More Shared Sacrifice Is In The Cards

A Connecticut paper that has never met a tax increase in did not approve breaks the news gently. So gimmicky is Governor Dannel Malloy’s budget that it puts the editorial board in mind of Mr. Malloy’s predecessor, former Governor Jodi Rell, whose budgets – all of them passed by the Democratic dominated General Assembly – relied heavily on such gimmicks as moving red ink into future budgets, excessive borrowing to balance ordinary expenditures, and other sleights of hand that, Mr. Malloy said in his first campaign for governor, were exceedingly dishonest.

This year, the paper chides, “Now, pushed into a corner by a lag in tax revenues, Mr. Malloy and the majority Democrats in the General Assembly are using gimmicks of their own in passing what they say is a balanced budget for the fiscal year that begins July .”

The post-election year will open with a bang of a deficit -- $1.3 billion or more. That is the amount Mr. Malloy and the Democratic dominated General Assembly must wring out of the first year of Connecticut’s biennial budget if Mr. Malloy hopes to keep his “no new taxes” pledge, or …

Or what?

There are only two ways to discharge a deficit, if one abjures the usual gimmicks used in the past to balance Connecticut’s books: Either you raise taxes, or you cut spending.

For purposes of re-election, Mr. Malloy has several times insisted he would not balance the books through tax increases. Funny how all politicians turn into former President George H. W. Bush – “Read my lips. No new taxes” – when the middle class, heavily burdened with the largest broad based tax increase in Connecticut’s history, is about to march to the polls.

Mr. Malloy already has played his “shared sacrifice” card. To be sure, the shared sacrifice of unionized state workers was not quite as burdensome to unions as was Mr. Malloy’s “shared sacrifice” tax increases to taxpayers, which is why, come to think of it, former state Senator Edith Prague chastised union leaders for balking at the deal -- a very good one for unionized state employees -- Mr. Malloy held out to SEBAC during negotiations prior to the signing of his first budget. Mrs. Prague said at the time that union leaders would be nuts not to have accepted Mr. Malloy’s best offer, which included salary increases of three percent nine years out. After some knuckle biting, the unions supinely accepted Mr. Malloy offer. They would have been nuts to reject it.

The tax increase card already having been overplayed, Mr. Malloy was under pressure this time around to promise, several times, that he was done increasing taxes. He had strained himself boosting taxes on nail salon owners during his first year in office. Taxpayers had sacrificed enough. This leaves Mr. Malloy with only one card remaining in his hand – multi-billion dollar spending for each of the next two years. Projected deficit figures are brought to us by the same Malloyalists who had recently calculated a surplus of half a billion dollars, a figure quickly whittled down by reality to a little over fifty million.

Recent polls do not indicate a sunny re-election effort by Mr. Malloy. A Quinnipiac poll conducted between February and March found 29 percent of voters approving Mr. Malloy’s handling of taxes while 63 percent disapproved. On his handling of the economy and jobs, 33 percent approved while 60 percent disapproved, while on his handling of the budget, 37 percent approved while 53 percent disapproved.

A week before the Republican nominating convention, Mr. Malloy unfurled his “no new taxes pledge” once again: "I do not believe we will do anything but cut taxes for the foreseeable future."

The “foreseeable future” will pass by Connecticut ears like a shot.  If there is in Connecticut one editorial writer, one political commentator, one union leader or one much plucked taxpayer who sincerely believes that Mr. Malloy will wring out of the hides of state workers the entire future multi-billion dollar state deficits, that person, now carefully concealed behind then flower pot, has yet to show his head. Nearly everyone in the state who thinks seriously about budget deficits “gets” the gubernatorial wink: “No new taxes” -- until the big spenders have all been re-elected.

The rational for raising new taxes in the foreseeable future will be what it has ever been: Despite years of throwing tax dollars in their direction, the poor are poorer. And besides, Connecticut’s huge and ungovernable dispensary of tax dollars cannot afford to lift the debt burden all by its lonesome self.

Those who have not already left the state for greener pastures elsewhere would be wise to hit the bunkers and prepare for SHARED SACRIFICE II.

Connecticut s Fiscal Cliff

Newly re-elected U.S. Representative Jim Himes, a moderate Democrat operating out of Connecticut’s 4^th District, has said concerning the nation’s so called fiscal cliff, “Washington understands how severe the consequences of the fiscal cliff are. When I saw House Speaker (John) Boehner speak two days ago, I thought he was conciliatory and traced the outlines of a deal."

Of course, the perceived severity of fiscal cliffs depends to some extent on one’s political vulnerability. Not all severity is created equal, and Democrats ensconced in Connecticut’s safe districts, such as U.S. Representatives John Larson and Rosa DeLauro, are apt to confront the fiscal cliff with less trepidation than Mr. Himes.

A recent study conducted by the Defense Technology Initiative should serve the members of Connecticut’s all Democratic Congressional delegation as a splash of cold water in the face. The study presents a sobering picture of Connecticut’s own fiscal cliff that should give vertigo to all freethinking and rational politicians in the state.

We learn that the amount of defense contracting in Connecticut has increased by 51 percent since 2003. The state’s defense contracting represents 5.1 percent of its economic output, not a negligible figure.

Should a lack of agreement between President Barack Obama, Democrats who control the U.S. Senate and Republicans who control the U.S. House trigger the automatic cuts implanted in the Budget Control Act of 2011, the effect on Connecticut would be severe, resulting in a loss of 36,000 to 50,000 jobs at a time when Connecticut is losing jobs to other states that are more business friendly.

The state treasury, presently more than $300 million in arrears according to a story in CTMirror or $690 million to $1 billion for each of the next two years according to a Bristol Today story, would also be hard hit as the state tumbles off the national fiscal cliff, since the defense industry contributes about $860 million towards Governor Dannel Malloy’s yet unbalanced budget. No one seems to know whether Malloy’s budget has EVER been in balance. According to Comptroller Kevin Lembo’s most recent report, the state has recovered only “31,400 (just over one quarter) of the 117,500 total nonfarm jobs lost in the March 2008 - February 2010 recessionary downturn.”Of the funds received by Connecticut from the federal government and parceled out to contractors, approximately $9.5 billion is spent on customary defense products: Virginia Class submarines, Black Hawk Helicopters, jet engines, turbines, other military components and the like. The spin-off economic activity generated by the contracts is even larger, about $22.4 billion, which affects about 101,000 jobs, according to the Defense Technology Initiative report.

Of the funds received by Connecticut from the federal government and parceled out to contractors, approximately $9.5 billion is spent on customary defense products: Virginia Class submarines, Black Hawk Helicopters, jet engines, turbines, other military components and the like. The spin-off economic activity generated by the contracts is even larger, about $22.4 billion, which affects about 101,000 jobs, according to the Defense Technology Initiative report.

Of course, the depth of the national “fiscal cliff” may be reduced if the president, the Democratic controlled U.S. Senate and the Republican controlled U.S. House are able to reach a satisfactory compromise on the self-elapsing Bush era tax cuts, otherwise known as tax increases.

But even assuming an end to the game of chicken, there must be defense cuts. Obama– who won the election -- needs the defense cuts to apply as a continuing payment on the Democrat’s new and expensive social programs, primarily Obamacare. And Connecticut’s all Democratic congressional delegation, having pledged its troth to Obama’s vision of the future in recently concluded state campaigns, is hardly in a position to offer at the alter a strenuous opposition to either Obama’s proposed defense cuts or increased taxes on quarter-millionaires or the increases in spending that will be plugged into a future Obama budget – presuming the president surprises everyone and offers a passable budget in his second term.

Unfortunately, Connecticut’s congressional delegation may not be ideally positioned to rescue the state from severe defense cuts. Its two U.S. Senators are relatively new arrivals and do not have enough political chits in the game – unlike departed U.S. Senator Chris Dodd and the departing U.S. Senator Joe Lieberman – to affect spending priorities in their state’s favor; and Connecticut’s House members will be joining an assembly controlled by Republicans averse to a crippling regulatory environment and increased business taxes that may, they predict, lead to a double dip recession and adversely impact an agonizingly slow recovery.

All of which leaves Connecticut in limbo, not to be confused with Lembo, who appears to be able to forecast deficits much more ably than the Malloyalists surrounding the governor, or indeed the governor himself – who recently promised no fewer than three times in one media availability that there will be no new tax increases in the coming budget – a dubious cry that recalls George H. W. Bush’s no new tax pledge and former Governor and Spendthrift Lowell “The Maverick” Weicker’s prophetic insistence that a state income tax would incinerate to Connecticut’s economic infrastructure .