The romance between
Fred Carstensen of the Connecticut Center for Economic Analysis (CCEA) at
UConn and the administration of Governor Dannel Malloy suffered a setback when
Mr. Carstensen discovered that new data supplied by the federal government
indicates a slowdown in business activity. For reasons that are not clear, the
dip in job growth in Connecticut surprised Mr. Carstensen, the Candide of
economic analysts in the northeast.
In proving foresight may be vain:
The best laid schemes o' Mice an' Men,
Gang aft agley,
An' lea'e us nought but grief an' pain,
For promis'd joy!
Prior to the passage
of a state budget that imposes hefty revenue enhancers on Connecticut’s
tax-whipped businesses and its suffering middle class, the CCEA predicted in
February that Connecticut might well add
44,000 jobs in 2015 and 2016. This rosy estimate, Mr. Carstensen now says, was
based on federal data that has been massively revised – and not for the better.
Earlier federal data
showed strong job creation and output growth in Connecticut, but more recent
data concerning the state’s gross state product (GSP) reduced promising estimates by more than $4
billion; the revised growth figure fell to a lowly 0.6 percent.
Based on the new and
more accurate federal figures, CCEA is now reporting that Connecticut ‘s GSP growth
in 2014 lags behind that of Massachusetts, New York, New Jersey, Pennsylvania,
Ohio and – adding insult to injury – “even Rhode Island.” The slowdown in business
activity in Connecticut means that job creation in Connecticut during the next two
years “will likely stall and may even now decline,” according to the revised CCEA
report.
One policy in
particular, the hospital tax, is especially onerous, Mr. Carstensen tardily
advises.
In fiscal year
2011-2012, Connecticut imposed a $350 million annual tax on its hospitals,
returning $400 million in state grants to the industry, a budget maneuver that
allowed Connecticut to qualify, under Medicaid rules,” for a 50 percent federal
reimbursement on its payments, or $200 million,” according to a report in CTMirror .
In order to accommodate
persistent budget deficits, the Malloy administration and the Democrat
dominated General Assembly steadily reduced its give-back amount to hospitals –
but, significantly, the hospital tax remained constant. Reimbursement rates
rose, state grants to hospitals were reduced and, predictably, the state forfeited
its federal aid. This year, CTMirror reports, “will get back less than $96
million, and the state will receive about $65 million in aid – about $200
million less than it would have had payments to hospitals remained at 2011
levels.”
If Robert Burns, the
author of “To A Mouse,” had been in charge of UConn’s Connecticut Center for
Economic Analysis, the Center’s job growth predictions might have been more
accurate:
But Mousie, thou
are no thy-lane,
In proving foresight may be vain: The best laid schemes o' Mice an' Men, Gang aft agley, An' lea'e us nought but grief an' pain, For promis'd joy!
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