It is gratifying to see a few other commentators starting to notice the dramatic contrasts between New York and Florida in government spending and policy outcomes.
You may already be aware of the truly incredible difference in state government spending between New York and Florida.
But what you may not be aware of is the shocking lack of measurable benefit that New Yorkers get for all their extra spending.
It was only a couple of months ago that I had a post contrasting the states of New York and Florida on many different measures of public policy and success (or failure).
The two states are roughly equal in population, yet are at opposite ends of the spectrum on major public policy issues, with New York following the high-tax, high-spend, high-regulation model, and Florida the low-tax, low-spend, low-regulation model.
It seems like every day things get worse for New York and better for Florida.
On January 1, 2021, our progressive true-believer mayor, Bill de Blasio, began his eighth year in office. Since he is limited to two terms under current law, this will be his last year, unless something changes.
Now that another crowd of progressive true-believers has just swept to power in Washington, it seems like an appropriate time to look at how the seven years of super-progressive government have served us in New York.
Recall that when de Blasio became Mayor in January 2014, he followed 20 years of at least nominally Republican mayors, Rudy Giuliani (1994-2001) and Mike Bloomberg (2002-2013). Those 20 years saw dramatic improvements in New York City’s fortunes, including reductions in crime (the murder rate, for example, fell by over 80%), and resumption of a healthy rate of population increase after previous declines. Would the progressive de Blasio instead bring about some kind of immediate disaster and collapse?
For better or worse, that’s not really how it works with bad progressive public policy. Instead of immediate disaster and collapse, what we see is gradual but steady decline, particularly when compared to other jurisdictions that follow policies of, for example, lower taxing and spending and disciplined law enforcement.
So on to an overview of de Blasio’s “accomplishments.”
On December 30, the Census Bureau issued its latest population numbers, going up through July 2019. Here is a link to the press release; and here is a link to various charts and graphs of statistics.
The long-time official spin on U.S. population changes has been that people are leaving the cold North and East in favor of the warmer South and West. Hey, people like warmer weather!
But while there may be something to that, a closer look supports a strong inference that what people really like is lower taxes, even if accompanied by a lower level of government spending and services. In other words, the news is not good for “blue model” governance.
Some ten states are estimated to have lost population in the year from July 2018 to July 2019; they are Alaska, Connecticut, Hawaii, Illinois, Louisiana, Mississippi, New Jersey, New York, Vermont and West Virginia. Many of those declines are small, and perhaps based on special circumstances (e.g., the decline of Alaska’s North Slope oil fields).
But two states stand out for remarkably large losses. The leader is my own New York, with a loss of about 77,000 residents — 0.39% of population in one year. . . .
In the New York Times last Thursday, Thomas Edsall had a piece titled “Is California a Good Role Model?” The piece summarized different views from pundits on the right and left as to the future prospects for California as it continues and adds to a growing menu of the latest progressive policy prescriptions — highest in the nation state income tax rates, highest in the nation sales tax rates, aggressive energy policies to address “climate change,” and so forth. A fair summary is that the right-side pundits chided California for having highest-in-the-nation inequality and poverty rates, while the left-side pundits responded that it also had strong economic growth.
I actually wrote a post on exactly this subject way back in February 2013, titled “Let’s Start A Pool On How California Will Do Over The Next Five Years.” That post began by describing three of the then-recently-enacted progressive policy favorites (highest-in-the-nation tax rates going up to 13.3% on incomes over $1 million, intentional increasing of electricity prices via a cap-and-trade system, and the high speed rail project). Would those things knock California off its high growth pedestal? You may be surprised with my take at the time:
I'm certainly not predicting an imminent collapse for California. The consequence of making yourself way out of line in taxes and costs is not rapid collapse, but slow relative decline.
Before getting more specifically to the case of California, let me illustrate what I mean by “slow relative decline” by describing the case of New York. . . .
Read MoreAt this blog, when not commenting on events in my home town of New York, I've tended to look more toward Connecticut than New Jersey. But New Jersey has just elected a new Governor, by the name of Phil Murphy, in the off-year 2017 election; and he took office on Tuesday. Here is a link to his inaugural address. So perhaps it's time for a brief look to the West.
In terms of major aspects of public policy, New Jersey's recent history bears a great resemblance to that of Connecticut. When I first moved to New York in 1975, New York had top combined State and New York City income tax rates approaching 19%, while New Jersey had no income tax. New Jersey was booming. It seemed that on a weekly basis some securities firm was announcing its move to the Jersey City waterfront, right across the river. But New Jersey had a budget shortfall, and in 1977 then (Democrat) Governor Brendan Byrne proposed a "temporary" 2% income tax to close the gap and avoid increases in already-high property taxes. Forty years later, the property taxes are still just as high or higher, and New Jersey still has the income tax, with the top rate all the way up to 9%. Meanwhile, New York's top rate, including the New York City tax, has been reduced to a little under 13%, but only on income over $1 million; for income between $500,000 and $1 million, New Jersey now has less than a 2% income tax advantage over New York. I can't remember the last time I read about a business picking up and moving to New Jersey to save on taxes.
Also during the same period, a string of mostly Democratic governors and legislatures entered into a string of wildly overgenerous pension promises to the state workforce. (Republican Governor Christine Todd Whitman, 1994 - 2000, bears a small portion of the responsibility.) When the budget was tight, they "solved" the problem by just skipping the pension contributions. Today New Jersey competes with the likes of California, Illinois and Connecticut for having the most irresponsible and worst-funded public pensions. A report out in December from the American Legislative Exchange Council put the funding level of New Jersey's public pensions (at a risk-free interest rate) at 25.6%, 46th worst among the states. This is way, way beyond the level where miraculous increases in the stock market or hedge funds can ever bail you out, and is deep into a death spiral.
And yes, like any decent blue state, New Jersey has a seemingly perpetual budget "crisis." As not the least part of it, it has been underpaying its required pension contributions by up to about $3 billion per year -- this on a budget of about $36 billion per year. And New Jersey's bond rating has been cut 11 times in the past 8 years, most recently to A3 by Moody's. Hey, it's better than Illinois's rating!
Enter new Governor Murphy. He is a Democrat. And what credentials! Harvard College! Wharton Business School! Goldman Sachs! This guy is really, really smart! And he may actually be "smart" in some sense. I'll bet he had great SATs. However, on the record of his campaign promises, you could be forgiven for inferring that he would have difficulty adding two plus two.
I should mention that Murphy is a complete standard-issue progressive, in the mold of an Obama or a Hillary. Perhaps not quite as far off the scale as a Sanders or a Warren. He is facing a nearly hopeless budget situation, with an immediate need for about $3 billion per year (almost 10% of the budget) to pay for past pension promises -- payments that will deliver absolutely nothing in the way of new or better services for the people. What to do? So far, his answer has been a collection of totally pie-in-the-sky promises of new and additional spending that can have no possible relation to reality. Here is a list of just some of the items from his campaign web site:
And so forth. And then, how about my perennial favorite -- infinite oodles of fresh cash to "Combat Climate Change & Make New Jersey A National Leader in Clean Energy"? Yes, Murphy is pledging to wipe out all use of fossil fuels by 2050 -- not just the paltry 80% reductions promised by his confrères across the river and in California:
Murphy committed, within his first 100 days in office, to starting the process of creating a new State Energy Master Plan to set New Jersey on a path to 100 percent clean energy by 2050.
This guy -- and remember, he went to Harvard and the Wharton Business School, and worked at Goldman Sachs for decades -- actually believes, or claims to believe, that spending oodles of government money to force a switch from less expensive to more expensive sources of energy somehow makes the people richer rather than poorer:
Murphy noted that moving to a clean-energy economy would encourage innovation and create jobs, as every $1 spent on early-stage clean energy research and development generates an additional $1.60 in output from other sectors of the economy. He said his plan would maximize this potential, in large part, supporting innovation and R&D in higher education.
And don't forget the importance of "climate justice"!
Murphy said he also would ensure that the benefits of clean energy reach all communities as a matter of environmental and economic justice. “Too often, conversations about climate change have ignored the disproportionate impact on lower-income and politically vulnerable communities, yet the environmental concerns in these communities are staggering,” said Murphy, noting that, in Newark, as many as one in four children have asthma. “We must ensure environmental justice as a core principle.”
Once you get into this groupthink, you're just not allowed to realize that tripling the cost of energy for the poor is the opposite of "climate justice."
All this (and lots more) with a budget already hopelessly under water. Does he have any proposal to pay for it all? Of course, there is the usual call for higher taxes on the top 1%. ("In New Jersey, the wealthiest 1% continue to pay a far lower share of their income in state and local taxes than the lowest-income residents. Phil strongly believes that is unacceptable in 2017.") Good luck with that. Here's NJ Senate President Steve Sweeney on Fox Business today basically saying that the "millionaire's tax" is not going to work any more in the wake of the federal tax reform. OK, the only other suggestion I can find in Murphy's stuff is the bright idea of getting the pensions out of investing in hedge funds in order to save on investment fees. That might produce about 1% of the money Murphy is looking for.
New Jersey has come to the blue state dead end. The new Governor, living in fantasyland, doesn't realize it yet. Maybe he never will. But he is about to get mugged by reality. Meanwhile, his state will continue its long-term relative decline. Maybe the voters will just keep voting for more and more of the free stuff while the decline continues and accelerates.
