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.

http://www.bea.gov/newsreleases/regional/gdp_state/2012/pdf/gsp0612.pdf

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.

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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.

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.

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 Under Christie: Corporate Tax Breaks for Crumbs

Since taking office in 2010, governor Christie has approved $1.57 billion in state tax breaks for a number of New Jersey’s largest companies after they pledged to add jobs.  Although that amounts to more than 50% of what the State Treasury would take in corporate taxes in a single year, New Jersey has received little return for its effort.

Corporate taxes amount to approximately $2.8 billion in New Jersey. They represent less than 10% of the state budget. Christie has surrendered about 25% of that income annually.

My proposal of phasing out most if not all corporate taxes would be much more effective since it would have the advantage of being perennial. A tax credit, even though it is a significant drain to the state, is a one time deal. Furthermore, the tax credits given to specific companies do not entice any newcomers. When we offer a tax-free environment to companies that do not operate in New Jersey, the State of New Jersey does not lose a dime and has a lot to gain if they move in.

But it has to be universal. Of course, it is a fiscal impossibility to do away with corporate taxes without dismantling part of the asphyxiating government structure we live under. Neither Christie nor the democrats can not do the latter. I can. No one owns me.

On Friday, the U.S. Labor Department released the latest update on job growth and the unemployment rate. New hires plummeted to 120,000 but unemployment rate fell to 8.2%. In February, the U.S. economy had added 227,000 jobs.

New Jersey, however, remains anchored at 9.0% unemployment. As I have said innumerable times, the problem is the lack of aggregate demand.

Itemizing the New Jersey tax credits we find: Panasonic received $102.4 million in tax credits to move its headquarters nine miles within New Jersey. Goya Foods picked up $81.9 million in credits to build offices and a warehouse in Jersey City, two miles from its current complex. Prudential Insurance obtained $250.8 million to move a few blocks to a new tower in Newark.

New Jersey lost more than 260,000 jobs in the recession. But the tax credit initiatives as carried out in New Jersey represent an inept way of promoting economic growth. The administration only reacts when a corporation threatens to leave the state. There is no proactive economic policy. The companies only received the tax breaks after they threatened to move to New York or elsewhere. When the promised jobs have not materialized, the Christie administration has merely reduced, not withdrawn, the subsidies.

My program on the other hand, would link the elimination of corporate taxes not to any number of new jobs. Instead, a law with a new minimum wage would be enforced. That minimum wage would be $15/hour with benefits or $18/hr without health benefits. These increases would exert an upward force on all wages in New Jersey. Economic activity would rebound.

But: “Christie has taken this to a whole different level; it’s become a feeding trough,” said Deborah Howlett, executive director of New Jersey Policy Perspectives, a liberal policy organization. “It seems ridiculous to steal jobs from one city in the state and move them to another city a couple miles away. There just doesn’t seem to be any benefit to taxpayers.”

Christie has used a new program, the Urban Transit Hub Tax Credit Program (UTH) for the subsidies. The program, which is intended to encourage development around nine cities, offers tax credits equal to 100 percent of some capital investments.

“This is another success story about one of our largest businesses choosing to stay in New Jersey, continue to grow and invest in our state and people,” Christie said in October. “This project directly benefits New Jerseyans by keeping over 800 jobs here, creating up to 200 new, permanent positions, and spurring private investment.”

Under the program, the Christie administration has granted more than $900 million in state tax credits over the next 10 years to 15 companies, including Panasonic, Goya, Prudential and Campbell’s Soup. The companies have promised to add 2,364 jobs, or $380,711 in tax credits per job, over the next decade.

The state approved up to $250 million in tax credits last year for Prudential, Newark’s most important corporate citizen, to build a new office tower. The company acknowledged that the jobs were not “at risk” of leaving the state and that renewing its leases at three buildings in the nearby Gateway complex were the “low-cost options by a wide margin when compared to the cost of new construction.” The $250.8 million in tax credits, however, made the office tower project possible. In return, Prudential claimed it would create 400 new jobs, including 100 coming from outside New Jersey. The other new jobs were based on the company’s past growth patterns, which presumably would occur at either location.

That is $250.8 million for 100 jobs. I can not imagine a more dismal return.

Christie approved a $42 million tax break for Campbell’s Soup to renovate its longtime headquarters in Camden and add new jobs. Campbell’s then announced in June that it would eliminate 130 jobs in Camden. The administration responded by reducing the subsidy to $34.2 million and warning Campbell’s that it could not use the tax credits until it restored the work force to the level before the job cuts and added five jobs a year for a decade. This is the clumsy approach to fomenting economic growth. It sounds almost Medieval.

Adding to the list: The state provided $261.4 million in tax incentives for the Revel casino in Atlantic City, where the gambling industry’s revenues have fallen sharply. It also plans to give up to $650 million in public financing for a twice-failed entertainment and retail complex in the Meadowlands – the infamous Xanadu.

UTH, which has expanded companies’ chances of obtaining subsidies, is basically a good concept very poorly implemented: We want to redevelop our cities, steering corporate investment toward them, putting the existing mass transit services to optimal use. UTH is a bipartisan initiative that has been revised three times since 2008 to make it easier for companies to qualify. But it has to be molded to fit into the tax and economic reforms that I propose, which by the way, can make UTH truly productive. UTH is more or less in line with the New Jersey State Master Plan and Smart Growth. All these ideas are good but must be executed effectively:

The Christie administration is simply not capable enough. This is no way of competing.

But Caren S. Franzini, chief executive of the New Jersey Economic Development Authority (a political subdivision of the State of New Jersey that under my administration would probably be dismantled) said the tax incentives offered by Mr. Christie had been highly successful. “It’s very much worth it,” Ms. Franzini said. “We’re sharing with the companies a percentage of new revenues. But we’re always getting more than we give out. There will be jobs, but there will also be more tax ratables for those communities and more spinoffs.”

Bombast is never lacking in the Christie administration however substance is in short supply: New Jersey has recovered only 20 percent, or 51,500, of the 261,000 jobs lost during the recession, compared with 80 percent in New York City. Numbers speak louder than words.

Two quotes in this article appeared in the NYT. Economic data is from the NYT, CNN, and Bloomberg.

New Wave of Foreclosures/Auctions Could Drop Home Prices 10%

After more than a year of relative calm due to the review of lenders practices, the wheels of attrition in the hosing market are beginning to turn again. As many as 1.25 million of America’s abandoned or neglected homes are headed for sheriffs’ sales and auctions.

Home Prices Seen Dropping 10% in U.S. on Foreclosures: Mortgages – Bloomberg.

“Sales of repossessed properties probably will rise 25 percent this year from 1 million in 2011, according to Moody’s Analytics Inc. Prices for the homes could drop as much as 10 percent because they deteriorated as they were held in reserve during investigations by state officials resolved in February, according to RealtyTrac Inc.”

Even though New Jersey law allows municipal appraisers to disqualify these homes when it comes to a tax appeal, the flood of distressed sales has an effect on the market and on the value of all houses. Homeowners who are still holding on to their properties are the losers in this picture.

Simultaneously, lenders may begin to move faster to foreclose on delinquent homeowners. Since the delinquent homeowner is typically one who has little money, those houses have for the most part been neglected too. Occupants may resort to short-cuts or temporary repairs when problems arise or do nothing at all. Some homeowners, feeling victimized by the banking system, have actually vandalized their own homes prior to eviction.

“The best measure of the influence foreclosures have on the broader market is the 20-city S&P/Case-Shiller home-price index that tracks deeds, including homes sold directly by banks and deals that don’t use mortgages, said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. The index probably will fall 5 percent to 10 percent this year, a range that depends on the condition of the mothballed homes, he said. ”

Some of the abandoned homes are in such a state of dilapidation that they may have to be bulldozed.

Although the situation involves the entire country, New Jersey may be affected more than average due to the fact that unemployment is the highest in the Northeast (with the exception of Rhode Island) and property taxes are the highest in the nation and can certainly add to the misery of homeowners almost the same as if they had a second mortgage.

My proposal of abolishing property taxes for primary residences of New Jersey taxpayers would have a soothing effect on the housing crisis. People would truly own their homes after their mortgages are paid off. But for that to occur, I have to be elected governor first and that, if you decide that it will happen, will not be until the end of 2013. For some homeowners, it will be too late.

The current administration of governor Christie has little sympathy for property tax relief. We already know that his 2% property tax cap is full of loopholes. The democrats in the Legislature have proposed a modest property tax cut but it would not be sufficient to reverse the tide of bad news. New Jersey needs shock therapy; bold measures, and these will not come from either political party. They are just too comfortable with the status quo and basically don’t care.

Greek Debt Deal Passes: Europe Must Focus on Growth – U.S. Adds 227,000 Jobs – Governor Christie Throws Environment Under the Bus

BBC News – Greek debt swap ‘success’ welcomed by European leaders.

Probably not many Americans realise how much was at stake here and although the respite gained by Greece is temporary and comes at a cost, it provides time for Europe to energize the euro zone economies.

The first step toward that goal, in my opinion, is to devaluate the common currency, probably to reach parity with the US dollar. This would make imports more expensive and euro-zone exports cheaper abroad. Tourism, one of the industries where Greece can show rapid growth, would greatly benefit from a cheaper €. The Greek economy contracted 7.5% in the last 3 months of 2011 under the weight of austerity measures.

One other factor is to control the price of oil and Europe must make an effort in muffling the war drums in the Middle East. The E.U must take the high ground of reason and diplomacy. High oil prices will make growth more difficult for everyone but the weaker economies will suffer the most.

The prudence in foreign policy that I advocate above applies to the United States as well. We should not be playing firemen elsewhere when our house is smoldering.

The Greek swap deal was welcomed by numerous private sector lenders to Greece, who said it paved the way for agreement on the EU bailout.

“The very strong and positive result provides a major opportunity now for Greece to move ahead with its economic reform program, while strengthening the  €  area’s ability to create an economic environment of stability and growth,” said Josef Ackermann, chairman of the International Institute of Finance, which represents private lenders.

U.S. Extends Its Run of Strong Job Growth Another Month – NYTimes.com.

It is the third consecutive month above 200,000 nationally. Unemployment however remains at 8.3. Nonetheless, the absence of bad news is good news. If this continues, it will help President Obama in November.

Christie administration adopts rule allowing businesses to bypass N.J. environmental regulations | NJ.com.

This was expected because the governor had proposed it in 2011. New Jersey is the most polluted state in the nation, with the possible exception of Louisiana. It is an act of desperation of an administration bent on creating some economic growth on faulty foundations. Growth that comes at the expense of the environment is not sustainable but what does he care? The governor is constantly flirting with higher offices which would involve moving to Maryland or Virginia. It really does not matter (to him) if he leaves a mess behind.

If elected governor in 2013, my policies will aim at sustainable growth with most consideration for maintaining the environmental integrity of New Jersey. Will I be an environmental zealot? Certainly not. But I will not exchange public health and quality of life for the mighty dollar either.