Friday, October 11, 2013
Red Flags Over Connecticut
A little more than a month ago, Jim Powell of Forbes Magazine did us the favor of pulling together in one piece – “How Did Rich Connecticut Morph Into One Of America's Worst Performing Economies?” -- a load of data much of which was already in the public stream. It’s useful to have all the festering lilies together in one bunch, so that one might get a good whiff of them.
Before and since the publication of Mr. Powell’s distressing news, some Republican opponents of Connecticut’s progressive governor and his helpmeets in the state’s General Assembly have been energetically flourishing some of Mr. Powell’s little red flags, hoping that the state’s sometimes inattentive media might awaken and take note that Connecticut is teetering on the brink.
Without mentioning all the points touched upon by Mr. Powell, here are a few worrisome indicators:
In Connecticut for the past two decades, out-migration has exceeded in-migration by about 300,000 souls; Connecticut no longer competes on a level playing field with other states for investors and entrepreneurs, both drivers of prosperity; Connecticut small businesses declined 2.2 percent BEFORE the financial meltdown; state spending has increased threefold since the Lowell Weicker income tax was promulgated in 1991, with much cheering from the state’s progressive media; Connecticut debt per capita, at $27,540, is the 4th largest in the nation, exceeding even that of California; Barron's tagged Connecticut’s financial condition as the worst in the nation; the state’s debt and pension liabilities exceed its Gross Domestic Product (GDP) by an astounding 17.1 percent, compared with South Dakota’s 1 per cent, South Dakota’s financial condition being the strongest among all the states.
There is more depressing bad news, much of it omitted here for reasons of space. The figures are, as always, interesting but perhaps unnecessary in a state that has for more than two decades felt on its back the lashes of overspending and prosperity suppressing regulation. Looking around the table at Thanksgiving and Christmas for the past 20 years, one counts with a sinking heart the empty chairs once occupied by sons and daughters and nephews and nieces who have moved out of state in search of greener pastures elsewhere, carrying with them their very expensive Connecticut diplomas. Their aunts and uncles and fathers and mothers occasionally have joined the outmigration – to be with their grandchildren, once the fruit of prosperity in Connecticut, now gone.
The 2014 edition of the State Business Tax Climate Index released by the Tax Foundation at the beginning of October places Connecticut among the ten worst states. Our neighboring state, Massachusetts, formerly called “Taxachussetts, placed 25th. Connecticut weighed in at 42nd, number 9 on the list of the ten worst states.
The annual fiscal review of State Comptroller Kevin Lembo, generally a straight shooter, brings little solace.
The good news -- from the point of view of politicians soon up for election who fear that additional taxes might sink their ships – is that the state had closed its $20.5 fiscal year 2013 budget with a nifty surplus of $398.9 million. The bad news is that Connecticut’s current debt and liabilities gap is a gargantuan $46.5 billion, which amounts to about $18,000 for every man, woman and child in the state. And of course the surplus is the result of a temporarily strong market fueled by high capital gains and estate tax revenue. Payroll tax revenue, an indicator of business growth, declined by 0.9 percent.
All these red flags point to an economically diminished and bleak future – unless and until the grown-ups take charge of Connecticut’s tax grubbing, high spending, crony capitalist government.
Far from being a solution to our economic woes, crony capitalism – in which Mr. Malloy and leaders in the General Assembly plunder the private economy of entrepreneurial capital they then bestow on favored companies – encourages polite bribery between tax dispensers and large corporations, while introducing toxic levels of moral uncertainty into a business-governmental relationship that should be even-handed and just. Crony capitalism tilts in favor of large, resource rich companies what U.S. Senator Dick Blumenthal might regard, if he thought about it, as the economic “even playing field.” It is the work of a day for large politically connected companies to use the agencies of government to drive healthy competition from the field.
One of the solutions to state beggary might be for states to stop begging federal taxpayers for bailouts. And economic conditions in Connecticut could be greatly improved by cutting spending for all, reducing taxes for all and disencumbering Connecticut of the regulatory bonds that tie Gulliver to the ground. Those are solutions that really would level the playing field. Unfortunately, the state has been moving in the opposite direction for more than 20 years, and incumbent Republicans, satisfied with a token resistance, have winked at the decline for as many years.
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