Democrats in New Jersey are calling on Sen. Jon Corzine to ride to the rescue after Gov. Jim McGreevey's sex scandal. Corzine could easily finance his own gubernatorial campaign if McGreevey steps down now, and even if McGreevey stays on till the fall, Corzine will probably run for the state's top job in 2005.
But Corzine might not seem a white knight to everyone in the Garden State. The wealthy senator is rated among the biggest tax-and-spend members of Congress, and a Corzine governorship would likely propel an increasingly spendthrift government in Trenton down dangerous new spending roads.
Once considered among the most fiscally responsible states, New Jersey's reputation has been rapidly unraveling. Although McGreevey's predecessor, Christine Todd Whitman, cut taxes her first year in office, after revenues began pouring in from the economic boom of the later 1990s, Whitman soaked up the extra dollars with higher state appropriationssending the state's budget sky high.
McGreevey then roared into office on promises that he would not raise taxes in the wake of a post-9/11 budget deficit. But McGreevey finagled his way around his pledge by claiming that instead of raising taxes he was closing "loopholes" in the state's corporate tax system to the tune of a billion dollars in new taxes.
The controversial governor then abandoned any pretense to fiscal restraint after his party captured control of the New Jersey Legislature last year. McGreevey signed on to a tax scheme cooked up by a coalition of social-service advocates and public-employee unions to sharply raise taxes on the wealthiest New Jerseyans, enacting among the highest top rates in the country. All told, according to a recent analysis by the state's largest newspaper, the Star-Ledger, McGreevey has raised taxes more than any other U.S. governor since 2002.
Even this has not been enough to satisfy an improvident Trenton, so this year McGreevey also borrowed $1.5 billion for day-to-day operations. There is little in state government that is as irresponsible as financing operations by borrowing (the equivalent of paying your mortgage by credit card because your salary can't cover it), and now McGreevey has left it to his successor to figure out how to replace that $1.5 billion hole next year.
McGreevey has justified his maneuvers, because some of the new revenues are going to a property-tax rebate for middle class homeowners. But the rebate doesn't address overspending by Jersey's municipalitiesthe real reason property taxes are rising and will continue growing, offsetting the rebate.
Meanwhile, since 1997 the state's budget has grown by more than 50 percent, an average annual gain of more than 7 percent, at a time when inflation increased a mere 19 percent, or less than 3 percent a year.
Into this growing mess now steps Corzine, who was recently voted by the National Journal, a nonpartisan, Independent political publication, as one of the most liberal members of the Senate. He's especially noted as a big-spender and advocate of high taxes. The National Taxpayers Union, which rates representatives and senators each year on their support for restraining spending and tax increases, has three times given Corzine a failing grade.
Corzine has exactly the kind of track record that Jersey doesn't need right now, given the way the state's reputation has been slipping. The state's once-sterling bond rating on Wall Street has been downgraded because of its fiscal shenanigans. The Washington, D.C.-based Tax Foundation rates Jersey as the 11th worst state in terms of overall business environment. The Small Business Survival Committee, a Washington based group, places Jersey near the bottom of its list of states in terms of friendliness to entrepreneurs.
The unraveling of Jersey will produce fallout in New York, too. Whenever Trenton raises taxes, the tax-and-spend forces in Albany argue that New York can afford higher taxes now, too, because Jersey competes most directly and intensely for jobs and residents with New York.
Call it the state domino effect. And from the looks of things, the dominos are going to start falling in this region pretty soon.
Steven Malanga is a senior fellow at the Manhattan Institute and contributing editor of its City Journal.