How a Republican governor’s austere budget may rescue the economically ailing state and establish a formula for financial recovery.
[The Editors: The economic recession has had a devastating impact on states across the country, but New Jersey has been hit harder than most. In no small part, that is because the economic downturn has only compounded the problems that have seen the state once considered among the wealthiest in the North East become a synonym for corruption, political dysfunction and fiscal mismanagement. State spending is out of control, the public sector has become unsustainable, billion-dollar budget deficits loom, and a tax burden that ranks among the steepest in the country has forced businesses and other creators of wealth to flee the state in record numbers. But the state may have found a reprieve in newly elected governor Chris Christie. After ousting Democratic incumbent Jon Corzine in last fall’s election, the new governor has made good on a campaign promise to reform the way the state does business by unveiling a budget loaded with spending cuts and no tax increases. Can Christie put New Jersey on the path to economic recovery and create a model for other states to follow? To discuss New Jersey’s prospects and the background of the current crisis, Front Page turned to Matt Rooney, 25, founder of Save Jersey, a New Jersey blog that monitors state politics and advocates for low taxes and limited government. Rooney is also a Rutgers law student, Young Republican leader, and new media strategist for GOP campaigns and conservative organizations.]
FPM: Gov. Chris Christie made national news when he recently unveiled a budget heavy on spending cuts – the kind of thing that politicians often promise but seldom deliver. What were some of the highlights of his proposed budget for you?
Rooney: There are plenty of reasons for taxpayers to celebrate this budget. The best part? In the interest of rescuing New Jersey from a fiscal abyss, Christie’s budgetary cuts to municipal aid are a challenging but extremely necessary step in the right direction. Right now, our 566 towns are literally addicted to annual handouts from Trenton. You can’t save money or avoid waste with such an inefficient system in place. The only workable solution is to cut out the middleman, slash state spending, and let towns keep more of their revenue. The next logical step will be corporate and property tax cuts, but Christie’s first budget is an important leap forward towards structurally reforming the way our state government operates.
FPM: New Jersey is facing colossal debt problems. Since 2002 alone, total state debt has tripled from $17 billion to over $51 billion. Presently, the state is facing a nearly $11 billion budget gap, which has been described as the largest deficit of any state in the country and the largest in New Jersey history. How did the state get to this point?
Rooney: Put simply, New Jersey’s politicians over-spent and over-promised. The State gifted Cadillac pension plans to its public employees for the price of Toyotas, gave away medical benefits packages without requiring employee contributions and, in some cases, engineered budget-busting union contract concessions in exchange for political cooperation. An infamous example occurred in 2009, when former Governor Jon Corzine signed off on a midnight deal guaranteeing millions of dollars in perks for the State’s largest public worker union. His primary motivation was to avert a union-led protest at his reelection campaign rally with Vice President Joe Biden. Is it any wonder why we’re broke?
When ominous fiscal warning signs began to surface, our “leaders” responded with quick fixes, bond schemes, and borrowing campaigns that amounted to band-aids on broken bones. Ultimately, these gimmicks only exacerbated the core problems underlying the financial crisis.
The rest is history. New Jersey is now completely broke, and the Democrats who voted this mess into being have been unbelievably complaining that Christie’s budget cuts are somehow “unnecessary” and “cruel.” Such illogical and absurd protests might be funny if our economic situation wasn’t so tragic.
FPM: Let’s talk about another aspect of that fiscal tragedy. Besides massive debt, New Jersey also has some of the highest taxes in the country: the highest top marginal income tax rates; the second highest sales tax rate; the sixth highest corporate tax rate; and the highest property taxes in the nation. What effect o you think has that had on the state economy?
Rooney: The liberals who have run Trenton for decades just don’t understand the nature of wealth. They think it’s a static pool of resources that they need to redistribute in order to ensure “fairness” which, of course, is a fundamentally subjective concept open to all sorts of abuses. Our Founders understood this all to well; that’s why they wanted to keep government’s annual allowance as minimal as possible.
Unfortunately, New Jersey voters didn’t heed these lessons and elected the wrong people. Now, every dollar Trenton takes from a middle class homeowner limits his or her ability to consume commercial goods or invest in a new venture. Furthermore, overtaxed small business owners have less capital at their disposal to upgrade equipment, expand facilities, raise salaries or expand shifts. Put simply, Trenton has neutered the traditional economic engines of our state’s economy (consumers and entrepreneurs) by confiscating the tools (liquid capital) they need to create and sustain jobs.
And, as if our poisonous tax climate wasn’t bad enough for current residents, we’ve developed an unfortunate but well-deserved reputation as a “tax hell” for anyone who might otherwise consider moving their family or business to our state. It’s a vicious cycle, perpetuated by liberals who can’t keep their hands to themselves!
FPM: To control runaway state spending, Gov. Christie has proposed a constitutional amendment to cap the growth of property taxes at no more than 2 ½ percent per year. That would force municipal governments to get by with less funding. But you’ve suggested that this can be a good thing. Why do you think so?
Rooney: Necessity is the mother of all invention, right? For far too long, municipal governments in New Jersey have had unfettered access to revenue because they could raise property taxes on their citizens with impunity. It’s akin to a teenager with a debit card account that his or her parents prevent from running a zero balance. You can’t foster fiscal responsibility when there are no financial consequences!
If Christie’s property tax cap clears the Legislature, mayors and councilmen will be forced to think creatively to ensure their residents are provided with the services they require at -- and this is the key part -- a manageable and sustainable cost to taxpayers. At the state level, Governor Christie is constrained by a balanced budget requirement that forces his administration to find and eliminate “fat” and waste. Why shouldn’t city hall also have to watch what it consumes?
FPM: New Jersey’s economic crisis has affected the private sector and the public sector in very different ways. While New Jersey’s private sector lost 121,000 jobs just in 2009, New Jersey’s local governments added 11,300 new municipal and school employees. How is it possible that those paying taxes to fund the government are being laid off while government employees are growing in number?
Rooney: Democrats excel at buying votes with tax dollars. They accumulate power by making as many people as possible dependent on the government for a paycheck. Sadly, this institutional corruption is nothing unique to my home state.
In New Jersey specifically, the public sector unions grew so powerful over the past ten years that legislators dared not attempt cost-saving layoffs or benefits reforms. Politicians betrayed taxpayers for union votes and campaign cash. Patronage jobs multiplied at a pace that required the taxes necessary to produce them to increase to a level that resulted in the elimination of revenue-producing private sector positions.
It’s not hard to see why New Jersey’s excessive government overhead is a real job killer. The only mystery is why voters put up with it until 2009 without so much as a whimper!
FPM: Democrats have claimed that Christie’s call for shared sacrifice in tough economic times is belied by his decision not to renew the so-called “millionaire tax surcharge” that applies to state residents making over $400, 000 a year. They insist that the rich are not paying their fare share in taxes and they need to be taxed more. You’ve argued that would be bad for the state and that the taxes on high income earners are one of the main reasons that the state now finds itself in such dire economic straits. Can you explain your reasoning?
Rooney: A recent Boston College study found that New Jersey lost $70 billion in revenue over just a four-year period between 2004 and 2008. $70 billion doesn’t simply disappear! Affluent New Jerseyans left the state and took it with them.
In the midst of waging class warfare to divide and conquer the electorate, Democrats strategically neglect to mention that “the rich” have been shouldering most of New Jersey’s tax burden for decades. Now our State’s biggest taxpayers have finally had enough and are moving their families and businesses to states like Pennsylvania and North Carolina in pursuit of lower tax rates. And who could blame them? Imagine you worked hard all your life to develop a successful pizzeria. You can probably afford to move, and if you’re trying to protect your life’s savings, then voting with your feet is definitely cheaper than voting at the ballot box.
A much healthier governing approach would be to recognize that we’re all connected in a free market economy. By overtaxing some of our State’s most successful citizens to pay for big government’s excesses, Trenton politicians have succeeded only in robbing our State’s most economically-vulnerable residents of the quality jobs they need to prosper. The poor get poorer, the rich leave town and, proving that irony can be cruel, the state no longer possesses sufficient revenue to provide a safety net for the unemployed who lost jobs when the wealth-creators fled!
FPM: Both parties have to some extent been complicit in the state’s fiscal mess. For instance, Gov. Christie has criticized Republicans for approving an increase in pensions for public unions without having a way to pay for it. Given that history, what are the chances that Christie’s tough-medicine budget will pass the state legislature in anything like its proposed form?
Rooney: The Governor’s worst enemy and greatest ally is necessity. Last Monday, New Jersey’s overwhelmingly Democrat Legislature passed sweeping public employee pension reforms. Trust me – these Trenton liberals didn’t wake up one morning and experience a mass ideological conversion! Nor did they arbitrarily elect to infuriate their union backers: Far from it.
Dire circumstances and public opinion have Democrats over a barrel. Few politicians seriously dispute the magnitude of the Garden State’s financial turmoil. With this crisis in mind, voters elected Chris Christie to change the way Trenton does business, and poll after poll demonstrates that residents believe dramatic spending cuts and pension reforms are important parts of the change they desire.
Will Chris Christie get everything he wants from the budget process? Absolutely not. He’s outnumbered by Democrat majorities in both chambers. But, the voters are watching and our state’s balanced budget amendment – and the Governor’s promise to veto any tax increase schemes from the floor – conspire to guarantee significant government downsizing in the new fiscal year whether or not the Democrats want it.
FPM: The New York Times last weekend ran an interesting piece suggesting that many on the Left who publically oppose Gov. Christie’s spending cuts privately support them. How widespread do you think that phenomenon is and what does it say about the management of state finances that even some Democrats have become closet fiscal conservatives?
Rooney: The uncomfortable truth is that many Democrats do know better! But then why do Dems continue to perpetuate lies if they don’t really believe them?
The answer is complicated. I’m not a psychologist, but it’s common knowledge how hard it is to stop telling a lie when you’ve been clinging to it for a long period of time. Ask Bill Clinton! I also believe, on some level, that owning up to the fact that you’ve been terribly wrong about something big is an emotionally challenging feat. Many people would rather continue to live a lie than admit complicity in a sin. It’s the comfortable alternative.
But more than anything, we have to accept that liberal economics is first and foremost a system designed to control people, their choices, and their property. “Big government” isn’t about “helping people;” the real goal is to concentrate power in the hands of a relatively small cabal of people motivated by greed or the delusion that they somehow know how to organize the universe better than God or any of His individual creations – us, the taxpayers.
Liberalism is arrogance, and the unseemly process of moral rationalization is the mechanism arrogant men utilize to justify their lies. Of course, no one would mind if liberal arrogance didn’t impoverish the rest of us!
FPM: Matt Rooney, thank you for joining us.