The New Jersey Comeback? Gone With The Wind

Fiscal common sense and sound economic policy have both taken back seats to political demagoguery. The tax cuts – whichever shape they adopt – are a mortgage on the future on New Jersey. Our difficulties are complex and require complex solutions: That means deep structural reforms in both our tax code and in the government itself.

The governor placed a public relations bet and lost. The fact is that objective economic conditions do not follow propaganda. Bombastic announcements do not belong in the realm of economics and fiscal responsibility. New Jersey is trailing the entire Northeast of the nation – with the exception of Rhode island – in almost all economic indicators and notably more so in unemployment. I have the hope that the fiscal fortunes of New Jersey may improve during the Summer with the income and sales tax receipts from the glorious Jersey Shore.

Nonetheless, the economic forecast pushed by the governor is his pony shows also known as town-hall meetings was of 7.3% economic growth for New Jersey this coming fiscal year.

That surpasses the expected economic growth of China! In what planet is the governor living in? I am sure that Christie may have no difficulty fooling some of his most gullible and sheepish supporters, but that does not mean that the wacky figures will become a reality. In view of the world economy sluggishness, there is not even hope that New Jersey could be dragged ahead into prosperity by other economies.

We have to be really smart and reform-bold to move ahead of the pack all on our own.That is what my economic program is all about: Breaking the mold; away with both Keynes and Friedman. We will borrow bits and pieces from all and put it together in a program tailored for New Jersey 2014.

Friedman, in particular, did probably more harm to the United States than the entire North Vietnamese army in a 9 year war.

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Christie Prepares to Second-Mortgage New Jersey

Christie faces hurdles over state budget plan : page all – NorthJersey.com.

That is what the proposed tax cut is: A mortgage, or rather another mortgage on New Jersey’s future, to be paid by this generation a few years down the road, or the next generation who are barely reaching the voting age now and still can not even buy a beer legally in the state.

Of course there are other mortgages on New Jersey: The Whitman Tax Cut bonds mentioned in the article above, other State bond issues, the underfunded Public Pension System, the unfathomable debt incurred by counties, municipal governments and independent authorities. The State of New Jersey has failed to fill the coffers of the Unemployment Insurance Fund, the Transportation Fund, and lacks any significant liquidity to spur economic growth. New Jersey, as its political structure exists today, lacks any capacity to maneuver fiscally: To clothe A, it must strip B.

It is economic growth that should be the center piece of any fiscal or tax measure. Considering the composition and structure of the economy of New Jersey, the first principal goal should be to raise aggregate demand. To increase aggregate demand, the fiscal or tax measure must be directed, primarily, to significantly benefit the lower and middle classes. That is simply because they are the majority of consumers.  The tax cut, as proposed by the governor, fails to do so. So does the democratic counter-proposal of applying an equivalent amount of money toward property tax relief. In the end, what ails both plans is their common point: They are too small. That is to say, too small to have any significant impact on the economy but they still create a hole in the budget.

Obviously Christie is covering all the political bases so he can further his political career. If President Obama is reelected in November 2012, it is very likely that Chris Christie will be among the republican contenders for the White House in 2016. However, if either Romney (the money) or Paul (the ideas) – the only two republicans that have a chance to beat Obama – is elected in November, it is rather unlikely that Christie will challenge a fellow republican in the 2016 primary. In that case, Christie will most likely run for re-election in New Jersey, 2013.

I do not expect that Romney will select Christie as VP. A republican presidential ticket formed by two moderate conservatives from the Northeast may not gather the necessary support from conservatives from the South and Midwest to have any hope of victory in November.

That is why the proposed tax cut. Christie is trying to butter up his base of donors/voters to keep all his options open. It is the typical move of a career politician. Christie may not be very competent at governance but he certainly is competent as a politician.

There is always the possibility that the growing economies of the states which surround us may rub some of their growth on New Jersey and our tax revenue may increase somewhat. Perhaps our higher than average unemployment rate declines as well. But until there is a certainty that those things are occurring, the governor should postpone any proposal for tax cuts which from an economic point of view are useless. I do hope that such a prudent retreat from the reckless proposal of the State of the State address is what we will hear from the governor on February 21.