Governor Christie, a master of hype, has been pushing an inflated revenue projection in his 2013 Budget. And if you believe that projection, I have a bridge to sell you. It does not take an S&P or Moody’s analyst to view this budget with suspicion. But why is a governor who vociferously wants to shrink government and decrease the budget using an inflated revenue estimate to justify substantially larger expenditures, particularly when last year he vetoed the legislature’s add-in items? And what would be a better approach?
Christie’s budget on page 11 projects a 7.5% increase in state revenue which includes a deduction for the cost of his planned income tax decrease. By ditching the tax plan and adding its lost revenue back into his projection, the increase in revenue over last year would be an incredible 9%. Is this a bridge you want to buy? The facts are that unemployment in NJ remains depressed at 9.1% – higher than the national average of 8.3%, and substantially higher than surrounding states. IHS Global Insight projects employment will not return to pre-recession levels until 2015. IHS Global Insight Inc. also projects the state will register only 1.3% growth in GDP in 2012, considerably below 3.1% which the National Bureau of Economic Analysis forecasts for the U.S. as a whole by the end of 2012. State Chief Economist Charles Steindel in his February report, points out that “there are improvements in the national economy but a full economic recovery” [which might help justify Christie’s projections] “is not yet baked in the cake.” Regarding New Jersey he focusses on the grim housing situation: “A bit more than 8 percent of all home mortgages in New Jersey were in foreclosure at the end of 2011. The number of foreclosures in the state exceeded 100,000, and was more than ten times higher than the 2005 figure.”
So why is Christie this year promoting an inflated budget and more expansive spending? First of all, our governor can be petty and wants to take the credit. When the Democrats proposed their own bills to stimulate business and the economy, he vetoed them and a few months later added most of them back into his current budget. In spite of the Office of Legislative Services’ estimates, he seemed spiteful in over-ruling the Democratic add-ins last year. Ironically, this year he is taking the opposite approach. He has higher expenses now he can not escape including pension, debt repayment, and fringe benefits. He has his own re-election campaign next year which will play out during the forthcoming budget – a campaign that benefits from selected budget increases. Also, with his probable national aspirations, he gains luster in Republican circles by proposing a tax cut.
A sounder approach fiscally and economically would be to ditch the unfair income tax cut which would remove its projected cost, increasing tax revenues and giving him a better chance to achieve his revenue projections of a 7.5% increase. After all, his income tax proposal, which provides so little money to most New Jerseyans would have only a negligible impact on stimulating our economy, necessary to actually increase tax revenues. With so many people jobless, high foreclosures and a struggling economy, a property tax decrease would be more beneficial, and if he really wants to achieve his revenue forecast a short-term, supplemental tax increase on millionaires would help.