Monday, February 08, 2016

Reinventing Malloy

After paying court to Governor Dannel Malloy’s budget address, a eupeptic Republican noted that he sounded like Ronald Reagan. Another, unused to taking leaps of faith, said if only Mr. Malloy had done at the beginning of his term in office what he had said in his current budget address, we wouldn’t be in this fix.

General Electric’s leave-taking may have served as a splash of cold water in Mr. Malloy’s face. Aetna, it appears, may be looking for an exit. Sikorsky has been sold, and other insurance companies, in part reacting to a failing Obamacare, are commingling in an effort to cut costs. More than a quarter of the total number of 893,851 active professional physicians reported by the Kaiser Family Foundation have now declined to participate in the new plans under the Affordable Care Act, a number of states have declined to set up exchanges, and UnitedHealth Group, the nation's largest health insurer, having lost more than $500 million on exchange plans, warned last November that higher costs were pushing it out of the Obamacare market.

Data provided by CTMirror and other news outlets is sobering – though it does point to a solution advocated, shortly before his assassination, by President John Kennedy.

“Income tax receipts were downgraded Friday,” CTMirror noted, by $183 million for 2016-17; $234 million for 2017-18; and $215 million for 2018-19. “And while sales and corporation tax revenues grew enough to offset much of the income tax erosion this year, projections for sales and corporation tax receipts for the next three years did not change significantly.” Diminishing tax receipts suggest that Connecticut’s tax and spend regime has reached a point of diminishing returns.

In a non-socialist economy, the corrective to high taxes is tax flight. Crony capitalism is simply a variant on the same note; the crony capitalist remains on the spot, his continued presence lubricated by tax forgiveness, bailouts, low interest loans and special preferences. Democratic Presidential candidate Bernie Sanders, a flower-child socialist, hopes to do something about this. Assuming Mr. Sanders is as good as his word, the tumbrils containing Wall Street fat-cats may begin rolling to the guillotine shortly after he is sworn in as President. Mr. Malloy, not a Sandersnista, is supporting Hillary Clinton’s presidential bid. People flinch at the word “socialism,” Mr. Malloy has said. Mr. Sanders flinches at the monetary support Mrs. Clinton has received from greedy capitalists.

Years before Mr. Reagan, a transformative president, arrived on the scene, President Kennedy provided a way out of the nation’s economic doldrums; among other things, Mr. Kennedy reduced marginal taxation, which eventually stirred business activity, opening the revenue sluice-gates that his successor used to construct his Great Society programs. Mr. Malloy is not quite as adventuresome and, were he to re-invent himself as John Kennedy, he would face considerable opposition from progressives in his own party, whose leaders in the General Assembly, Speaker of the House Brendan Sharkey and President Pro Tem of the Senate Martin Looney, provided the lash, a Unitary Tax, that caused GE to bolt northward to Massachusetts. Mr. Malloy’s boldest strokes in office involve spending money, not contriving ways to save Connecticut from penury.

Having exiled Republicans from budget negotiations during his entire term in office, Mr. Malloy must now depend upon alienated Republicans to support measures he currently finds more profitable than the crony capitalist schemes he had been persistently advocating. Scratching their heads in wonderment, Republicans are not quite sure whether Mr. Malloy’s turn to the center represents a change of heart or a change in political strategy that will permit Democrats to survive the upcoming elections, after which Democrats addicted to spending will find some other pot of gold – tolls look promising – to temporarily fill empty treasury coffers. Are the Democrats seriously looking for new ways to control spending, or are they on the hunt for new wine to pour into their old wineskins?

Mr. Malloy was raucously applauded when he took aim in his budget address against rarely read bills tucked into end-of-the-year implementer legislation, a pig-in-a-poke devise that avoids the hearing process. Grown-up legislators resent such legislative run-arounds. He was wildly applauded again when he cautioned legislators that in an era of declining revenue – the “new normal” constructed by disastrous progressive programs – state workers must accept painful solutions and the government itself must learn finally to live within its means. Mr. Malloy once again reiterated that his new budget contained “no tax increases,” though he did not promise to veto a revised increase budget including tax increases sent to him by the General Assembly. The grey ghost of union-negotiations-past hangs menacingly over Mr. Malloy’s remarks. Republicans suggested that union contract negotiations should be monitored closely by legislative leaders of both parties, a reform overburdened taxpayers certainly would welcome.

It’s a beginning. Watch out for the trap doors though.

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