"There ain't no more bottom to this bottom" -- diner wisdom
In the often quoted words of former Prime Minister of Britain Maggie Thatcher, the state ran out of other people’s money.
Former Governor Lowell Weicker’s 1991 income tax was
followed, taxpayers of Connecticut will recall, by two additional massive tax
impositions, the largest and the second largest in state history, initiated by
present Governor Dannel Malloy – disapproval rating 72 percent, the lowest in
the nation, according to Morning Consult.
With the additional taxes in hand, spending spiked. The last non-income tax
budget in the William O’Neill administration was $7.5 billion, a figure that
tripled within the space of four governors. These tax increases relieved the
Democrat dominated General Assembly of the necessity of instituting permanent,
long term spending cuts. That’s number one. Number two: Over a period of years,
the Democrat dominated General Assembly has simply rented out its
constitutional and statutory obligations, foremost of which is control over the
budget, to the governor-union-bosses combine. Number three: The dominant
Democrat Party has remembered nothing and forgotten everything. Democrat
nominee Ned Lamont’s political program– a repeat of Malloy’s failed governance
-- is 98 percent aspirational and 2 percent analytical.
It turns out that Republican gubernatorial nominee Bob “the
re-builder” Stefanowski, had pledged during his primary campaign to eliminate
the state’s income tax over an eight year period; the income tax generates
about half of the state’s revenue. Just before he had gotten the primary locked
up, Republican leader in the House Themis Klarides, stuck a pin in
Stefanowski balloon. She said a program that envisioned the elimination of
one half of the state’s revenue was “silly,” her word. Stefanowski then
allowed that his ambition was “aspirational,” his word. Does that mean it was a
politically opportune fake pledge?
It does not. Stefanowski is serious about tax reduction,
just as Lamont is serious about tax increases. The elimination of the income
tax is the banner on Stefanowski’s flag. His problems are much different, and
perhaps more serious, than overpromising in a Republican Party campaign.
What are they?
Political inexperience for one. Of course, that is a disability
Stefanowski shares with Lamont, whose political experience is minimal. Both are
self-financers and successful – read “rich” – businessmen and outsiders. So
these demerits, if that is what they are, cancel each other out. But the danger
for those who have no direct and pertinent political experience should be
obvious. If you have little experience in state government, you are more or
less forced to throw yourself on the mercy of strangers. What strangers? Well,
DC consulting firms for example. That did not help Linda McMahon in her
successive bids in either of her U.S. Senate campaigns, and there are some indications that Republican Tom Foley's bid for governor did not survive rancid advice from DC consultants.
President Trump, to be sure, stands out an exception. Before
becoming president, Trump was a rich businessman with little political
experience and boisterous opinions. “Exception” is the right word. Barack Obama
was an “exceptional” President as well. Over a period of three decades, we have
been witnessing in real time the demise of the two major political parties, a slow
descent into political anarchy.
But back to Connecticut. If you listen to pro-tax increase number
crunchers, who are legion, they will tell you that Connecticut cannot
cut spending. The thing is impossible, because the state is facing crushing
deficits in the very near future.
Stefanowski’s economic guru Arthur Laffer aside, if you cut
taxes, you will in the near term pump up the deficit, according to a static
analysis of getting and spending. Then too, state union contractual obstacles
will prevent a future governor, be he Stefanowski or Lamont, from deploying traditional
cost saving measures. When Malloy and the union friendly, Democrat dominated
General Assembly affirmed a backroom deal struck between the Democrat Governor
and SEBAC, Malloy placed the executive
departments of any future governor in straightjackets that simply prevent
administrative maneuverability. Imprisoned by contractual obligations that
stretch out until 2017, future governors will not be able to resort to layoffs
to balance their budgets and, after three years, salary increases kick in. In
addition, over a long period of time, “fixed costs” have narrowed the space in
which governors are permitted to maneuver. Lamont, one can be sure, will not
propose policies to widen the gubernatorial space in which chief executives
might broaden and extend administrative and legislative powers to cut spending.
The expression “cut spending” is not one that drops easily from Lamont’s lips.
Chris Powell, once the managing Editor of the Journal
Inquirer, now retired but an active political columnist, is enlightening on the downside of fixed costs.
Powell writes, “The alternative is to unfix all the
"fixed costs" of state government -- not just the union contracts but
also municipal aid formulas, which are just camouflage for raising the pay of
municipal employees, as well as welfare formulas and such. Then all major
appropriations again could be determined by how much the state could afford.
“That is, the alternative is to make it impossible for
elected officials to get away with shrugging that they are powerless to control
state spending. What these elected officials really mean is that becoming a
‘fixed cost’ is the highest aspiration in government in Connecticut and that
those so designated have become too influential politically.”
It is only a slight exaggeration to say that Malloy seeded
the path of future governors with political IEDs. The Malloy-SEBAC deal pushed
out contractual terms favorable to unions – a no-layoff provision and automatic
salary increases after the first three years of the contract – to 2017, well
beyond the conclusion of his two terms in office. So, for these and other
reasons, principal among them the cowardice of union bought legislators,
spending cuts are viewed by Lamont and his well-wishers in Connecticut’s left
of center commentariat as impossible. How then will the future crippling
deficits be discharged? Why, of course, through tax increases. Asked recently
if he would raise taxes as governor, Lamont paused briefly, perhaps feeling the
tug of the noose around his neck, and responded with disarming honesty, “Yes.”
That has been the Malloy-Weicker solution to chronic deficits caused by massive
tax increases, which inescapably lead to massive increases in spending, which
in turn lead to more massive tax increases – and, once the getting and spending
has reached a saturation point, a sharp decrease
in state revenue due to capital flight.
We’ve been traveling this well-worn path since 1991,
when then Governor Lowell Weicker pushed
an income tax through the legislative sausage machine over the heated
objections of wiser heads who reasonably
predicted that the income tax and future tax increases would increase spending
proportionally – true’dat – and relieve future legislators of the necessity of
permanently cutting long-term spending. It is simply a form of magic thinking
to suppose that there is no causal relationship between tax increases and
spending. The inflexible rule is: The more you tax the more you spend. And THIS
is the unresolved problem that will break Connecticut’s back.
Once the way to Heaven is blocked, the traveler must seek
out the low road to Hell, shrugging his shoulders and alleging “inevitability.”
One can hear the note of inevitability in scores of pro-progressive budget
analyses and editorials.
This road to ruin was on vivid display recently in
connection with the state’s bailout of its Capital city, Hartford.
Mayor of Hartford Luke Bronin, once Governor Malloy’s chief
counsel, broadly hinted that he would discuss Hartford’s impending bankruptcy
with some lawyers. A media fuss ensued, and the usual fools rushed in where
even angels might have feared to tread. Prior to the bailout, the air was full
of promises of reform; apparently Hartford unions were going to take a bath.
After the General Assembly ponied up a half billion dollars in rescue funds,
the city council decided that the ballyhooed reforms were quite unnecessary.
The reversal produced a condemnatory editorial in the Hartford Courant: “Hartford's city council is giving
the state legislature reason to regret its generous bailout. Now that the state has agreed
to pay off a half-billion dollars of debt the city ran up, Hartford's council appears to be
backing off a modest pension reform…”
This is not extraordinary behavior for politicians and
commentators who have long argued that Connecticut/Hartford is suffering from a
revenue shortage, not a spending problem. Both tax increases and state bailouts
of foundering cities release politicians from the obligation of solving
problems. That is why revenue intake in Connecticut has tripled within the administrations
of four governors AND the state is still suffering from multi-billion dollar deficits.
The non-Laffer rule is a simple one: The more government
gets, the more it will spend. Beyond the point of diminishing returns,
government gets less the more it taxes – because excessive taxation drives away
real wealth and wealth producers. It follows that the reverse will also be
true. Permanent, long-term reductions in expenditures by Connecticut may have a
more salubrious effect on companies bolting the state than Malloy’s polite
bribery. Malloy’s “First Five” program provides a temporary soft landing to
companies in and outside the state that would rather set up business under a
less predatory and more reliable government.
Every mother of every family in Connecticut who has balanced
a household budget is familiar with the rule. When outgo exceeds intake, you
are making a misery pie for your family. And when you cannot increase the
family revenue, you must cut spending – unless you are a city like Hartford
that can rely on bailouts furnished by union-friendly governors and cowardly legislators.
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