YI Poll: Voters Oppose Spending, Favor Tax Cuts

The Yankee Institute has released a poll showing support for cutting spending, and opposition to raising taxes. Some of the highlights:

By 72-28 percent, voters say the state should cut spending rather than raise taxes to plug the $8 billion budget deficit.

By 66-34 percent, voters say they would be less likely to vote for a candidate who voted to raise the income tax.

By 54-46 percent, voters say Gov. Rell’s support for higher taxes makes them less likely to vote for her.

45 percent of voters say they have considered moving out of Connecticut due to the state’s high taxes.

Voters also favored cutting the sales tax and the inheritance tax, and also approved raising the income tax (56%-44%).

Interestingly, while an overwhelming number of Republicans favored cutting spending, fully half of Democrats also favored spending cuts over tax increases. Democrats strongly (72.5%) favored raising taxes on the wealthy, as did a slight majority of independents (52.6%). Majorities of Democrats, Republicans and independents said that the governor’s support for tax increases made it less likely that they’d vote for her. Thoughts of moving out of state because of higher taxes were somewhat stronger in the 4th and 5th congressional districts.

Some of these numbers seem a little high–45% have thought about moving out of state because of taxes? Wow. But at the very least, the poll shows that Connecticut voters would much rather see more spending cuts instead of an income tax increase.

More data here.

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39 responses to “YI Poll: Voters Oppose Spending, Favor Tax Cuts

  1. Thomas Hooker

    Look carefully and you will see that the majority of people do indeed support the core of the Democratic proposal, which is to raise income taxes on the wealthiest nutmeggers. 56% want that to happen. And they want to raise taxes on the wealthiest residents, while cutting the sales tax, which hits those at the lower end of the scale the hardest. And a majority want to increase the cigarette tax.

    The first question on the survey only asks about spending cuts versus tax increases, without making a distinction about taxes on average residents as opposed to taxes on wealthy residents. And when the institute asked about whether raising taxes would make them more or less inclined to vote for a politician, once again the survey failed to specify whether the tax increase would be on them or on wealthy residents, which a majority of respondents had already said they favored.

    So the survey was very misleading. In essence, however, the people of Connecticut do want to see higher tax rates for the wealthiest residents, which Republicans are trying their darnedest to avoid.

  2. “In essence, however, the people of Connecticut do want to see higher tax rates for the wealthiest residents, which Republicans are trying their darnedest to avoid.”

    In essence, the Republicans lost that battle when Generalissimo Rell threw in the white flag. It may linger for awhile as a possible campaign issue now that a judge in the Superior Court has discarded the state’s campaign finance law as unconstitutional. Funny that Blumenthal lost that one.

    But on the whole, chalk up one for the Dems.

    The issue on the front burner now is how, from the center of this gigantic hole, Dems may jack up revenues so that they will not be put to the inconvenience of having in the future to face a $9 billion deficit. These things are most embarrassing around election time.

    There are three ways to do it:

    1) Cut costs – not in the Democratic play book.

    2) Raise taxes even more on mini-millionaires and millionaires. Very possible. The minis are a minority, and they have not the means to vote out of office pickpockets in the legislature. So long as the Democrats do not raise taxes on the “middle class,” their seats are secure. And the poll you cite simply confirms what every demagogue already knows: that when vulnerable minorities are footing the bill, the majority non-payers are not likely to object to the arrangement.

    3) Highball the deficit. This is a sure shot. If I project the deficit to be, say, an additional $2 billion over and above what I suspect it might be, I have produced a $2 billion lump sum that may be applied to the real deficit, sparing me the necessity in the future of struggling with the present circumstances.

    My guess is Democrats will settle on a combination of 2 and 3.

  3. Thomas Hooker

    Mr. Pesci suggests that in order to avoid an even larger state fiscal deficit in the future, Democrats will have to turn to one or more of three sources.

    Before addressing each point, however, it is important to understand the state’s actual fiscal position. A study just published in the summer edition of University of Connecticut’s publication “Connecticut Economy” pointed out that Connecticut spends a smaller portion of its gross state product on government than all but two other states. U.S. Census Bureau data released this year revealed that the state ranks roughly in the middle of all states in terms of state employees per 10,000 population. If one adds municipal employees, Connecticut ranks well into the more efficient states in the country. And a 2005 study conducted by economists at the Federal Reserve Bank of Boston also pointed out that government spending in Connecticut as a percentage of personal income ranks the state among the lowest spending states in the country. Furthermore, let’s recall that Connecticut’s Democratic-controlled General Assembly and its Republican governors have for many years registered balanced budgets, only failing to do so twice- this year during the worst economic downturn since the Great Depression, and2003, when the area was hit with a recession. So the data all point to a state that is already efficient in terms of staffing and spending. Let’s stop pretending, as does Governor Rell, that our state government is “bloated”; it’s not.

    Mr. Pesci asserts that in order to avoid a future deficit we might have to:
    “1) Cut costs – not in the Democratic play book.”

    Republicans are constantly demanding that government cut costs, without pointing out how those cuts will affect real people. Let’s point out that the current budget negotiations are already going to reduce spending on Medicaid by some $200 mn. Let’s be clear about that: Medicaid is medical spending for poor people who get sick or injured. Medicaid is already underfunded, primarily because unlike federal spending, which can go up when the economy enters a downturn, states must balance their budget and therefore are unable to fund important social services such as Medicaid when they are needed most. And another one of the few areas in which the budget can be cut is funding for higher education. Is that really what we want to be doing? Cutting funding for the University of Connecticut and the state university system right at the time when family finances are failing and more and more state residents are either forced to or are inclined to attend state universities? Just at the point of maximum need, do we really want to short change our young people’s education?

    Democrats do indeed believe that it is the responsibility of government to provide a safety net for its citizens, especially during times when needs are most dire. We believe in funding education properly. We believe in taking care of people’s health, especially the most vulnerable among us. That’s who we are. And we believe that all of us in a civilized society bear a responsibility to help our fellow citizens.

    Mr. Pesci continues:
    “2) Raise taxes even more on mini-millionaires and millionaires. Very possible. The minis are a minority, and they have not the means to vote out of office pickpockets in the legislature. So long as the Democrats do not raise taxes on the “middle class,” their seats are secure. And the poll you cite simply confirms what every demagogue already knows: that when vulnerable minorities are footing the bill, the majority non-payers are not likely to object to the arrangement.”

    Wait a minute. It is simply wrong to term our legislators “pickpockets”. That is the sort of inflammatory rhetoric that increasingly characterizes Republicans in this country and in this state. It is also the sort of ill-considered and irrational rhetoric that has led Americans and Nutmeggers alike to reject the Republican Party. Our state is faced with a massive fiscal deficit and our legislators are struggling with how to balance that budget in a time of need for many citizens without hurting the most vulnerable amongst us. That is government’s dilemma, and referring to those making those difficult choices as “pickpockets” is simply wrong.

    Also, referring to millionaires as a “vulnerable minority” turns logic and truth on its head. Many in our state are hurting now, losing their homes, losing tuition money, losing jobs, losing health insurance when they might be very sick. But of all the people who are hurting in our state, millionaires are not included. By definition if they are sitting on a million in savings, or bringing in incomes in the seven figures, they are not vulnerable, but in fact are the lucky ones. It is not demagoguery to point out that for more than a century, America has believed in and set as national policy the tenet that Americans who are able to pay more to help their more vulnerable neighbors should pay more. That is the basis of our progressive tax rate system that has been supported by voters for a hundred years.

    For Governor Rell to demand that the poor suffer bad health care through major cuts in Medicaid, to demand that the lowest rung of workers pay 50% more for bus fares to get to their low-paying jobs, and to short-change our youth by cutting education expenditures when they are needed most, is wrong and cruel. And it is equally wrong to make every citizen in this state feel the pain of this recession, except for those who are most able to assist without pain- the wealthiest among us. This is a moral question, and I simply cannot accept the characterization of millionaires as a “vulnerable minority”. Go to the slums in Bridgeport and you will see a real vulnerable minority.

    Furthermore, let’s keep in mind that New York has a far higher tax rate than Connecticut, including a top rate nearly double ours, and that top rate, when it kicks in, pertains to a taxpayer’s entire income, not the marginal amount. So a higher marginal amount for Connecticut’s wealthy is certainly not unprecedented.

    To the last of Mr. Pesci’s points:
    “3) Highball the deficit. This is a sure shot.

    With the new legislation that requires the General Assembly and the governor to use economic and fiscal estimates supplied by the non-partisan Office of Fiscal Analysis, no one can play games with budget deficit figures any more, especially not the governor, as she attempted to do this year.

  4. Hooker,

    Circumstances are such as to make the highballing of deficits an irresistible temptation for everyone, but most especially for those hooked on spending. And if you don’t believe legislators are hooked on spending, please explain to me what happened to all the state’s surpluses over the last 18 years. You do understand that a surplus is by definition the amount of money appropriated in excess of budgeted needs? Right? Those surpluses should have been returned to the people from whom they were misappropriated. They weren’t because government got greedy, and greed led legislators to spend beyond their means. That is why the state budget tripled within the administrations of three governor, two Republicans and a faux republican.

    As to the rest of it, we’ll see what Democrats produce.

    But you can cut 10% of anything.

    Just thank the Lord you don’t live in Rhode Island, whose governor is proposing to shut down for twelve days all but necessary governmental functions. They have a deficit there too, caused in part by the declining fortunes of their mini-millionaires. We are experiencing the same situation here, which is why Democrats now claim that Gov. Rell’s forecasts are too low. The income tax was supposed to be more reliable than, say, the sales tax. The reason it isn’t is because a minority group, mini-millionaires, pays 40 percent of the tax. A flat rate tax would be less subject to economic changes in the market place.

    What can this mean if not that the ability to pay of the minority groups Democrats hope to plunder have been seriously compromised?

    If not at this precise moment, we will very shortly have a situation in which a voting minority, mini-millionaires, will be overwhelmed at the polls by a majority that will force them to pay more than half of the state’s budget. That is why I have used the word “plunder.”

    Now that is good news indeed for state service consumers and providers, but it is not good news for the minority that gets to foot more than half of the bill. Is it? Surely, you can see this.

    Thomas Jefferson could.

    My further point is that, in the long run, none of this may be good news at all. My view is that everyone should be more equitably “invested” in the state economy — middle class people and poor people too, not only as consumers of state goods and services, but as people who provide money for these purposes.

    Naturally, our views of fairness are different. Mine is a little more democratic than yours.

    Thomas Jefferson could.

  5. wtfdnucsailor

    Everyone is in favor of cutting spending before raising taxes until the cuts affect a program that the individual uses or benefits from – To paraphrase Senator Russell Long of LA – Don’t cut your program, don’t cut my program, cut the program of the fellow behind the tree. That is where the Dems have recognized the dilemma. There are a great number of programs and organizations that would be crippled beyond recovery if State funds were reduced or eliminated entirely. These programs play a vital roll in the State, whether it is providing support for those who cannot fend for themselves, encourage business to come to or stay in Connecticut, encourage the out of state or out of country tourist to come and spend dollars in CT, support public education (primary, secondary, or collegiate), conduct safety and environmental inspections, or fund local bridge, road, and other infrastructure repair to mention just a few state supported programs.

    Unfortunately, to get a budget, it will be necessary to reduce support for many programs. Some of these programs, such as the Tourism Districts, have already been shut down for the duration. I just hope that the ‘consessions’ made by the governor yesteday will lead to a budget agreement that minimizes the effect of the cuts and also minimizes the tax hike for any group. No matter, the State still needs a budget. The Governor and the legislature have played ‘fingerpointers ‘ long enough.

  6. When I say that mini-millionaires are vulnerable, I mean they are politically vulnerable. It only takes 5o per cent of a vote plus one to deprive pluckable classes of their liberty and their money.

  7. wtfdnucsailor,

    The quote you are paraphrasing is: “Don’t tax you, don’t tax me, tax the fellow behind the tree.” It is a black commentary on the notion that we can spend endlessly and get someone else to pay for it.

  8. Well, well, well, a poll shows that a majority of Nutmeggers understand math, and a bunch of Dems jump through hoops to show that in fact they can’t add and subtract.

    Folks, we have to cut spending, or we will have a structural deficit forever. Even a state with a majority of Dems now gets it. Will Don Williams ever get it?

  9. Vic said it in 3 sentences. It does not get any simpler.

  10. When I say that mini-millionaires are vulnerable, I mean they are politically vulnerable. It only takes 5o per cent of a vote plus one to deprive pluckable classes of their liberty and their money.

    Well sure. But is that a reason to diminish majority rule, or is it a reason to diminish income inequality?

    If Connecticut had one person making $180 billion a year, and 3.5 million residents making an average of $5000 a year, I imagine that one individual would be extremely vulnerable to being deprived of his or her money.

  11. wtfdnucsailor

    Don Pesci – I knew the original quote, that is why a said ‘a paraphrase’ to turn it around. Same sentiment if from a different point of view. By the way, are there any trees left to hide behind?

  12. By the way, are there any trees left to hide behind?

    Always, a forest of them.

  13. If Connecticut had one person making $180 billion a year, and 3.5 million residents making an average of $5000 a year, I imagine that one individual would be extremely vulnerable to being deprived of his or her money.

    In the old Soviet Union, they used to call them kulaks, which translates into “fist.” Those who did not flee the country went to the gulag. Wouldn’t it be more efficient to confiscate the riches of the millionaires and treat them similarly? Out where I live — the frontier — there’s still plenty of land for a gulag. We could name it after Mr. Donovan.

  14. The question of “fairness” resolves itself into a difference between appropriation and expropriation. At some level, one becomes the other no?

  15. Thomas Hooker

    Don Pesci writes, “Circumstances are such as to make the highballing of deficits an irresistible temptation for everyone, but most especially for those hooked on spending.”

    But again, legislation passed into law this session requires both legislature and governor to use the same forecasts produced by the non-partisan, and I emphasize “non-partisan”, Office of Fiscal Analysis. So neither branch of government is permitted to either low-ball or high-ball the budget balance. It is a thing of the past. I think that is now established fact.

    Mr. Pesci writes further: “And if you don’t believe legislators are hooked on spending, please explain to me what happened to all the state’s surpluses over the last 18 years.”

    In response, one could look at the “rainy day fund”, which I believe is over $1.5 billion heading into the current recession. Of course that reserve is mostly to be used to close the gap in the budget the next two years, and it is insufficient to do that. But let’s keep in mind that the drop in tax revenues in the United States is the most precipitous since the early days of the Great Depression. Though you suggest that legislators are “hooked on spending”, I would point out that over this period of rising incomes, economies and spending, those Democrats you so deplore have received strong and rising support from the voters of this state. It seems clear that the people of this state do, indeed, approve of the spending that those legislators enacted (with the active approval of Republican governors). But I would reiterate this state’s fiscal facts: all the data point to a state government that spends taxpayer funds judiciously. Only two states spend a smaller percentage of their state economy on government than Connecticut. We are lightly staffed compared with the majority of states in the country, and even more so if one counts municipal workers. Again, though you continue to contend that spending is out of control, the data simply do not support that belief.

    Also from Mr. Pesci, “You do understand that a surplus is by definition the amount of money appropriated in excess of budgeted needs? Right? Those surpluses should have been returned to the people from whom they were misappropriated.”

    First, let’s get away from heated rhetoric like “misappropriated”. The state’s budgets were passed with bipartisan support: a Democratic General Assembly and Republican governors. And if state funds have been so badly managed, it certainly cannot be discerned by our state’s voting patterns. If anything, each succeeding election that brought rising Democratic majorities suggest that the people of this state approve of their actions. If they believed the government had “misappropriated” funds, our legislature’s composition would be much different today.

    Mr. Pesci further asserts that “government got greedy, and greed led legislators to spend beyond their means.”

    I think it is very clear that our state legislators are not greedy. If they were, they wouldn’t waste their time as legislators in Connecticut, earning $35,000 each for many months of work each year, many from this part of the state suffering through long commutes in miserable traffic, and their work in Hartford certainly impacting their ability to earn significantly more in their private sector jobs. Only the rare individual has been caught embezzling government funds. So the manner in which they have appropriated the taxpayers’ funds is certainly not motivated by greed. If it were, they would have voted themselves real salaries, rather than the puny salaries they are receiving.

    But Mr. Pesci contends that greed is the reason “…why the state budget tripled within the administrations of three governor, two Republicans and a faux republican.”

    I think that budgets rise for a few reasons, the very least of which is “greed”. As incomes rise, people in any state demand more services from government, better roads, repaired bridges, more money for education, including greater funds for their universities, more attention to the environment and more strenuous efforts to clean up pollution. Furthermore, since public employees are people who have to purchase goods and services just like private sector workers, as prices, including housing prices, rise, those workers have to be paid more to keep pace with the cost of living. We simply cannot pay salaries commensurate with rural Missouri to employees here in Connecticut. Though Mr. Pesci harps on the tripling of the budget over several years, still the data point to government spending and government staffing that are quite moderate, or even abstemious compared with most other states. Again, those conclusions come from the University of Connecticut, the Census Bureau, and the Federal Reserve Bank of Boston. In other words, from sources that aren’t politically motivated. Indeed, the economists with the Fed of Boston asked precisely the question of whether New England state governments were overspending, and answered with a resounding “no”.

    Mr. Pesci further contends that “The income tax was supposed to be more reliable than, say, the sales tax.”

    I find that difficult to fathom, because any economist will tell you that both income and sales taxes are by their very nature cyclical. Both will fall during an economic downturn, and fall sharply, though the latter somewhat less than the former. The property tax is the one tax that is not cyclical.

    Mr. Pesci adds: “My further point is that, in the long run, none of this may be good news at all. My view is that everyone should be more equitably ‘invested’ in the state economy — middle class people and poor people too, not only as consumers of state goods and services, but as people who provide money for these purposes.”

    But the problem with everyone being “invested more equitably” in the economy, the middle class and the poor as well, is that that “equitable investment” is far more painful and difficult to produce for the middle class and the poor than it is for the very wealthy. Though Mr. Pesci contends that it is a matter of democracy with a small “d”, in fact Americans have supported an unequal taxation regime for many decades. Most Americans understand that the poor should be exempted from taxation for the most part, because they are struggling and vulnerable. And in a downturn, most Americans acknowledge that the middle class often struggles mightily, as they are now. So to maintain our educational systems, which must educate our youth in good times and bad, to maintain our police and fire departments, who must be paid in good times and bad, to keep our roads and bridges from decaying, we must maintain a certain level of spending. And the only people in the state who can afford to continue paying, and pay taxes without severe economic distress, are the wealthiest.

    It is therefore a moral, as well as a practical, decision. Everyone should contribute to maintaining essential services, and services for the newly struggling unemployed and those without health insurance, and those losing their homes. In that situation, it is morally right to ask that those most able to help actually help. And that has been the belief of the majority of Americans for a very long time.

  16. State legislators are not in for the $$$, it’s the power to spend YOUR $$$. Oh and the benefits.

  17. Mr. Hooker has an enviable gift for misunderstanding. When Mr. Pesci says that legislators who have tripled spending within the space of two governors are greedy, Mr. Hooker surely knows that Mr. Pesci is not pointing to their greed for personal wealth: They are greedy for tax money. Now, the funny thing about state taxes is this: States do not print up money, unlike the federal government. So, every dollar that is appropriated by the state is a dollar that is not spent on something else. If the state takes a dollar from Mr. Hooker, that is a dollar he cannot put towards his child’s college education, or a payment on his mortgage or the purchase of a McDonald’s hamburger. This is simply another way of saying that it is a dollar not spent on the salary of a UConn professor, which dollar the professor will use to stimulate the economy according to his fancy; it is a dollar that a bank will not receive from Mr. Hooker as payment on his mortgage, which dollar the back will use to lend to a possible homebuyer; it is a dollar lost to McDonald’s, which dollar the fast food restaurant will use to pay a worker who likely earns less a year that Mr. Hooker.

    That’s how the thing works in the public marketplace. Every dollar taken from the marketplace is a dollar that is not productive of multiple goods. Mr. Hooker is a little quick in assuming that the dollar taxed does more good than would be the case if it were left to make its way in the public marketplace enriching college professors, banks and hamburger tossers.

    And that is why Mr. Pesci objects to the state spending rather than returning surpluses. A surplus is money collected by the state for an unbudgeted purpose, which is another way of say that it is unneeded taxation. A budget is a declaration of needs and costs.

    Mr. Pesci does not care a wit about Connecticut’s relative standing with respect to other states, because Mr. Pesci lives in Connecticut. Mr. Pesci has lived in Connecticut all his life, and he remembers when – three short governors ago – the bottom line on the budget was about $7.5 billion. He does not recall people with distended bellies starving in the street. At that time, under the enlightened administration of Gov, William O’Neill and the preceding Gov. Grasso, both Democrats, the legislature was considerably more conscious of its spending.

    Then, along came Weicker, for many years a Republican. Then came the income tax. Then the spending floodgates were open, and they have not been shut since. Why? Because legislators are greedy for tax money. If you give them money, they will want more. If you give them more, they will want more. I call that greed. This greed has produce a trifold increase in the state budget since the last Democratic governor.

    And it seems people are beginning to catch on, according to every poll I have consulted. Even in New Jersey, rife with corruption, people’s number one concern is – spending.

    If Mr. Hooker wants to ignore these trend lines, he does so at his own peril. Perhaps he should seek out a job in the state legislature, where he will find himself right at home among pooly paid head-in-the-sand legislators who are simply tone deaf to the shouts and alarms all about them.

  18. Now, the funny thing about state taxes is this: States do not print up money, unlike the federal government. So, every dollar that is appropriated by the state is a dollar that is not spent on something else. If the state takes a dollar from Mr. Hooker, that is a dollar he cannot put towards his child’s college education, or a payment on his mortgage or the purchase of a McDonald’s hamburger. This is simply another way of saying that it is a dollar not spent on the salary of a UConn professor, which dollar the professor will use to stimulate the economy according to his fancy; it is a dollar that a bank will not receive from Mr. Hooker as payment on his mortgage, which dollar the back will use to lend to a possible homebuyer; it is a dollar lost to McDonald’s, which dollar the fast food restaurant will use to pay a worker who likely earns less a year that Mr. Hooker.

    The state isn’t vaporizing all that money, though: in fact, they’re paying the UConn professor, who then spends that money on hamburgers or mortgages or what have you.

    Correct me if I’m wrong, but the state’s budget seems like it’d have to have a greater part of its expenses dedicated to salaries — and less spent on consumables (raw materials, energy costs, etc) — than just about any other industry you could name. If the state hires a state trooper, we all get to enjoy safer roads, and at the end of the day, from an economic standpoint, who really cares if it’s Don Pesci or Joe Trooper buying a hamburger from the McDonalds?

    I get what you’re saying about not caring about our standing relative to other states, but we don’t produce a lot of stuff here: I imagine we want to keep as large a slice of the dollars knocking around the many service professions as possible. At the same time, we have a lot of income inequality. So why not hire a lot of teachers so we can have small class sizes in Greenwich (and everywhere!), and set that money to circulating instead of gathering dust in some hedge fund? Let Ray Croc’s widow and the Argentinian cattle ranchers send their money here to be invested.

    Because lets face it, your mini-millionaires aren’t measuring their happiness by how many McDonald’s hamburgers they can cram into their craw anyway. They want local police to come shush their noisy neighbors, public schools so good even the cleaning lady can discuss Chaucer with you, fast fire department response times, short lines at the DMV, a great big McMansion built by the seashore by a townie builder, good roads, lots of nice landscaping, sparkling clean beaches, and a government that does enough to gossip about with their friends over doubles tennis.

    Maybe there are some people who just want to die with the most money, and they can build a big cube in the middle of Nowhere, Alabama to fill with cash in the middle of a big plot of land with nothing but a diesel station and a WalMart for 100 miles around. We’ll lose those people. But who cares? If the rare billionaire classless enough to prefer having the billion-and-first dollar in their pocket to a having a well-functioning community around them decides to go elsewhere, then I’m not going to shed any tears.

  19. “So why not hire a lot of teachers so we can have small class sizes in Greenwich (and everywhere!), and set that money to circulating instead of gathering dust in some hedge fund?”

    The state could employ every unemployed person as a teacher. The state could, theoretically, employ everyone to do everything. The problem is, the state is not omnipotent and it is forced to make assumptions about the needs and wants of the people. The free market uses price signals to determine supply and demand. But as the state’s budget grows relative to the free market economy, prices become distored because the state must rely on assumptions. The state economy is therefore necessarily more inefficient than the free market economy. As the state’s budget grows relative to the size of free market economy, those inefficiencies will generate greater and greater distortions in prices. Those distortions will result in gluts of some things and shortages of others (to many cops, not enough burger flippers). At some point, the price mechanism which signals the equilibrium between supply and demand fails. Soon after, the whole system collapses.

    If what you’re really asking is how to increase employment, the answer is to remove state interference in the economy. Take the minimum wage for example. If a business is only able to spend $5/hour on someone to perform an entry level job, but the state mandates the business pay $9/hour, the job goes unfilled, creating unemployment. Which is worse, a $5/hour job or no job at all? And if the person gets hired at the entry level job, he can learn from the person at the next level up and eventually move into a $9/hour job or a $20/hour job. But minimum wage laws price entry level workers out of the market and so they don’t ever get the opportunity.

    There is an infinite amount of work to be done, but there is only a limited amount of capital to put towards that work. The state can seize that capital and redistribute it, but it can only do so inefficiently. And state taxes and regulations discourage the use of capital in the free market. So the best way to get that capital to work – generating employment – is to remove state interference.

  20. Sam,

    I have no strong objection to anything you’ve said. My point to Mr. Hooker, who I enjoy discoursing with, was simply that a dollar spent in the public marketplace is like the mustard seed mentioned in the bible, small but giving rise to a tree so large that the birds of the air make their homes in it.

    One quibble: You write, “Correct me if I’m wrong, but the state’s budget seems like it’d have to have a greater part of its expenses dedicated to salaries — and less spent on consumables (raw materials, energy costs, etc) — than just about any other industry you could name.”

    You are not wrong; that is true of all service industries. Here is the real difference: In the public market place salaries, or the price of labor, is determined by the market place. If the product or service is good, people buy it and the money they spend on the product or service is parceled out in the form of wages and profits, part of which is devoted to maintenance, research and development and other associated costs.

    If the product is bad, the company goes out of business.

    Generally, that’s how things work in this theatre.

    Most of the money collected through property taxes and grants from state government for the purpose of public education is devoted to salaries. How do you know in the government run market place if a salary is too high or if a product isn’t good?

    Well, one way to measure this is to compare salaries and the quality of the product with similar salaries and products the public market place (by the way, there is no such thing as a private marketplace; that would be an oxymoron; neither is there such a thing as private enterprise. All entrepreneurial activity is by its nature communal and public).

    Comparison studies have been done between public and private education that services the same pool of students. And guess what? It turns out that Catholic schools in inner cities beat the pants of public school, and the salaries of the educators are lower. Ditto with schools such as the Armistead Academy.

    Now this tells me that the quality of the product in the one case (good) has less to do with salaries than other considerations. It also tells me that the product in the other case (bad) is not the result of low salaries, because salaries in the bad case are considerably higher than they are the good case.

    So suppose we want fewer bad schools and more good schools. How, in state run educational systems, is this to be done? In the public marketplace, what used to be called the “invisible hand” points its boney finger are bad education and say, “We’re not going to finance you any more.” In government run education, the boney finger is binding arbitration, a process that for decades has rewarded failing public schools in urban areas. Salaries for poor work are high in these failing institutions because it is politics rather than the quality of education that sets salaries.

    Believe me Sam. I’ve written enough columns on this subject to paper your living and dining room walls – all to no purpose. The obvious solution to this problem is to get rid of binding arbitration, which inflates costs and salaries. You want to see Chris Powell, Managing Editor of the Journal Inquirer, on this matter. Make sure you have a free afternoon.

    This is what happens when economic decisions are made by politicians. And that is why I am struggling against statism, in all its satanic forms. Just now, we are on the point of turning over our health care system to a government that can’t properly run an auto industry, a housing industry and an urban public school,l industry.

    I know I will lose this battle.

    And I don’t care.

  21. About losing the rich to other states, you write, “We’ll lose those people. But who cares? If the rare billionaire classless enough to prefer having the billion-and-first dollar in their pocket to a having a well-functioning community around them decides to go elsewhere, then I’m not going to shed any tears.”

    Heh!

    I have some very disappointing news for you. Virtually everybody in the executive and legislative department – with the possible exception of our crusading Attorney Generalisimo Dick Blumenthal, who is fixated narssisistically on his press image – are agreed that we do not want the rich to take off to Texas, which has no income tax.

    Don’t want it!

    Why? Because those golden geese provide, according to one study, 40 percent of state revenue. And, in the absence of attempts to cut the state budget by 40 percent – it has never been cut significantly – someone (perchance you) will be charged for the difference.

    No one wants to do this, because that would be political suicide. It would also rip the mask of the political pretenses that have trebled the state budget within the administrations of only three governors.

  22. Sam,

    I like my idea about the gulag better than yours. It will settle the problem of inequality once and for all. Then too, why should we be sending these pestiferous rich folk to Texas. Don’t they have enough problems?

  23. I like my idea about the gulag better than yours. It will settle the problem of inequality once and for all. Then too, why should we be sending these pestiferous rich folk to Texas. Don’t they have enough problems?

    Of course, for tax purposes, the gulag might as well be Texas, for all the revenue you’re going to collect off of them. A billionaire in a gulag is like a golden goose with a butt plug.

    If your plan was going to work, we’d need to find a way to tax stored wealth somehow. Which, joking aside, is probably a better idea from an economic perspective than taxing income, and is something we already do in the form of the property tax on people’s houses (and for most people, the far majority of their wealth on paper is their house) — and which is quite regressive, now that I think of it.

  24. Sam,

    Kidding aside, if all the rich in Fairfield’s Gold Coast were to move to Texas, the state would still be enriched by their presence – because there is more than one way to get the golden eggs, or at least some of them, from mobile geese; sales taxes, death taxes, property taxes.

    Your mentioning of geese reminds me of an aphorism from Soren Kierkegaard, the Danish philosopher: “It’s better to be shot at once than to be trampled to death by geese.” I suspect the rich know this.

    By the way, before Mark Sanford’s Argentinean adventure, South Carolina was going to ELIMINATE its property taxes. I don’t know how that stands now. But if you want to get rid of your high taxed house and move to a state where housing priced are lower and may, God willing, be unencumbered by taxes, you might consider SC. My brother moved there a dozen years ago. And when I last visited, I saw no one dying in the streets.

    I’ll let you have the last word. It’s been a pleasure.

  25. Thomas Hooker

    Mr. Pesci notes, “If Connecticut had one person making $180 billion a year, and 3.5 million residents making an average of $5000 a year, I imagine that one individual would be extremely vulnerable to being deprived of his or her money.”

    Actually, Mr. Pesci, when we come across countries like that with a vast impoverished peasantry and a few oligarchs, far from being victimized, those oligarchs are the oppressors. They have the resources not only to squirrel away billions in banks, both domestic and foreign, but also to hire bodyguards and finance armies whose loyalty they purchase with high salaries and lots of fun military toys. And they are also able to purchase elections and the thugs who insure that no one objects to those rigged elections. Let’s think of the Somosa family in Nicaragua, or the families who still exercise feudal control most of the land and companies in Pakistan, the military junta that oppresses the impoverished Mayan majority in Guatemala, or the generals who control oil wealth in Nigeria, or the regime in Equatorial Guinea, or the House of Saud, whose vastly extended family continue to sip at that Middle Eastern country’s carbon trough.

    No, great wealth usually leads to great strength for that wealthy minority. Don’t weep for the uber-wealthy, Mr. Pesci. They generally do just fine!

  26. Thomas Hooker

    Mr. Pesci writes, “Your mentioning of geese reminds me of an aphorism from Soren Kierkegaard, the Danish philosopher: ‘It’s better to be shot at once than to be trampled to death by geese.’ I suspect the rich know this.”

    I take off my hat to Mr. Pesci for finding the one coherent sentence that Kierkegaard ever wrote in his life!! Kudos!

  27. Thomas Hooker

    Mr. Pesci writes: “That’s how the thing works in the public marketplace. Every dollar taken from the marketplace is a dollar that is not productive of multiple goods. Mr. Hooker is a little quick in assuming that the dollar taxed does more good than would be the case if it were left to make its way in the public marketplace enriching college professors, banks and hamburger tossers.

    “And that is why (I) object to the state spending rather than returning surpluses. A surplus is money collected by the state for an unbudgeted purpose, which is another way of say that it is unneeded taxation. A budget is a declaration of needs and costs.”

    In fact, I must take issue with that supposition. This is not only a moral issue, but an economic one as well, and it centers on the concepts of marginal propensity to consume versus marginal propensity to save, and the multiplier effect. When you take a dollar out of state spending by firing an employee, there is a reverse multiplier effect in which that dollar is not spent on food in a supermarket, and that supermarket doesn’t pay its employees, who do not by shoes, etc. The multiplier varies depending on whose dollar it is, because those at the lower end of the economic spectrum must spend all of their earnings, or most of them, while someone at the higher end of the spectrum saves a far higher proportion of each marginal dollar of income. So the reverse multiplier effect, i.e., the amount taken out of the economy from a dollar of cuts, is far higher if it was going to a low-paid employee than it is when that dollar was going to a highly paid person.

    And that is the essence of the argument put forward by Joseph Stiglitz, the Nobel Prize-winner in economics who asserts that it is preferable for a state economy to raise taxes modestly than to resort entirely to spending cuts. I’ve copied below an excerpt from his writings on the subject:

    “[E]conomic analysis suggests that tax increases would not in general be more harmful to the economy than spending reductions. Indeed, in the short run (which is the period of concern during a downturn), the adverse impact of a tax increase on the economy may, if anything, be smaller than the adverse impact of a spending reduction, because some of the tax increase would result in reduced saving rather than reduced consumption. For example, if taxes increase by $1, consumption may fall by 90 cents and saving may fall by 10 cents. Since a tax increase does not reduce consumption on a dollar-for-dollar basis, its negative impact on the economy is attenuated in the short run. Some types of spending reductions, however, would reduce demand in the economy on a dollar-for-dollar basis and therefore would be more harmful to the economy than a tax increase….

    “Basic economy theory suggests that direct spending reductions will generate more adverse consequences for the economy in the short run than either a tax increase or a transfer program reduction. The reason is that some of any tax increase or transfer payment reduction would reduce saving rather than consumption, lessening its impact on the economy in the short run, whereas the full amount of government spending on goods and services would directly reduce consumption….

    “The more that the tax increases or transfer reductions are focused on those with lower propensities to consume (that is, on those who spend less and save more of each additional dollar of income), the less damage is done to the weakened economy. Since higher-income families tend to have lower propensities to consume than lower-income families, the least damaging approach in the short run involves tax increases concentrated on higher-income families. Reductions in transfer payments to lower-income families would generally be more harmful to the economy than increases in taxes on higher-income families, since lower-income families are more likely to spend any additional income than higher-income families. Indeed, since the recipients of transfer payments typically spend virtually their entire income, the negative impact of reductions in transfer payments is likely to be nearly as great as a reduction in direct government spending on goods and services.”

    That other Nobel Prize-winner in Economics, Paul Krugman, has also written to support tax increases on wealthier residents as far less damaging to an economy than reliance on spending cuts. Indeed, he has pointed out that FDR’s spending increases early in the Great Depression were largely offset by massive spending cuts at the state level. And we see today that Obama’s real spending increases (as opposed to tax cuts) have been largely offset by spending cuts at the state level, a la the Great Depression.

  28. I’ll let you have the last word. It’s been a pleasure.

    In that case, let me just express my alarm that the WordPress moderation feature let through “butt plug.”

  29. Ok Hooker, you and Stiglitz win — raise taxes during a depression. Just brilliant.

  30. It’s one of the reasons George Bernard Shaw said that every profession was a conspiracy against the laity. He was probably thinking of college professors covered with the dust of ages, waving sheeves of statistics in their hands, or partisan economic writers. He could not have been thinking of Kiekegarrd.

  31. I’ve always preferred Bastiat to Stiglitz

    “If you make of the law the palladium of the freedom and the property rights of all citizens, and if it is nothing but the organization of their individual rights to legitimate self-defense, you will establish on a just foundation a rational, simple, economical government, understood by all, loved by all, useful to all, supported by all, entrusted with a perfectly definite and very limited responsibility, and endowed with an unshakable solidity.

    “If, on the contrary, you make of the law an instrument of plunder for the benefit of particular individuals or classes, first everyone will try to make the law; then everyone will try to make it for his own profit. There will be tumult at the door of the legislative chamber; there will be an implacable struggle within it, intellectual confusion, the end of all morality, violence among the proponents of special interests, fierce electoral struggles, accusations, recriminations, jealousies, and inextinguishable hatreds; the public police force will be put at the service of unjust rapacity instead of restraining it; the distinction between the true and the false will be effaced from all minds, as the distinction between the just and the unjust will be effaced from all consciences; government will be held responsible for everyone’s existence and will bend under the weight of such a responsibility; there will be political convulsions, fruitless revolutions, and ruins upon which all the forms of socialism and communism will be tried out. Such are the plagues that the perversion of the law cannot fail to let loose. “

  32. Thomas Hooker

    Don Pesci writes, “Ok Hooker, you and Stiglitz win — raise taxes during a depression. Just brilliant.”

    Keep in mind that he’s talking about state governments, not the federal government. For the federal government in a situation of overwhelming excess productive capacity and a liquidity trap, as we’re experiencing now, both of the Nobel guys have endorsed Keynes’ heavy deficit spending prescription, which should be substantially higher than our stimulus plan, which in terms of the actual cash outlays, is barely higher than the cuts at the state level.

  33. Hooker,

    You write, “But again, legislation passed into law this session requires both legislature and governor to use the same forecasts produced by the non-partisan, and I emphasize “non-partisan”, Office of Fiscal Analysis. So neither branch of government is permitted to either low-ball or high-ball the budget balance. It is a thing of the past. I think that is now established fact.”

    I just want to call to your attention this morning’s unwelcomed note from Keatings “Capitol Watch:”

    “The legislature’s nonpartisan fiscal office had made some fairly quick calculations Thursday on the governor’s latest budget proposal and said that the revenue was off by about $370 million. But some recalculations Friday now have the two offices much closer on the projections – off by less than $100 million over two years.” http://blogs.courant.com/capitol_watch/

  34. Hooker,

    I’m relying on you to tell us all whether you think George Jepsen, formerly the state Democratic Party chairman, is any longer a Stiglitzian.

    This is what he has to say in the Hartford Courant about the so called millionaires’ tax:

    “The so-called millionaires’ tax exacerbates what economists agree is a major defect of our current revenue structure — over-reliance on a narrow, affluent population — which leaves the state’s finances highly vulnerable to economic volatility, especially on Wall Street. It also codifies the class warfare ethos of the Democrats (mitigated somewhat by the governor’s proposed elimination of the estate tax). This rhetoric gives the wealthy one more reason to shift residency to tax-friendly states, as so many already have, taking their income, local purchases, job creation and philanthropy with them.”

    That is, I think you will agree, a pretty spare and neat encapsulation of everything that Mr. Pesci has been saying about the millionaires’ tax for the last year and a half.

    There are three possibilities here: 1) Mr. Jepsen has fallen away from his former faith and no longer favors despoiling millionaires of their diminishing riches and consigning them to gulags, 2) Mr. Jepsen has read our little dispute here at CLP and agrees most heartily with the position taken up by Mr. Pesci as against Mr. Hooker, 3) the light has finally dawned on Mr. Jepsen and he realizes that there ain’t enough water in the millionaires well to tend the garden he has fussed over most of his life, which requires huge transference’s of money and power from citizens to al all devouring state.

  35. Samuel says “we’d need to find a way to tax stored wealth somehow”

    Why not? The federal government does it through inflation, so why couldn’t the state’s do it, too? All we need is our own fiat currency. It’s specifically prohibited to the states by the Constitution (courtesy of Roger Sherman, who had a rather unpleasant experience with it), but who pays attention to the Constitution these days, anyway? The federal government doesn’t so who’s going to stop a state like Connecticut or… California… from printing its own paper money?

  36. Thomas,

    All of your arguments rely on the false theory called the Parodox of Saving. For those not familiar with it, it basically says when people save they hurt themselves because if people aren’t spending, then companies won’t have to produce as much and if they don’t have to produce, they will fire people, which will cause even less spending and higher unemployment in a vicious circle. So all spending is good.

    It’s a Keynesian theory, and just about everyone in government is a Keynesian. That is why the government is just throwing money at everyone – at businesses hoping they will lend and at individuals hoping they will spend. The government is always trying to increase spending and actually encourages people to go into debt. The government keeps the money supply high, which artificially keeps interest rates low (discouraging saving and encouraging debt) and which also inflates the money supply creating rising prices. Rising prices make people want to get rid of their dollars quickly, while the dollars are worth more. That’s why people save little and we end up with a high reliance on welfare and social security when work is hard to come by and in old age.

    The government actually encourages people to go into debt. When enough businesses and people get so far into debt that they can’t recover, a collapse occurs. The government tries to stop this from happening by throwing more money at everyone. Inevitably this will fail and in the end the dollar will be destroyed.

    But who cares, because in the long run, we’re all dead, right? Except our debt doesn’t die. It just keeps getting passed on to the next generation. Using that theory, eventually you reach a point where you can’t find anyone else willing to finance your debt and you can’t make the payments on it if you could find someone willing.

    We’ve just about reached the end of the road.

    What people should be doing is increasing savings. Initially there will be a recession. The recession will cause unemployment, and it will also cause prices to fall. When prices fall far enough, people will begin to spend again. They will spend from their savings, not with debt, because it is cheaper than debt. The high savings rate will cause interest rates to fall naturally, rather than by inflating the money supply. This will stimulate the economy further while keeping prices down. The result will be very low unemployment, low prices, little debt, and naturally low interest rates that fluctuate based on the savings level rather than manipulation of the money supply.

    This will not ever happen as long as the Federal Reserve exists.

  37. Well said, JP.
    Washington continues to spend more, tax more, print more, and regulate more without having the slightest understanding of how the Federal Reserve created the problem and how the free market ought to work.

  38. Thomas Hooker

    First, Mr. Pesci, I am amazed that you or anyone, for that matter, still reads that worthless rag Hartford Courant anymore, especially since it is relying, according to its competitors, on stealing content from other newspapers, and since its reporting staff is a quarter what it was just a few short years ago. But George Jepsen did, indeed, pen an oped published there, and it is appalling.

    Let’s be clear: the progressive tax system is a moral and ethical choice that this country made nearly a century ago. It states that those who are able to pay somewhat more should pay something more to help out the entire country. When President Bush 43 proposed his tax cuts for the wealthiest Americans, Bill Gates and Warren Buffett both opposed it. Mr. Buffett pointed out that it was immoral for a billionaire like him to be paying a lower tax rate than his secretary. It is sad to see Mr. Jepsen parroting misleading and untrue right-wing talking points when he held such an important position in the Democratic Party. He’s definitely left the reservation. Off his meds? Can’t tell.

    But his suggestion that a graduated state income tax compels rich Nutmeggers to leave the state is hogwash and not supported by any reputable study. For several years now Connecticut has ranked in the top three states in the nation in the percentage of millionaires to total population. The other two are New York and New Jersey…? It’s not MA, is it? Sorry, the second one escapes me. But the point is that these states have continued to be among the wealthiest states in America with the highest percentages of millionaires, even though the tax rates of two of them are substantially higher than Connecticut’s. So Mr. Jepsen’s suggestion is silly, and it is certainly regrettable to see him use that argument, and to use the equally silly and false “class warfare” slogan. Shame on him. Lots of explaining for him to do.

    The truth is that the real crisis in our tax and cost structure is that it chases out our young people. They are the ones who suffer the most. Not only are our housing prices very high, but so, too, as a result of a failed privatization program, are our utility rates. In fact, they’re the highest in the continental U.S. Our tax regime is highly regressive, hitting lower income and middle income young professionals and new college graduates the hardest. They pay the same flat tax on income that much wealthier residents pay, though they spend a substantially higher percentage of their substantially lower incomes; they pay the sales tax that hits a much larger percentage of their incomes than it does the wealthiest residents; and property taxes are highest in communities with the most modest income levels, which also penalizes young people just starting out. That is why we lose our young people at the highest rate of any state in America, and why we are the 8th oldest state in the nation. The reverse is true for the wealthiest Nutmeggers, with effective property tax rates in wealthy Greenwich the lowest by far of any community in the state. And our gasoline tax, the highest in the continental U.S., also hits lower income young workers harder than more established families. The Working Families Party put out a study that revealed how our tax regime hurts lower income families by imposing a much higher effective tax rate.

    So please don’t expect me to cry for millionaires in Connecticut. They’re doing just fine, thank you. A progressive tax rate is not only fair, but it is essential to relieve pressure on young workers, who don’t deserve to be burdened with high property taxes, high gas taxes, high utility rates, and high sales taxes while Republicans protect the wealthiest residents from chipping in to help resolve our economic and fiscal crisis.

    And regarding Mr. Jepsen’s essay, I’m appalled.

  39. Thomas Hooker

    Hi, JP. You write that, “All of (my) arguments rely on the false theory called the Parodox of Saving.” Let me point out that the arguments I put forth are based on the arguments of economists far more eminent than myself. I would like to point out that you appear to have left out an essential element in your criticism of Keynes’ 1936 General Theory, which includes The Paradox of Saving. Keynes was making the point that this paradox is the case in a situation of profound economic collapse in which factories are lying idle across the nation, and a very high percentage of the workforce is unemployed. It is not a prescription for an economic patient during normal times.

    In a situation like that faced by the world in the 1930’s, it was impossible for the economy to pull itself out of the downturn through normal corrective factors, because there was so little consumer demand, and new investment was impossible due to the massive overhang of idle factory capacity. In that specific instance, Keynes pointed out, and Nobel Prize-winning economist Paul Krugman has reiterated in recent months, only the central government has the capacity to stimulate the economy out of its doldrums through massive deficit spending. He also pointed out that the economy was held in its depression due to the Liquidity Trap, in which no matter how low the government pushed interest rates, it could not stimulate new investments because of the capacity overhang. We have something approaching that in today’s economy. Interest rates are effectively zero, and the same was the case in Japan during its “lost decade”.

    The Great Depression has been studied for decades by economists and the lesson that leads to the prescription of heavy government spending in a major recession and substantial liquidity creation by the central bank have been widely accepted, tested, and found reliable. Might I point out that massive liquidity creation was relied upon after the 1987 stockmarket crash (down a third in a day), and after the LTCM meltdown in the late ’90’s.

    Contrary to your suggestion that the government is always trying to get people into debt, I would refer you to the fiscal policies of the Clinton administration, which raised tax rates on the wealthiest Americans, cut discretionary and military spending as a percentage of GDP, and succeeded in achieving three straight years of fiscal surpluses, including the largest fiscal surplus in decades. As a result, by the end of the Clinton administration, the Treasury Department ceased issuing 30-year bonds. All of those gains were squandered during the atrocious reign of Bush 43, however. Mr. Clinton succeeded in sharply reducing our nation’s central government debt as a percentage of the economy. In fact, that ratio has risen the most during peacetime under Republican presidents: Reagan, Bush 41 and Bush 43 (our current wars just don’t qualify as all-out mobilization of the nation for war).

    I will also point out another anomaly in your argument, which is that governments always rely on Keynesian theory. Paul Volker, Fed chairman in 1979, utilized monetary policy to stamp out inflation, though his Rx was brutally painful. Volker screeched on the monetary breaks in 1979, pushing money supply growth down to zero at one point. That led interest rates to rise to 20% at one point during the Carter administration, which killed the housing market and was the key reason that Carter lost his reelection bid. The high interest rates brought on the worst economic downturn that the country had seen since the Great Depression, which led Ronald Reagan’s popularity numbers to plummet through his first two years. But massive deficit spending combined with an economic recovery (and certainly ignited a big part of that recovery) led to greater employment growth just in time for the 1984 election.

    I must conclude by saying that your suggestion that we eliminate the Federal Reserve System is a very “out there” position. It’s been shown over the decades that an independent or quasi-independent central bank has led to monetary, price, and interest rate stability in far greater measure than in economies in which political forces have strong control over money creation. The Fed is not perfect, and it never will be. But “auditing” or curbing the authority of the Fed, or, heaven forbid, eliminating it, is a very dangerous policy choice that would certainly leave the American economy worse off.

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