Saturday, February 24, 2007

Corzine's Social Welfare Vision

Murray Sabrin

Governor Corzine’s second budget address last Thursday calling for more social welfare spending was as predictable as the chilly winds sweeping across the Statehouse in late February. The Governor presented his 2008 $33.3 billion budget, which is 7.2% greater than the current year’s outlay, to the Legislature claiming it is fiscally prudent. Although social welfare spending increases modestly, Corzine stated, “Reflecting fiscal realities, this budget regrettably has few new initiatives…” He also asserted that the budget proposal he will send to the Legislature, “is a very good budget for the people of New Jersey.”

Governor Corzine stated that the 2008 budget contains no new taxes or increases for the first time in six years. He also proposed increasing the income limit for families receiving the Earned Income Tax Credit. The EITC was established by the federal government in 1975, and is essentially a negative income tax. Low-income families not only get back income taxes they paid, they also get a refund of their Social Security taxes. In addition,
they also get a check from the government. In effect, a welfare payment. Corzine wants to expand this program statewide, increasing the amount of state tax dollars that will be redistributed from both middle and upper-income families to low-income families.

The crowning achievement of the 2008 budget, according to Governor Corzine, is the more than $1.8 billion in property tax relief and additional aid to schools and local governments. In other words, state taxes are collected by Trenton in order to be sent back to the people who paid them in the first place, and to pay for local government schools and other services. This is government at its worst.

Governor Corzine pointed out that “almost 50 cents of every dollar in this $33 billion budget goes to property tax relief. That’s a total of $16.6 billion.” The state budget could be reduced by 50% if local governments and schools had to raise the funds they needed to operate. But that would eliminate Trenton’s control and power over the people of New Jersey and their local elected officials. The political elite in Trenton would then not have the resources to redistribute money from the suburbs to the cities run by their political allies.

To collect state taxes a tax collection agency is needed that does not provide any valuable service to the people. Then the state needs agencies to funnel the state tax dollars back to local schools and municipalities. The state collection and distribution agencies do not provide any valuable service to the people. In short, they are “deadweight” on the economy. If they were closed and the monies now collected by the income tax, sales tax and other levies stayed in people’s pockets, the people would have the funds to pay for local services.

Instead, the Legislature has created such programs as healthcare for seniors and low income children and their parents, if they qualify. The courts have mandated school spending for urban and suburban low-income districts and social welfare spending to bolster children’s’ services, as well as affordable housing programs.

The bottom line is that state government has become a social service provider, a healthcare insurer, a low-income housing developer, a builder of schools, a day care provider, an education spender, and an R&D underwriter. And the governor wants universal preschool and full day kindergarten!

Is it any wonder that the state is broke? Or will stay broke until we do things differently in Trenton?

Governor Corzine, at the end of his budget address, stated, “I think it’s time for a new paradigm for the state’s fiscal future.” But throughout his address, Corzine called for expanding state spending on social welfare programs and perpetuating the redistribution of income.

The new paradigm we need-- freedom and liberty—will not be embraced by the political elite in Trenton, because limited government requires human action (social power), individual, family and community actions to deal with people’s needs. The current paradigm is Trenton is: “we are from the government and we are here to help you.” And the costs keep rising and rising. With no end in sight.

In the final analysis, it is about social power versus political power. It is about the people versus the political elite. The sooner the people realize that the moneys that Trenton sends back to them came out of their pockets in the first place and demand ending the social democracy paradigm that will bankrupt us in the not-too-distant future, the sooner we will be on the road to economic recovery and solvency.

Murray Sabrin, Ph.D., is professor of finance in the Anisfield School of Business, Ramapo College of New Jersey, where he is executive director of the Center for Business and Public Policy (