Welcome to 1991. Is It The Revolution Yet?

 

In 1991, then Governor Lowell Weicker was facing a stubborn billion dollar deficit that had been left on his doorstep by retiring Democratic Governor William O’Neill, an opponent of a state income tax that had first been publically proposed by Bill Cibes in a Democratic Party primary.

Running for the Democratic Party nod against Bruce Morrison, Mr. Cibes argued that the deficit and Connecticut’s parlous economic climate made it impossible for the state to raise the sales tax, then among the highest in the nation, or business taxes. An income tax was inevitable. ''The public,” Mr. Morrison retorted, “should beware of people who want to increase their taxes and call it reform.”

Mr. Cibes lost the primary – no surprise, really, since most Democrats from time immemorial had been income tax averse – and Mr. Weicker won 40 percent of the vote on Election Day, defeating both Republican John Rowland, who hauled in 37 percent of the vote, and Mr. Morrison. Although Mr. Weicker lost Fairfield and New Haven counties, he received strong support from the Hartford metro area after having been robustly endorsed by the Hartford Courant and state employee labor unions, according to an account in the New York Times.

Following his ascension to the governor’s office, Mr. Weicker brought Mr. Cibes on board as his Office of Policy Management (OPM) chief. Mr. Cibes then laid before the new governor the budgetary bad news, which instantly converted Mr. Weicker from an anti to a pro income tax fundamentalist  Elmer Gantry. On the way to instituting an income tax, Mr. Weicker had to step over an imposing hypocrisy bar, having insisted, along with all the other candidates running for governor that year save Mr. Cibes, that instituting an income tax, given the state’s dour economic condition, would be “like pouring gas in a fire.”

Shortly after the income tax bill passed into law, more than 40,000 protestors appeared at the state capitol demanding the tax be axed. The General Assembly obliged by passing a measure repealing the tax, which was vetoed by Mr. Weicker. The veto override fell one vote short of passing, and the income tax became a permanent feature of Connecticut life. To make the tax palatable to dubious legislators, a constitutional spending cap was attached to the final bill. In a dubious arrangement with the tribes, Weicker persuaded the Indians to surrender a portion of their slot earnings in return for a monopoly on gambling in the state, a protection racket reminiscent of Al Capone’s Chicago minus the machine guns.

Fast forward to Governor Dannel Malloy’s first term. Other governors have danced agilely around Connecticut’s inconvenient Constitutional spending cap. The constitutional spending cap specifies:

“The general assembly shall not authorize an increase in general budget expenditures for any fiscal year above the amount of general budget expenditures authorized for the previous fiscal year by a percentage which exceeds the greater of the percentage increase in personal income or the percentage increase in inflation, unless the governor declares an emergency or the existence of extraordinary circumstances and at least three-fifths of the members of each house of the general assembly vote to exceed such limit for the purposes of such emergency or extraordinary circumstances.”

This spending stop sign has not prevented the state’s governmental apparatus from increasing spending threefold since it was instituted, although both inflation and personal income have remained flat during the same period. As a practical matter, largely because the General Assembly has yet to implement the constitutional law by providing necessary definitions, the constitutional cap is a spending compliant pussy cat. The Malloy administration and the Democratic dominated General Assembly this year breezed through the stop sign traveling at warp speed when both decided to remove $6 billion cap counted dollars from the strictures imposed by the state constitution.

The parallels between the Malloy and Weicker administrations are too obvious to ignore. Both governors raised taxes to discharge deficits; the Malloy tax increase is the largest in state history. The niggling little tax increases that the Weicker tax was supposed to ameliorate returned with a vengeance in Mr. Malloy’s first budget. Spending cuts in both administrations were doubtful and minimal. Mr. Weicker steered a course around Republicans and moderate Democrats to enact his tax increase, the second largest in state history. Mr. Malloy tossed Republicans from the room when he negotiated his budget, pre-approved by the General Assembly, with tax hungry unions. Mr. Weicker relied on state unions to get elected; Mr. Malloy relied on the same bunch to shape his budget. Both the Weicker and Malloy budgets were union friendly.

The Weicker recession that followed the imposition of his income tax lasted about 10 years. The Malloy recession, joined now to a national recession, will be more perdurable, even though the Malloyalists and progressives in the General Assembly remain giddily optimistic that Connecticut’s recovery will be swift and long lasting. The $6 billion the Malloy administration removed from the provisions of Connecticut’s constitutional cap should allow the Malloyalists to continue their improvident spending through the next elections. After that – who cares?

The Spending Sink Hole and the Fat Lady’s Song

Governor Dannel Malloy’s budget staff and the General Assembly’s non-partisan Office of Fiscal Analysis are now on the same budget gap page. All the green eyeshade folk have agreed in a consensus report that Connecticut has entered the sinkhole.

Only a few weeks ago during a special session of the General Assembly, Mr. Malloy and Republican legislative leaders came together – in the spirit of Sandy Hook, as one of them put it – to wrestle to the ground a budget deficit of nearly a half billion dollars.

This bi-partisan cooperation was unusual for Mr. Malloy and Democratic operatives in the state’s legislature. Shortly after being elected the first Democratic governor in more than 20 years, Mr. Malloy shooed Republicans out of the room and in cooperation with a General Assembly dominated by Democrats hammered out a budget suitable to the state’s unions. Republicans were understandably miffed at the cold shouldering, but not so put off as to refuse this year to co-operate with Mr. Malloy in a special session to liquidate – by means of an across the board spending cut – what Mr. Malloy was pleased to call a “budget shortfall,”pointedly NOT a budget deficit.

The gap between spending and revenue collection in Connecticut has hovered around 6 percent for some time. And so, to no one’s surprise, the billion dollar budget deficit is back and showing its fangs to a governor and the General Assembly that authored Mr. Malloy’s first budget, which included the largest tax increase in state history.

In a statement following the consensus report, Mr. Malloy’s budget guru, Office of Policy and Management Secretary Benjamin Barnes, wrote:

"The decline in revenue projections is not surprising. The economy and state government finances are extremely difficult to project in these unusual times, particularly given the significant shifts in income tax revenue that occur surrounding the dates of major tax changes. We will continue to closely monitor state revenues in order to maintain balance in the state budget this year and through the coming biennium."

That statement is, for the most part, green eye shade Gobbledygook. A continuing six percent gap between spending and revenue receipts, along with a plunging economy, makes budget projections effortless for anyone but eternally optimistic legislators who believe that there is no connection between increases in spending, necessitating commensurate increases in taxes, and stagnant economies.

After more than two decades of massive tax increases, beginning with former governor Lowell Weicker’s income tax and cresting with Mr. Malloy’s massive tax increase, the Democratic dominated General Assembly has at last hit a tax wall it can no longer ignore, though, Heaven knows, it has tried. The cow’s utters are empty; taxpayers have flat-lined; the cupboard is bare; ain’t nothing in there but a peanut butter stain and a cobweb.

Ordinarily, given such dire circumstances, politicians would begin to slash spending, and it is instructive to ask: Why are members of Connecticut’s General Assembly and the governor of the state of Connecticut so dense and deaf that they cannot hear the fat lady singing her dirge?

This is what the fat lady is singing: You cannot hope to stimulate the economy by removing from it in the form of higher taxes the entrepreneurial capital necessary for growth and dumping the capital you have acquired into special trickle down projects you approve of, such as busways and UConn Health Centers and grants for prosperous multi-billion dollar companies, ad infinitum. Bribing large companies through tax credits to remain in a high-tax, over-regulated state is particularly offensive to whatever members of Occupy Wall Street remain in Connecticut, because the monies lavished upon tax absorbent companies are taken from struggling 99 percenters who are trying desperately to balance their own shrinking budgets.

The governmental stimulus fraud is beginning to wear thin. If a political Elmer Gantry were to tell us that he has raised the net level of water in our pools by taking a bucket of water from the deep end and dumping it into the shallow end, we should immediately detect the fraud. But here comes Governor or President Elmer Gantry and the gang; and they want you to know that by taking a dollar from the private marketplace and dumping it into the public marketplace, they have increased the wealth of the state or nation, when in fact, clever sleight of hand artists, they only have moved the pea from one walnut to another.

Bottom line, sings the fat lady: Get out of the tax bribery-corporate welfare business, lower business taxes, lower energy costs by increasing the energy product, pare back ruinous regulations, shake yourself free of the preposterous notion that you can allocate scarce dollar resources better than Adam Smith’s invisible hand, and cut spending.

Do it now. We are fast approaching the "too late" mark.