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New York Post

 

Jersey: A Lesson in Failure for NY

August 19, 2008

By Steven Malanga

In the latest sign of New Jersey's rapid deterioration, its newspapers, which rely heavily on the local economy, are in dire straits. The state's biggest newspaper, the Star-Ledger, is losing some $30 million annually and cutting 20 percent of its work force, while the Bergen Record is closing its headquarters and sending most of its reporters to work out of their homes. Six Jersey Gannett newspapers are cutting jobs and seeking early retirements.

While (like most papers) they're suffering from the flow of advertising dollars to the Internet, Jersey's papers are also getting hammered by the state's economic woes. The Star-Ledger's owner says the paper is doing far worst than its outlets in other markets. That's not surprising - Jersey never really recovered from the recession of 2002.

From 2003 through 2007, while the nation's private economy soared, only tax-supported government jobs grew robustly in Jersey. Private employment increased a meager 1.8 percent, mostly in low-wage service jobs. In 2006, when the country was in the midst of an economic boom that produced government surpluses everywhere, Jersey faced a crushing $4.5 billion budget shortfall that prompted an embarrassing shutdown of state government.

Jersey's decline has been rapid and astonishing. In the '60s, one study judged it to be among the most business-friendly states because of its light tax burden. That helped attract a steady stream of businesses and residents from New York and produced robust economic growth.

Although there were occasionally signs of trouble over the years (like the pension shenanigans of Gov. Christie Whitman, in which government shirked its long-term obligations), the state's real decline started with the election of Gov. Jim McGreevey and a Democratic-controlled Legislature in 2001.

McGreevey, aided by the Legislature, raised taxes and fees an astonishing 33 times, totaling $3.6 billion, amid a recession. The state also passed a heap of new labor-friendly, anti-business laws that rapidly worsened conditions.

When an executive at one of the state's biggest employers, Federated Department Stores, said the company would re-evaluate future growth plans in Jersey, critics hammered him. But now, as an advertising executive noted, one reason the state's papers are suffering is because of retrenchment among local department stores, which used to be big advertisers. Jersey's pols see no connection, of course.

The fallout has been swift. In 2002, the Beacon Hill Institute rated Jersey 26th among the states in overall competitiveness; by 2004, it had plummeted to 44th. Recently, corporate executives surveyed voted it one of the states where they're least likely to expand.

Yet Jersey's leaders have learned little. In 2006, they heaped on several billion dollars of new taxes. Recently, Gov. Jon Corzine signed into law one of the most astonishingly stupid and anti-growth pieces of state legislation anywhere, requiring municipalities where private commercial or residential building is going on to build one unit of subsidized housing for every 16 new jobs that developers create. To comply, towns say they'll have to tax developers and raise property taxes. So a state that desperately needs new jobs is further raising the cost of generating them.

Despite the constant stream of bad news, reform has been difficult because the kind of big-government, tax-consuming politics ruining Jersey have given too many residents a stake in the system.

The rapid growth of state and local government - whose employment increased by 15 percent from 2000 through 2006 alone - has created a huge public work force not about to vote for eliminating its perks and benefits.

Meanwhile, the state's recent tax increases have fallen almost entirely on upper-income residents, so that those earning more than $200,000 a year (just 4.9 percent of households filing tax returns) are paying 60 percent of all income taxes. Jersey has even managed to make its onerous local property-tax system progressive by instituting a state rebate program - but only for those earning below certain incomes.

The effect of all of this is to make Jersey a place where businesses and a few residents pay the freight. So many people are on the public dole that reform becomes virtually impossible.

But such a system can't sustain itself long as businesses balk at expanding, some shrivel (like the newspapers) and declining job opportunities stifle growth. That's why New Jersey now lurches from crisis to crisis.

The question for New Yorkers is whether their pols learn anything from this. While for years people pointed to Jersey as a business environment New York should emulate, Jersey now stands as a cautionary tale. With Albany's own dysfunctional politics, only Wall Street's enormous earning power and Gotham's international tourist appeal has insulated New York (and only Downstate) from Jersey's fate. But with a prolonged crisis now possible in financial markets, New York may face the prospect of a Jerseyfication of its own budget and economy.

Wouldn't that be ironic?

Steven Malanga is senior editor of City Journal and a senior fellow at the Manhattan Institute.

Original Source: http://www.nypost.com/php/pfriendly/print.php?url=http://www.nypost.com/seven/08192008/postopinion/opedcolumnists/jersey__a_lesson_in_failure_for_ny_125076.htm

 

 
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