A Competent Republican? It's a Miracle

I wish GOPers in DC could make persuasive arguments like this. One has to wonder whether Governor Christie will be a player in 2012.

Can Governor Christie Save New Jersey?

My default assumption is that all politicians will do the wrong thing when they have to choose between defending freedom and appeasing special interests. Even the ones that spout good rhetoric often do the wrong thing, particularly after a couple of years in office (sort of like being assimilated by the Borg, for you Star Trek fans). So I did not hold out much hope that Chris Christie would have any positive impact on New Jersey. I'm glad to report that (at least so far) I was wrong. Here's a excerpt from a National Review article about what he's accomplished. The excerpt is long, but the details are important. And since I obviously had to summarize, you should read the entire article to more fully appreciate how Christie seems to be the real deal.

...on February 11, Christie addressed a special joint session of the state legislature, replacing the vague promises of the campaign trail with first principles, and elaborating the constraints under which he was determined to govern: "Our constitution requires a balanced budget. Our commitment requires us to begin the next fiscal year with a prudent opening balance. Our conscience and common sense require us to fix the problem in a way that does not raise taxes on the most overtaxed citizens in America. Our love for our children requires that we do not shove today's problems under the rug only to be discovered again tomorrow. Our sense of decency must require that we stop using tricks that will make next year’s budget problem even worse." And in an extraordinary move, he then declared a fiscal state of emergency, announcing that by executive order he would impound $2.2 billion in appropriations from a fiscal year that was already seven months gone. That figure represented virtually every dollar the state was not legally obligated to pay out for the remainder of the year. In Bagger’s words, it was “everything that wasn’t nailed down.” “By doing that so quickly and so dramatically, and by executive action, it really set the stage,” Bagger says. “It was just a very clear declaration that there’s a new reality.” There was much wailing and teeth-gnashing about the cuts among Democrats. Sweeney accused Christie of “pick[ing] someone else’s pocket,” and senate majority leader Barbara Buono went so far as to say the executive order had “declare[d] martial law” in New Jersey. This raised the stakes significantly for the FY 2011 budget battle, which was then only beginning. In the year to come, the state would face an $11 billion deficit that made the previous shortfall look like a gratuity. It was a big hole, and Christie needed Democratic votes to close it. But he had no intention of mollycoddling the other side. On March 16, the governor went back before a joint session of the legislature and introduced a $29.3 billion budget that doubled down on his most controversial measures, trimming fat — and muscle, and sinew — from virtually every department and every entitlement in the state. The budget did small things, like reducing overtime hours, shrinking the state’s fleet of official vehicles, replacing paper with digital filing, and consolidating government office space. It cut the pay and pension eligibility for members of a number of state boards and commissions, many of whose duties required them to do little more than attend once-monthly meetings. It saved $216 million by eliminating a number of wasteful programs, and another $50 million by privatizing others. But the budget did big things as well. It shrank the state’s major spending programs — including many that were, the governor admitted, not without merit — by reducing base appropriations and either scaling back or eliminating scheduled funding increases. It converted the state’s property-tax rebate system — long funded by borrowing, at interest, to cut checks to homeowners — with tax credits. It cut $466 million in local aid, against Trenton’s trend of corralling more and more municipal tax dollars for the purposes of redistribution, while pushing a constitutional amendment that would limit towns’ ability to raise property taxes in the future. And like Corzine before him, Christie deferred payments to the state’s pension program to secure $3.1 billion in savings, under the justification that it was imprudent to sink more money into a failing system. But unlike Corzine, Christie pushed through tough pension reforms that rolled back overgenerous payment increases, limited payouts for unused sick leave, and enrolled new workers into 401(k)s. He’d also signed a law requiring public employees to pay at least 1.5 percent of their salaries toward their health benefits, which would save the state and local governments hundreds of millions each year. But what caused the first and most strident wave of opposition to Christie’s agenda was his decision to slash funding for public education, by some $820 million. ...A near-pristine version of Christie’s budget passed at 1:13 a.m. on June 29, less than 24 hours before the constitutional deadline. ...But as significant as his early victories have been, Christie must now turn to pushing the structural reforms that will institutionalize his vision of leaner, meaner state government. ...Even as he was fighting the budget battle, the governor was barnstorming the state to talk up perhaps the most significant of these reforms: his “Cap 2.5” initiative, which would constitutionally limit the ability of municipalities to raise property taxes. The cap is popular among residents, most of whom pay the preponderance of their non-federal tax liability in property taxes. ...But Christie’s amendment is at the mercy of the Democratic legislature, whose assent is required for a popular referendum on it. ...Christie has vowed not to give up the fight. Other battles loom wherein the governor’s chances for success are highly uncertain. He has promised yet more pension and compensation reforms, moves that could break his tenuous alliance with the reformist elements in the Democratic party and push his openly hostile relationship with labor beyond Thunderdome. ...Senator Kean, who hopes to move from minority to majority leader, has confidence that Christie will continue to stick to his guns. “The governor has an internally strong constitution — that’s who Chris is — and he has an externally strong constitution in the constitution of the State of New Jersey,” Kean says. “I think he is absolutely the genuine article. That’s why we won’t ever go back to the status quo, at least not under Chris Christie’s governorship.”

America's Best Governor Wants to Starve the Beast

Chris Christie of New Jersey has done a remarkable job so far, but his biggest battles are still ahead of him. A key fight is whether the state will impose a cap on property taxes. As the Wall Street Journal opines, this reform has worked very well in Massachusetts and is critical to curtailiing the greed of government employee unions in the Garden State.

The Governor wants to cap annual property tax increases at 2.5%, on the model of the successful cap that Massachusetts imposed in 1980. Over the next 27 years, property taxes in the Bay State rose 22% compared to 68% nationwide and 102% in New Jersey. The cap is crucial to preventing local Garden State school districts, which are dominated by teachers unions, from raising taxes and thus defeating whatever spending restraint Mr. Christie can impose on Trenton. The unions know this, which is why they've spent some $7 million in TV ads portraying Mr. Christie as the scourge of police, firefighters and children. The Governor's approval rating has held up well despite the onslaught, which may reflect that voters understand the state's new fiscal reality. New Jersey's property taxes and its overall state and local tax burden are the nation's highest, and the state hasn't created a single net new private job in a decade. Democrats who run the state legislature have counter-offered with a 2.9% cap, but with so many spending exceptions that it's more fig leaf than cap. Their bill would allow lawmakers to raise property taxes above the cap to pay for pensions, health care and utility costs and, here's the kicker, even in order to promote the health, safety or welfare of the municipality. ...This showdown is worth watching because Mr. Christie has shown admirable political grit so far, and success in New Jersey would bolster the nerve of other reform governors. One temptation for Mr. Christie would be to settle for too little reform when his political capital is at its highest, which was Arnold Schwarzenegger's original mistake in California. ...Mr. Christie's best reform opportunity is now, and taxpayers everywhere should hope he succeeds.

Governor Christie Is a Taxpayer Hero

I may as well confess that I have a man-crush on Governor Christie. It's not nearly as bad as Andrew Sullivan's fixation on Obama (and it certainly hasn't involved me changing my views), but this video and the excerpt below are two examples of a politician actually doing the right thing and giving intelligent and coherent explanations to justify his actions. The video shows him taking on the teacher unions and the story is about his veto of a class-warfare tax bill.



Christie may wind up "growing in office" and becoming a squish, but so far he is the nation's most impressive Republican politician. That's normally damning with faint praise, but not in this case.

It took about two minutes from the time Senate President Steve Sweeney certified the passage of the millionaires tax package for Gov. Chris Christie to veto the bills at his desk. "While I have little doubt that the sponsors and supporters of this bill sincerely believe that the state can tax its way out of this financial crisis, I believe that this bill does nothing more than repeat the failed, irresponsible and unsustainable fiscal policies of the past," wrote Christie in his veto statement. "Now is not the time for more of the same. Ultimately, another tax increase will punish the state’s struggling small businesses and set our economy further back from recovery."

The Ronald Reagan of New Jersey?

He's only been Governor for a couple of months, and we have seen other elected officials start strong and then get captured by the special interests, but it certainly appears that Governor Christie of New Jersey genuinely intends to rescue his state from becoming the Greece of America. Here's an excerpt of what George Will just wrote, which included some spot-on analysis of the role of tax competition as a tool for constraining greedy politicians:

At the Pennsylvania end of the bridge, cigarette shops cluster: New Jersey's per-pack tax is double Pennsylvania's. In late afternoon, Gov. Chris Christie says, the bridge is congested with New Jersey government employees heading home to Pennsylvania, where the income tax rate is 3 percent, compared with New Jersey's top rate of 9 percent. There are 700,000 more Democrats than Republicans in New Jersey, but in November Christie flattened the Democratic incumbent, Jon Corzine. Christie is built like a burly baseball catcher, and since his inauguration just 13 weeks ago, he has earned the name of the local minor-league team -- the Trenton Thunder. He inheritaged a $2.2 billion deficit, and next year's projected deficit of $10.7 billion is, relative to the state's $29.3 billion budget, the nation's worst. Democrats, with the verbal tic -- "Tax the rich!" -- that passes for progressive thinking, demanded that he reinstate the "millionaire's tax," which hit "millionaires" earning $400,000 until it expired Dec. 31. Instead, Christie noted that between 2004 and 2008 there was a net outflow of $70 billion in wealth as "the rich," including small businesses, fled. And he said previous administrations had "raised taxes 115 times in the last eight years alone." ...New Jersey's governors are the nation's strongest -- American Caesars, really -- who can veto line items and even rewrite legislative language. Christie is using his power to remind New Jersey that wealth goes where it is welcome and stays where it is well-treated. Prosperous states are practicing, at the expense of slow learners like New Jersey, "entrepreneurial federalism" ...competing to have the most enticing business climate.

Meanwhile, a column from the Wall Street Journal makes some of the same points, noting that productive people will move across borders when they reach a tipping point. This underscores the value of tax competition - which is made possible by federalism:

Mr. Christie has started spreading the news that the Garden State aims to compete once again for businesses, jobs and residents. He notes that for years the state offered a better tax environment than New York, which encouraged city dwellers to discover New Jersey's beautiful suburbs. Mr. Christie says that he recently bumped into former New York Gov. George Pataki, who noted that he'd been shocked to learn that New Jersey now has an even higher burden than its tax-crazy neighbor. "See what happens when you're not looking?" he said to Mr. Pataki. "Snuck right up on ya." The governor aims to move tax rates back to the glory days before 2004, when politicians lifted the top income tax rate to its current level of almost 9% from roughly 6%. Piled on top of the country's highest property taxes, as well as sales and business income taxes, the increase brought the state to a tipping point where the affluent started to flee in droves. A Boston College study recently noted the outflow of wealthy people from the state in the period 2004-2008. The state has lately been in a vicious spiral of new taxes and fees to make up for the lost revenue, which in turn causes more high-income residents to leave, further reducing tax revenues.

The Right Way to Deal with Budget Problems

With Intrade.com showing an 83 percent chance that Obamacare will be approved, let's console ourselves by looking at a bit of good news. The Wall Street Journal has a good editorial today lauding the new Republicans governors of New Jersey and Virginia, both of whom are reducing spending. But unlike in Washington, where a spending cut is so loosely defined that politicians can increase spending and simultaneously claim to be cutting spending (so long as they increase spending by less than previously planned), Governors Christie and McDonnell actually are proposing to spend less next year than is being spent this year. That hasn't happened in Washington since 1965 - and it certainly won't happen under Obama's phony spending freeze:

Republicans Chris Christie (New Jersey) and Bob McDonnell (Virginia) were elected in November in states that had seen years of tax increases and explosive spending growth. Mr. Christie inherited a $2.2 billion deficit in 2010 and it is expected to grow to $11 billion in 2011. Mr. McDonnell is confronting the largest deficit in Virginia history—$4.2 billion for fiscal years 2011 and 2012, out of a $32 billion two-year general fund. This week Mr. Christie proposed his first budget, calling for a 9% cut in the state's $32 billion annual general fund. He is not talking about phony Washington-style "cuts" against a baseline that automatically increases each year. The governor is asking Trenton to spend $2.9 billion less in 2011 than it did in 2009, shrinking the budget to $29.3 billion, which he admits will be "painful, but what other choice do we have?" ...Mr. Christie deserves special applause for his willingness to battle government employee unions. His office calculates that New Jersey's unionized employees have carved out health-care benefits that are 41% higher than the typical Fortune 500 company offers. A teacher who has contributed $62,000 toward her pension, and nothing toward medical benefits, can retire and receive over her lifetime a $1.4 million retirement package and an additional $215,000 in health-care payments. ...Meanwhile, Mr. McDonnell is preparing to sign a 2011-12 budget of $14.5 billion that will reduce state spending below 2006 levels ($14.8 billion). The $2.3 billion in cuts include a reduction in state employee pay, halving arts funding, selling off state-owned liquor stores, and cutting Medicaid payments by $300 million and aid to school districts by $700 million. Mr. McDonnell argues the cuts are fair because school spending has risen 60% in the last decade, while Medicaid is up more than 75%. He has already signed legislation to allow off-shore oil drilling, which the state says could raise $5 billion in revenues over the next 30 years. (Are you listening, California?) Both governors are under attack from liberal interest groups and the media for not raising taxes, but the public wants government to restrain itself the way families have already had to do. New Jersey's property tax rates are the nation's highest and its top income tax rate is close to the highest at 8.97%. Mr. Christie will have to negotiate his way through a legislature that is dominated by Democrats who answer to the public unions, but as he told them: This "is what the people sent me here to do." Virginia Democrats raised taxes twice in six years and should consider New Jersey's punishing rates and fleeing taxpayers an example not to emulate.

Class Warfare Tax Policy Wreaks Havoc with New Jersey Economy

Barack Obama wants higher tax rates on the so-called rich, including steeper levies on income, capital gains, dividends, and even death! Along with other greedy politicians in Washington, he acts as if successful taxpayers are like sheep meekly awaiting slaughter. In reality, class-warfare tax policies generally backfire because of the five reasons outlined in this video:



A new study from Boston College provides additional evidence about the consequences of hate-and-envy tax policy. The research reveals that high tax rates in New Jersey have helped cause wealthy people to leave the state, leading to a net wealth reduction of $70 billion between 2004 and 2008. Wealth and income are different, of course, so it is worth pointing out that another study from 2007 estimated that the state lost $8 billion of gross income in 2005. That's a huge amount of income that is now beyond the reach of the state's greedy politicians. Here's a report from the New Jersey Business News:

More than $70 billion in wealth left New Jersey between 2004 and 2008 as affluent residents moved elsewhere, according to a report released Wednesday that marks a swift reversal of fortune for a state once considered the nation’s wealthiest. Conducted by the Center on Wealth and Philanthropy at Boston College, the report found wealthy households in New Jersey were leaving for other states — mainly Florida, Pennsylvania and New York — at a faster rate than they were being replaced. ...The study – the first on interstate wealth migration in the country — noted the state actually saw an influx of $98 billion in the five years preceding 2004. The exodus of wealth, then, local experts and economists concluded, was a reaction to a series of changes in the state’s tax structure — including increases in the income, sales, property and “millionaire” taxes. “This study makes it crystal clear that New Jersey’s tax policies are resulting in a significant decline in the state’s wealth,” said Dennis Bone, chairman of the New Jersey Chamber of Commerce and president of Verizon New Jersey. ...In New Jersey, the top 1 percent of taxpayers pay more than 40 percent of the state’s income tax, he said. “That’s probably why we have these massive income shortfalls in the state budget, especially this year,” he said. Until the tax structure is improved, he said, “we’ll probably see a continuation of the trend, until there are no more high-wealth individuals left.” He added the report reinforces findings from a similar study he conducted in 2007 with fellow Rutgers professor Joseph Seneca, which found a sharp acceleration in residents leaving the state. That report, which focused on income rather than wealth, found the state lost nearly $8 billion in gross income in 2005. ...Ken Hydock, a certified public accountant with Sobel and Company in Livingston, said in this 30-year-career he’s never seen so many of his wealthy clients leave for "purely tax reasons" for states like Florida, where property taxes are lower and there is no personal income or estate tax. In New Jersey, residents pay an estate tax if their assets amount to more than $675,000. That’s compared to a $3.5 million federal exemption for 2009. Several years ago, he recalled, one of his clients stood to make $60 million from stock options in a company that was being acquired by another. Before he cashed out, however, the client put his home up for sale, moved to Las Vegas, and “never stepped foot back in New Jersey again,” Hydock said. “He avoided paying about $6 million in taxes,” he said. “He passed away two years later and also saved a huge estate tax, so he probably saved $7 million.”

Still not convinced that high tax rates are causing wealth and income to escape from New Jersey? The Wall Street Journal wrote a very powerful editorial about the Boston College study, noting that New Jersey "...was once a fast-growing state but has now joined California and New York as high-tax, high-debt states with budget crises." But the most powerful part of the editorial was this simple image. Prior to 1976, there was no state income tax in New Jersey. Now, by contrast, highly-productive people are getting fleeced by a 10.75 percent tax rate. No wonder so many of them are leaving.

New Jersey and Obamacare

Yesterday's elections were almost a complete disaster for the White House. In the races for governor, the GOP won a huge landslide in Virginia and knocked off the Democratic incumbent in New Jersey. The only silver lining to Obama's dark cloud came in upstate New York, where the collectivist Republican nominee apparently was successful in helping the Democratic candidate beat the Conservative Party candidate.

But this was a 99 percent defeat for the Obama Administration. Especially New Jersey.

From a policy perspective, it will make Democrats on Capitol Hill much more nervous about supporting government-run health care. This does not guarantee the defeat of Obamacare, but it is much less likely now than it was 24 hours ago.