Christie attacks taxes
EDITOR'S NOTE: To read Tom Moran's take on the Malloy-Christie rivalry visit the Newark Star-Ledger at http://blog.nj.com/njv_tom_moran/2012/07/connecticut_proves_raising_tax.html
Govs. Dannel P. Malloy of Connecticut and Chris Christie of New Jersey have renewed their verbal sparring match, roughly a year after the two made national headlines exchanging insults over contrasting approaches to state fiscal policy.
In a July 23 interview with NPR, Malloy referred to Christie's policies as "horrendous," as he continued to bristle at Christie's taunt from last year that Malloy needed to "read the manual" on being a governor.
Malloy was responding to Tom Moran's recent column in the Newark Star Ledger praising his policies as working better than Christie's.
The amusement of the governors' rift notwithstanding, the core of their dispute is a question of national importance: Should states address their deficit and debt problems through higher taxes or reduced spending?
Moran suggests that Connecticut's policy of higher taxes is the way to go. Christie and his supporters disagree. So who is right?
First, as anyone who has ever received or paid a paycheck knows, higher taxes mean employees have less money to spend, and employers face higher costs when hiring workers. So higher taxes mean less private sector spending and fewer jobs.
Defenders of higher taxes counter that the private sector job losses are offset when government spending is focused on investing in infrastructure and work force training that create jobs and future value in the economy. This is arguably true.
The problem is that Connecticut, like many states that have increased taxes, is not putting its new tax revenues toward investment spending. Rather, it is funding an ever increasing budget for public employee compensation and wealth transfers such as Medicaid.
Even programs that Malloy calls investment spending aren't necessarily so. And in Connecticut's case, those programs are being funded entirely by new borrowing, not new tax revenues.
Take Malloy's $300 million investment in a building and other incentives to bring Jackson Laboratories to Connecticut. Malloy claims this deal marks the beginning of a bioscience renaissance in Connecticut.
But, Jackson Labs is committing to bring only 300 jobs to the state at a cost to Connecticut taxpayers of $1 million per job, an absurd amount by any standard. Connecticut has been promoting a Connecticut biosciences cluster for more than a decade, with limited progress, and there is no reason to believe Jackson Labs can do any more to bring a bioscience renaissance to Connecticut than the state's existing biotech companies that did not receive government subsidies.
The Jackson Labs deal is not an investment of taxpayers' income. It is a corporate welfare program and political stunt, plain and simple.
Moran claims that Connecticut is doing better than New Jersey because Connecticut's unemployment rate is lower. But, the unemployment rate isn't what everyone thinks it is.
A lower unemployment rate doesn't necessarily mean a better economy, and that is the case when we compare Connecticut with New Jersey. A lower unemployment rate can result from people getting jobs or from people leaving the work force. It also uses a questionable definition of whether a person is employed. If Moran were to look at the non-farm employment rate, a better measure of economic health, a different picture emerges.
Since the November 2010 election, Connecticut has regained only 13 percent of the roughly 115,000 jobs it lost since the economy turned down in 2008. New Jersey, in contrast, has regained 27 percent of the jobs it lost, far more in line with the national recovery rate of about 30 percent.
So if job creation is the measure, New Jersey is doing better than Connecticut, and, using Moran's logic, it appears reducing spending is working better than increasing taxes.
It remains to be seen who will win the battle of political barbs between Malloy and Christie. But in the battle of good policy, Connecticut's approach of not reducing spending and paying the bill by increasing taxes on middle-income workers is not the way to go.
States that are trying to hold the line on taxes and focus on reducing spending have taken a better approach. Some combination of the two - with a much heavier emphasis on reducing spending than we've seen in Connecticut - is probably the right answer.
Ben Zimmer is the executive director of the Connecticut Policy Institute, a nonpartisan research organization founded in February 2011 by Tom Foley, the 2010 Republican candidate for governor of Connecticut. He wrote this piece for the New Haven Register.
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