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.

Of Capitalism I Sing

The driving force behind Western styled capitalism, “the force that through the green fuse drives the flower,” says George Gilder, the Walt Whitman of Capitalism, is – hang onto your hats here – altruism. Or, to put it in terms that might best arouse the fierce antagonism of socialists, progressives and “Occupy Wall Street” san culottes, the primary notes of capitalism are: methodological experimentation, creativity and a concern for others – not greed.

The very notion that altruism, a meeting of the wants and needs of others, rather than greed is the spark that sets the entrepreneurial spirit aflame is anathema to the ardent followers of Ayn Rand, the author of“Atlas Shrugged,” apart from the Bible one of the bestselling novels -- or, as some would insist, polemical tracts -- of all times.

Crony Capitalist Democrats

It began as a “First Five” program and then, as happens with the usual governmental fix, quickly expanded, while retaining in its name the modest number “Five.”

The day after Democratic voters in Connecticut went to the primary polls and chose Elizabeth Esty over Chris Dovovan in the 5^th District campaign for the U.S. Senate, Mr. Donovan having caught his foot in an FBI snare, Governor Dannel Malloy announced he had given to Bridgewater, the world’s largest hedge fund, a $25 million ten-year forgivable loan at 1 percent, a $5 million job training grant, a grant up to $5 million for the building's alternative energy systems and up to $80 million in urban and industrial reinvestment tax credits.

Bridgewater is the eighth recipient of state largess in Mr. Malloy’s “Next Five” program; the name of the program, open ended to any business chosen by the governor as a fitting recipient of taxpayer dollars, has been changed to comport with reality, the “Next” suggesting that there will be no terminus beyond “Five.” It does not take long for new governors to become conversant in Orwellian Newspeak.

The reality is: The state of Connecticut is now in the corporate bribing business.

The seven companies that so far have joined the former “First Five” program are: Cigna in Bloomfield, ESPN in Bristol, NBC Sports in Stamford, Alexion Pharmaceuticals in New Haven, CareCentrix in Hartford, Sustainable Building Solutions in North Haven and, most recently, Deloitte in Stamford.

As befits the largest hedge fund in the world, the CEO of Bridgewater, founder and chief investment officer Ray Dalio, is the highest paid hedge fund manager in the world at $3.9 billion per annum. Mr. Dalio will be moving his company from Westport, Connecticut to Stamford, Connecticut. “First Five” originally was intended to lure out of state businesses into Connecticut.

If Occupy Wall Street were still in business, tents would be sprouting somewhere near Stamford's Harbor Point development where, according to co-CEO of Bridgewater Greg Jensen, the company intends to construct a 750,000-square-foot of space in two buildings on a forested campus. Mr. Jensen’s yearly salary was not mentioned in news reports touting Mr. Malloy’s big catch, but it’s probably up there in the stratosphere of other one percenters who’s fannies have been spanked by Occupiers and their sympathizers in Connecticut’s General Assembly, Speaker of the House Chris Donovan among them. Mr. Donovan’s jihad against under taxed hedge fund operators is legendary.

The Occupiers might have had a sympathetic U.S. Representative in Mr. Dovovan had the FBI not rooted up some corruption truffles in his campaign. Last Tuesday Mr. Donovan was womped by Elizabeth Esty, wife of Mr. Malloy’s Commissioner of the Department of Energy and Environmental Protection (DEEP) Daniel Esty. Mrs. Esty is believed to be a moderate Democrat. She will be facing moderate Republican State Senator Andrew Roraback in the general election.

The original progressives, like their modern counterparts, looked upon big business with a baleful eye; Teddy Roosevelt played a prominent role in the election of 1912 by vowing to break up the Big Trusts whose path to power in the economy ran through Washington D.C. and state houses.

Oddly, in the modern period, trust busters tend to be conservative Republicans, who are convinced that too-large-to-fail businesses should not be artificially propped up by Washington and state house crony capitalists. In the progress of progressivism from 1912 to 2012, the impulse to level the economic playing field by removing governmental preferments showered upon large businesses by incumbent politicians thirsty for campaign contributions gravitated from progressive Democrats to anti-crony capitalist conservatives.

The architecture of Mr. Malloy’s “Next Five” program virtually assures that capital investment cash provided by taxpayers will flow to mega-businesses such as Bridgewater, thus giving too-large-to-fail corporations a leg up over their smaller competitors, who are left to struggle in the usual Darwinian economic universe that rewards free enterprisers who have earned their own success without battening on the teat of Trust enablers.

Here is a difference between the two parties that Roraback the Moderate Republican might well stress in his campaign against Mrs. Esty, doomed by her association with the Malloy administration to support the transference of tax dollars from Social Security recipients to Mr. Dalio’s gold lined pockets.

The best, most efficient and least corrupt way to spur business activity in Connecticut is to reduce business taxes – for all businesses, not for those relatively prosperous select few whose tin cups are filled by phony progressive crony capitalist governors. Now that Mr. Donovan has been sidelined by an FBI sucker punch, real 1912 progressives in the state could use an honest political broker.