Tuesday, October 27, 2015

Democrats and Republicans Behind Closed Doors

The relationship between Republicans on the one hand and Governor Dannel Malloy and Democratic leaders in the General Assembly, Speaker of the House Brendan Sharkey and President Pro Tem of the Senate Martin Looney, on the other has been frosty from the beginning of Mr. Malloy’s tenure in office. “Frosty” may be a considerable understatement: On budgetary matters, Democrats and Republicans were not on speaking terms at all.

Mr. Malloy, quite consciously, pushed Republican leaders out of the room during all his budget negotiations, which made budget formation easier for the Governor, even as it signaled a certain audacious and dismissive attitude towards Republicans. In fact, Mr. Malloy had diagnosed Connecticut’s ills before he presented his first budget to the General Assembly. He knew what he had to do and proceeded to plow an unobstructed path for himself.

Mr. Malloy’s prescription for what ailed Connecticut involved massive tax increases, temporary savings from unions, and crony capitalist offerings to select companies that were considering moving out of state; his tax credits, low interest loans and government gilded treatment were supposed to anchor to Connecticut long standing companies itching to improve their profit lines by moving operations away from entangling government. Mr. Malloy’s massive tax increases extended a lingering recession and throttled job production.  Understanding that crony capitalist bribes were not enough to offset increased taxes and crippling regulations, major companies in Connecticut began to look for the exit signs. Not only did Mr. Malloy’s prescriptions fail to cure the patient; his solutions exacerbated the very problems they were designed to cure.

Mr. Malloy’s second budget imposed on a limping state the second largest tax increase in Connecticut’s history, the largest being Mr. Malloy’s first tax increase. Massive tax increases from former Governor Lowell Weicker onward had produced chronic budget deficits, which were temporarily interrupted during the Malloy years by recission hiccups. Mr. Malloy’s budget chief, Ben Barnes, later would offer the following soothing consolation: Connecticut, he said, would have to get used to recurring deficits. Some large Connecticut companies, most notably General Electric, already had gotten the message.

In order to recover costs associated with Obamacare, which restricted the profits of insurance companies, large insurers began to combine with each other. Aetna, merging with Humana, Cigna, bought by Anthem, Travelers, scouting out acquisitions, and Prudential, acquiring Hartford Life – all companies that for years have had large footprints in Connecticut – have been transformed. Some or all of these businesses, having recombined with other insurance giants, may pull up roots in Connecticut in an effort to recover lost costs.

This is the bleak background that may explain why Mr. Malloy, facing the inevitable consequences of his handiwork, now has called Republicans to the budget negotiation table. The invitation arrived hemmed about by barbed-wire Democratic demands issued by Mr. Looney and Mr. Sharkey. Republican Minority Leaders in the General Assembly, said the two Democratic Majority Leaders, must come to the table prepared to “stay in the room until the job is done.” Also they must “present real ideas” and “be willing to compromise.” Most importantly, they must “bring votes.”

Republicans were uncomfortable with the demands. Were the “real” ideas of Republicans to be only those that did not discomfort leading Democrats and Mr. Malloy? Republicans in the past had put forward some “real” budget solutions, which had been brusquely dismissed by Mr. Malloy, who told Republicans, rather imperiously, that if they jotted down their ideas on the back of an envelope, he would consider them -- la-di-da! If demands Democrats were to offer in the closed door meeting were simply more of the same temporary fixes, there would be little room for compromise. Minority Leader of the Senate Len Fasano and Minority Leader of the House Themis Klarites, who does not suffer bullies gladly, sensed a tar pit and rejected the demands. They wanted a frank discussion that did not prevent both parties from arriving at real solutions that involved long-term structural changes.

And the very first order of business, Republicans insisted, should be to determine what the real deficit is. Democrats, who in the past have high-balled the rate at which state revenue would increase, pegged the state’s present deficit at $221 million.  That was a low-ball number, Republicans said; the real debt is closer to $350-430 million. No more temporary fixes please; no more recissionary sleight-of-hand. Repetitive recissions remove from the General Assembly its most important function – producing rational budgets -- and invest budget making authority in the executive department. Following the November 2016 elections, the projected budget will run more than $1 billion in the red.  A real structural change, painful but necessary, would involve long-term spending cuts, union contract re-negotiations and budget reallocations.

The first round of negotiations, both Democrats and Republicans agreed, was cordial. All agreed that a special session dealing with the budget could not be convened until mid-November, sometime after municipal elections have concluded.
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