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Connecticut Down


"There ain't no more bottom to this bottom" -- diner wisdom


How Did Rich Connecticut Morph Into One Of America's Worst Performing Economies?” Jim Powell asked in a stunning piece in Forbes magazine more than five years ago.

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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