By being fairer, has New Jersey’s economy grown stronger

In a recent op-ed, Gov. Phil Murphy stated that “New Jersey is getting stronger” but cited no data in support of that claim. In fact, the most recent data shows New Jersey tied for dead last among states in the mainland U.S. in economic growth so far this year. We’ve lagged the nation for years. This means a slowly declining standard of living relative to the rest of the nation. That in turn means less tax revenue to support education and infrastructure for water quality and transportation, and other needs. It also means fewer job opportunities particularly for recent graduates. How did we slip so far from the days of Thomas Edison, Robert Wood Johnson, Bell Labs, and others?

Has our quest for “fairer” perversely interfered with our goal of “stronger?” Arguably, certain well-intentioned policies have made the average New Jerseyan worse off. We’ve made the state a less attractive place to do business with taxes that make us uncompetitive and actually discourage innovation, certain regulations that may do more harm than good, and an attitude that business owes us that may discourage certain employers. We can achieve fairness by trying to raise people up, or by unwittingly leveling us down to a lower common denominator.

Let’s discuss attitude. One of Newark’s largest employers is Audible, a subsidiary of Amazon. They are a model of socially responsible corporate behavior. They pay people well, give bonuses to employees who live in the City of Newark, and give employees $20 per week to patronize local restaurants to try to stimulate more street life in Newark. Public officials had been begging parent company Amazon to consider Newark. But when Audible did a ribbon cutting to celebrate a major expansion, neither the governor nor the mayor accepted invitations to attend. Perhaps we should not be surprised that Amazon didn’t give Newark a closer look after cancelling their project in New York.

Now let’s talk about regulation. One thing that gets lost is the burden of compliance with well-meaning but poorly thought through regulations that entail reporting requirements that are incredibly costly in terms of time and money, with minimal benefit. Then, we have multi-layered approval processes for minor capital improvements that could be streamlined. Some simple construction projects, for example, require both local and state approvals. Government should differentiate between needed regulation and pointless obstructionism.

Progressives should favor economic growth. There is nothing wrong with going for “stronger” by expanding the pie. There are some simple fixes to make the state more economically friendly; technical provisions of our state tax law actually discourage many investments in innovative enterprises. Changing this might be seen as favoring those wealthy enough to make major investments, so the irony is that such rational reform would promote “stronger” but might fail a litmus test on “fairer.” All the while, job creators can choose to expand or move out of New Jersey as Mercedes Benz and several other major corporations have recently done.

While we’re on taxes, we have been losing over $3 billion per year of net income that is migrating to other states, according to my analysis. That is nearly 1 percent of our income leaving the state forever each year – enough to offset any gains from a hike in a millionaire tax within a single gubernatorial term. That measure precedes the new federal limits on state and local deductions; outflow is bound to accelerate as the financial incentives to move increase. Perversely, our abnormally high exodus may narrow the income gap by lowering the average income, but that is hardly an optimal way to become “fairer.” Liberal denial that uncompetitive tax policy has consequences is the left wing analogue to conservative denial of global warming.

You can’t responsibly cut taxes unless you prudently cut costs of government. It can be done without adversely affecting needed services. We give public employees billions of dollars worth of health care benefits above and beyond what private sector people get. We have never really examined our spending on schools, particularly regarding how much money actually reaches the classroom. Our costs of public safety far exceed the national average. Spending varies widely among comparable municipalities, often for no good reason. But even reform of clearly abusive government spending seems to go against the current Administration’s notion of “fairer.”

If we have policies that make it too attractive for job creators to favor other locations, New Jersey will continue to see its economy gradually lag national trends. A strong economy requires attention to our relative competitive standing. Cheerleading is great, but is no substitute for actually playing the game well.

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