The most recent economic indicators show that the U.S. economy may be on the brink of another downturn. However, for about a year, there has been slow but clearly visible job growth across the country. ,As a result, there has been an uptick in state income tax collections across the counrty. ,The additional revenue has been warmly welcomed by many state budget officers…
…and legislators.
While budget officers see the extra cash as a reduction of deficits, lawmakers tend to want to get back to their old deficit-causing spending habits. Nowhere is this contrast more visible than in New York, where income tax revenue is up for the first time since before the recession. The state comptroller is urging caution and fiscal restraint, while state assemblymen and senators appear to believe Christmas is coming early. From the Albany Times Union:
Income tax collections were briefly in the spotlight Thursday when state Senate Democrats ran through a series of proposals for more job training, start-up investments and other measures to boost employment. “We need to spur job creation,” Democratic Minority Leader John Sampson said in highlighting nearly a dozen bills with a total price tag of $101 million. The money, he said, would come from a $214 million pot containing income tax revenues that have come in higher than had been predicted in January when Cuomo put out his first budget proposal. The administration noted it is too early to finance new spending because much of the extra cash is going to restorations that lawmakers put in the 2011-12 budget, which went into effect April 1. … There’s no denying income tax revenues to date are ahead of the same period from 2010, according to the Department of Taxation and Finance. In April, for example, the revenues went from approximately $4 million in 2010 to $5.5 million this year — a 35 percent increase. “We are seeing growth,” agreed Mark Johnson, spokesman for state Comptroller Tom DiNapoli. But “it’s premature to say whether this will continue.”
First of all, government spending does not create any jobs. It redistributes jobs by taking Jack’s money in the form of taxes and giving it to Jill in the form of a paycheck, a “grant” or a subsidy. If Jack had been allowed to keep his money he could have spent it in a way that would have created a job for Jill; a real, private sector job.
In addition to the lessons of basic economics, there is the lesson to be learned from decades of fiscal recklessness in New York. If there is one state in the nation that should not increase its spending, it is New York. It is practically marinated in big government. In August last year, New York State Comptroller Thomas DiNapoli (D-WF) estimated that in addition to all the state’s costly entitlement programs, it also has a very big “shadow government” with practically autonomous, tax funded agencies. This bureaucracy, left untouched for years by the state legislature, costs each New York household $7,900 per year.
As a result of its over-bloated government, taxes in the Empire State are the highest in the country. The American Legislative Exchange Council ranks New York as the least competitive state. It should come as no surprise that New Yorkers are fleeing the state by the numbers. This obviously creates a vicious circle where the state’s economy suffers, something that is clearly visible in state GDP growth data from the Bureau of Economic Analysis: over thte past decade New York has seen its economy grow by a tepid 2.1 percent per year, 32nd in the nation.
Governor Andrew Cuomo (D) came into office with a big ambition to bring the state’s out-of-control budget into balance. However, he did not get farther than to his State of the State speech before he was back to the same old progressive agenda that has infested the legislative and executive hallways of Albany for decades. If he really wanted to end political “spendoholism,” he would have taken seriously the warnings he got from E.J. McMahon, the Manhattan Institute’s state fiscal watchdog. And while he has made a futile attempt to reform Medicaid, all he has accomplished is a crude cut in costs. The underlying cost drivers – the irresponsible handing-out of entitlements to people, regardless of the state’s ability to pay for those entitlements – are left untouched. This goes for all entitlement programs, not just Medicaid.
New York’s perennial fiscal problems, endless taxes and poor economic performance cannot be solved by more spending at every turn. A far better route forward is to follow the example set by Chris Christie (R), New Jersey’s dynamic and hard-working governor. If nothing else, what will prove that fiscal responsibility and restrained government works, will be the day when The Garden State outgrows, out-works and out-earns its Empire State neighbor.
