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OP-ED | A Campaign of Substance

by Brian O'Shaughnessy | Aug 14, 2014 4:26pm
(4) Comments | Commenting has expired
Posted to: Economic Development, Economics, Election 2014, Equality, Opinion, Poverty, State Budget

Campaign season is officially under way. We will hear a great deal about issues that candidates believe will influence votes. This does not mean, however, that we will be analyzing the information we need to make informed voter decisions.

We especially will not be hearing about strategies that will move Connecticut out of the economic doldrums in which it is perpetually mired.

The majority of our issues are economic in nature. Academic achievement, crime, jobs and rising healthcare costs are all tied to poor economic conditions. How we raise money, how we spend the money we raise and the impact of both of these decisions is central to the quality of life in Connecticut. 

Why then during the campaign will the only economic issue we discuss be how much we spend?

I have bored folks for the past 18 months writing about the pressing need to measure the effectiveness of how government operates. How can we promote investments that have a positive economic impact and how do we ensure that this benefit is being achieved?

Why is this concept so important? Because we can’t spend more, but we can most certainly spend better.

Prior to the implementation of the state income tax, Connecticut was noted as a state with great income equality. That is not a typo. An interesting study of Connecticut’s travel toward intense disparities in economic condition can be accessed here

Subsequent to the implementation of the state income tax, state government grew from approximately $4 billion to $19 billion and economic disparities accelerated dramatically. As government grew, so did economic disparities and urban poverty.

Connecticut traveled from a state in the top 10 when it came to economic parity to the state — behind New York — with the greatest disparity in the nation. All in 30 years.

Many believe it is not a coincidence that these negative population results have coincided with the growth of government.

To want change is not an anti-government sentiment. To the contrary, it is driven by people that still believe government has a fundamental role in shaping how we live, but we need to adjust. We must follow the money we spend in the most intense manner possible to see if it achieves purported goals.

In a recent article in Governing magazine, urban planner Aaron Renn wrote about the challenges in promoting real economic development, using Detroit as an example: “There are a lot of people who are personally doing quite well even in the midst of decay. In fact, the cold reality is that they are benefitting from that decay.  In places long in decline, it’s likely to take some outside shock to the system to break the rackets that are producing civic stasis and dysfunction.”

We are not Detroit. Not even close. The point, however, should be well taken. The interplay between an economy and government policies produces certain results. We should honestly appraise these results. When the results are bad, we need to adjust.

Simply, we need to “reallocate” increasingly limited public assets. This is no small effort. No mechanism exists to reallocate funds based upon results. The appropriation of funds appears to be an annuity, not an honest annual appraisal of merit.

New approaches are evolving that measure the impact of taxpayer funded public investments. They should be imbedded in how our state spends money. They should also be discussed during the campaign.

“Pay-for-success” initiatives are prodding government to evaluate the efficacy of programs when making funding decisions. Social financing concepts seek to promote the enormous financial benefits that flow from addressing root causes that avoid later “reactive” costs tied to criminal justice, special education, supportive housing or unemployment. The manner in which we spend money directly impacts our ability to later raise money with tax revenues. These are all such basic concepts that most are unaware that they are absent in the world of government finance.

I wrote some time ago that government does not necessarily need to be smaller, just better.  Government jobs are important to our state’s financial health. With arguably the worst job market in the country, a somewhat constricting economy and a decreasing median income, the jobs of those that rely on government are important to the overall health of our state’s economy. Jobs do not need to go away, but they need to be different. 

Government can do better and that should be a campaign topic.

Brian O’Shaughnessy of New Haven is a principal in the firm Community Impact Strategies Ltd. The mission of CIS is to facilitate the investment of public and private capital for the purpose of creating measurable improvements in human productivity and living conditions.

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(4) Comments

posted by: shinningstars122 | August 14, 2014  5:31pm

shinningstars122

Mr. O’Shaughnessy I agree that government needs to be more efficient but I feel you need to do some deeper research on the reasons why we are in the predicament we are in today.

I’ll cite this passage.
>>>>>Subsequent to the implementation of the state income tax, state government grew from approximately $4 billion to $19 billion and economic disparities accelerated dramatically. As government grew, so did economic disparities and urban poverty.

Connecticut traveled from a state in the top 10 when it came to economic parity to the state — behind New York — with the greatest disparity in the nation. All in 30 years.

Many believe it is not a coincidence that these negative population results have coincided with the growth of government.

I think you missed a great opportunity to dig into this data beyond the obvious.

50 years ago Connecticut has a thriving industrial based economy, which believe it or not was substantially driven by government spending… defense spending to be exact.

Corporate tax rates in 1964 were 50% with a surtax of 28%.

When the industrial jobs disappeared so did the tax revenue.

The service economy that replaced this offered much lower salaries and demished taxes collection dollars.

Cities and towns felt this the hardest and I am sure the large growth in state spending can be attributed to off setting these tax losses in all areas.

Today corporate tax rates are at 35% over $18.3 million and we all know corporations with all the tax loopholes they have lobbied for, do not even pay half of that often.

Some actually get hundred of millions dollars in rebates from the IRS.

Clearly we are under collecting coporate taxes and the tax code is riddled with special interest preferences that have greatly effected the current economic crisis of lack.

How much is enough for these publicly traded companies?

Now we have to deal with inversion as share holders demand even more profits.

I mean honestly not one Fortune 500 company is doing worse after the Great Recession, the majority are doing way better, but you and I are still struggling.

Sir that is not a government spending problem it lack of moral responsibility to our society problem.

As long as we ignore how much corporatism has changed all of our lives , for the worse, then we can blame no other but ourselves for allowing our elected officials to run the American economy, and the middle class, into the rocks.

Here is the link for tax rates since 1909.
http://taxfoundation.org/article/federal-corporate-income-tax-rates-income-years-1909-2012

posted by: BrianO | August 16, 2014  9:25am

shinninstars122:

Thank you for your thoughtful response.

You are correct about the changing jobs market in Connecticut and you may be correct about the appropriate levels of corporate taxation, however you somewhat missed my point.

I am not commenting upon the sources of state revenues in my piece, but the manner in which the available revenues are spent and the effect these expenditures have on the underlying conditions they purport to address.  If we had more corporate taxes, but the same policies toward expenses, the results may be worse. If our state programs support the underlying economic conditions that are creating need, we are involved in a zero sum game.  There is a financial conflict of interest involved in permitting government to be a change agent when it has a vested interest in the status quo. This is especially true because we arguably have the worst private sector jobs market in the country, which makes government resistant to change. Simply, how do we get better results?

posted by: QuestionMark | August 16, 2014  1:34pm

@BrianO: You are absolutely correct. Arguably have the worst jobs market in the country, which makes government resistant.  You ask: “How do we get better results?” 
We need a change with our Gov.Dannel Malloy jobs market resistant government. It’s time to replace our career politician governor with a proven career businessman in Tom Foley. Too much political leadership keeps the state failing very badly. We need educated Connecticut voters on Election Day who won’t be party line robot voters, to elect Tom Foley as governor to change our sinking fiscal downfall direction.
Malloy has realistically earned no Boy Scout merit badges to qualify him to earn Eagle Scout Governor honors. I agree with Brian O’Shaughnessy and shinning stars that government needs to be more efficient, but it won’t happen in Connecticut until we make a voting change in our failed state leadership of Gov. Malloy. We are fortunate to have a very business-savy qualified Tom Foley to vote for on Election Day to replace a career life-time politician who appears to have over-stayed his welcome as a non-performing governor.

posted by: shinningstars122 | August 17, 2014  11:26am

shinningstars122

@BrianO so we are at what came first the chicken or the egg?

I fully understood your point.

I just fundamentally disagree with your premise.

Maybe you saw this article from the CTMirror on state spending on cities and towns?

http://ctmirror.org/state-funding-how-much-is-your-city-or-town-getting/

This is just one year of data.

I hate to say this but you are buying into the free market opinion of how to fix the economy and government.

When the Federal government, which is the biggest spender in our economy, stops spending well we all know GDP falls.

Since the great recession the FED has lowered interest rates to zero so for the investment community,the free market they have accumulated way to much wealth while continuing to pay lower tax rates.

This has also creating the painful reality of why recovery has been so slow…there is no incentive to invest in job creation which leads to increased consumer spending which is what actually fuels are growth.

Job creation and all its related benefits would increase tax revenues too. The growth of wealth made playing stock market does not give us the same bang for our buck.

Basically this is the FED/ US Treasury subsidizing, just as the Federal government subsidizes billions in spending for all aspects of our government that corporations and the plutocracy devour.

The Feds loan money at interest rates that no one on Main Street will ever see and continue to under charge these folks on taxes as a form of keeping the economy afloat.

This is not clearly sustainable. It is basically a Ponzi scheme.

It would be illegal for any US corporation to be run like this but that is the irony of the problem.

Corporations and the plutocracy depend on this type of policy,in actuality they thrive on it.

What this means for the states, which can not run deficits, is that they have to raise revenue and or cut expenses.

Or as we are now seeing in many states cutting corporate tax rates, subsidizes billions in corporate welfare and embracing right to work policies.

All this combined lowers workers pay and spending habits, which in turn lower tax revenue.

The bottom line is that government is not a for - profit entity but I do agree it should at least break even and be run much more efficiently.

Sadly we are are having our arm twisted by special interests, I would actually call it a form of extortion, by the free markets.

I mean look what the technocrats have done in Europe.

Spending is a big part of the problem but fair and responsible tax policies are bigger part of it.

I feel both must be tackled with equal furor but like your piece states and as many others in the private and public sector believe…its a spending problem.

I would highly suggest you seek out the book ” Winner Take All Politics- How Washington Turned Its Back on the Middle Calls.