Monday, August 29, 2016

Bankruptcy In Connecticut

It’s more than a whisper. Hartford, Connecticut’s capital city, already is bankrupt; no one as yet has bothered to read the last rites over the corpse.

The city’s formal announcement of bankruptcy can be deduced from the math, and there is no quarreling with math, as Mr. Micawber, a character in Charles Dickens’ David Copperfield, well knew: “"Annual income twenty pounds, annual expenditure nineteen pounds, nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

Misery is what happens when your expenses exceed your income. A crisis is what happens when you are unwilling to cut your expenses permanently and you have no means of increasing your income, which perfectly describes the state of Connecticut. The Democrat dominated General Assembly having imposed on Connecticut both the highest and the second highest tax increases in state history, Governor Dannel Malloy has, perhaps for election purposes, forsworn future tax increases, and the state’s red ink continues to rise to knee level.

To be sure, there are reasons why state revenue continues to plunge downward: high income salaries are diminishing; the stock market continues to under-perform, and Connecticut is more reliant than most states on taxes drawn from financial institutions; home grown Connecticut companies either have left the state or have their eyes fixed on the exit signs; revenue from the gas tax is down because gas prices have been low for a long while thanks in part to fracking, and Connecticut is the only state in the union that has not yet fully recovered from a major recession that ended elsewhere more than FIVE years ago.

Generally, moral bankruptcy precedes economic bankruptcy. Long before politicians begin lying to the general public, they lie, convincingly, to themselves. The great gap that has formed nationally between the promises of politicians and their performances does much to explain the rise of Bernie Sanders, a socialist from the People’s Republic of  Vermont, and Donald Trump, a dissenter from Republican Party orthodoxy who has managed to clear the Party nomination field of conservative Presidential contenders.

Late in August, Governor Dannel Malloy stepped before the TV cameras and declared – with as straight a face as he could summon – that his innovative crony capitalist “First Five Plus” program had been a crashing success. Outside the state’s hegemonic one-Party bubble, tittering could be heard. For the last quarter century in Connecticut, success has taken on the appearance of abject failure.

Rating the fifty states according to fiscal solvency, a June 2016 Mercatus study placed Connecticut dead last:

“Connecticut’s fiscal position is poor across all categories. With between only 0.46 and 1.19 times the cash needed to cover short-term liabilities, Connecticut’s revenues matched only 94 percent of expenses, producing a deficit of $505 per capita. The state is heavily reliant on debt to finance its spending. With a negative net asset ratio of −0.88 and liabilities exceeding assets by 34 percent, per capita debt is $9,077. Total debt is $20.88 billion. Unfunded pensions are $83.31 billion on a guaranteed-to-be-paid basis, and other post-employment benefits (OPEB) are $19.53 billion. Total liabilities are equal to 53 percent of total state personal income.”

Within the six years of the Malloy administration alone, General Electric, a fixture in the state since 1974, pulled up stakes and moved its headquarters north to Massachusetts, not south to Texas or Florida; Sikorsky, spun off from United Technologies, was purchased in July 2015 by Lockheed Martin Corp. for $9 billion in cash; Aetna Insurance Company, founded in Connecticut in 1853 and a beehive of employment activity in the state, appears to have its eyes on the exit signs; and – not that anyone in the Malloy administration cares all that much – gun manufacturers in a state known since the Revolutionary war as “the arsenal of the nation” are moving operations  to other move friendly states.

Having passed a highly restrictive gun regulation law in 2013, Mr. Malloy gave the back of his hand to Connecticut gun manufacturers who had been begging for a place at the table before the General Assembly passed its regulations. “What this is about,” Mr. Malloy told CNN, “is the ability of the gun industry to sell as many guns to as many people as possible—even if they are deranged, even if they are mentally ill, even if they have a criminal background. They don’t care. They want to sell guns.”

Well now, all businesses in Connecticut do want to sell their products. It is a slur unworthy of the most retrograde politician to have accused gun manufacturers of such callous indifference. In the age of crony capitalism, some businesses in Connecticut – “First Five Plus” awardees selected by the Malloy administration for crony capitalist treatment – are more equal than others. When Mayor of Hartford Luke Bronin, once Mr. Malloy’s legal counsel, petitions the governor and the General Assembly for assistance prior to declaring bankruptcy, one may be certain his petition will not be so summarily dismissed.

And just for the record, it may be proper to point out here that the Malloy administration has, through the state’s Bond Commission, provided $22 million in grants and loans to the largest hedge fund in the world in order to prevent Bridgewater Associates from moving jobs elsewhere, as gun manufacturers have done, while at the same time Mr. Malloy’s “caring” government has reduced tax outlays to Connecticut’s disabled.
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