exemptions, and a capitalist willing to oblige. In certain quarters, Mr. Immelt is the Vladimir Putin of crony capitalists, an aggressive bargainer with nuclear tipped teeth.

High taxes and burdensome regulations force governors to soften business costs by offering select companies special exemptions if they are able to produce a requisite number of jobs in states suffering from anemic job growth due to – here it comes – high taxes and burdensome regulations.

The chief problem with crony capitalism is that its benefits cannot be offered equitably to all businesses, which is a great pity – because reducing taxes and regulations across the board would kick open Connecticut’s doors to businesses fleeing high taxes, burdensome regulations and crony capitalist governors and legislators.

It is, of course, a bit embarrassing to ask from whom Mr. Malloy got the million with which he lured New York jobs from Mr. Cuomo. The dollars came from Connecticut taxpayers, the “little people,” middle class working folk, who have uncomplainingly borne the costs of both the largest and the second largest tax increases in state history.

Another paper advises in an editorial, “Special session needed to address drastic Connecticut budget cuts” .

Ah! Budget cuts! Now, there’s a useful prescription for what ails us here in the land of steady tax increases. Perhaps if there were more permanent budget cuts, there would be fewer permanent tax increases. But of course long-term budget cuts would necessarily involve union concessions and a retreat from the temporary fixes offered by state Democrats to chronic deficits.

A portion of Connecticut’s gargantuan pension liability  might be reduced by requiring state employees to retire later; reopening contract negotiations when a budget deficit for the biennium – including intermittent rescissions – reaches a certain percentage might provide Connecticut governors with a necessary tool to balance budgets through legislative approved spending cuts rather than endless rescissions. The contract Mr. Malloy negotiated with state employee unions for health and pension benefits in 2011 is not due to expire until 2022, and Mr. Malloy announced during his last election that he would not ask state employees for further concessions. Connecticut is one of only three states with a funded pension ratio below 50 percent.  It might also be helpful if Mr. Malloy and his single-party accomplices in the General Assembly were required to fashion bipartisan budgets.

Speaking of which – Republicans in the General Assembly and some rational, moderate (read, non-progressive) Democrats lately have been calling upon Mr. Malloy and his accomplices in the General Assembly to include them in a special session so that the draconian rescission cuts deployed by Mr. Malloy might be revisited and readjusted. The $41 million cut in state Medicaid reimbursements to hospitals, Republicans and some Democrats insist, ought not to slash the throats of mentally ill people or others forced to visit hospitals, whose costs will increase in response to the ill-advised cut in reimbursements. The cut in state Medicaid reimbursements is especially onerous because each dollar cut triggers a proportional cut in Federal reimbursements.

A number of newspapers so far have endorsed a special session in which recurring deficits may be addressed, hopefully through long term spending cuts rather than temporary fixes. And some editorial offices have been so bold as to recommend Republican Party involvement in the process, which would represent a healthy change in one-party rule.
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