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Monday, June 27, 2011

Christie: Fiscal Conservative, or Deadbeat?

New Jersey Governor Chris Christie is fond of portraying himself as a fiscal conservative. However, the facts indicate that New Jersey's fiscal situation is worsening and that Christie has made only slight progress in tackling the problem of runaway government spending outpacing revenue.

The Wall Street Journal reports today that New Jersey seeks short-term bank loans of around $2.25 billion to cure its budget deficit for 2011. This shows there is no magic to the Christie mantra of providing solutions for irresponsible state governments. Christie recently got a little progress on the issue of union members' contributions towards their own health care, but that is scratching the surface and hardly the type of systemic change that is required.

It also bears noting that New Jersey only balanced its budget in 2010 by totally foregoing all contributions to public employee pensions -- which merely defers the payment for those defined benefit plans into the future and saves nothing. So far, beyond the rhetoric that makes for a nice YouTube moment, Christie's progress has been minimal. State expenses still far exceed revenues. Short-term tricks like offloading state obligations onto local municipalities merely shift around the burden -- when the problems are either how to pay the obligation, or do away with it. 

Frankly, this sounds like the deadbeat economics of the borrower who chooses to go the strategic default route, pocket the cash that would go to paying the loan, and daring the bank to come get him.

If this is government reform, do defaulting homeowners and business managers, who treat contracts as if they're not worth the paper they're printed on, qualify for nomination for a Nobel Prize in economics?

The real test of leadership will come when that question is addressed. Right now, it is being avoided. That is not leadership; that is retreat in the face of crisis. Hardly presidential timber.

Eric Dixon
Eric Dixon LLC
World-Class Strategic Analysis

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