It’s (Still) the Economy Stupid!

Warning: I get a bit political!

It was way back in 1992, when James Carville, then an advisor to then candidate President Clinton in his first campaign, coined the famous phrase, “It’s the Economy Stupid!” The premise then was that no matter what else the voters were talking about, in the end it was really the “economy” they cared about most, and that would dictate their votes.

In my view, there are a few exceptions to this, especially in national politics. Take a “hot war” for example. However, for the most part, I think the phrase represents sheer brilliance. “It’s the economy stupid!” …. ranks right up there with Nike’s famous “Just do it!” as one of the real truisms in our modern age.

Four years ago, Chris Christie was the media’s darling governor, but refused to run for President because he said he was just not ready, and “he had a job to do in New Jersey”. This year, he seems to think he is more ready, although, New Jersey voters who just brought his in-state popularity down to an all-time low…. 37%, seem to think he may still have a job to do. Could it be the old effect… “It is the economy stupid!”

None of us need a politician, or an advisor to politicians, to teach us about the effects of the great recession, and how our economy has ever-so-slowly been coming back. However, the national unemployment rate which climbed to 10% in 2004, now at 5.5%, has for 59 straight months registered private sector employment gains, a record that exceeds even the previous record during the Regan administration. The stock market has been almost as good. The dollar invested during the Regan presidency was up a staggering 190% percent during the first 67 months of his presidency. During the same period, the Obama presidency is up 220%.

However, back to Mr. Christie, our state and why things may not turn so well for our governor when people start to study his record, unlike the national situation, things have not gone nearly as well in New Jersey. In recent years, jobs seem to be literally fleeing our state… not just at casinos (where four of the twelve casinos have closed in the last year), but in the pharmaceutical industry where New Jersey has literally led the world until this recent recession. The only people truly prospering in New Jersey are those with incomes over $1 Million. Every other category, even those making $500,000 per year, and certainly those with more typical incomes below that, have not done well since the recession began in 2008.

Let us start with unemployment. New Jersey is down from its peak of 9.7%, but only to 6.6%. The phenomenon of disgruntled job-seekers “giving up” seems to be, if anything, even greater here in New Jersey. 172,000 of those unemployed have been jobless for at least 27 weeks, the highest rate in the nation. Our job growth rate is 50th of the 50 states. It is estimated that although the US has now regained all of the 9 million jobs which were lost in the recession, New Jersey has recovered fewer than half of the 258,000 jobs it lost from 2010 to 2014.

The New Jersey job growth rate of just 3% is half as fast as the nation as a whole and is worse than every state but Alaska. Lest you think this is a problem in the whole northeast, New Jersey stands alone in the region. States all around us doing much better and Massachusetts, in particular, also burdened with high property taxes, home costs, etc., and weather even snowier, seems to be beating New Jersey in almost all cases, in stealing pharmaceutical startups to its state.

The flight of wealthy New Jerseyans to cheaper states to live also continues to be a problem. In the years from 2006 to 2011, more than 90,000 tax payers with $8 billion in income, moved to other states and countries. Those who are still here are having a hard time as well, as New Jersey again leads all 50 states in the number of mortgages who are either in foreclosure or ninety days late.

I am determined to find some positives to end this article with, other than to recite the Governor, who thought he had a job to do in 2012, if anything he has an even bigger job now. Unfortunately, it is not true that no one is noticing the problems in New Jersey; our bond rating has been downgraded a record eight times by three bond rating agencies since 2010. The state has had gigantic budget deficits made up by gimmicks in all recent years. Last summer’s

$800,000 shortfall was covered by cutting the state’s pension contribution. It is not that the Governor and the legislature have not tried to do some things to help our economy. Although our property taxes remain the highest in the nation, New Jersey corporate taxes now range from 6.5% to 9%, reduced almost 2.5% from its highest rate.

There are things that can, and should be done. In addition to making New Jersey a better tax environment, a highly qualified and well-trained work force which already exists, needs to become even better. New Jersey has been losing major elements of the pharmaceutical industry, not because of its infra-structure or tax policies, but because innovative research oriented individuals and institutions have been clumping together in Massachusetts, not in New Jersey. With all this going on, we likely do not need a Governor on a trade mission to London, to embellish his foreign policy chops, but one that is hard at work with some of his oh-so-famous Jersey bluster to encourage New Jersey employers to do more, to work harder, and those who might come to New Jersey to see our many advantages.

Thomas M. Wells is the Founding Partner of WJ&L. He practices in the Land Use, Real Estate, Business, Corporate & Commercial, and Non-Profit areas.

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