Coming into office eight years ago, Connecticut Governor Dannel Malloy faced a fiscal disaster, following decades of shortsighted but popular policies that robbed the future. He raised some taxes and cut some services, but mostly kicked the can with borrowing and deferred pension contributions shifted further into the future, and pursued an agenda based on traditional Democratic tribal issues such as guns, gays, immigration and marijuana. (Republican Generation Greed politicians use the same misdirection). Since the majority of Connecticut residents don’t follow state and local government closely, however, Malloy received all the blame for all that had gone before. As a result he was barely re-elected to a second term, and is leaving office as one of the most despised politicians in the country.
Coming into office today, Connecticut Governor-elect Ned Lamont 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. At some point he will either have to 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 Malloy, 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 Malloy and former New Jersey Governor Christie.
But there is a third option. Interested Ned?
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 Connecticut residents 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 Connecticut’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 Connecticut and its local government are providing to Nutmeggers 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 MetroNorth ticket is $300. And your additional Generation Greed surcharge is $100.
Almost your entire reinstated Connecticut Turnpike toll is going to make up for the past, not invest in the future, and counts as a Generation Greed surcharge.
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, of which I’m not sure there is any in Connecticut. (Buying new rail cars to replace old rail cars on schedule, and sending some of them up existing tracks, doesn’t count). And regular taxes would fund the current cost of maintaining and replacing Connecticut’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.
Connecticut’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, Connecticut had the fourth most sold out future among all states in FY 2012, behind Rhode Island, Illinois, and Michigan (it would also be behind New York City if it was a separate state), and just ahead of New Jersey and New York State as a whole.
Despite an average state and local debt burden, due to the third lowest average infrastructure construction expenditures as a share of state residents’ personal income over the decades.
And what at the time was the nation’s ninth worst public employee pension disaster.
(I’ll be updating the “Sold Out Future Ranking Analysis” to FY 2016 soon – it has thus far taken me 42 ½ hours of my own non-work time to download and arrange the Census Bureau Government Finances data for all states.)
People may not want to face it, but for those making investment decisions the cat is out of the bag. With General Electric giving the fiscal overhang of the state’s infrastructure disinvestment and pension underfunding as a reason to flee the state. It ought to know. Ever hear the phrase “the government should be run like a business?” Well in the Generation Greed era, the federal government and most state and local governments have been run like a business. Unfortunately, that business is GE.
Seeing the extent to which their future has been robbed right in front of them, over and over, would no doubt make many Nutmeggers 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 Connecticut residents 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 Lamont, and those public employees now on the job.
The public unions, like Governor Lamont, 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?
Connecticut’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 passed 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 soaring public debts, and the soaring trade deficit, both of which benefit the richest.
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 Ned Lamont 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 wehave been Generation Greed, and this is our last chance to change our shameful legacy by sharing in some of the consequences.”
Connecticut doesn’t have a sold out future because somewhere in Hartford 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, Ned Lamont was born in 1954, well within what I call “Generation Greed” well before my generation, “Generation Apathy.” He started a cable television station in 1984 that he sold in 2015, and is married to a wealthy financial executive.
Connecticut 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. For most years up until 2011 Connecticut did not, in part because it did not reinvest in its infrastructure, and did not fund its public employee pensions, during the time when Lamont’s income was highest. Taxes were even lower earlier. Connecticut didn’t even have a personal income tax until 1991, and eliminated county governments so its very few poor localities such as Bridgeport would not share a local tax base with richer places such as Greenwich.
No matter how high the state’s taxes rise now, the taxes that weren’t collected on all the high incomes of the past are gone forever, particularly now that the wave of corporate headquarters fleeing cities for suburbs has reversed, and the financial sector employment and income bubble is gradually deflating.
(Note: this is inflation-adjusted in $2017).
Others will have to make that up, with interest.
It may be that Lamont didn’t have to rely so much on Connecticut’s infrastructure at the time when tolls were being removed and maintenance was being deferred, if he and his wife both lived and worked in Greenwich, Connecticut, as his Wikipedia page implies. But it is likely that those who worked for them, at the office or at home, did use that infrastructure over the decades, as most of Southwest Connecticut zones out housing for all but the rich, and relies on in-commuters from farther and farther away to do all the other work.
The reason MetroNorth has proposed adding stations in the East Bronx as part of a plan to run some trains to and from Penn Station isn’t to provide a way for working class Bronx residents to get to Manhattan. It is to allow working class Bronx residents to get to Fairfield County, Connecticut, and provide workers without them having to be allowed to move there. Meanwhile, many of Lamont’s wealthy neighbors access their high-income Manhattan jobs either on the overtaxed roads or the deteriorating train line, each of which is essential to keep the falling value of their homes from falling further.
Lamont also paid lower taxes, and is therefore now richer, as a result of the Reagan and Bush II tax cuts at the federal level, although it is uncertain how the Trump tax cuts the federal level will affect him. 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.
Lamont 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, Connecticut’s total state and local government tax burden as a percent of state residents’ personal income was about 4.6% percent above average in FY 2016, 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 34.6% higher than the U.S. average, as in the part of New York State outside New York City, if not 63.3% percent higher than the U.S. average, as in the city itself.
By some combination of tax increases, and falling income, as the richest Connecticut residents cash in and head for Florida, along with retired public employees – if they can sell their homes.
As for the political/union class, as I’ve noted Connecticut’s public employee unions, with fewer retroactive pension increases, fewer early retirement incentives and fraud than in many other places, have been less guilty than Connecticut 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 the compensation of most private workers in Connecticut has flatlined at best since the year 2000, as Fairfield County’s corporate campuses emptied and metro Hartford’s insurance industry downsized. 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 Connecticut’s state and local government workers, as measured by the Bureau of Economic Analysis, is now about the same as the average for the state’s Finance, Insurance and Real Estate sector, and 27.2% higher than the average for those working in the rest of the state’s private sector. State and local government workers were probably getting 27.2% 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 Connecticut’s average public employee compensation have to go, relative to private sector compensation, to get its public pension funds out of the hole? The 42.0% in Downstate New York? The 68.9% in Upstate New York? It will certainly be more than the 32.9% in New Jersey, which as of 2017 still wasn’t paying in enough to get out of its pension hole either. Not even close.
And what will happen to public services, and the quality of public employees, if Connecticut 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 Connecticut. 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 Lamont, New Jersey’s 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 fell 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 Ned Lamont 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 Connecticut residents 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.
Lamont might even be dumped out of office after one term, as Malloy nearly was.
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. Especially when they find out that past Connecticut politicians have added bond covenants to force future state residents and businesses to pay their deferred bills.
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 Lamont 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, Ned?
Ok, I’ll admit it. This is basically the same post I wrote last year about New Jersey’s then newly-elected governor Phil Murphy, almost word for word, but with the charts extended another year.
As for Murphy, the answer is “no.”
The fact is, however, that I could write the same post, with the same links, about any newly-elected official anywhere in the country over the next two decades. In fact, I think one reason politics has become so nasty is that a generation wants someone else to blame for what it has done collectively to those coming after, as the consequences become harder and harder to dismiss or ignore.
I could have written the same post and substituted newly-elected Illinois Governor J.B. Pritzker. He and the man he defeated, Bruce Rauer, are a couple of old rich guys who benefitted from that state’s below average state and local tax burden over the decades and now benefit from the fact that all retirement income – no matter how much – is exempt from income taxes in Illinois. They spent the whole election basically not dealing with the fact that their state is broke, or explaining how they got there and who benefitted.
In fact, I emailed Governor Malloy after he was re-elected, and said I’d like to talk about a suggestion I had. His office never e-mailed back, but in case anyone up there was wondering, this was it. I originally came up with it for New York’s MTA. “You paid $60, and you have a $40 Metrocard! Your Generation Greed surcharge in $20.
That would certainly tell subway riders why they are in the situation they are in, each and every time the added money to their card.
Besides, I’ve been busy updating that state-level government finances database for every state from 1972 to 2016 – the Census Bureau stopped producing the “DAC-REX” files after FY 2007. Three weekends, both days. But now I just about have it.
I think a large aspect of political malpractice stems from far too many politicians being so much better off than the average person, almost entirely disconnecting them from the concerns and travails of the ordinary citizen. And when older, perhaps trapped in a nostalgic time warp.
Itemizing tax receipts is a superb idea. Not least because so many have very skewed ideas of where tax dollars are going anyway. A little astonishment might do some good.
Who says it’s malpractice?
In my view, the assertion that the harm they have done to everyone my age and younger was a mistake is a very generous interpretation of events.
I’d say they set out to do something, and succeeded. Which is why they keep doing it more.