President John Kennedy formulated the phrase “a rising tide
lifts all the boats.” In an address to the New York Economic Club in 1963 Mr. Kennedy spelled out what he meant by the phrase. In a time of sluggish
growth, rising taxes and improvident spending, Mr. Kennedy proposed to reduce
marginal taxation, a measure that would, he was convinced, spur business activity
and INCREASE tax revenue. Following the implementation of the Kennedy tax
reforms, the tide manifestly rose. After Mr. Kennedy’s assassination, his
successor, Lyndon Johnson, was able to use the increased revenue occasioned by
Mr. Kennedy’s reforms to water his own garden, the Johnson “Great Society”
programs.
By imposing upon Connecticut the largest tax increase in
state history, Governor Dannel Malloy lowered all the boats – with predictable
results. Connecticut’s economy, whipped by a malingering recession, has moved
forward at a snail’s pace. The national recession ended three years ago,
according to the Business Cycle Dating Committee of the National Bureau of Economic Research.
But here in Connecticut, a suffocating recession marches remorselessly forward.
Despite the good news proclaimed from the rooftops by the Malloyalists,
Connecticut is still treading water, and all the important indices point downward.
Prosperity remains elusive for nearly everyone but Mr. Malloy and those few
businesses in Connecticut Mr. Malloy has favored with crony capitalist tax
reductions, low interest loans and property giveaways. Mr. Malloy’s business is
prospering; a campaign PAC affiliated with the governor, the ineptly named “Prosperity
for Connecticut,” has raised over $235,000 in the course of fifteen fundraising
events, three of which were held in Washington, three in New York and the
remaining nine in Connecticut.
Having been chosen as the Democratic nominee for governor at
the recently concluded Democratic Party nominating convention, Mr. Malloy is
now in the process of fully unfurling his campaign banner.
The legislature’s non-partisan Office of Fiscal Analysis
(OFA) has projected a state deficit of $1.4 billion. When last faced with a
similar deficit, Mr. Malloy lowered all the boats by imposing a massive, broad
based tax on many small businesses in the state that had previously escaped the
baleful eye of the tax collectors. The additional revenues permitted Mr. Malloy
to offer tax deals to some mega businesses he thought might take flight in
response to Connecticut’s high taxes and business throttling regulatory
octopus.
Good news, Mr. Malloy advised at the beginning of June as
his reelection campaign steamed forward: “We don’t face a deficit.”
The deficit projected by the impartial OFA, whose crystal
ball has been considerably more accurate than the one used by Malloyalists to
predict deficits and surpluses, was based on a spending projection of more than
seven percent. Under the Malloy dispensation, spending will be more restrained
than it had been during the profligate reign of the last two Republican
governors. “Nobody,” Mr. Malloy assured doubters, “no party… is going to
advocate increasing our spending by 7.78 percent… This is very much about
continuing fiscal restraint.”
The current budget, Mr. Malloy said, includes a spending
increase of only 2.5 percent. The difference between the two projections will
offset the OFA’s projected deficit, all things else being equal. There will be
no increase in taxes, no increase in spending, and fortune once again will
smile on Connecticut, even though its tide is yet receding.
These are the talking points that will fuel the Democratic
Party campaign this year.
The oracle has spoken – “period” as President Barrack Obama
might say.
There are a few good reasons to doubt Mr. Malloy’s oracular powers.
The predictions of the gods and goddesses in charge of Mr. Malloy’s crystal
ball have not in the past proven accurate, possibly because their predictive
models have been compromised by political ambitions.
Another reason: “All things else” are rarely equal. If you
impose on Connecticut the largest tax increase in its history -- this on top of
the second largest tax increase in its history, the Weicker income tax incubus –
other things happen that eventually upset the static predictive apple cart.
There are no balls and chains on the ankles of overtaxed people and businesses.
The instinctive reaction to a regulatory anvil about to fall on one’s head is
anvil avoidance.
Three years after the national recovery, Connecticut is the
only state in the union to have lost population to other states. Connecticut has fewer people in the workforce today than it did in 1989. According to a January 2014 report
by the nonprofit organization State
Budget Solutions, Connecticut has a state debt of over $112 billion. Its
state debt per capita is $31,298. These and other figures cannot be imagined
away by Malloyalist fortune tellers, nor can the state’s debt, accumulated
over years of improvident spending, be fairly put on the last two Republican
governors. Budgets are created by the legislature and executed by governors.
Debt is a function of spending and can be reduced only through corresponding
spending reductions. Either this governor or his Republican successor must
knock one or two billion dollars out of the budget. That is the hard choice,
and anything short of it is rhetorical sludge.
Comments
We may as well change the welcoming signs that greet motorists venturing into our state to say "Lasciate ogne speranza, voi ch'intrate", or " Abandon all hope, ye who enter here." .
Keep in mind as well that the state has not fully adopted GAAP accounting standards so in addition to any current budget deficits there remains a structural budget deficit of approximately $1 billion