D. Dowd Muska

 

The Nutmeg State’s 20-Year Suicide Spiral

March 08, 2012

The competition is fierce. California. New York. Illinois. Michigan.

But there’s a dark horse in the contest for Most Self-Destructive State. The data make it clear that over the last two decades, Connecticut stands above all others in adopting unwise public policies.

It started in the 1980s, when profligate pols used the windfall generated by the Reagan boom to grow state spending at a rate that far surpassed population growth and inflation. When Connecticut’s economy began to decline in 1989 -- a recession that started earlier, and ended later, than its national counterpart -- Hartford’s solons were unwilling to muster the courage to make cuts. A bipartisan cabal pushed through a revenue-raising tool that was once unthinkable: a broad-based income tax.

Since an economic crisis was already underway, the income tax isn’t solely to blame for all of Connecticut’s subsequent woes. But its enactment signaled that a fundamental shift had occurred. No longer would The Land of Steady Habits have restrained government. In 1991, when the income tax squeaked through the legislature and was enthusiastically signed by Governor Lowell Weicker, the state budget was $7.7 billion. Sixteen years later, when the Great Recession struck, expenditures had soared to $16.5 billion -- an inflation-adjusted increase of 41 percent.

At 7 percent, population growth didn’t spur the spending surge. The state, as well as the 169 municipalities that Hartford heavily subsidizes, went on a hiring binge. Government employment rose by 28 percent, while private-sector job creation was negligible.

And those positions in “public service” are lavishly compensated. A March 2011 analysis by the Bureau of Labor Statistics documented that in the Hartford region, nongovernment wages averaged $23.23 per hour. Public employees received $34.47. Service workers in the real world earned less half their counterparts in the bureaucracy. Even in management and professional occupations, government sinecures had the edge: $40.03 versus $35.46.

On Americans for Tax Reform’s cost-of-government index, Connecticut ranks as the priciest state. Its performance isn’t much better on other measures, including the Small Business & Entrepreneurship Council’s “Small Business Survival Index,” Chief Executive’s “Best/Worst States for Business,” Mercatus Center’s “Freedom in the 50 States,” and Tax Foundation’s “State Business Tax Climate Index.”

“Pish tosh,” sigh the state’s elites, “Big Government isn’t a concern here, because we’re so rich.” The argument has superficial appeal. Connecticut’s got old money and Wall Street wealth. Wages are high, and median household income consistently lands in the nation’s top spot.

But factor in the cost of living, and it’s easy to see why many residents of New Hampshire, Virginia, North Carolina, Florida, and Texas are ex-Nutmeggers. Only New Jersey and New York impose heftier state-local tax burdens. Only Hawaii has a higher electricity rate. Groceries, gasoline, and healthcare are mighty steep in Connecticut. (The Pacific Research Institute’s “Index of Health Ownership” ranks Connecticut a dismal 42nd, and the Council for Affordable Health Insurance reports that 45 states impose fewer coverage mandates.) Housing, particularly in populous Fairfield County, can be astronomically expensive.

In an issue brief released last month by the far-left Connecticut Voices for Children, demographer Orlando J. Rodriguez concluded that a graying population and a shrinking number of prime-age adults augurs ill: “Connecticut may find itself transitioning from the Great Recession’s economic downturn into an economy where growth and the capacity to support vital public services are hampered by a dual decline in the earnings of its workforce and in the number of workers.”

Those “vital public services” include ponying up for unrealistic promises made to retired government employees. The Institute for Truth in Accounting has named Connecticut the top “sinkhole state,” because of the $29.4 billion it has in assets, “$10.1 billion are available to pay $63.4 billion” in unfunded liabilities -- primarily pension and healthcare obligations.

Laugh at the moonbeams in La La Land. Snicker at the cluelessness of the folks who sent Barack Obama to the U.S. Senate. But the state with the most dismal recent economic performance, and perhaps the most frightening fiscal future, is a small, heavily forested spot wedged between New York City and Boston.

If you’re lucky enough to have a government gig or qualify for its wildly generous welfare programs, Connecticut remains a wonderful place to live. Toil in the competitive, accountable sector, and the smart move is to flee to a state where taxpayers and entrepreneurship are welcomed, not targeted.

For 20 years, Connecticut has carefully followed liberals’ policy playbook, and pursued tax hikes, education-monopoly engorgement, economic planning, and Nanny Statism.

And the results have been disastrous.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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