Our governor’s approach to today’s problems are hurting the middle class and those most vulnerable by threatening huge budget cuts and a tax cut at a time when judicious tax increases and added spending make more sense. It’s not just our budget which is suffering. It is our economy. And more importantly it is our citizens who have lost savings and pension in the market, seen their home prices sink below the level of their mortgage, and have become under- or un-employed, with banks treating them like prey.
More needs to be done to harness the state’s revenues in a proactive, positive manner. For the short-term Christie should increase taxes for wealthier residents and increase expenditures. An enlarged budget of about $2 billion would provide a better safety net for the most vulnerable and investments to generate recovery. Penny-wise pound-foolish budgeting only serves to dig a bigger hole and make rebounding more difficult. Ultimately it is wise government, not less government nor more government, which is most beneficial.
The key is not to add to our debt, accomplished by increasing the tax rate on higher brackets and expending only such funds as become available through the added revenue. Equally important is to pay more into our self-funded debt, such as pension, and not enlarge our outside debt, such as highway bonds. Merrill Lynch said on Monday that New Jersey’s debt should be downgraded to reflect the cost of paying its retiree pensions and health care. In effect, Wall Street analysts are more concerned by a state’s debt overload, and as businessmen they can understand wise investments. What is needed is to keep our budget in balance and not use accounting to mask debt or project unlikely revenue sources.
Funds raised through a progressive tax schedule can serve as investments. Done on a short-term two-year basis, it should not increase the flight of the wealthy as other states are adopting stern measures, and the wealthy can not quickly or easily liquidate assets such as their expensive homes in order to move elsewhere.
Penny-wise, pound-foolish approaches abound in our governor’s budget, which, if reversed will help. Defunding women’s health clinics, hurts their health, makes them less employable and increases the burden on more expensive emergency rooms which then seek reimbursement elsewhere. Does the governor think that reducing access to library books, a source of free job training and skills enhancement, will help the unemployed? Any increase of mass transit fares during a recession reduces people’s job opportunities. Will refusing to pay into the pension fund help to recruit and retain good state employees or help to hold onto an acceptable credit rating? Attacking TAG college tuition grants is no way help prepare people for the job market.
Housing is another example of an area in which government investments can help. The decrease of 8% in Northern New Jersey home prices in 2009 is a harbinger of continuing economic malaise. As the Record points out, “For most people, who are neither buying nor selling, lower values reduce household wealth, making consumers less willing – and able – to borrow and spend. This lost housing wealth has added to a sense of unease about the economy.” Until prices stabilize, new home construction workers, remodeling contractors, real estate agents, Home Depot type staff, and others face continued unemployment. In California, with a budget probably even more stressed than ours, Business Week indicates, Governor Arnold Schwarzenegger last Thursday signed a bill aimed at selling California’s vacant homes and encouraging new construction by extending a $10,000 state tax credit for first-time homebuyers.
Our governor already advocates more taxes – retrogressive fees on those who can afford them least – while harshly cutting government services and the higher-bracket tax rate. A two-year return to the $400,000 income tax rate by itself would yield approximately $1 billion, and additional rates at the $250,000 and $750,000 bracket could provide another $1 billion. With government investments more people can obtain employment, and both individuals and businesses can recover – creating a “virtuous cycle” rather than a downward spiral or a lengthy “stuck- in-the-mud” period. Then our Governor will still have time in office to cut the budget, reduce some taxes, and increase our surplus.
What I am advocating represents less than a 8% budget increase. It is the government’s role to invest in hard times when citizens are in most need, and put on the brakes in the good times . We need smart, but increased expenditures and taxes now. Citizens and the legislature should urge this wiser approach.