Anyone who has read my blog throughout the years knows that I often rail about decisions taken in NJ with regard to the state’s pension system, but this is one time that I am firmly with NJ and all the other states that have seen their economies wracked by Covid-19-related expenditures.
In yesterday’s post, I mentioned that Senate Majority “Leader” Mitch McConnell and the Republican Senate didn’t appear to be willing to provide assistance to states and municipalities. In fact, McConnell was quoted as saying that he would prefer that states file for bankruptcy rather than receive a Federal bail-out despite the fact that everyone else is getting one at this time. Here is why McConnell’s thinking is so shortsighted. It was reported that another 140,139 New Jerseyans filed for unemployment last week, bringing the tally to an unbelievable 858,000 workers desperate for checks. The state has already dished out $1 billion or so in unemployment benefits. Some perspective: At this time last year, there were just 84,000 residents collecting from the state’s unemployment pool.
As everyone knows, NJ’s economic environment is already challenged by one of the country’s worst out-migration trends that has been brought about through a combination of high state income taxes, excessive property taxes, and out-sized housing costs that make it challenging for a large percentage of the state’s residents. Couple those impediments with a pension system that has a colossal deficit, and not surprisingly, you create a terrible economic environment. Sure, and to be fair, some of this has been brought on by mismanagement, especially when it came to the state’s failure to make the full annual required contribution, which they haven’t done since Washington slept here! But, the unprecedented impact from this virus is crushing NJ’s budget and those of many other states and municipalities.
Does it make any sense to let states collapse? Do we really want to see mass lay-offs in the public sector that would mirror those in the private sector? Isn’t it imperative that we have the tools and resources now to meet this crisis head-on, and not wait for some resolution in the courts to begin to defeat this menace? Governor Murphy said, “come on, man” when reacting to McConnell’s stance. I couldn’t agree more! As a point of reference, I am honored to be an elected official (Councilman) for the town of Midland Park, NJ. In my capacity as a Councilman, I am seeing first hand how state and local budgets are being stretched in ways that we’ve never considered or imagined. Midland Park certainly doesn’t have a rainy day fund of the size necessary to meet these unanticipated burdens. Why should we expect that any state or municipality would?
On the other hand, the US government does benefit from having a fiat currency that can be used at this time to prop up and support our displaced workers and their families, retirees, businesses, AND government entities. It would be foolish to “punish” any one of these important constituencies when we have the economic capacity to provide life saving measures. For once, can we put politics aside and do what is best for our country? If not, then you don’t deserve to “lead” us!
There are many who have become highly concerned about huge spending without mostly no control and now, more largesse. Some states who have historically spent $ they do not have are looking to the US to use the virus to bale their fecklessness out
Good morning, Bill. Please don’t confuse the debt of individuals and states with that of the US government. Because we enjoy the benefits of having a fiat currency, we can meet today’s demands without “stealing” from our children. The only issue relates to potential inflation and whether or not we create demand for goods and services that exceeds our ability to meet that demand through production. Right now we have little demand for goods and services. However, once people start demanding again, we will need to ramp up production. Thanks for your comment. If you’d like to read more on this subject, please check out Bill Mitchell, MMT founder and expert.