Coming into office eight years ago, New Jersey Governor Chris Christie faced a fiscal disaster, following decades of shortsighted but popular policies that robbed the future. He talked like a problem solver, and could have made difficult choices to raise taxes and tolls, and reduce public services for everyone, not just for transit riders. But since the majority of New Jersey residents don’t follow state and local government closely, this would have meant Christie received all the blame for all that had gone before. So he punted, and shifted costs from the past further into the future, to the extent that this was possible. As a result he won a second term. But the future continues to become the present, and the bills continue to come due. He is leaving office as one of the most despised politicians in the country.
Coming into office today, therefore, New Jersey Governor-elect Phil Murphy also faces a fiscal disaster, this time at the peak of an economic cycle rather than in a deep recession. A fiscal disaster that is certain to get even worse when the next recession hits and the stock market corrects to something like fair value. And he faces those same two options. Raise taxes, cut services, and perhaps tell his public employee union supporters that they have to give up more to get back in solidarity with their fellow state residents. And be blamed for all of the above. Or hope that state residents have gotten used to how bad things are under Christie, kick the can a little further, and try to sneak into a second term before the additional bills come due. And then leave office as despised as Christie and outgoing Connecticut Governor Malloy.
But there is a third option. Interested Phil?
The third option is to tell the truth about exactly how much of the harm in the present is a result of the policies of the past, policies that many older and former New Jerseyans benefitted from. Not in speeches few people hear, or newspaper articles and reports few people read, all of which are soon forgotten. But every day, in a way that forces people to face up to the reasons why they are getting less value for their tax dollar in the present than in the past.
The third options is to, yes, raise taxes, cut services, and demand reductions in compensation from New Jersey’s public employees, relative to the private sector workers who pay for it. But also, regardless of what combination of these painful options is chosen, to reduce taxes, tolls, transit fares to a level that only reflects the public services and benefits that the State of New Jersey and its local government are providing to New Jerseyans today. So people would see what the public services they are now getting actually cost.
All the costs from the past would be funded by a separate, additional surcharge that everyone could see. The Generation Greed surcharge.
Your local property tax is $6,000. And your additional Generation Greed surcharge is $1,500.
Your state income tax calculates to $5,000. And your additional Generation Greed surcharge is $1,000.
Your monthly New Jersey Transit ticket is $250. And your additional Generation Greed surcharge is $75.
Your New Jersey Turnpike toll is $2.50. And your additional Generation Greed surcharge is $0.75.
As a public employee, your contribution to own future retirement benefits is 10.0% of your pay. And your additional contribution to help fund the richer, underfunded benefits of older and retired public employees is an additional 5.0% of your pay.
In this system, regular taxes and fees would only fund the normal cost of the pensions and other retirement benefits that recently hired public employees are earning today.
The Generation Greed surcharge would pay for the additional pension contributions required make up for the inadequate past pension contributions for, and retroactive pension increases and early retirement incentives of, the retired and near-retired, and the retiree health insurance benefits of today’s retirees that were not pre-funded.
Regular taxes and fees would only fund the debt service associated with entirely new infrastructure built in the past 30 years, such as Secaucus Transfer rail station and the additional lane on the New Jersey Turnpike south of Exit 9. And the current cost of maintaining and replacing New Jersey’s existing infrastructure on an ongoing basis.
The Generation Greed surcharge would be used to fund all the additional debt service on bonds issued for any other purpose, including bonds floated to fund operating costs, to avoid pension contributions, and to pay for the ongoing repair and replacement of existing infrastructure that already existed 30 years ago. And any current revenues used for catch up maintenance and replacement of infrastructure that had been neglected.
New Jersey’s Generation Greed surcharge would be large. Based on a ranking I did using data from the Governments Division of the U.S. Census Bureau over the decades, New Jersey had the fifth most sold out future among all states in FY 2012, behind Rhode Island, Illinois, Michigan and Connecticut.
Based on somewhat above average debts and below average infrastructure expenditures over the decades.
And one of the nation’s worst public employee pension disasters.
Seeing the extent to which their future has been robbed right in front of them, over and over, would no doubt make many New Jerseyans angry at their politicians, and perhaps at public employees. The state legislature and public unions may not like that. As the state and its local governments are forced to make them pay more and more for less and less, however, that anger is going to gradually build anyway, with the public sector becoming discredited as a result.
By telling the truth up front, with the separate surcharge, today’s and tomorrow’s New Jerseyans would be forced to see that it is past politicians and public employees that they should be angry at. And perhaps their past selves, if they were among the past beneficiaries of lower taxes, greater services, richer pensions. Instead of Governor-elect Phil Murphy, and those public employees now on the job.
The public unions, like Governor Murphy, have to decide whom they represent. Those taxpayers and public employees who are cashing in and moving out after voting themselves a great deal in the past? Or those who are on the job now, and who will be working here in the future?
New Jersey’s situation is far from unique. I’ve identified Generation Greed, the richest generations in U.S. history on average but also the most self-serving , as those born between 1930 and 1957 or so. Those coming after have been left worse off, aside from those at the top, in terms of what they have been paid at work.
They have been disadvantaged in cheated in the public sector by deals to cash in future revenues and shift forward past costs, at all levels of government.
They have, on average, been provided with less stable childhoods than Generation Greed had received from its own parents, with perhaps one third of them having stable families instead of two-thirds.
To the point where the life expectancy of those born later has started to fall.
Such is the extent of Generation Greed’s entitlement, that it demands rationalizations, scapegoats and excuses for its collective failures. It put Donald Trump in the White House because he blamed immigrants and foreigners, not 35 years of future selling by Generation Greed, for the nation’s problems.
And until that entitlement is challenged, they will keep taking more.
Down in Washington, the Republicans are about to pass a huge tax cut for the last few years of Generation Greed’s careers, followed by an automatic tax increase on younger generations once all of Generation Greed is retired. Retired with old age benefits they have enriched for their own benefit, but demand be reduced to those with “time to adjust” to pay off their public debts.
Plenty of people are criticizing that deal, but none is doing so on generational equity grounds. No one dares. Those born after 1957 are without a champion. It is the opening no one will take.
Were Phil Murphy to take it, he would be in an interesting position. He wouldn’t be able to say “here are the higher taxes we have to pay, and the services and raises you will not get, because they have been Generation Greed.” He would have to say “here are the higher taxes we have to pay, and the services and raises you will not get, because we have been Generation Greed, and this is our last chance to change our shameful legacy by sharing in some of the consequences.”
New Jersey doesn’t have a sold out future because somewhere in Trenton there is a furnace where $100 bills are burned. It has a sold out future because past taxpayers paid lower taxes in exchange for better services by shifting the bill to the future, and past and soon to retire public employees got paid more in total compensation that future public employees – and past and future private sector workers — will receive.
According to his Wikipedia page, Phil Murphy was born in 1957, right on the border of what I call “Generation Greed” and my generation, “Generation Apathy.” He worked at Goldman Sachs from 1983 to 2006, and while he was often stationed abroad, while he was in New Jersey he personally benefitted from the average-to-below-average New Jersey state and local tax burden during those years.
New Jersey is among the states that receive the worst deals from the federal government, in terms of federal taxes paid and federal spending received. Most similar states have above average tax burdens. New Jersey did not, in part because it did not reinvest in its infrastructure, and did not fund its public employee pensions, during the time when Murphy’s income was highest.
In particular, Murphy benefitted from the massive money he got as a result of the Goldman Sachs IPO in 1999, at a time when New Jersey’s state income taxes had been cut by shorting and borrowing from the state’s pension funds. And while he might have been too rich to qualify for the property tax rebate checks the state was sending out during those years, the rest of his generation benefitted from that as well. No matter what tax increases are passed now, the taxes that weren’t collected on his Goldman Sachs income are gone forever. Others will have to make that up, with interest.
According to his Wikipedia page, Murphy sent his children to exclusive private schools, rather than Monmouth County’s excellent public schools. But the excellence of those public schools, for now, certainly increased the value of his house, for now. If New Jersey’s teacher pensions had been fully funded over the years, either Murphy would have paid more in taxes, or the schools would have had fewer services and lower paid staff, or both.
Murphy presumably commuted to Goldman Sachs in Downtown Manhattan. If he took the train, he benefitted from the fact that New Jersey Transit was one of the finest transit systems in the country during his career, even though its infrastructure in general, and the connection to Manhattan in particular, was being allowed to rot in a way that will diminish the economic well being of millions of younger and future state residents.
If Murphy drove to Manhattan, he benefitted from the lower Port Authority tolls, relative to MTA tolls, that resulted from toll freezes during the 1990s, in effect toll cuts relative to inflation. Those revenues, gone and never to be recaptured, were in part sucked out of New York City, with promised money not invested in New York’s airports. But also not invested in repairing and replacing the Port Authority bus terminal, resulting in an increasingly hellish commute for New Jersey residents who bring home a substantial share of the state’s income from Manhattan.
Murphy also paid lower taxes, and is therefore now richer, as a result of the Reagan, Bush and now Trump tax cuts the federal level. Tax cuts that in no way have diminished the public services and benefits that his generation has received, but will instead force a diminished old age, despite higher taxes, for those coming after.
He has been part of the executive/financial class. And, as a Democrat, has been elected with the support of the political/union class. Each of which has used its control of our public and private institutions to enrich itself at the expense of everyone else, the serfs, and the future.
To make up for what his generation did not pay, New Jersey’s total tax burden as a percent of state residents’ personal income is now about 10 percent above average, even with pensions and the infrastructure continuing to be underfunded. Getting out of the hole, if it is even possible, might require a tax burden as high as 35 percent higher than the U.S. average, as in the part of New York State outside New York City, if not 65 percent higher than the U.S. average, as in the city itself.
By some combination of tax increases, and falling income, as the richest New Jersey residents cash in and head for Florida, along with retired public employees.
As for the political/union class, as I’ve noted New Jersey’s public employee unions, with their retroactive pension increases, early retirement incentives and fraud, have nonetheless been less guilty than New Jersey taxpayers who didn’t pay for the pensions public employees had been promised to start with. Whereas in New York City the taxpayers are blameless, and the unions completely guilty.
The reality, however, is that most private workers have become worse off, or at least no better off, in New Jersey. And as the huge cost of public employee pensions has come to be admitted and partially paid for, state and local government workers have become richer and richer in total compensation relative to the private sector workers who pay their bills.
The total mean compensation of New Jersey’s state and local government workers, as measured by the Bureau of Economic Analysis, is now 40 percent higher than the average member of the private sector working in the state. State and local government workers were probably getting 40 percent more all along, but it didn’t show up in the data because taxpayers weren’t paying part of it – the pension part. That means paying extra from now on.
How high will New Jersey’s average public employee compensation have to go, relative to private sector compensation, to get its public pension funds out of the hole? The 55.2 percent in Downstate New York? The 81.8 percent in Upstate New York?
And what will happen to public services, and the quality of public employees, if New Jersey goes the union-preferred route of exempting all retired and soon-to-retire members from any sacrifices? And “sacrificing” their “fair share” exclusively by slashing the number of workers providing services, and the pay and benefits of new public employees? So the unions could justify lousy work on the grounds that they are understaffed and underpaid? As New York City did in the 1970s.
There aren’t many good choices in the wake of Generation Greed. And not just in New Jersey. In U.S. public policy, the only concern anyone in power has shown toward the future and those who will live in it has been the effort to cut and repeal the estate tax. So the offspring of plutocrats such as Phil Murphy, Donald Trump and the like would have enough money to be exempted from the diminished common future Generation Greed has created for just about everyone born after 1957 or so. Presumably screaming and demanding and lying and rationalizing all the way to the grave, so they don’t even have to feel bad about it.
The Greatest Generation sought to build a better world for its children. The richest members of Generation Greed want to try to assure a future for their children, and only their own children, in a future their collective choices has diminished.
Were Phil Murphy to tell the truth, to call out Generation Greed and impose the sacrifices needed to change its legacy while there is still time, he would be a hated man. By his executive/financial class. By his political/union class. By the state legislature. By everyone his age and older.
In part because, after being confronted by a Generation Greed surcharge on a property tax bill, younger and future New Jerseyans might seek to do the only thing they can do to shift some of that burden back to Generation Greed. By refusing to buy their houses until the price is so low that lower mortgage payments make up the difference.
Murphy might even be dumped out of office after one term. Of course if I were in his place, I’d prefer going down fighting after one term to slithering away after two, like his predecessor.
Sacrifices and pain are coming, however, regardless of what he does, and he will end up hated anyway. So, once their control of the media and the narrative ends, will his generation.
The sudden revelation of decades of sexual predation of young women by men who, in the words of Harvey Weinstein, “came of age in the 1960s and 1970s” shows what will happen when the dam finally breaks. On which side of it does Murphy wish to be?
The job of champion of everyone born after 1957, and the opportunity to be remembered as the person willing to tell the truth and become that champion, remains open. Because no one has the guts, plus the self-promotion capability, to take it. How about you, Phil?