Tuesday, January 09, 2018

Red Notes From a Blue State - What Connecticut Can Learn From History

Connecticut, as everyone who has been leaving it knows, is in a bad way. How bad is it?

The state is still recovering from a recession that had ended elsewhere in the nation in June 2009. For eight years, we have been hobbling along and are now the only state in the nation that has yet to recover from the recession – which is, as everyone who has been leaving the state knows, a slowdown in business activity. There are two very good reasons why Connecticut has been so laggard: 1) Governor Dannel Malloy’s first tax increase, the largest in state history, and 2) Governor Malloy’s second tax increase, the second largest in state history.

But then, we were forewarned.  Lowell Weicker did caution us during his campaign for governor that raising taxes in a recession would be like throwing gas on a fire, only a few months before he instituted his income tax, over the heated objections of a Republican Party rump in the General Assembly. When Weicker was met by the largest rally in state history, he fearlessly strode through the anti-tax crowd, a triumphant smile pasted on his face. Awaiting him at the state Capitol was his Office of Policy Management chief, Bill Cibes, who had run for governor, honestly, on a pro-income tax platform and had been solidly rejected.

The Weicker income tax convinced businesses outside the state that they had better think twice before they moved to Connecticut, where they and their employees would no longer be safe from rising taxes. And business within the state – realizing that the cost playing field had now been leveled between, say, New York, Massachusetts and Connecticut -- began looking for the exit signs. We are now living in the flames stoked by Weicker and Malloy. During this period, one could hear sighs issuing from wiser heads: if only these two knuckleheads had listened closely to President John Kennedy’s address to the New York Economics Club in 1962. It was during that address that the King of Camelot vowed to cut taxes to spur business activity, which would flood the national treasury with necessary tax receipts. He did this, and the results
were as he had supposed.

Truisms are powerful because they are true. Those who do not learn from history are doomed to repeat the mistakes of history. The Weicker tax did two things; it saved spendthrift Democratic legislators in the General Assembly the trouble of cutting costs permanently, and it raised revenue temporarily by draining dry the well that replenishes state revenue. Malloy repeated the errors of the Weicker administration – twice, and his tax increases have led, unsurprisingly, to increased spending, business flight and chronic deficits.

The real wealth of a state resides in its people and businesses. For the last quarter century, Connecticut has witnessed a flow of wealth from the private to the public sector and from Connecticut’s increasingly progressive and redistributive public sector to pampered special interests, such as state workers, that benefit the politicians directing the flow of wealth. All this hums along until, to quote Prime Minister of Britain Maggie Thatcher, “you run out of other people’s money,” at which point your choices are severely diminished. Unable to raise taxes without destroying the real wealth of the state, you MUST reduce expenditures, and the reductions must be permanent and long term – because diminishing tax resources have become permanent and long term.

So, what do you do under these circumstances, if you are a progressive majority in the General Assembly? You capitulate temporarily to reality, always a tough taskmaster, cross your fingers and hope that President Donald Trump’s economic reforms, barely indistinguishable from those of John Kennedy, will succeed in lifting all the boats, including Connecticut's sinking Titanic, at which point you may return to political business as usual.

Don Pesci's Profile Photo, Image may contain: 1 person, smiling
Author Don Pesci

And what do you do if, faced with such a bleak future, as you are Malloy? First, you decline to run for office again . . .

To read the rest of Don's commentary, visit his web site.

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