The pandemic health crisis is swiftly dissipating, but the severe economic crisis caused by the response to it will take longer to get over.
State and national economies are roaring back from their suppression by public fear and government policies, but the lasting damage to employment and production can’t be estimated yet and may be large.
Given the likelihood of abnormal needs and economic challenges ahead, the prudent path for New Jersey would be to firm up its financial condition and to favor economic expansion — in particular shed its multi-year status as having the nation’s worst business tax climate.
Instead, in the year he’s seeking reelection, Gov. Phil Murphy has chosen an unprecedented spending spree, showering money on his political supporters and potential constituencies alike.
Murphy signed a state budget recently that balloons to $46.4 billion, a 15% increase over his record budget last year. In his first term, following a predecessor who pursued fiscal discipline and lower taxes, Murphy has increased state spending by 30%.
The governor and his fellow Democrats in the Legislature have rewarded their public worker union supporters with a $7 billion payment into their pension fund, without any attempt to rein in past promises of outsized benefits that some Democratic leaders have admitted are excessive and improper. Funding for schools — many of which remained closed in the pandemic against medical science advice to reopen — will leap another $580 million above prior year increases.
People outside of government haven’t been forgotten, but will get much less.
The Murphy administration will distribute $500 checks throughout the state to families that have the dependents and the limited income required. Those qualifying for the Homestead Rebate can expect a $130 increase.
Those already getting the enhanced Earned Income Tax Credit will see it enhanced some more. Exclusions from state income tax for retirees will be increased a bit. More money will cover the tuition of county college and some four-year state college students.
Most of the money from this spending binge is coming from taxpayers.
State income tax revenue is up $3 billion, mainly due to increases on those earning a million or more. Sales tax has provided an additional $1.5 billion and would have extracted more if Murphy’s attempt to raise the sales tax hadn’t been denied by the Legislature. Business tax hikes under Murphy have yielded another $2 billion.
Even this wasn’t enough for the spendthrift governor. He borrowed nearly $4 billion last year, fearing a decline in revenue that never occurred. In his budget he plans to put $2.5 billion toward retiring state debt with a higher interest rate and use $1.2 billion to avoid planned debt.
But the $4 billion was borrowed on special terms favorable to the financial industry, where Murphy had his prior career, so taxpayers must fund the principal and interest payments for it into the next decade.
Taxpayers and their children may suffer in the future, but for now there are many beneficiaries of this election-year spending. They should enjoy it while it lasts. Such excess can’t and therefore won’t be perpetuated, and what Murphy and the Legislature are doing now will make the next economic downturn more painful.