This is the fifth in a series of articles exploring the critical policy challenges that the next governor and Legislature will face, as well as their positions on these issues.
Listening to Republican Gov. Chris Christie and his Democratic opponent Barbara Buono talk about jobs and the economy in New Jersey, you would think they were talking about different states.
Buono sees a state with 400,000 unemployed workers unable to find jobs, a state that ranked 47th in economic growth two years in a row, a state that gives $2.1 billion in tax breaks to corporations, but condemns hundreds of thousands to work for a “starvation wage” of $7.25 an hour because its governor vetoed an increase in the minimum wage. She blames the state of the economy on Christie’s failed “trickle-down, supply-side, Romney-style economics.”
Christie sees a state that created 140,000 jobs in four years and bounced back from superstorm Sandy, a state that turned around an anti-business climate by cutting business taxes and blocking a new millionaire’s tax, a state that merged Rutgers and UMDNJ into a mega-university that can help the state compete for biotech and high-tech jobs. Christie said rebuilding the state’s economy was difficult because of the “mess left for us after the Corzine-Buono years.”
What Buono and Christie agree on — and what voters consistently tell pollsters — is that supercharging the New Jersey economy and creating jobs are the most important challenges facing the governor and Legislature that will be elected 11 days from now, and the two offer very different visions for how to do it:
To economists, business leaders and public policy experts, the Christie-Buono debate over economic policy and job creation is part of “the usual witches’ brew of politics and economics,” as Rutgers University economist Joseph Seneca put it, and it is inadequate for the depth of the economic challenge that New Jersey faces.
New Jerseyans understand that that the state is worse off today than it was in 2000, which is why they gave Christie only a 42 percent approval rating for his handling of jobs creation and the economy in a Rutgers-Eagleton Poll released this week, even though they are prepared to vote for his reelection in landslide numbers.
New Jersey’s pharmaceutical industry has lost market share to research clusters in California, Massachusetts, and New York; its telecommunications industry has evaporated; and companies are leaving its suburban office parks for 24/7 urban centers with good mass transit.
New Jersey lagged neighboring states in both job and Gross Domestic Product growth before losing 250,000 jobs in the Great Recession of 2007 to 2009, and has only regained 140,000 of the jobs lost, while New York State has been adding private-sector jobs. Further, the jobs created are in industries like hospitality and healthcare that pay less than the high-tech and financial sector jobs lost.
What is needed, economists and public policy experts say, is for New Jersey’s leaders — public and private sector, Democrats and Republicans — to come together and agree on a new vision for where the state wants to go and what it needs to do to make up for a dozen years in which New Jersey has steadily been losing ground to other states in economic competitiveness.
“What we need is a grand vision like the founders of North Carolina’s Research Triangle Park had in the 1970s and New York Governor George Pataki had in the 1990s for the capital region of Albany and what New York Governor Andrew Cuomo has today to make New York a world center of high-technology excellence,” said Gil Medina, a former Republican state commerce commissioner and currently executive vice president of CBRE Group, the state’s largest commercial real estate brokerage.
“It’s hard to look long term because New Jersey has had so many problems to solve, but we need a vision to guide tax policy, infrastructure spending and investments in higher education based on where we want to be in five years, 10 years, 20 years from today, and we need to decide how we’re going to pay for it,” he said.
That was the type of vision and leadership that was provided by governors like Democrat Richard Hughes, who understood in the 1960s that New Jersey had to build a competitive higher education system, and Republican Tom Kean, who created the Transportation Trust Fund and the Commission on Science and Technology and built four advanced technology research centers at New Jersey universities in the 1980s, Gordon MacInnes, president of New Jersey Policy Perspective, a liberal think tank, noted.
Seneca agreed. For New Jersey to compete in the new global economy, he said, New Jersey needs to develop a “bipartisan consensus on a whole portfolio of policies — a competitive tax structure, business incentives, infrastructure, high-quality schools, higher education, R&D (research and development) — that would pay off independently of party if you kept doing it for 25 years.”
“If you look at states that have been successful — North Carolina, Massachusetts, and California before its recent political wars — that’s what they did,” he said. “They focused on investment as opposed to pursuing a redistribution agenda and property tax relief.”
The long-range vision that Medina, Seneca, and MacInnes are talking about has largely been missing from the Christie-Buono campaign, much less a grand economic master plan with a plan to pay for it.
Buono has promised to increase state spending on a wide range of initiatives that could make New Jersey more competitive, but has failed to provide a plan to pay for them. The millionaire’s tax she wants to reimpose would be dedicated to a redistribution of property tax relief.
Christie has touted the potential of the merger of the University of Medicine and Dentistry of New Jersey into Rutgers University to produce job-creating research partnerships with biotech, pharmaceuticals, and other cutting-edge industries. But he has been reluctant to put forward any long-term plan to provide a dedicated funding source for transportation infrastructure or any other long-term investment that would conflict with his “no new taxes” pledge.
“Except for rebuilding after Sandy, Christie has not talked about capital investment in infrastructure,” MacInnes complained. “The $750 million higher-education bond issue was not as strategically targeted as it should have been and represents a marginal step against the scale of investment required over time to take advantage not only of the Rutgers-UMDNJ merger, but also to create the smaller research centers and public-private collaboration we will need to take full advantage of the assets we have.”
Buono has noted repeatedly during her campaign that she sponsored legislation to engender public-private research partnerships between New Jersey colleges and private-sector firms, but that Christie vetoed it along with a slew of other Democratic-sponsored job-creation bills that he dismissed as “a pile of crap.”
Buono, MacInnes and other liberal Democrats have argued that Christie’s focus on cutting taxes to spur economic growth is the wrong approach.
“When you look at where the good-paying, high-quality jobs have gone, the idea that they are going to low-tax states is fictional. Sanofi Aventis, Hoffman-LaRoche and companies like them are going to Cambridge, California, New York City, Germany — to places where higher education is strong and taxes are high. The conversation we’re having about tax cuts is the wrong one.”
Tom Bracken, president of the New Jersey Chamber of Commerce, disagrees.
“Gov. Christie has done more in the last four years than any governor I can remember going back to Tom Kean to make New Jersey competitive,” said Bracken. “Would everybody like to have more projects underway? Absolutely. He took a situation that was going downhill and turned it around and now we have some momentum going forward.”
Bracken joined Seneca and Medina in praising Christie and the Democratic Legislature’s leadership for working together in bipartisan cooperation to approve a series of targeted business tax cuts in 2010; the Rutgers-UMDNJ merger; a pension and health benefits overhaul, a 2 percent cap on local spending increases to limit property tax increases; and, most recently, a revamping of the state’s corporate tax incentive program.
Michael Egenton, the Chamber’s legislative director, noted that the five-year phase-in of $560 million in business tax cuts included a series of tax changes that benefited both large companies and small businesses, and that it underlined Christie’s message to the business community that the state would be business-friendly and would follow through on its pledge to cut unnecessary regulation. So did Christie’s appointment of Lieutenant Governor Kim Guadagno to personally oversee business development.
“We actually went to Gov. (Jon) Corzine and said you need to centralize economic development and be the CEO of the state,” Egenton recalled. “Pennsylvania Gov. Ed Rendell was actually calling our board members on the phone and inviting them to come see the incentives on offer if they moved to Pennsylvania. Corzine said no, that the system he had in place was okay. It wasn’t.”
“Guadagno has been a breath of fresh air for the business community,” Bracken added.
The debate between Christie and Buono over the $2.1 billion in subsidies New Jersey has provided to companies to move into or stay in New Jersey has been one of the most heated areas of policy disagreement in the campaign.
Good Jobs First, a national public policy institute, reported in June that New Jersey tied for fifth in the nation with the 10 “megadeal” incentives of $75 million or more that it paid to companies to relocate to or stay in New Jersey. Newark-based Prudential received $250.8 million to move to a new office tower a few blocks away. Panasonic got $102.4 million when it moved its headquarters nine miles, but stayed in New Jersey. Burlington Coat Factory received $40 million in tax incentives to keep 626 jobs on land it already owned in Burlington County. Nationwide, Good Jobs First noted, the average subsidy’s cost-to-jobs ratio is $456,000 per job.
Buono denounced the subsidies as “more corporate welfare for the rich while Christie cuts property tax relief for the middle class.” But Seneca noted that “most states offer rich incentive programs, and you have to have cards to be in the game.” If tax subsidies are a bad idea, “why are the other 49 states doing this?” Christie asked when he signed a bipartisan overhaul of the state’s corporate tax subsidy program into law on September 19.
“One positive from the recently enacted incentive law was the fact that they now allow incentives for firms with as few as 10 employees in health sciences or information technology, or for 40 employees in manufacturing, which recognizes the technological change in contemporary manufacturing,” MacInnes said. “But to completely lift the cap on the amount of future subsidies and to believe you can turn around the economy by depending on future tax credits alone is nuts.”
The change in the corporate tax subsidy law to help smaller firms has been a mainstay of Buono’s platform, as has her support for the constitutional amendment that would raise the minimum wage from $7.25 an hour to $8.25 and provide for future increases pegged to the inflation rate.
Christie conditionally vetoed Democratic-sponsored legislation to raise the minimum wage by $1, suggesting a three-year phase-in instead to cushion the impact on businesses.
Bracken and the New Jersey Chamber of Commerce have made the defeat of the minimum wage constitutional amendment a top priority, while the New Jersey State AFL-CIO and its president, Charles Wowkanech, have worked hard to mobilize support for its passage, believing that a higher minimum wage would tend to push up wages throughout the workforce.
Buono has hammered away at Christie over New Jersey’s high unemployment rate, which stood at 8.5 percent for the month of August — 1.2 percent higher than the 7.3 percent national average — and the state’s failure to regain 110,000 of the 250,000 jobs lost between December 2007 and February 2010 as a result of the Great Recession, while New York State and Pennsylvania regained all of the private sector jobs they lost and added tens of thousands more.
New Jersey’s poor job performance is actually part of a national “jobless recovery” in which national employment remains more than 2 million jobs below 2007 levels and is part of what economists predict will be a “New Normal” where 7 percent to 8 percent unemployment is not uncommon. Furthermore, unlike most states, New Jersey’s employment problems predate the Great Recession.
“New Jersey was creating an average of 67,500 jobs each year during the 1990s when the economy was expanding,” noted Medina, who was serving as commerce commissioner during those dot.com boom years. “But we experienced very weak job growth through the first decade of the 21st Century, adding just 15,500 jobs a year even though the national economy was expanding.”
Medina noted that Democratic Gov. Jim McGreevey not only imposed a corporate business tax surcharge to close a budget gap created after the 9/11 attacks on the World Trade Center sent the region’s economy into a tailspin, “but when corporate leaders complained about the new tax burden, he called them out and demanded they release their tax returns so people could see how much money they were making. He really damaged the state’s credibility with the business community.”
Even during the Corzine years, while the stock market was surging, New Jersey’s job growth was tepid, peaking at 23.7 million a year in 2006, Corzine’s first full year in office and flattening in 2007 before losing more than 100 million jobs a year in 2008 and 2009.
Under Christie, New Jersey gained 28,400 jobs in 2011, a state-record 59,100 jobs in 2012, and regained 28,800 jobs in the first half of this year, a trend that portended a similar job gain this year. But Seneca warned that New Jersey’s employment gains may not be as robust in the second half of 2013 as they were in the first six months.
He noted that national job growth has slowed from 200,000 a month to 150,000 a month, and added that the partial federal government shutdown and threat of a federal debt default will undoubtedly have an effect on employment gains in New Jersey and other states.
“Within New Jersey, the echo effects of Sandy are still playing out,” Seneca noted. “There has been a time lapse on recovery expenditures, and anecdotal evidence suggests that the net stimulus from rebuilding has been delayed and will be less rapid than expected. The summer tourism season also took a hit, partly due to the weather, and that will have an impact on both the jobs report and the overall economic picture too.”