Tuesday, November 13, 2012

Connecticut s Fiscal Cliff

Newly re-elected U.S. Representative Jim Himes, a moderate Democrat operating out of Connecticut’s 4th District, has said concerning the nation’s so called fiscal cliff, “Washington understands how severe the consequences of the fiscal cliff are. When I saw House Speaker (John) Boehner speak two days ago, I thought he was conciliatory and traced the outlines of a deal."

Of course, the perceived severity of fiscal cliffs depends to some extent on one’s political vulnerability. Not all severity is created equal, and Democrats ensconced in Connecticut’s safe districts, such as U.S. Representatives John Larson and Rosa DeLauro, are apt to confront the fiscal cliff with less trepidation than Mr. Himes.

A recent study conducted by the Defense Technology Initiative should serve the members of Connecticut’s all Democratic Congressional delegation as a splash of cold water in the face. The study presents a sobering picture of Connecticut’s own fiscal cliff that should give vertigo to all freethinking and rational politicians in the state.

We learn that the amount of defense contracting in Connecticut has increased by 51 percent since 2003. The state’s defense contracting represents 5.1 percent of its economic output, not a negligible figure.

Should a lack of agreement between President Barack Obama, Democrats who control the U.S. Senate and Republicans who control the U.S. House trigger the automatic cuts implanted in the Budget Control Act of 2011, the effect on Connecticut would be severe, resulting in a loss of 36,000 to 50,000 jobs at a time when Connecticut is losing jobs to other states that are more business friendly.

The state treasury, presently more than $300 million in arrears according to a story in CTMirror or $690 million to $1 billion for each of the next two years according to a Bristol Today story, would also be hard hit as the state tumbles off the national fiscal cliff, since the defense industry contributes about $860 million towards Governor Dannel Malloy’s yet unbalanced budget. No one seems to know whether Malloy’s budget has EVER been in balance. According to Comptroller Kevin Lembo’s most recent report, the state has recovered only “31,400 (just over one quarter) of the 117,500 total nonfarm jobs lost in the March 2008 - February 2010 recessionary downturn.”

Of the funds received by Connecticut from the federal government and parceled out to contractors, approximately $9.5 billion is spent on customary defense products: Virginia Class submarines, Black Hawk Helicopters, jet engines, turbines, other military components and the like. The spin-off economic activity generated by the contracts is even larger, about $22.4 billion, which affects about 101,000 jobs, according to the Defense Technology Initiative report.

Of course, the depth of the national “fiscal cliff” may be reduced if the president, the Democratic controlled U.S. Senate and the Republican controlled U.S. House are able to reach a satisfactory compromise on the self-elapsing Bush era tax cuts, otherwise known as tax increases.

But even assuming an end to the game of chicken, there must be defense cuts. Obama – who won the election -- needs the defense cuts to apply as a continuing payment on the Democrat’s new and expensive social programs, primarily Obamacare. And Connecticut’s all Democratic congressional delegation, having pledged its troth to Obama’s vision of the future in recently concluded state campaigns, is hardly in a position to offer at the alter a strenuous opposition to either Obama’s proposed defense cuts or increased taxes on quarter-millionaires or the increases in spending that will be plugged into a future Obama budget – presuming the president surprises everyone and offers a passable budget in his second term.

Unfortunately, Connecticut’s congressional delegation may not be ideally positioned to rescue the state from severe defense cuts. Its two U.S. Senators are relatively new arrivals and do not have enough political chits in the game – unlike departed U.S. Senator Chris Dodd and the departing U.S. Senator Joe Lieberman – to affect spending priorities in their state’s favor; and Connecticut’s House members will be joining an assembly controlled by Republicans averse to a crippling regulatory environment and increased business taxes that may, they predict, lead to a double dip recession and adversely impact an agonizingly slow recovery.

All of which leaves Connecticut in limbo, not to be confused with Lembo, who appears to be able to forecast deficits much more ably than the Malloyalists surrounding the governor, or indeed the governor himself – who recently promised no fewer than three times in one media availability that there will be no new tax increases in the coming budget – a dubious cry that recalls George H. W. Bush’s no new tax pledge and former Governor and Spendthrift  Lowell “The Maverick” Weicker’s prophetic insistence that a state income tax would incinerate to Connecticut’s economic infrastructure .

Arecent story in CTNewsJunkie pegs the current deficit at $365-million. Once the state arrives at the other side of elections, deficit figures tend to explode mysteriously:
“(Updated 3:54 p.m.) The numbers haven’t been certified by the comptroller, but Gov. Dannel P. Malloy’s budget director told the legislature’s Appropriations Committee on Wednesday that the state is running a $365-million deficit.”

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