Nearly 25% of N.J. Residents Lived in Poverty in 2010

This report is more realistic than the federal standard for measuring poverty – which I believe is outright ridiculous no matter where you live in the U.S. – N.J. defines being poor as making less than $36,620 for a family of three — twice the federal poverty rate. New Jersey has a higher cost of living than most other states particularly because our exorbitant property taxes, which also reflect on rental costs.

Nearly a quarter of N.J. residents lived in poverty in 2010, study shows | NJ.com.

There are a number of factors which have contributed to this imbalance in one of the richest states in the nation. But all the factors, fundamentally, find their roots in the complicity of the two dominant political parties in holding wages stagnant and fleecing the public. In other words: A lot of people, even those not comprised in the low 25%, are making too little money and paying too much to the political octopus that rules New Jersey.

Note that the 2000 or so government entities of New Jersey devour more than 10% of the state GDP of about $650 billion. And we do not even have defense expending!

This reality has had two major consequences after two decades or so:

1. A lot of people borrowed beyond their means to maintain the illusion of prosperity.

2. Disposable income plummeted and with it went aggregate demand, thus pushing the economy into an endless period of anemic performance.

Since government – and all its local subdivisions –  also borrowed left and right, New Jersey has entered a period when the high degree of leverage has the effect of quasi paralyzing both the public and private sectors. There are budgetary problems and people are taxed out. Even if millionaires are taxed, as the democrats call for, that additional revenue would amount to considerably less than $1 billion.

The millionaire surtax has become more like a political football to keep the masses distracted and pretend that there is a major difference between the two dominant political parties. It is theatre.

The democrat-proposed increase in the minimum wage – possibly to blunt my message because I am the first who has mentioned minimum wage in the last decade – would be the first in I-don’t-know-how-many-years and it is clearly insufficient to have any economic impact.

Both parties have proposed tax reductions: Christie his ubiquitous income tax across-the-board cut, which of course favors his political base, and the democrats their property tax cut. Both plans are better than nothing; the democrat plan slightly better. But the grand problem is that the state is not in a sound enough fiscal position to – responsibly – adopt either plan.

If a tax cut – any of them – is implemented, it will amount to a tax deferment rather than a tax cut. When such tax becomes due, 10, 20 years from now, it will also come with accrued interest so we will end paying more for this meaningless relief today.

While both political parties endeavor in buttering up the voters in back-to-back election years, I am presenting  – in this website – my program of reforms, which I believe are the minimum essential to save New Jersey.

Citizens of New Jersey beware: Our problems are complex. Any politician that presents a simple solution to a complex problem is eminently dishonest.

Advertisements

Did Christie’s “New Jersey Comeback” Ever Occur – Outside of His Mind?

New Jersey lost 11600 private sector jobs and added 3000 public positions in March. That is the opposite of the image Christie has been bragging about ad nauseam at every town-hall meeting and radio show since January this year. The March figures, even though reflecting a single month, are egg on his face.

Loss of 8,600 NJ jobs clouds economic picture : page all – NorthJersey.com.

Christie’s office referred questions on the job figures to New Jersey’s top economist at the Treasury Department, Charles Steindel, who admitted that there is a definite correlation between between employment and revenue. He did not say it but there are other correlations – sometimes I wonder if they understand them – such as that of employment and economic growth and with aggregate demand. Some are functions of the others.

Steindel said it is a long term relationship, and one month of bad job figures is not enough to redraw the state’s budgeting plan. Again, I must add, one month of good figures is no reason to open the champagne either.

“Data is volatile from month to month, it jumps up and down,” Steindel went on. “I think it’s a little hard to pin too much on the fact that you had a month where things seemed to go in the opposite direction.”

Mr. Steindel is assuming that the natural direction is forward. But there is no natural direction. The economy will move according to a given set of conditions. Those conditions, in New Jersey, do not favor growth. Steindel’s sentence should be corrected and say that we really do not know where the state economy is heading and should include the word stagnation. 

Although an economic failure of the Christie administration would facilitate my election, I do wish the New Jersey economy to improve. The problem is that I do not see real basis for optimism on such an expansion: Not with the current tax and government structures in New Jersey.

The stubbornly high unemployment rate – remains at 9% – betrays the governor’s portrayal of the state under his stewardship as an example of how to rebound the economy.

Christie is a lawyer who has decided to micromanage both education and the economy in New Jersey: That is a recipe for disaster because he is not qualified to do either. But he is not alone. Democrats are not far behind. In fact, he could not do many of the things he is doing without the complicity of at least some of the democrats in the NJ Legislature.

The loss of jobs is always deplorable. Even more deplorable is the rigidity and selfishness of the two political parties which rather see the state decay that give up their power and perks. We are governed by leeches. Significant structural changes in government and the tax system are desperately needed.

My entire economic revival program rests on the premise of increasing aggregate demand in New Jersey. Demand generates supply and increasing supply creates both jobs and wealth.

New Jersey State Health Benefits Program VS. Private Brokers/Healthcare Managers

The New Jersey Comptroller Office provided the report (first below) supporting the premise that many government subdivisions – municipalities, and authorities – are wasting taxpayers money by having private brokers/managers choose their health insurance coverage rather that doing it through the New Jersey State Health Benefits Program (SHBP). The SHBP was established in 1961 to provide health insurance coverage to State employees, retirees and their dependents.

The report, issued late February by Comptroller Matthew Boxer, said four local government bodies collectively would have saved $12.5 million over a two-year period had they been a part of the state’s health benefit plan. That amounts to about $1,000 per enrollee, the report said. An accompanying press release said if those ratios were to hold true for all public workers who aren’t part of the state benefit plan, then more than $100 million would have been saved each year. Fourteen of the state’s 21 counties and 217 of its 566 municipalities were not a part of the state benefit plan as of April 2011, Boxer wrote.

The report also found, of the 4 local government units studied that the they are not procuring their insurance coverage and insurance brokers in accordance with requirements of the Local Public Contracts Law and the State’s “pay to play” law. The audits found several violations of these laws, including the award of a government contract to an insurance broker that had made campaign contributions that should have disqualified the broker from receiving such a contract.

http://www.nj.gov/comptroller/news/docs/shbp_audit_report.pdf

Pay to Play Law looks very good in the paper but lax enforcement can make it irrelevant. Like the bidding law: Either they are porous or they are ignored when nobody is looking. The study that found NJ to be one of the states with the least corruption because of its laws gave me a good laugh. It was published about 2 weeks ago: It was like saying that the Soviet Union was the freest nation in the world because of its constitution.

It did not take long before a critic of the comptroller’s report surfaced. He is the former commissioner of the Department of Banking and Insurance, Tom Considine, now chief operating officer of MagnaCare, a health benefits manager. That is the same line of work that the SHBP does at no cost and obviously that makes the opinion of Mr. Considine much less objective. He is after a piece of the action. In fact he does not hide his desire of getting more public clients. That places his company in direct competition with SHBP.

Ex-insurance commissioner questions claims that N.J. towns would save millions in state health benefit plan | NJ.com.

“We believe in and of itself that (the state benefit plan) is an incomplete solution,” said Tom Considine, now chief operating officer of MagnaCare, a health benefits manager. “Many municipalities fair far better at pursuing a cost-effective solution by going out to bid.”

The last sentence may be a stretch: It is very rarely (if it ever happens) that health insurance goes out to bid; I have never heard of it.

Rather, the contract is awarded to someone (usually a broker/manager such as MagnaCare) under the clause of “professional services” – a loophole of the bidding law. Typically the contract is given to an agent or firm who is already known to the municipality or subdivision of government

Other “professional services” not subject to competitive bidding include law firms, other types of insurance, engineering consulting firms, lobbyists, etc.

He goes on: “One steep hurdle local governments face in switching to the state health plan is getting approval for the move from local unions, a process that is oversimplified in the comptroller report, Considine said.”

In my personal experience, it was quite the contrary: In 1991 I was vice president of my union and convinced then president Elaine Berg to vigorously protest publicly – at the very gate of the Bergen County Utilities Authority on a night when the Commissioners met. The reason was that BCUA had announced it planned to leave New Hersey Health Benefits Plan (SHBP) for a private management company, Insurance Design Administrators, IDA, which was then either owned or partially owned by the the late N.J. Attorney General Gary Edwards, who was also a republican candidate for governor of N.J. but lost in the primary to James Courter who in turn lost to Jim Florio in 1989.

There was no open bid at all in the selection of IDA. I believe that SHBP was a cheaper option. Speculation at the time was that Mr. Edwards needed help to pay his election debts.

Then BCUA Executive Director, Larry McClure, cancelled the plan to abandon SHBP but only temporarily. The BCUA implemented the change sometime later, after I had left my union position. Elaine never felt at ease with those street actions – perhaps too third world for her – and that was one of the reasons why I resigned from the VP post a few months later.

I tend to think that Mr. Considine’s opinion in this issue is greatly influenced by the fact that he wants to expand his business in the public sector. SHBP would be a very powerful competitor with his company. His opinion here, I believe, is contaminated with self-interest.

This is just another issue where both republicans and democrats are guilty alike. Health costs take a good chunk of the government dollars. We better get it right. We can not afford being fleeced any longer.

Just for the record: I support SHBP. I believe the NJ Comptroller is right.

Disconnect between Wall Street and Main Street Hinders Recovery

Economy improves…incomes don’t – Economy.

I have written about this before and the only reason why I touch this topic so soon again is because the Dow reached 13000 the other day. The Dow and the other market indicators tend to give a somewhat distorted view of the American economy. That is in part because many firms traded are not American and even the stock of American firms may fluctuate due to gains overseas, political news, mergers, decline of competitors, etc. In other words, the gains (or loses) may have absolutely nothing to do with what is happening in the nation.

The lacking elements in this recovery are those which affect aggregate demand. Although there is a school of thought which maintains that supply generates demand, most empirical evidence points to the contrary. Excess in supply can actually lead to deflation and consequently to job erosion. Aggregate demand, as the sum of all demands for goods and services in the economy is tremendously influenced by consumer demand. The U.S. Department of Commerce estimates that 70% of the U.S. economy is internal consumption.

A large majority of American consumers depend primarily on wages to live. Long-term stagnation of real wages is possibly among the greatest threats to the U.S. economy, greater than a break-up of the European Union or a state of general war in the Middle East following a hypothetical attack on Iran.

Since the New Jersey economy is not growing by leaps and bounds, the demand for labor is tepid. We do not have huge gains in productivity which could lead to sizable wage increases, What we have is a lot of competition. We have all the other states around us with more or less similar conditions and in fact, in the competitive ladder, New Jersey is standing on the lowest rung, looking at the backside of New York. And then there is an entire world beyond the two oceans, trying to attract U.S. capital to their shores. Lately, they have been very successful.

Without wage increases, demand remains flat. With low demand, businesses lose traction.

I have a number of proposals to reverse that situation and they are outlined in the Pages of my blog. The tax cuts proposed by both parities have very limited impact on aggregate demand, primarily because they involve too little money spread over a very long period of time. Furthermore, there is no sufficient economic growth to sustain those cuts without leveraging the State even more. The consequence of the latter is that the bill for those tax cuts will come due with accrued interest in a number of years,. The current politicians are not the first ones using the same trick to seduce the voters. Seduction is the right term.

It is very easy to make a demagogic call like “lower taxes” or “tax the rich”. Their appeal is in their simplicity. But to claim that those are solutions is fraudulent. Those steps may be part of the solution; just a small part if at all. To turn New Jersey around there are no simple solutions. If there were we would not be in trouble in the first place.

To build up a fund from which a significant injection of liquidity goes into the pockets of consumers, we have to reduce size the government the right way: By eliminating  not the teachers, or firemen, or cops, or maintenance workers who perform a real service but the political bureaucracy which feeds voraciously from the system. The best way to do so is to eliminate entire layers of government; We simply have too many government subdivisions.

The second step is to reform our tax code rewarding those who invest in New Jersey. Those who chose to invest elsewhere may continue to do so but will not receive our gratitude at tax time. We must be supportive of the New Jersey employer by eliminating their tax liability. As we support the New Jersey employer, we must support the New Jersey employee as well; that is by means of minimum wage increase – not the miser $1.25 proposed in the N.J. Assembly but up to $15 with benefits or $18 without. Employee and consumer are two words referring to the same people.

The measures above intend to reconnect Wall Street with Main Street. Along these proposals, come the elimination of property taxes for most and the abolition of the sales tax.

Bankrupt City in R.I. Reduces Pensions Of Already Retired Police, Firefighters; Protects Bond-Holders

Pension Deal in Rhode Island Could Set a Trend – NYTimes.com.

A warning that nobody is untouchable and that we must carry out structural reforms here in New Jersey to methodically and comprehensively overcome our difficulties. And we can not solve our problems under the current two-party monopoly on power.

The Rhode Island case is a first and it could set a trend not only for police and firefighters but for all public retirees. The Rhode Island town in question gave preferential treatment to bond-holders over public retirees.

Private sector retirees have undergone these cuts for the last two decades as large corporations such as numerous airlines, Chrysler, GM, etc., filed for bankruptcy protection.

Washington Liquidating Private Sector Labor Unions Through the Back Door

Crippling the Right to Organize – NYTimes.com.

The National Labor Relations Board, NLRB,  was created by FDR in 1935 and is for the private sector what the Public Employment Relations Commission, PERC, is for public employees in New Jersey. The NLRB covers the entire nation and it is indispensable in arbitrating contract disputes, violation of labor laws by both employers and unions, organizing,  etc.

U.S. Supreme Court ruled last year that the NLRB can not function without a quorum.  As of January 2012 it will lack a quorum.

We are not eliminating labor unions by decree like fascists states did or putting puppets at the head of unions like the communists do. We are pulling the legal platform from under the unions. The  methods may be a bit more refined but the end-result is the same

As the writer notes, the republicans have the bulk of responsibility in this situation but then president Obama shares a great deal of that responsibility as well. In what I perceive as a Machiavellic move, he has proposed two very pro-union candidates for the board, most likely knowing full well that those nominations are going nowhere. So he can tell the unions he tried to place their friends in the board and at the same time renders the board inoperable by default – which is the ultimate goal of the other side. But of course, that is only if there is other side. Perhaps there is only one side.

The NLRB, like PERC, should be populated by civil service professionals, and not political appointments. Healthy labor relations are fundamental for the revival the this nation’s economy.

If the NLRB falls, and if elected governor of New Jersey in 2013, I will propose to the legislature to create a NJLRB or PERC doubling for both public and private sectors. We must never forget that the worker is also the consumer and that without consumer demand there is no economic growth.

New Jersey Governor Puts Up Show With Sick-Time Payouts Issue

Gov. Christie pushes to end payouts for public employees’ unused sick days | NJ.com.

Of course limiting sick-time payouts makes sense. The State of New Jersey already has a limit already agreed upon. I believe it is 2 weeks max. Setting limits on payouts has always been possible through contract negotiations, or if there is no union, by council (towns), commissioners (independent authorities), or freeholders (counties) resolution. Where there are no limits, it is often because the politicos benefit the most.

Now, from the view point of the sums of money involved, limiting political patronage is much more significant because a political hack will make every year much more than what the average  retiring worker will take in sick-time payout just once in-a-lifetime.

Why is the governor not addressing political patronage or nepotism?

Obviously, Christie would not touch the latter with a ten-foot pole because those are the perks of the political caste in power; he is part of it. I mean: Christie making a real effort to correct the eternal abuses in public employment in New Jersey at the expense of the taxpayers; it is not going to happen. The governor is very apt to put up a theatre show and take down a couple of fall-guys as he did in the Passaic Valley Sewage Authority. But he will not – ever- attempt to fix the system in a comprehensive manner.

To do so, Civil Service Law of New Jersey must be strengthened. Christie is proposing the opposite.

This is what occurs when there are political appointees in a government unit:

http://www.nj.com/jjournal-news/index.ssf/2011/12/jersey_city_administration_giv.html

You can bet the family farm that many or most of these positions are political patronage appointments.

I propose to strengthen Civil Service Law in New Jersey and also reforming the section of the statute that covers the sick time allowance. From my experience as union president, I do believe that leaving the current allowance of 15 days will lead to absenteeism if the payouts are ended. Sick time issues were always a pain during my tenure as union president, because it was a gray area.  Therefore the best approach, in my opinion, is to change to a system of occurrences which would be much lower that 15 but would also cover a serious illness event that could keep the employee off work until short term disability kicks in. Nonetheless, a fair system requires some more fine-tuning.

Once a system of occurrences is the law, there would be no payouts at all except for those current employees who have accumulated time already.