The Shrinking New Jersey

Real gross domestic product (GDP) increased in 43 states and the District of Columbia in 2011, according to new statistics released yesterday by the U.S. Bureau of Economic Analysis (BEA). New Jersey moved in the opposite direction.

New Jersey was among the few states which actually experienced a GDP contraction: -0.5% and that explains why government revenue is also down. New Jersey’s unemployment rate was 9.1 percent in April, a full percentage point above the national rate.

New Jersey is now the 47th state out of 50, measuring from best to worst, in economic performance. Only Wyoming, Mississippi, and Alabama are worse off. We are the brakes on the national economic recovery.

Governor Christie will go on pushing his fiscally unsustainable tax cut which will have no economic effect because a single such measure does not stimulate aggregate demand – the missing link in our economy.

But blaming the policies of Governor Christie alone for the economic decline is a gross simplification of the facts. Unfortunately, almost everyone, including the media, prefer simplifications. Candidate A vs Candidate B; or Raise Taxes vs Cut Taxes. That is why single issues become so disproportionally influential in elections: Abortion, Guns, Gay Marriage, etc .

The reality is that in New Jersey, regardless of what candidate we elect, the roots of the problems are in the political system. And attacking the system is not safe. I have already been harassed for what I am doing and this is just the beginning. We are not even in our election year yet.

A candidate fails New Jersey the moment he/she shuns to even attempt to revamp that system. I mean really doing change; not just propaganda and token tinkering.

What is the political system? The two dominant political bureaucracies, Home Rule, political patronage, political money, the tax code, the laws that skew the political contest in favor of the two parasitic parties, and more.

But it is much easier to focus on one face than on a myriad of political and economic reforms.

As I have said many times: It is not so much what Governor Christie has done. It is what he has not done. His sin is for the most part in omission.

If elected governor, my administration will be made up of technocrats. The mission will be to put New Jersey on a path of economic growth and social balance. Nothing will be untouchable.

In a presidential election year, a gubernatorial candidate for the year after is a lone wolf. However if we look at the two presidential candidates, Obama and Romney, there are differences in positions but when we come to the actual actions, they do not look as distinct. Obama appears as the lesser of two evils. Telling of our political drought is the fact that many people vote for one candidate just to keep the other one out of office.

New Jersey shall have a more diverse menu in November 2013.


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 |

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.

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.

Christie Vetoes Health Insurance Exchange

Governor Christie caved in to ideology and is pandering to Romney to get the VP spot in the republican national ticket. In fact, New Jersey should have the healthcare Exchange, with a good public option in it, even if ACA is overturned by the U.S. Supreme Court. A conditional veto, sending the bill back to the legislature with modifications was in order.

Yet, the democratic bill has defects. That is why I suggest the conditional veto with modifications as the best avenue to follow: Why a paid board as the democrat- tailored bill proposes? That is another nest for patronage jobs. Then, if the state becomes the arbiter deciding what private plans are admitted in the exchange, lawsuits will fly. Lawsuits are costly.

Christie has used the excuses the democrats gave him to torpedo a good idea. That is how the two parties play with New Jersey.

But one of the objections of Christie is senseless: The Exchange and the Medicare-like expansion have no relation other than both being part of ACA. We have the choice of having one without the other – or adopting both – if ACA is overturned.

Furthermore, the Exchange has nothing to do with ACA’s mandate to buy insurance – the main point of contention in the USSC. I myself am not comfortable with such mandate. But I repeat, the Exchange has no impact on the mandate issue nor the mandate has an effect on the usefulness of the Exchange.

The virtual Exchange I foresee is just a website where all the private plans and policies available are included, together with a cost-neutral public option, and all are compared objectively according to cost, value, and any other applicable parameters. The existence of the Exchange would  make the selection of health coverage easier for individuals and businesses alike.

That is the type of Exchange I envision: A virtual market for health services for New Jersey in the XXI Century without a bureaucracy behind it.

Read Governor Christie’s veto message

Is Governor Christie a Leader or a Pusher?

He is certainly a consummate divider. Do we want 4 more years, after November 2013, of this mismanagement of the state? Or do we want the democratic opposition, which have been accomplices if not the protagonists in the undoing of the fiscal health and economy of New Jersey?

The tentacles of both parties are suffocating New Jersey.

New Jersey is still stuck in the 43-46 position in the national unemployment roster, tied with Florida, Georgia, and Mississippi. Christie is indeed pushing the state backwards.

Unemployment: Where does your state rank? – CNNMoney.

We have the highest property taxes in the nation. We can not have growth without significant reforms in our tax and political systems.

Taxation in New Jersey

We do not have a budget for FY 2012 yet (which runs from July 2012 through June 2013.) For FY 2012, governor Christie has proposed a higher budget of about $32 billion and also a 10% income tax cut. He expects that the New Jersey economy will grow as much as China’s. That is above 7%.

The budget which was approved by the Legislature for FY 2011 was about $29 billion and you can see the sources of that revenue and how it was spent in the pies below. The bottom-right pie shows legislature and Judiciary together but the Legislature takes about 2/3 of that amount – that is about $500 million. The Governor’s office consumes a bit below $ 100 million but that I know from a different source and it is not specified here.

I find both Legislature and Governor Office expenditures exorbitant.

If we add to that about $25 billion in property taxes we arrive at the sub-total amount of $55 billion that we New Jersey residents pay in taxes. About 10% of that goes to the counties. But we are not done yet.

Senator Sweeney has just introduced a bill which would include user fees charged by municipalities under the 2% property tax cap which became law last year. The bill is an attention seeker. Why? Because what municipalities will do is to drop those services which are most needed and residents will have to pay directly to the service providers – garbage collection for instance: Either people will have to hire their own private garbage collectors at higher cost and/or there will be more illegal garbage dumping everywhere.  Sweeney may be planning  to run for some higher office.

The total amount of user fees that New Jersey residents pay is near $10 billion per year. Therefore, the total amount of money that we all are forced to give the many governments of New Jersey is the eye-popping figure of almost $65 billion  yearly.

Bottom line: Government – or rather the political class benefiting from it – is financially suffocating the economy and people of New Jersey.

That is what I intend to correct if elected governor in 2013.

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.

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 |

“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.