Connecticut Could be One of the "Hardest Hit" States

Christine Stuart reports that a top economist is saying up to 90,000 jobs could be lost in Connecticut thanks to the financial services meltdown:

Lanza told officials that direct industry loss of financial services jobs will likely top 30,000, while indirectly it could trigger reductions of more than 55,000 jobs. “So total job cuts could approach 90,000,” he said.
[…]
“Connecticut will probably become one of the hardest hit states in the country,” Lanza said. (Stuart)

Connecticut has been hard hit by recessions in the past. The one that we suffered through during the early 1990s is the worst in my own memory, but each time we’ve managed to come back.

It may be much more difficult to come back this time.

Now What?

Lanza’s solution, predictably, is to cut as much from the budget as possible to make ends meet, rather than raising taxes–which “makes things worse.”

I wonder about that.

It’s taken as a given that raising taxes by any amount will hurt the economy more. But exactly how true is it? Is it worth losing bus services, for example, at a time when more people are relying on public transportation? What about cutting human services during times of crisis and trauma, or cutting criminal justice programs when, due to rising unemployment, crime spikes?

How about cutting library services now that more and more people are using the library? Or, as the article suggests, cutting money going to state colleges and universities when more and more people want to go back to school to earn another degree, and find work in a different field? Isn’t that one of the points of the state university system, to help our citizens better themselves in order survive crises like this?

The fact of the matter is that now, when our government is looking to curtail state services, is when people need those services the most.

Raising taxes cuts into buying power. But cutting state spending essentially does the same thing, as state workers, people working on state projects and those who rely on them have less money–even if, as has often been suggested, state employee unions give up some concessions in either salary or benefits. Neither option is good.

The question then becomes one of priorities and philosophy. Should we cut spending and not raise taxes, and hope that the effects on our economy are as mild as possible, and that the lack of suddenly missing services will be counterbalanced by more jobs and a quicker recovery? Or should we cut some spending, perhaps lowering salaries or getting rid of nonessential services (whatever those might be) and raise taxes to cover the cost of services that we feel are real priorities, like transportation, education, human services, programs that help children and criminal justice?

That might prolong the recession in Connecticut, but our people will have the services they need.

It’s not an easy choice. Governor Rell has already signaled that she is in favor of cutting spending rather than raising taxes even a little. This means that the cuts she’ll need to put through in order to balance the budget will be deep and incredibly painful, and she’ll have to fight every step of the way to get them all enacted.

This is an excellent time for government to discover what its mission truly should be, and how best to accomplish that mission as effectively and efficiently as possible during these tough economic times. But if we cut out government services that people truly need, the “core missions” of government that Rell herself has talked about, even in the name of balancing the budget, then the state will fail in its mission.

When the need to cut spending bumps up against the need to keep the state’s “core mission” services going, all options should be on the table.

Source
Stuart, Christine. “What Goes Up Must Come Down.” CT News Junkie 10 December, 2008.

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6 responses to “Connecticut Could be One of the "Hardest Hit" States

  1. State workers do not contribute to the economy. They simply recycle money (taxes) that comes from the private sector.
    The fact is that the State is burdened with huge costs in its employee benefit programs, and there is an issue of fairness when the citizens, who have seen their own retirement funds shrink and can’t afford medical insurance, etc that in anyway approaches the state programs, are asked to part with even more of their money to maintain benefits out of ordinary reach.

  2. I disagree with JM. While some individual state workers may not contribute, but hinder, the economy, most are doing their job with dedication and enthusiasm. Doesn’t proper police protection contribute to the economy? Doesn’t properly functioning transportation systems and roads contribute to the economy? Doesn’t providing a safety net for those in financial trouble contribute to the economy? I believe they do for without them we would not be able to function as a region and a state. Lets be realistic, there are no painless solutions to the current economic troubles.

  3. WTFD,
    I was speaking from an economic standpoint in response to the argument that state WAGES are necessary to maintain the economy. Obviously some state functions are necessary to support economic activity, but that wasn’t my point. From an economic standpoint, these are necessary cost of doing business, and to the extent these functions can be provided for less cost, the better for the overall economy.
    The fact is that the more government takes from the overall state GDP, the worse the local economy will get.
    And why should the average Joe be taxed to provide platinum plated benefits to state workers when he’s busting his A** just to keep his head above water? Despite their “dedication and enthusiasm”, their benefits are way out line with the real world that pays for them. Until someone can show me that state workers are leaving in significant numbers to pursue better opportunities, I think a credible argument can be made that their cost is to high.

  4. “Lets be realistic, there are no painless solutions to the current economic troubles.”

    Yes let’s be realistic… So far all the pain of job loss, pension loss, benefit loss,etc. has been carried on the shoulders of the private sector. As more and more people in the private sector see their jobs disappear, or see no wage increases, or even see their pension or benefits reduced in order to keep their jobs, the pain of supporting a bloated, wasteful, state government, in business as usual mode is not just unfair, it is totally unaffordable, as well as totally unrealistic.

    Let’s be even more clear. As GC says in his closing comment: “all options should be on the table.”

    I am sure most if not all of us who can do the simple math, also understand there is no way to close a $6 billion dollar budget gap by simply cutting spending around the edges. Someone’s taxes must also be raised. Without doubt one of the options that will be “on the table” will be hiking the taxes of those who already pay the vast majority of them, no matter what the Governor is currently saying.

    At the same time, she is 100% correct that we can only close a $6 billion gap in our budget by reducing the true size, and true cost, of state government. Not by smoke and mirrors accounting, but by actual real dollars, billions of them.

    If that means there is less state employees waiting on us to get their services I suggest we all become a bit more patient waiting in longer lines for those services. If that means there are less services, I suggest we learn to get by without some of them. If many of those in the private sector can learn to live without a raise, or reduced benefits, or even a job, I am sure the public sector can learn as well. This has nothing to do with how hard anyone works. It’s simply a matter of what can be afforded.

    As was said here there are “no painless solutions” ………For anyone, both in the private, as well as public sector. Closing a $6 billion dollar budget gap will require some real sacrifice from everyone in this state.

  5. If you ask me, the effects of tax increases are pretty clear.

    There’s a reason why Connecticut has ranked last in the country for job growth… it has everything to do with the institution of the state income tax by Lowell Weicker.

    Connecticut has never really recovered from the recession of the early ’90s… we’ve spent the last 15 years treading water.

    Where to cut? Let’s start with municipal aid. The only municipalities that benefit from state aid to municipalities are small towns and big cities. Meanwhile, city-like suburbs, e.g. Enfield and Manchester get the cold shoulder and pay for everyone else’s expensive government.

    For far too long, state aid to municipalities has masked the real cost of government. If you pull away the curtains and expose the residents of small towns and big cities to the expensive cost of their governments, you will see the reforms that will needed. Of their own free will, small towns will opt to merge and share services. Likewise, cities will be pressured to end patronage and operate efficiently.

    Standing in opposition to this will be CCM, the Conference of Crying Mayors. In truth, they do not effectively represent the interest of all Connecticut cities and towns… they put the interests of big cities ahead of towns like Enfield.

  6. One of the problems with poor budget practices is we find ourselves constrained in the ability to use state spending in a counter-cyclical manner.

    Having a true rainy day fund that could pump several billion into the state’s economy without tax increases or more bond payment burden would really help right now — of course that mean’s you didn’t have wasteful spending in the good years, or had things like underfunded pension obligations.

    Of course fiscal policy is only one problem. Our legal and regulatory environment which strongly discourages innovation and fast action constrains our ability to put public works projects in place quickly enough to have a positive impact.

    Combine these, a classic Keynesian cure for economic doldrums simply no longer exists.

    There are plenty of things we should be doing — it would be a good time to be letting out the contracts to complete I-384 between Manchester and Willimantic; to complete Route 11 to I-395; for private investment to begin to build a new nuclear plant in Haddam Neck, and more plants at Millstone; to be rebuilding our electric transmission grid; to be moving the Amtrak passenger line inland and to a more straight route that actually allows European / Japanese class high speed passenger trains.

    But boldness is the enemy of liberals today, and we can’t take these actions on a timeline that would fix this recession. We have few good sheperds today to lead the flock when they’re scared, but a lot of politicians from the top on down who pander instead to their irrational fears.

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