Democratic gubernatorial hopeful Phil Murphy called for a sweeping revision of state economic policies during a major speech in Newark yesterday, saying New Jersey’s economy is now saddled with inequality after more than six years under Republican Gov. Chris Christie’s direction.
To help restore fairness for everyone, Murphy said the state minimum wage must go up, student-loan programs revamped and tax breaks for the working poor should be expanded. But his most noteworthy proposal was a call for the creation of a state-owned public bank that would allow college students and small businesses to access loans at more equitable rates than those charged by profit-driven commercial institutions. Only one other state currently operates such a bank in the U.S.
Murphy, a former Wall Street executive and ambassador to Germany under President Obama, also criticized tax breaks for major corporations that have become a hallmark of Christie’s tenure, saying the governor’s approach represents “outdated” economic thinking. And if he becomes governor, Murphy said the state would invest more in cities, infrastructure and higher education, even if it means hiking taxes on the wealthy and forcing big corporations to pay more by closing loopholes to bring in new revenue.
“We can no longer tolerate a zero-sum economy where some are able to succeed only because others have been left by the wayside,” Murphy said. “There is too much inequality (and) our economy is in a place you don’t want to be, profoundly unfair and flat as a pancake.”
Murphy’s speech, delivered on the campus of the New Jersey Institute of Technology, drew praise from several fellow Democrats and proponents of public banking. They said his idea to create such a bank in New Jersey is worthy of national attention. But Murphy’s economic agenda was also loudly criticized by state Republicans, and they predicted his ideas would bring on higher unemployment and increased taxes.
Christie has held firm since taking office in early 2010 to an economic strategy that has emphasized streamlining regulations and reducing a tax burden that the state’s business community has long blamed for holding back growth and investment. His administration has enacted more than $2 billion in business-tax cuts while also authorizing more than $6 billion in corporate-tax incentives through the state Economic Development Authority.
But New Jersey’s economy has remained stuck in a trend of largely slow growth since the end of the Great Recession, and the unemployment rate has trailed the national average in recent months as the state has struggled to string together consecutive months with net job creation. Some of the economic wounds have also been self-inflicted, as Christie and Democratic legislative leaders have been mired in an ongoing stalemate over renewing the state Transportation Trust Fund, leading to a lengthy shutdown of state-funded road, bridge, and rail projects.
Christie will reach the end of his second term in office in early 2018, and due to constitutional term limits, he cannot run a third time. With Christie now struggling to overcome extremely low approval ratings, most Democrats believe New Jersey voters will be unlikely to give Republicans another try when they go to the polls next year.
Right now Murphy is the only official candidate in New Jersey’s 2017 gubernatorial contest, though Senate President Stephen Sweeney (D-Gloucester), Sen. Ray Lesniak (D-Union), Assemblyman John Wisniewski (D-Middlesex) and Jersey City Mayor Steven Fulop are among the high-profile Democrats who are expected to eventually join the race for the Democratic nomination. The field on the Republican side could include Lt. Gov. Kim Guadagno, Senate Minority Leader Tom Kean Jr. (R-Union), Assembly Minority Leader Jon Bramnick (R-Union) and Assemblyman Jack Ciatterelli (R-Somerset).
Murphy, during the speech yesterday, suggested investing more in infrastructure and the state’s cities would provide far more incentive for companies to relocate to New Jersey than a tax credit. He also said state colleges and universities need better funding to prevent high-school seniors from being the state’s “leading export.”
The Middletown resident also called for the organizing of an “innovation cabinet” that would be focused on getting New Jersey back into the lead when it comes to fostering new technology, and he stressed the need for the state to also improve technology within government itself to be more responsive to innovators and entrepreneurs. Murphy also called for an increased minimum wage, gender-pay equity, tax credits for childcare and family caregivers and an expansion of the state’s Earned Income Tax Credit for low-wage workers.
But he pitched the creation of a public bank in New Jersey as the cornerstone of his economic vision, holding up North Dakota’s state-owned bank as a model. Established by the North Dakota Legislature in 1919 in response to the rising interest rates that commercial banks were charging for agricultural loans, the public bank was seeded with $2 million in capital. As of last year, the bank had over $270 million in capital and 168 employees, and had returned hundreds of millions of dollars in profits to the state’s general fund.
Local governments could borrow money for infrastructure projects at cheaper rates than those offered by Wall Street if New Jersey created a similar state-owned bank, Murphy said. It would also allow college students and small businesses to access capital without having to pay the high fees that sustain shareholder profits and exorbitant bank-executive bonuses.
Right now, the state deposits more than $1 billion in commercial banks, some located overseas, he said.
“This money belongs to the people of New Jersey, it’s time to bring the money home,” he said.
Pressed by reporters after the speech about how he would keep the proposed public bank from being used for the wrong purposes in a state known for political corruption, Murphy said that could be accomplished through the drafting of the bank’s charter and the selection of its board members.
Walt McRee, national chairman for the nonprofit Public Banking Institute, has previously pitched New Jersey as a prime candidate for the nation’s next state-owned public bank. He praised Murphy’s proposal yesterday, calling it “bold” and “timely.”
“Phil Murphy has distinguished himself not only in the race for New Jersey governor, but nationally as well with a policy innovation actually capable of turning the state’s economy around,” McRee said.
But several of Murphy’s economic policies put him at odds with the state business lobbying groups like the New Jersey Business & Industry Association, including calling for a higher minimum wage, earned sick leave and the adoption of combined-reporting corporate-accounting policies that would make it harder for multistate corporations to shift profits to states with lower tax rates.
Rick Rosenberg, a spokesman for the state Republican Party, also criticized Murphy’s economic agenda, comparing it to policies enacted by former Democratic Gov. Jon Corzine. Corzine served one term in office before being unseated by Christie in 2009 at the onset of the economic collapse. Corzine and Murphy are both former employees of Wall Street-powerhouse Goldman Sachs.
“Phil Murphy has made it abundantly clear that he is hell-bent on resurrecting the same kind of failed big-government policies of the Corzine era,” Rosenberg said. “His plans for bloated government and job-killing regulations would bring us back to the days when New Jersey had the highest unemployment in the region, a government teetering on bankruptcy and families and seniors paying the highest tax burden in the nation.”