Disciple of ‘Supply-Side Economics’ Guru Tapped to Fill Treasury’s Top Job

Democratic leader in state Senate declares Gov. Christie’s choice ‘raises questions and concerns’

Ford M. Scudder has been nominated by Gov. Chris Christie to be New Jersey's next state treasurer.
As lawmakers gear up for a major debate with Gov. Chris Christie over what to do about transportation funding and state tax policy, Christie said yesterday that he’s picked a financial analyst from Princeton who most recently worked alongside an icon of Reagan-era tax-cut economics to be the state’s next treasurer.

The nomination could face opposition in the Democrat-controlled Legislature.

The Republican governor said Ford M. Scudder, a Princeton native and Princeton University graduate, will take over administration of New Jersey’s $33.8 billion budget and the 3,100-employee state Department of Treasury on Nov. 9.

“With over a decade of private sector experience at one of our country’s premier economic research and analytical institutions, Ford Scudder brings important insights and management experience to our seasoned team of Treasury professionals,” Christie said in a statement, referring to Scudder’s work at Tennessee-based Laffer Associates, the consulting firm of Arthur Laffer, who was an economic adviser to President Reagan.

“I look forward to his insights on fiscal and tax policy solutions that will continue growing our economy and bringing much-needed relief to the burden shouldered by New Jersey taxpayers,” Christie said of Scudder.

‘Supply-side’ icon

Laffer is considered by many to be the father of the supply-side economic theory, which argues that lower tax rates encourage economic growth and investment. He’s also the namesake of the “Laffer Curve,” a measurement first scrawled on a cocktail napkin, which attempted to depict the point where higher federal tax rates would lead to less tax revenue by discouraging work and investment.

Within hours of Christie’s announcement yesterday, Senate President Stephen Sweeney cited Scudder’s work with Laffer in a statement that said Scudder’s selection for the treasurer position raises “many questions and concerns.”

To serve in more than an acting capacity in New Jersey, Scudder will have to win approval in the state Senate, which is controlled by Democrats and has constitutional “advice and consent” authority over Christie’s nominees.

“As the former chief operating officer of Laffer Associates he is deeply tied to a failed economic philosophy that treated working people and the poor with disdain,” said Sweeney (D-Gloucester). “New Jersey is not the place to reintroduce the policies that caused so much lasting damage to the economy and left middle class families and the working poor to struggle against economic forces that worked against them.”

Scudder could not be reached for comment yesterday.

A 2012 opinion piece that Laffer and Scudder co-wrote for the Wall Street Journal sheds some light on his approach to tax policy. The two men made the case that the country faced “economic collapse” due to the pending expiration of tax cuts launched by President George W.
Bush and “continued deficit spending” associated with Obamacare.

“The blunt reality is that we cannot have a prosperous economy when government is overspending, raising tax rates, printing too much money, overregulating and restricting the free flow of goods and services across national boundaries,” Laffer and Scudder wrote.

In a 2013 opinion piece published by the Orange County Register, which is based in California, Scudder wrote more about taxes.

“Policies that decrease the incentives of people and business to work, save and produce — such as high tax rates, a high minimum wage, and forced unionization — lead to increased unemployment and outmigration from the area,” he wrote.

Federal campaign-finance records indicate Scudder has made only a few political contributions, including a $500 donation in 2010 to The Club for Growth, a conservative political action committee. Scudder has also made political donations to U.S. Rep. Jared Polis of Colorado, a Democrat and fellow Princeton grad, but state campaign-finance records don’t show any contributions in New Jersey.

Republicans applaud pick

Christie’s pick, meanwhile, was well-received yesterday in New Jersey’s Republican circles.
Assemblyman Declan O’Scanlon (R-Monmouth) said Scudder’s background and insights “offer a new perspective to solving the deep-rooted fiscal problems the Christie Administration has been at the forefront in addressing.”

“Mr. Scudder has impeccable credentials that befit the tasks ahead of him, regardless of knee-jerk critiques,” said O’Scanlon, the top Republican on the Assembly Budget Committee.

Matt Rooney of The Save Jersey Blog wrote of Christie’s pick that “if his goal was to catch conservative eyes, Save Jerseyans, this might do it.”

But New Jersey Policy Perspective, a liberal think tank based in Trenton, pointed to tax-policy advice that Laffer Associates provided government leaders in Kansas, which is now struggling with budget deficits after implementing a round of income-tax cuts.

“That is not the kind of economic agenda New Jersey needs, and we trust it’s not the kind Mr. Scudder will bring with him to Trenton,” said Gordon MacInnes, the think tank’s president.

Key issues looming

When Scudder takes over the Treasury Department next month from acting Treasurer Robert Romano, he’ll be coming to Trenton at a time when Democrats who control the Legislature are anxiously waiting to hear what Christie plans to do about the state’s Transportation Trust Fund.

The trust fund is a pot of money, supported by New Jersey’s 14.5-cent gas tax, that pays for road, bridge and rail projects throughout the state.

The fund is projected to only have enough revenue coming in to pay down its significant debt as of June 30, 2016, unless the gas tax is increased or some other new source of funding is identified. Christie maintained transportation spending this year by relying on borrowing and drawing down cash balances, among other steps.

Many lawmakers have called for hiking the state gas tax, which is the second-lowest among U.S. states and hasn’t been increased in more than two decades. But with Christie currently seeking the GOP’s 2016 presidential nomination and all 80 seats in the Assembly on the ballot next week, the issue has largely been put on the backburner in Trenton.

Republicans in recent weeks have talked about a potential deal that would involve trading new revenue from a gas-tax hike in exchange for a commitment to phase out New Jersey’s estate tax, inheritance tax, or both.

And Christie himself said during a public appearance in New Jersey last month that lawmakers should be pushing for more “tax fairness,” citing the estate and inheritance taxes as examples of New Jersey’s high tax burden.

New Jersey’s estate tax, as the name suggests, is levied against someone’s estate upon death if it is worth more than $675,000. The state inheritance tax is typically paid by those who are left a bequest by someone who is not a direct relative, although estates can also arrange to prepay an inheritance tax. New Jersey is one of only two states to levy both “death taxes.”

Letter opposes tax trade-off

New Jersey Policy Perspective was one of more than 40 groups to sign onto a letter, delivered to lawmakers in Trenton yesterday, opposing any tradeoff of new revenue from a gas-tax hike for cuts to the estate and inheritance taxes, which together bring in about $755 million in annual revenue for the state budget.

The letter argued that “giving up hundreds of millions from the State General Fund through irresponsible tax cuts” would likely mean less investment by the state in key areas like mass transit and education.
Christie’s selection of Scudder marks a sharp shift from a year ago, when the governor picked Jamie Fox, a Democrat, to lead the state Department of Transportation. Fox won easy approval from the Senate and would later say “everything is on the table” when asked about hiking the gas tax.

But Fox is no longer the state’s transportation commissioner, and Christie, as he’s struggled to gain traction as a GOP presidential candidate, has signed on to a national conservative group’s anti-tax pledge.

If Scudder is eventually confirmed by the Senate, his tenure would follow that of Andrew Sidamon-Eristoff, who led Treasury from the time Christie took office in early 2010 until he stepped down this year in early July.

Sidamon-Eristoff’s tenure coincided with a tumultuous time for state finances after tax revenues dropped dramatically during the last recession. Despite a $2 billion business-tax cut initiative implemented by Christie, New Jersey has struggled in recent years with its own budget shortfalls, and tax collections are still behind the state’s pre-recession peak, according to compiled by The Pew Charitable Trusts.

A huge unfunded pension liability and a series of credit-rating downgrades that have left New Jersey’s debt grade ranked only ahead of Illinois’ among U.S. states are other challenges facing Scudder, who plans to move back to New Jersey from Tennessee, Christie’s office said.

On the same day that Christie praised Scudder for his background in analytics, Sidamon-Eristoff said in a NJ Spotlight opinion piece that New Jersey “suffers a relative dearth of analytics, both inside and outside of government.”

Despite the dire warnings about a looming national economic collapse that Laffer and Scudder offered in their 2012 Wall Street Journal piece, Sidamon-Eristoff’s budget for New Jersey’s 2015 fiscal year provided a more optimistic recap of the national economic growth that ended up occurring in 2013.

“The national economic expansion is continuing,” the budget document said. “Over the twelve months of 2013 the nation added 2.2 million jobs, virtually equal to the job gains experienced in both 2011 and 2012.”