NJ Business Matters: The Blog of the CIANJ

Now That's Sicko

Yogi Berra gets credit for being the first to declare, "No one goes there anymore. It's too crowded."

When fiscal conservatives point out the flaws in socialized government-run medicine, the same axiom applies. For evidence, look no further than the British National Health Service, which is dealing with the fact 70,000 Britons will fly to a foreign country to get treatment for their illnesses. And the reason,

The first survey of Britons opting for treatment overseas shows that fears of hospital infections and frustration of often waiting months for operations are fuelling the increasing trend....

New research shows that growing NHS bureaucracy has left nurses with little time to see patients – most spending long periods dealing with paperwork.

Katherine Murphy, of the Patients' Association, said the health tourism figures reflected shrinking public faith in the Government's handling of the NHS. 

These "health tourists" will travel to 48 countries to seek treatment. Fewer than half of Britons were treated within 18 months of visiting a General Practitioner. Sometimes the mantra of "government inefficiency" loses its meaning - until you read this piece from the Daily Mail. This is why socialized care is bad medicine.

Sometimes, It's Good to Be Reminded of the Obvious

Regular blog readers have heard the drumbeat before, but it is worth repeating - next year New Jersey faces a structural deficit of about $2.5 billion. To put that in perspective, this year's budget was above $33 billion, with about $3 billion used to pay off part of our existing debt. In the end, the legislature must choose between spending restraint or raising taxes.

The administration has pledged the need to "grow our way out" of NJ's present fiscal state. In today's Opinion Journal, former DE governor Pete DuPont details the model laid out by the federal government,

Tax rate reductions increase tax revenues. This truth has been proved at both state and federal levels, including by President Bush's 2003 tax cuts on income, capital gains and dividends. Those reductions have raised federal tax receipts by $785 billion, the largest four-year revenue increase in U.S. history. In fiscal 2007, which ended last month, the government took in 6.7% more tax revenues than in 2006.

These increases in tax revenue have substantially reduced the federal budget deficits. In 2004 the deficit was $413 billion, or 3.5% of gross domestic product. It narrowed to $318 billion in 2005, $248 billion in 2006 and $163 billion in 2007. That last figure is just 1.2% of GDP, which is half of the average of the past 50 years.....

[T]here have been 49 consecutive months of job growth as a result of the economic expansion induced by President Bush's 2003 tax rate reductions.

Let's hope members of the legislature read the Opinion Journal.

Coulda, Woulda, Shoulda...

Assemblyman Michael Carroll has increased the frequency of posts on his blog, bringing more truth to the New Jersey blogosphere. On Saturday, he blasted proponents of the State Children's Health Insurance Program (SCHIP), a government-run program which has led to much gnashing of teeth without serious discussion over the past few weeks.

During the debate, we totaled up the number of SCHIP press releases posted to PoliticsNJ (a bill NJ legislators do not vote on) versus those regarding the fact nearly half of Garden State residents would like to leave thanks to our high cost of living (a subject the NJ legislature can impact). Guess which side had the majority?

On the subject of health insurance, Asm. Carroll makes the same point we have at CIANJ - NJ has high health insurance rates in large part due to legislative actions. Every time the legislature requires something such as unlimited coverage for substance abuse to be part of the small market's basic coverage, premiums increase and New Jerseyans are priced out of the market. The legislature, in the interest of the children, could take steps to reduce the cost of health insurance in New Jersey. They haven't,

Health insurance is not difficult to come by; it’s just expensive. And while the blame for that can be laid at numerous feet, primary among these is government. NJ boast the highest health insurance costs in the country, but that could be ended with a single stoke of a gubernatorial pen, signing legislation which permits a state resident to purchase a policy approved in any other state. A policy of insurance in Kentucky costs one-sixth as much as does a policy in NJ, primarily because of "community rating" and the huge number of incredibly expensive coverage mandates placed upon policies by the Legislature.

Put another way, faced with the choice of making basic coverage available to everyone at a reasonable price – that is, letting people decide for themselves what coverage they need and want – and compelling everyone to purchase a hugely expensive policy, covering numerous services that most folks don’t want and will never need, the Legislature chose the latter.

Click here to read all of Assemblyman Carroll's recent posts. 

A How To Guide On Making Prescription Drugs Unaffordable

The Association of Trial Lawyers of America (ATLA) recently changed its name to the "American Association for Justice", because you know, who could be opposed to an organization that sounds like a collection of B-list superheroes. Talk about putting lipstick on a pig.

The association is gathering in New York today so trial lawyers can swap notes on how to sue drug manufacturers, and thus, drive the price of prescription drugs in America even higher. Their promotional material pitches that,

Taking lessons learned from going up against big pharma, this one-day program will offer unique insights beneficial to all plaintiff lawyers. Special guest Mark Lanier will be joined by an outstanding faculty of trial lawyers and consultants who will share with you the insights, techniques, and strategies they developed in handling landmark pharmaceutical cases. This seminar is designed to teach you how to take these valuable tools and apply them to every type of case you handle.

All for only $695. For those of you interested in tort reform in New Jersey (which should be virtually everyone who owns a business or buys insurance), check out the website for our friends at the New Jersey Lawsuit Reform Alliance, of which CIANJ is proud to be a member.

Yowzers

Bloomberg has the skinny on what House Ways and Means Chairman Charlie Rangel has deemed "the mother of all reforms" - namely huge tax increases to help offset changes to the AMT. Rangel's committee is the author of tax legislation.

[A] 4 percent tax-rate surcharge on adjusted gross income over $200,000 for married couples. The surcharge would rise to 4.6 percent for those with income of more than $500,000. In addition, households with income of more than $200,000 would have to pay rates as high as 19.6 percent on capital gains and dividends, instead of the current rate of 15 percent.

That provision alone would raise $831.7 billion, more than enough to cover the cost of eliminating the minimum tax, Rangel said....

The proposal also imposes $9.4 billion in Social Security and Medicare taxes on lawyers, accountants and others who currently avoid them by organizing as a partnership. It would also raise $4.3 billion in taxes from investors by requiring stock purchase prices to be reported to the Internal Revenue Service beginning in 2009 and all other types of securities beginning in 2011.

Oh, and if you're in the financial services sector,

House Ways and Means Committee Chairman Charles Rangel said he will propose a $48 billion tax increase on executives of hedge funds and private-equity firms to pay for curbing another tax this year.

Taking From Peter to Pay Peter - Part 2

Add New Jersey's public colleges and universities to the list of state entities to be declared as wasteful by yet another government investigation.

CIANJ has been aggressive in pointing out the difficulty of taxpayer-funded lobbyists, especially in the state's higher education system. In such a scenario the state is left with lobbyists who are paid for by the taxpayer lobbying legislators for more taxpayer money for their school. Somewhere in that equation there needs to be protections for the men and women who pay taxes to fund the entire operation.

NJ.com is reporting on a State Commission of Investigation report on the misappropriation of dollars, including the aforementioned merry-go-round. The report found,

Excessive intrusion of politics, including millions of dollars in lobbying expenditures, efforts to solicit state college and university officials for campaign fundraising and influence-peddling in the appointment of institutional governing boards.

Even more unfortunately, when it comes to NJ's colleges saddling future generations with some of America's highest debt, the news only gets worse. The report recommends a reshuffling of priorities and of governing boards at various schools. All 189 pages are available here. 

The Global Economy: Love It or It'll Leave You

Robert Samuelson gets it right again in today's edition of the Washington Post where his column defends free trade and encourages its promotion. Despite being whipped by protectionists as a device to benefit the wealthy at the expense of everyone else, trade is a two-way street.

While American consumers have absolutely benefited the rest of the world, the rest of the world has also helped the US create jobs as overseas markets become available. In fact global economic growth is now out-pacing America's, meaning that the rest of the world is helping the US get through a housing slump. The International Monetary Fund expects global economic growth to more than double the US in 2008.

But if we embrace a protectionist stance, such as what Congress has done by thus far refusing to approve free trace pacts with Peru, Panama, Columbia and South Korea?

All the ritualistic denunciations of globalization are not harmless. Psychology matters. If global investors fear that the United States might make its economy less open to foreign trade and investment, the result might be the very dollar panic that everyone fears. The dollar's status as the world's central international currency depends on its usefulness in buying and selling. The more we restrict, the less useful it becomes. Globalization's casual bashers should remember that. They think they're playing only to a domestic audience, but the world is listening, and it may not like what it hears.

Who Would Fight New Jobs In A UEZ? You Guessed It

Last week, CIANJ was proud to have Wal Mart's Northeastern President, Hank Mullany, address more than 500 CIANJ members at our Annual Luncheon. Mullany spoke about the hundreds of thousands of people Wal-Mart has hired in the northeast and the billions of dollars in savings - including prescription drugs - offered to consumers.

Of course, the hiring of workers doesn't matter to the United Food and Commercial Workers union if those workers don't pay UFCW dues.

"It will certainly result in a major fight, probably involving litigation, probably involving the defeat of any elected official who allows this to take place," said Evan Stavisky, a spokesman for the United Food and Commercial Workers union in North Jersey and New York.

"The United Food and Commercial Workers, with a quarter-million members in New York and New Jersey, will clearly wage an aggressive campaign," Stavisky said. "We've been successful in defeating every single proposal in the five boroughs. This will be a monumental battle, should anyone make the mistake of trying to slip in a Wal-Mart monster store where nobody's paying attention."

Fight. Fight. Fight. Always fighting those guys. If the UFCW won this 'monumental battle' they will have stopped the creation of 300 new jobs.

Fortunately for North Jersey cooler heads have prevailed as the promise of new jobs and competition (along with ratables) has enticed political leadership.

Wal-Mart encountered little opposition when it opened in Saddle Brook and Secaucus, largely because it picked sites other retailers had shunned. Those stores also don't include supermarkets, although they sell some food products.

Officials in those towns welcomed the Wal-Marts as valuable ratables. Paul Swibinski, a spokesman for North Bergen Mayor Nicholas Sacco, called the store and the redevelopment project it is part of "good news for North Bergen."

Let's hope that attitude holds despite union threats.

Hat tip: LaborPains

Lame Duck Watch: Making New Jersey A Home For Trial Lawyers

Welcome to the latest installment of Lame Duck Watch, where we introduce CIANJ members to legislation that is likely to threaten the business community in the final days of this legislative session.

Reforming New Jersey's litigative climate remains a priority for NJ's business community. Lost productivity and revenue defending oneself from overbearing or frivolous lawsuits has increased the cost of American healthcare by more than $120 billion annually. That lessens the likelihood that employers will be able to offer coverage and that workers will be able to afford it. This December, trial lawyers in New Jersey are looking to expand the state's wrongful death statute to make NJ an even more expensive place to live and do business.

Presently, the state allows for lawsuits in wrongful death cases for those with very specific relationships to the victim. Suits are allowed to recover not only the loss of a bread winner, but the loss of companionship, parental guidance etc. What you cannot sue for is emotional grief. In state's that allow suit for grief, a cap is always in place to ensure predictability and fairness within the system.

A-1511 would change the New Jersey law to allow for unlimited recovery by a much larger pool than is currently allowed. Our opposition to this, and the insistence on a cap has been described as heartless in that we would cap how much money someone's grief is worth.

Juries will do that anyway when they assign monetary damages. Juries will also determine that one person's grief is worth more than someone else's and that disparity will be even greater if no cap exists. To keep a sense of fairness and predictability in a state increasingly becoming a destination for America's trial lawyers, this expansion cannot become law. Our own citizens are already delayed justice because out-of-staters decide to sue here based on our legal climate. It's time to improve that system, not make it more burdensome.   

More Talk Of New School Funding - New Target: 2008

Today's Star-Ledger follows up on news reported yesterday on potential changes to the state's school funding formula. The disjointed system is a primary reason for New Jersey's status as having the nation's highest property taxes. In short, the 31 so-called Abbott districts, which are the state's poorest, must be funded at the same level as the state's wealthiest according to the state supreme court's Abbott v. Burke decision. Local property taxes in those districts cannot sustain that type of spending, so the state (i.e. the rest of NJ's taxpayers) are forced to pay for their own public schools and a large share of Abbott schools. In fact, of the more than $7.5 billion NJ spends on state aid to schools, half that goes to the 31 Abbott districts while the other half goes to the other 585 districts.

CIANJ has maintained that Abbott districts should be funded at the statewide average, not the same per-pupil rates as the wealthiest districts. Regular blog readers already know that NJ spends an average of more than $20,000 per student in Camden, despite a real graduation rate of only 15%. We also believe in accountability, especially as it relates to students being able to leave failing districts for other public or non-public schools. If a school is not meeting standards, it should not be rewarded with even more spending and students should not be forced to attend a failing school simply because of their zip code.

The Ledger article details the concerns of suburban school parents and urban superintendents. The suburban folks want a cap on state spending of 85% of a district's needs (presently, the state picks up the tab for more than 95% of the spending in certain districts). For our part, CIANJ favors a system in which dollars follow a child. We presently fund staffing levels, demographics and programs but there is no one-to-one correlation which asserts that each child in NJ receives $x in state funding with exceptions for special needs children etc. Until we reach that point, taxpayer dollars will still be aimed at a top-heavy administration.

The complete article is available here. 

Lowering Enforcement and Accountability

During the summer we pointed out the giveback budget cut offered by certain Members of Congress in the form of less accountability for organized labor. Within the Department of Labor is a small division called the Office of Labor Management Standards, charged with ensuring union compliance with government regulations and accounting standards - which are much lower than what is required of business.

In the last six years the OLMS has helped secure the conviction of 775 corrupt union officials and ensured the restitution of $70 million in misspent dues. The office is in place to ensure that dues-paying members of unions do not have their mandatory dues spent in inappropriate ways. Some in Congress, particularly those who have benefited from union political contributions, have decided it's time to defund the OLMS.

Today's Examiner features an op-ed by Richard Berman, President of the Center for Union Facts, on the good work of the OLMS and of the need to ensure accountability in large organized labor.

Given its mission, the OLMS offers critical protection for union members who have little power to stand up to Big Labor, a $10 billion-a-year industry. The agency uses its already-meager budget and authority to step in when corrupt union officials rig internal union elections.

More importantly, OLMS investigates abuse of dues money and monitors compliance with accounting requirements. It’s getting the job done. Since 2001 the courts have ordered restitution of $70 million in OLMS criminal cases. That’s real union money that union bosses are really trying to keep covered up.

If Congress were to pass the budget as-is, the OLMS would be the only segment within the Department of Labor to have its budget cut. We're sure you've connected the dots at this point, but some must not agree that accountability is as important for labor leaders as it is for business leaders.

Hope On The Way?

Assembly Speaker Joe Roberts is promising action on the largest share of our property tax bills – a school funding formula that targets demographics and not students. The Speaker told the Associated Press that he expects to see movement on a new funding formula either during the upcoming Lame Duck session or during the opening months of the next legislature.

Whether it's done in the lame-duck session or whether it's done at the very early part of the year remains to be seen, but rest assured it's something we're going to be talking about and working on through November and December," said Roberts, D-Camden.

If you are a suburban property taxpayer, most of your property tax bill goes to fund public schools with the remainder paying for services such as police, fire and municipal government. A portion of suburban property taxes are also sent to Trenton to be redistributed to 31 urban school districts (the so-called Abbott districts) including Newark, Camden and Hoboken.

NJ is under a state supreme court mandate to spend as much per pupil in the 31 poorest districts as are spent in the wealthiest. As we have seen, increased dollars has not produced the best possible results, but it has produced America's highest property taxes. To fix the formula, funding levels for all children, especially special needs children, must be targeted to individual students regardless of their zip code. Without that control, towns have mandatory spending costs that have become unsustainable.

While CIANJ pushed for a new funding formula to be introduced before this year's budget, election season lessened political will to take what may be a controversial step.

Update at 10:05 a.m. - The Garden State Coalition of Schools is holding a press conference later this morning on the need for an updated formula.

SCHIP Veto Upheld

The House of Representatives has just voted to uphold President Bush's veto of the $35 billion expansion of SCHIP/tax increase on cigarettes and cigars. The New Jersey delegation voted 10-3 in favor of overriding the President's veto. Congressmen Garrett, Frelinghuysen and Saxton all voted against the override (and therefore against the expansion). We'll post the full roll call vote when available.

Update 1: Here come the reactions. There is much gnashing of teeth over at Blue Jersey with statements such as "Any Representative who votes to sustain the veto is voting against the health of American children." Now contrast that with Rep. Frelinghuysen's statement:

Let me be very clear about my position: I support SCHIP, I voted to create the SCHIP program ten years ago, I want children of the working poor to receive health care coverage through this program, and I look forward to voting for a bill that provides a fiscally responsible and compassionate approach to reauthorizing SCHIP that the President will sign into law.”

“It is time for Governor Corzine to step up to the plate and repair New Jersey SCHIP’s reputation.  Too much damage has been done, as evidenced by verifiable statistics which show that New Jersey is failing poor children in the area of health care coverage.  New Jersey’s program has been cited nationally by too many as the poster child for what is wrong with SCHIP."

Update 2: The complete roll call is available here. A "NAY" vote is a vote to uphold the President's veto.

It Ends Tonight...Sorta

Later today the House of Representatives is expected to vote on whether to override President Bush's veto of HR976, which would expand the much-ballyhooed SCHIP program by $35 billion. Today's Record reports on a political news conference hosted by the Governor and Speaker Roberts calling on Congressmen Scott Garrett, Jim Saxton and Rodney Frelinghuysen to change their votes and support overriding the veto.

Regular blog readers already know this all by heart. The Administration (contrary to what you may read  in the press) favors a $5 billion expansion, not dismantling the program. You also know that a program intended to subsidize insurance for those who cannot afford it has a crowd out effect of 60%, meaning to cover four children, the government will move up to six from private insurance to government (taxpayer) funded insurance. Finally, you know that some states spend more money to cover adults through the State Children's Health Insurance Program than they do to cover children.

Furthermore, if today's vote fails to override the veto, that does not necessarily mean SCHIP collapses. Congress can always appropriate money to keep SCHIP in tact, as is, for as long as they wish. The program was set to expire by the end of September, but Congress authorized its continued funding through the present. A simple majority is required to continue the program and it is likely the President would sign such legislation.

If you'd like to contact Reps. Garrett, Frelinghuysen or Saxton and support their protection of the taxpayer, you may use the following links:

Contacting Rep. Garrett
Contacting Rep. Frelinghuysen
Contacting Rep. Saxton

234 Economists Warn Against Weakening Energy Supplies and Increasing Prices

The National Taxpayers Union has released a letter signed by 234 economists (including 4 from Rutgers) warning against market-restrictions and higher taxes contained in this year's energy bill. For more than three decades legislation has attempted to ensure Americans use more of the "good" energy which is scarcely available. For more than three decades our blend of energy uses has remained largely unchanged. The last time Congress attempted this with ethanol subsidies, they managed to drive up food and fuel prices with one bill. Pretty impressive.

The letter states,

We, the undersigned economists, write to strongly advise against the inclusion of damaging anti-market provisions in the energy legislation now moving through Congress. History has shown that attempts by the federal government to tax, regulate, and subsidize our way to more plentiful and secure energy have failed miserably. This Congress ought not to repeat those expensive mistakes when considering energy policy.

It is available in its entirety here.

Writing Checks No One May Be Around to Cash

Last week we blogged extensively on the loss of 72,000 residents last year and the way the trend is impacting our economy. It's already cost NJ $10 billion in income and more than $600 million in taxes paid into the state budget.

Today, a Monmouth University poll gives details as to who is leaving and why. The Ostrich Society likes to pretend actions in Trenton have little correlation to the exodus, and that factors such as retirement are the driving force behind the movement.

The Monmouth poll finds that those most likely to move are in their working years. In fact, 49% of ALL New Jerseyans would like to leave the state. Of those 54% are under fifty-years-old and 59% earn between $50,000 and $100,000 annually. Those earning more than $100,000 were almost evenly split as to whether they would like to stay or leave the state. The top reason cited is property taxes followed by high cost of living. The rest of the sour news is available here.

How much evidence is needed before we address property taxes in a way beyond rebate checks and look to reduce the nation's second-highest tax burden?

Insert Witty Terminator Reference Here

While Governor Corzine and some members of the legislature consider placing a paid family leave mandate on virtually all New Jersey employers, California's Governor is acknowledging that paid leave in the only state with an existing mandate needs reform. Today's San Fransisco Chronicle reports on the governor's veto of bills that would expand California's paid leave program.

"While some expansion of existing law may have merit, these laws in combination are too expansive and also fail to recognize the need for reforms to current law," Schwarzenegger wrote in a veto message shortly before his Oct. 14 deadline to act on bills from the 2007 legislative session.

California now requires firms with 50 or more workers to provide up to 12 weeks of unpaid leave for serious personal illness, bonding with a new baby or caring for a seriously ill dependent child, parent, spouse or domestic partner.

California also provides up to six weeks of paid family leave - funded through employee contributions to the state's disability insurance program - for baby bonding or care for an ill spouse, child, parent or domestic partner.

To contrast the existing New Jersey proposal with the California program, readers should know that NJ employers would be required to provide up to 10 weeks (versus 6) of paid time off to care for a newborn or newly-adopted child or sick family member. There would be no exception for small businesses, as there is in federal law. Also unlike federal law, part-time employees would be eligible to take up to 10 weeks of paid time off and the entire program is funded by a tax increase on workers.

Readers should also know that in the case of a newborn child, New Jersey is already one of about six states which provides paid maternity leave. The ten weeks of family leave would be in addition to the maternity leave.

Schwarzenegger cited the need to clear up confusion as layer upon layer of laws have been authored without much regard for what has already been written. The same situation could arise in New Jersey, as FMLA, Paid Family Leave and the Law Against Discrimination interact. For example, PFL advocates point out their bill is "business friendly" (despite businesses and business groups noting otherwise) because a small business would not have to guarantee a job be held open if leave is utilized.

Sounds fair, but in California the overwhelming majority of those using PFL were the mothers of newborn children. NJ's Law Against Discrimination has protections for pregnant women. The policies appear to contradict one another and would be ripe for lawsuits.

Isn't it time legislators answered some of these questions while chatting up their pro-business credentials on the campaign trail?

The Price Is Right For Congestion Alternatives

In his first appearance on Reason TV, Drew Carey (yup, that Drew Carey) outlines some innovative ways to leverage the private sector into congestion relief. Your trusty blogger is a lobbyist emeritus in Virginia, home of public-private partnerships throughout the Northern part of the state.

In short, private companies paid an overwhelming majority of construction and operating costs for the building of certain new roads and then retained the rights to collect tolls on those roads. The HOT lanes had varying toll prices based on congestion levels and the number of passengers in a car. Critics liked to throw around the term "Lexus Lanes" when tolls got as high as $8, but remember these lanes existed where none previously had. So even if you were not a HOT lane driver, you still benefited because those in the HOT lanes were not occupying your road.

Congestion relief and minimal cost to the taxpayer, imagine that. Carey explores the same realities in Los Angeles in the 9 minute video below.

IETC 2007

Last week, the CIANJ's Environmental Business Council gathered at NJIT to showcase some of the industry's latest technologies. Today's Record features the exposition side of the Innovative Environmental Technology Conference (IETC) and highlights the challenges and opportunities for those whose business is to keep our environment clean.

The need for environmental workers is fueled in part by the building boom at so-called brownfields and by new state regulations on site cleanups and environmental permit requirements, said (EBC Chair Tracy) Straka.

While the consultants say New Jersey is making their business harder and even slowing it down with tough new directives, they say the new regulations and initiatives also create business.

"The state wants to know where every private well is and whether it's safe to drink the water in it or not," said Robert Ochs, sales and marketing manager for Blue Marsh Laboratories, a Bordentown-based, state-certified water and soil testing facility.

The initiative is increasing his company's water testing business, but he's also seeing less competition as labs shut down that don't have the capital to do the level of quality testing that the state demands.

Aside from showing off technologies, conference attendees had the opportunity to participate in a job fair. There just aren't enough tech students out there to fill the slots necessary and businesses are beginning to run at capacity. Dozens of companies interviewed hundreds of students on the campus of NJIT as the business community looks to strengthen its relationship with academia.

Attendees also heard from special guest speaker Lawrence Hunt, CEO of SilverJet (the world's first carbon-neutral airliner). For more info about Hunt and his company, check out this interview from COMMERCE Magazine.

Cause and Effect

State Senator Tom Kean wrote an op-ed for yesterday's Asbury Park Press outlining the reasons for next year's projected budget shortfall and the necessity of a budget which utilizes spending cuts versus the business-as-usual model of tax increases.

New Jersey's income tax structure is progressive. More than 50% of state income taxes are paid by the top 4% of wage earners. Those high wage earners tend to have large portions of their income in corporate partnerships and investments which are not reported until the end of the year, making budget forecasts on thin margins a tricky busiuness.

New Jersey's high wage earners are also heavily reliant upon Wall Street success compared to other states. Kean aptly writes,

Given the recent downturn in the nation's housing, credit and financial markets, many economic observers expect state revenues will fall significantly short of expectations. The current state budget assumes a nearly 8 percent projected increase in income tax revenues. Those reduced collections, combined with a structural budget gap that Corzine last week projected as high as $3.5 billion, present a serious challenge to the state's fiscal stability.

In both the city and state governments in New York, Mayor Michael Bloomberg and Gov. Eliot Spitzer have acknowledged the slowdown in the economy and are beginning to reduce government spending in anticipation of a reduction in income tax revenue collections.

The Governor's office is preparing for such changes with next year's budget cycle. Sunday's Record tells of a high-level meeting at which Department heads were told to find $3 billion in cost savings. Of the state's $33 billion budget, certain gubernatorial priorities and 'mandatory' spending is considered off-limits - - about $18 billion worth. That means the remaining $15 billion requires a 20% cut. While it would still leave major areas for savings untapped, a $3 billion reduction should at least prevent digging even deeper into taxpayers' pockets. Maybe those 72,000 departures we blogged about last week are making an impact. 

Children's Health Advocates Say "Smoke 'em If You Got 'em"

Thursday's the big day in Washington for the much talked about but seldom reasonably discussed SCHIP expansion. In one corner is a majority of Congress which seeks to expand the program by $35 billion so that children in families earning as much as 350% of the federal poverty limit can have their health insurance provided by the federal government (aka other taxpayers). They propose to do this by hiking the tax on cigarettes and cigars so that America will need 22 million new smokers to fund the program. Nothing like needing the children of today to smoke so the children of tomorrow can have health care.

On the other side of the ledger are advocates for American taxpayers who note that the President already supports a $5 billion expansion and that states are using current funding to subsidize the insurance of adults - and not just poor adults. In fact New Jersey's program, well-intentioned as it may be, spends more dollars to insure adults than it does to insure children (see the WSJ's "Garden Statism" editorial). We also point out that the 'crowd out' factor for SCHIP is 60%, meaning that a majority of SCHIP eligible children already have private insurance.

All that leads to CIANJ's opposition to HR 976. If you would like to urge your member of Congress to uphold the President's veto, click here for a listing of the New Jersey delegation.

Main Street Cigar Shops - Meet Washington-Style Thinking

Our conversations on SCHIP have focused mainly on the pitfalls of expanding a program by $33 billion when the current funding has already been used by states in ways beyond legislative intent.

We've also touched on the fact America will need 22 million new smokers to keep the program afloat or (as expected) face a choice between taking children off the rolls or increasing future taxes. Today's Record lights up yet another issue - the 6,000% increase on cigars that would become law should a Congressional override be successful. The current federal tax on cigars is 5 cents, which would increase to $3 each nearly doubling the price of a cigar in the US. A Ridgewood cigar shop analyzes the cost breakdown as,

Current cost to consumer ($6.35) includes:

• Manufacturer's price*: $3.10
• State excise tax: $0.93
• Retail markup: $1.90
• New Jersey sales tax: $0.42

Cost to consumer ($10.02) after tax increase would include:

• Manufacturer's price: $4.09
• Federal tax: $1.65
• State excise tax: $1.73
• Retail markup: $1.90
• New Jersey sales tax: $0.65

*Price includes 5 cents federal tax.

The article teaches that cigar shop owners are an intelligent bunch, grasping free market economics better than some of our elected leaders.

Andy Kerstein, president of NATO and owner of six tobacco shops in Middlesex, Monmouth and Atlantic counties, said such a large tax hike could end up causing cigar smokers to turn to foreign sources to beat the levy.

"New Jersey's already learned this lesson,'' Kerstein said.

"New Jersey raises tobacco taxes and Delaware retailers rake in profits. Cigar smokers are going to stop buying in local stores and turn to the Internet. We live in a worldwide economy."

CIANJ has already reached out to our Congressional delegation urging their opposition to the expansion of SCHIP. A vote is expected next week. 

Humility and Grace

As you have been told all morning, former Vice President Gore and the Intergovernmental Panel on Climate Change (IPCC) are co-recipients of this year's Nobel Peace Prize. Shocking that there would be a political angle to this, we know. The best response thus far goes to Jay Richards at Planet Gore,

Keeping to the trend of politicized awards, the Nobel Peace Prize has been given jointly to Al Gore and the Intergovernmental Panel on Climate Change. In his initial statement, however, Gore explains that global warming isn't a political issue at all: "The climate crisis is not a political issue, it is a moral and spiritual challenge to all of humanity. It is also our greatest opportunity to lift global consciousness to a higher level."

Glad he cleared that up. I had been thinking it had something to do with science.

The Star Ledger Says - NJ Business Matters

The Star-Ledger gets credit today for stating the obvious - NJ's status as an expensive place to live and do business greatly contributed to the departure of 72,000 residents last year.

In today's editorial, the Ledger notes the points mentioned on NJ Business Matters (we wouldn't dare say 'follows our lead') in discussing the Rutgers University study highlighting the exodus from the Garden State at the cost of $10 billion in income and $680 million to the state budget.

The state's policymakers need to enact programs that will give the state an edge in attracting businesses. In a global economy, location alone isn't enough. Companies look for equitable, stable tax policies as well as a diverse and skilled work force.

They also look for areas where their employees can afford to buy houses and pay property taxes. The average in come of New Jerseyans is 33 percent higher than the national average. But that advan tage is negated by housing costs -- including highest-in-the-nation property taxes -- that are 52 percent higher than the national average....

More than anything, the Hughes-Seneca report is proof that papering over problems from one election to another doesn't work. Eventually, steps must be taken to make New Jersey a place where businesses want to locate and ordinary people can afford to live.

The trouble with this type of an editorial is what it lacks in follow-up. If the Ledger is going to take the stance that NJ needs to attract business, will it also take the stance that in order to do that, we need to reject measures such as Paid Family Leave? Or that we need to put an end to the mandates that now account for up to 20% of health insurance costs in New Jersey?

Unfortunately, they have not yet taken that step. You would be hard pressed to find a newspaper or political candidate declare that we need a weaker economy with fewer jobs. They are all willing to give lip service to a healthy business climate but when it is time to make the public case or cast the necessary legislative vote too few are willing to follow through.

Pro-business rhetoric is great, but pro-business and pro-jobs action is the difference between prosperity or stagnation and decline.

What NJ High School Diplomas Should Mean

Derrell Bradford, Deputy Director for our friends at Excellent Education for Everyone, penned a column which ran in Tuesday's Record and cut to the heart of the failures associated with the Special Review Assessment (SRA).

For those unfamiliar, in order to receive a diploma from a New Jersey high school, a student is expected to pass the High School Proficiency Exam (HSPA) - which tests to ensure 8th grade skills have been acquired before a student can graduate high school. After the HSPA's implementation, the SRA was introduced as a way to test students who 'froze' during the exam and therefore had failed to pass the HSPA three times.

Now, more than 13,000 students annually - who have failed to pass a test of 8th grade skills - are granted their diploma through the SRA.

This raises a host of questions which Bradford poses - such as how does a student without 8th grade skills get promoted through high school and how does this happen in urban districts which spend upwards of $20,000 per pupil on education. He closes,

Reauthorization or extension of the SRA should not be supported. Its abuse is symptomatic of a critical failure in New Jersey's schools that overwhelmingly affects communities of color, and stymies the transparency necessary to identify deficiencies and make genuine school change.

As former Education Commissioner William Librera said in 2005: "It's time to get rid of [the SRA] and refocus our efforts on helping our kids pass [the HSPA]."

Regular blog readers already know that CIANJ is proud to work with E3 in support of the Urban Schools Scholarship Act. This legislation would allow companies to make tax deductible contributions to scholarship funds so that up to 4,000 children in our poorest school districts can use the money to attend other public or non-public schools. Mayor Booker, a cofounder of E3, also supports the program as a way to improve education "by any means possible". Let's hope legislative leaders in Trenton are willing to take the same approach when they reconvene in November, even if it means taking a stand against the powerful education lobby.

At Least We're Not Rhode Island

It's been a rough day of studies for the state's Ostrich Society. First we learned that Jerseyans are leaving the state at a greater rate than expected, and that it is already costing the economy billions of dollars. Meanwhile, the Record points out NJ's business-friendly ranking slipped from 48th to 49th according to the Tax Foundation. Rhode Island finished last for the second consecutive year.

New Jersey has the next-to-worst individual income and property tax systems and the seventh-worst sales tax system, the study said. Rhode Island has the worst unemployment tax system, the third-worst property tax system and the fourth-worst individual income tax system.

"Companies in New Jersey are paying among the highest rates in the world," said Curtis Dubay, an economist who compiled the ranking for the Tax Foundation. He noted that companies in Rhode Island pay slightly less corporate income tax than New Jersey.

"In New Jersey, everything is bad," he said. "The only reason that New Jersey doesn't rank last is that Rhode Island is a little worse."

The Tax Foundation is the latest group to rank New Jersey as unfriendly to business -- a perception that has increasingly concerned business leaders and some politicians.

Taken another way, about 2% of land area in the US is a more expensive place in which to do business than New Jersey. 

Later this month, Governor Corzine is expected to unveil this year's updated strategy for Economic Growth. Last year, the Administration highlighted the importance of "selling" New Jersey to potential companies in an attempt to increase the number of high paying jobs. The Administration should be applauded for making the improvement of the state's economic image a priority, but the harsh tax and regulatory climate created by the legislature is counterproductive.

Those other 3.5 million square miles in America already look appealing to the 72,000 residents leaving every year. 

As If We Needed More Proof...

During the Senate Labor Committee hearing on Paid Family Leave an association President testified as to the alarming rate at which citizens were leaving the state, largely due to our high cost of living and the loss of high paying jobs to more hospitable economic climates. His claims were dismissed.

Today, the Star-Ledger highlights a Rutgers University report detailing the exodus of New Jersey's residents to states such as Florida, North Carolina and Pennsylvania.

"The population outflow is real, is approaching worrisome dimensions, and is exerting a small but increasingly negative impact on the New Jersey economy," said the study by Rutgers economists James Hughes and Joseph Seneca.

Last year alone, the loss of people cost the state economy about $10 billion in income, and about $680 million in state budget revenue.

While the economists said they are certain the exodus is growing, they are less sure of why. Possible reasons include high housing costs and the state's generally high cost of living. Society in general also is increasingly mobile, they said.

Seneca said state leaders need a broad agenda to reverse the slide. The solutions, he said, should include a further reduction in the highest-in-the-nation property tax burden, more investments in infrastructure, science and technology and new policies to restore business confidence. (emphasis ours)

Where have we heard suggestions to accomplish that before?

Here's the kicker - short of reversing the policy trends that are likely to manage a net loss in population next year the trend may be slowed by NJ's soft housing market (if you can't sell your house, it's tough to leave).

Next year the state legislature will be faced with a budget deficit of about $2.2 billion. How they choose to address it will indicate how concerned they are that New Jersey is becoming a place too expensive to live for the people who built it. Just doesn't seem right.

More Proof That More Money Does Not Equal Better Results

You don't have to be a policy wonk or legal scholar in New Jersey to have heard of the Abbott v. Burke case - a state Supreme Court decision which set the stage for mandating that New Jersey's poorest school districts spend the same amount per student as the state's wealthiest. The decision flows from the misconception that more money equals better education and has led to situations such as in Camden, where the real graduation rate is only 15% despite spending more than $20,000 per student.

This week's NJBiz ($ubscription required) breaks down the state's 25 largest school districts, by enrollment, and lists state funding for those districts during 2006-'07.

To exemplify how skewed the state funding formula has become, consider the cases of Clifton (a non-Abbott District) and East Orange.

The Clifton School District has 10,388 students and received $20,508,273 in state funding.

The East Orange School District has 10,239 students and received $169,691,706 in state funding.

Because property taxes in East Orange would not support current per-pupil funding levels, the overwhelming majority of the East Orange School District (and the other Abbott Districts) is funded by the rest of the state's taxpayers.

Given that, isn't it finally time for increased accountability within these districts, an altering of the school funding formula and some form of school choice in our poorest districts?

Check's In The Mail, Reform is On The Waiting List

This spring, when property tax relief measures were being signed amidst a fit of self-congratulations CIANJ acknowledged that some relief was always welcome, but that this was far from the necessary true reform.

Kudos to the Courier-Post for making the same point today, a week after rebate checks arrived in the mail.

[W]e also believe these relief checks are, in the grand scheme of things, just a very tiny step toward actual property-tax reform that would permanently and significantly lower our highest-in-the-nation property taxes of $6,300 per year on average. That's more than twice the national average for property taxes.

For one, raising one tax to give people "relief" from another tax isn't reform; it's smoke and mirrors.

Second, real property-tax reform means actually slashing people's quarterly tax bills. If you woke up tomorrow and found you suddenly owed only $1,200 and not $2,000 to the local tax collector next quarter, that would be actually cutting taxes. Continuing to collect the same amount in taxes but then giving a little back to people as a check or a tax credit is not the same thing.

The way to cut property taxes is to eliminate the fat from our government by reducing its size and consolidating and sharing services. We must also lessen the percentage of funding school districts draw from property taxes.

Our lawmakers in Trenton, despite the palpable outrage around the state over high property taxes, have done nothing in recent years to cut the size of state government or force consolidation and the sharing of services. Nor have they improved the school funding formula.

Businesses pay property taxes twice. Once through directly paying about one-third of all property taxes collected in New Jersey (while owning about 6% of the property) and then again through higher wages paid in order to attract talent and sustain a high quality of life. Despite that, businesses do not directly benefit from the much-ballyhooed rebate checks.

The biggest opportunity to actually reform the system lies in a fair school funding formula. The re-distribution of suburban property taxes, Abbott districts, repetition of administrative services due to our 616 school districts and lack of accountability within failing districts all contribute to our highest-in--the-nation property tax status. The longer the legislature waits to address those issues, the more entrenched the situation becomes and the more businesses, taxpayers and students become victims of a system.

Update: It seems as though residents interviewed by Tom Hester with the Associated Press have the same feelings as the Post and CIANJ.

Don't Call It a Comeback

Today's Washington Post features further proof of nuclear power's resurgence in American energy discussions. As always, we remind the blogosphere that nuclear power is the only technologically available capability which both produces energy on a large scale while generating virtually zero greenhouse gas emissions.

The Post does an adequate job in addressing the waste disposal, cost and political concerns while noting that Congress has passed legislation to authorize loan guarantees that have sparked a relative slew of applications to build new reactors.

For President Bush, getting new nuclear plants built has been a priority since his first months in office. "America should also expand a clean and unlimited source of energy: nuclear power," Bush said in May 2001. In a Gallup poll in March 2007, 53 percent of Americans surveyed favored the use of nuclear energy, little changed from the 57 percent who favored it when Gallup first asked the question in 1994.

There are 104 nuclear plants operating in 31 states now, and they provide about 20 percent of the nation's electricity. France, in contrast, relies on nuclear energy for 80 percent of its electricity. But no new U.S. plant has been completed since 1996. (The Tennessee Valley Authority this year reopened one it had closed in 1985.)

With plant construction frozen, U.S. nuclear facilities have boosted output by becoming more efficient. Utilization rates that once lagged around 70 percent now routinely exceed 90 percent. But proponents of nuclear power say that with electricity use rising, the country needs to build 30 or so more plants by 2025 for nuclear to provide the same share of the country's power.

Scientists studying climate change have tossed around even more ambitious figures. To solve one-seventh of the global greenhouse gas problem, Princeton University professors Robert Socolow and Stephen Pacala estimate that the world would need to triple current nuclear capacity. The U.S. share of that expansion (including replacement of aging plants) would require building about five nuclear reactors a year for 50 years.

In New Jersey, more than half of our electricity is produced via nuclear power - a major reason the Garden State produces some of our nation's lowest emission levels on a per capita basis.

The full Post article is available here and is a must read for regular blog readers. In the November issue of COMMERCE Magazine, look for a column by Dr. Patrick Moore (co-founder of Greenpeace) on the importance of nuclear power in New Jersey's energy infrastructure. 

That Whole Tree in a Forrest Thing

It seems as though every hour on the hour, a new press release is posted to PoliticsNJ.com assailing the President for vetoing the $35 billion expansion of SCHIP. Examples are available here, here, here, here, here and here.

For the moment, we'll put aside the fact that these state legislators will not directly vote on any attempt to override the presidential veto because of that pesky constitution and the fact federal dollars are directed by the federal legislature. Then, we'll also forget that health insurance mandates voted on by many of those issuing press releases account for up to 20% of insurance costs in New Jersey. Maybe, if the costs weren't so high and we had a system that allowed for basic coverage with additional coverage paid for by consumers on an 'as needed' basis, SCHIP would be less of a necessity.

As mentioned, we'll put those concerns aside and address a few of the myths that have arisen during legislators' frenzies.

• Myth: The administration sought to end the SCHIP Program
• Fact: The administration's budget calls for a $5 billion expansion of the program. The bill vetoed yesterday would have expanded the program by $35 billion.
• Myth: This expansion is funded through a cigarette tax increase
• Fact: As noted time and again here at NJ Business Matters, the tobacco tax increase would not fund the program unless more Americans begin to smoke than are projected. This sets up a Hobson's choice between raising future taxes and moving children off the SCHIP rolls.
• Myth: The veto guarantees New Jersey children will no longer have their insurance subsidized
  
• Fact: In my philosophy classes at Seton Hall, this was taught as the fallacy of the false dilemma. There does not need to be an 'either-or' decision whereby either the federal government expands its program by $35 billion or children lose insurance. The state government has the ability to increase its share of the FamilyCare program and legislators have the ability to reduce insurance costs by reducing the number of mandates they impose on insurance companies.

PENPAC Gathers to Support Pro-Business Candidates

Last night more than one-hundred business leaders gathered in support of PENPAC, the Private Enterprise Political Action Committee. All two of you regular blog readers (hi mom and dad!) know that last week, PENPAC released its list of 47 endorsed candidates for the New Jersey Senate and General Assembly.

Last night’s event gathered those dedicated to free enterprise principles, smaller government and job creation. A special thanks to the following legislators who stopped by to show their support and appreciation.

• Senator Anthony Bucco
• Senator Gerald Cardinale
• Assembly Republican Leader Alex DeCroce
• Senator Tom Kean, Jr.
• Assemblyman Kevin O’Toole
• Assemblyman David Russo
• Senator Paul Sarlo

SCHIP Expansion Vetoed

The President has vetoed HR 976, which would have expanded the State Children's Health Insurance Program (SCHIP) by $35 billion. Both you regular blog readers know the SCHIP program has been used by the states in ways that go beyond Congress's original intent. In certain states, the fund is used to subsidize health insurance for children and adults earning as much as 350% above the federal poverty level, rather than only benefiting children in families earning 200% of the poverty level as the law was written. The expansion also relies on a tobacco tax increase which would require 22 million new smokers to continue its sustainability. Thank you for smoking indeed.

As the President declares in his message to the House of Representatives,

The original purpose of the State Children's Health Insurance Program (SCHIP) was to help children whose families cannot afford private health insurance, but do not qualify for Medicaid, to get the coverage they need. My Administration strongly supports reauthorization of SCHIP. That is why I proposed last February a 20 percent increase in funding for the program over 5 years.

This bill would shift SCHIP away from its original purpose and turn it into a program that would cover children from some families of four earning almost $83,000 a year. In addition, under this bill, government coverage would displace private health insurance for many children. If this bill were enacted, one out of every three children moving onto government coverage would be moving from private coverage. The bill also does not fully fund all its new spending, obscuring the true cost of the bill's expansion of SCHIP, and it raises taxes on working Americans.

At the time of its inception, more than half of SCHIP eligible children already had private sector coverage. Rather than trying to move more Americans into government coverage, Congress and the state legislature should be doing all they can to reduce the cost of health care and health insurance.

CIANJ urges New Jersey's Congressional delegation to vote against any attempts to override this veto.

Supporting Those Who Realize NJ Business Matters

Tonight the Private Enterprise Political Action Committee (PENPAC) will host its Second Annual Wine and Dine in support of pro-business candidates for the New Jersey legislature. Lucky for us, the Record is running an article on business PACs and the way in which they choose candidates.

NEWJOBS PAC is operated by our friends at the NJBIA, the Chamber of Commerce of Southern New Jersey and other regional chambers. PENPAC, affiliated solely with CIANJ, released its list of 47 pro-business and pro jobs candidates last week.

As CIANJ President emeritus and PENPAC Chairman Rich Goldberg declares,

PENPAC, which holds a rigorously free-market perspective, backs candidates solely on their position on the issues, regardless of their party affiliation or their power in Trenton, said Chairman Richard Goldberg.

He said the PAC trustees paid particularly close attention to the candidates' position on issues of paid family leave and a proposed law that would require a company that gets a state tax break to pay union-level wages. Another key issue is a candidate's position on a proposal to provide health care coverage for all state residents. The association believes all three proposals would hurt business.

As a result, PENPAC backed just five Democrats among the 47 endorsed candidates. They included Sarlo and Assemblyman Gary S. Schaer, D-Passaic. The PAC expects to donate $70,000 to candidates this year.

The October issue of COMMERCE Magazine will feature endorsed candidates and a column by the Chairman on the importance of supporting pro-business candidates, which we will link to once it's available.

If we don't vote for business and job growth, legislators won't either.

Taking from Peter to Pay Peter

A hat tip to Herb Jackson in yesterday's Record and to the paper's editorial board for bringing to the light the practice of public colleges hiring lobbyists to help increase funding to those schools. Jackson's article points out one of the most glaring problems with taxpayer-funded lobbyists seeking taxpayer dollars for taxpayer-funded institutions - - the lack of a review process to protect the taxpayer,

James A. Savage, a University of Virginia professor of politics and author of the book "Funding Science in America," could not comment on whether those grants were appropriate or not.

And that's his problem with them.

"With earmarking, there's no review process, no accountability, and the taxpayer has no way of knowing if the money is going to the best place," he said.

He said that Congress in the 1960s set up a system where teams of experts, mostly at the National Institutes of Health and the National Science Foundation, would identify proposals with the most potential to advance scientific discovery. These proposals would then receive federal funding.

It soon became clear that the lion's share of these grants was going only to a few top-tier universities, so Congress in the 1980s began to direct money to institutions that aspired to be in the top tier, Savage said. And the university earmark was born.

"The research universities thought they could keep this to themselves, but that ignores politics. Members of Congress respond to constituents, and they also respond to junior colleges," Savage said.

Last year, for example, Congress directed $1 million from the NASA budget for equipment at Burlington County Community College.

Universities originally wanted a peer-review process like the ones at NIH and NSF to protect against political meddling into research, Savage said.

"But what's happened is universities and colleges for their own self-serving interests have gone to members of Congress to get these pork-barrel projects," he said. "About 10 percent of all federal money for research is now pork barreled. The growth of earmarking has outstripped the growth in normal academic research."

The editorial board at the Record notes that aside from the $1.6 million spent by public colleges on lobbying, public agencies spent another $1.4 million. Both the investment by the intuitions and the returns are paid for by taxpayers. Somewhere in that equation, their interests need better protection.

Creating Jobs Through Business Incentives

Senator Joseph Kyrillos penned a column for today's Asbury Park Press in which he lays out an agenda for attracting businesses to the state. While Governor Corzine's plan to "sell" New Jersey to companies in an attempt to create jobs is good news for businesses and taxpayers alike, once companies take a serious look at the Garden State, they see conflicting messages coming from the legislature and the various divisions in the administration.

Kyrillos writes,

The effectiveness of the state's primary job creation initiative, the Business Employment Incentive Program (BEIP), is hampered by limitations, including caps on the salary and the number and types of jobs that our state seeks to attract. This is backward thinking. New Jersey needs more high-paying jobs, not fewer.

My plan would also reform the Business Retention and Relocation Assistance grants. This initiative was designed to attract and retain businesses that are considering relocation of their operations. But it needs to be strengthened by increasing the value of potential tax credits for projects that provide substantial job commitments....

Fundamentally, private investment and entrepreneurs create job opportunities, not the state government. But what we can and must demand from our government is that it not stand in the way and that it instead forge a productive partnership with new employers working to create new jobs in this state.

New Jersey has the people and the potential to lead the nation in economic opportunity, but we are squandering that potential. Our governor and legislative leaders must recognize that the fiscal and economic policy choices we make today will determine whether, 10 years from now, we will look back and remember a once strong and prosperous state that lost its way.

The BEIP program mentioned is already on the verge of sending more of those conflicting signals. It is based upon the model of reducing costs through tax advantages in exchange for job creation. Unfortunately, legislation is moving through Trenton that would put prevailing wage requirements on private companies building within the state and taking advantage of BEIP.

Put another way - BEIP exists to reduce the costs of doing business while the prevailing wage artifically increases labor costs to some point north of the supply and demand intersection. Reducing costs on one side while incresing them elsewhere would help neutralize NJ's most successful job creation program - one that's helped generate more than 60,000 jobs since its inception.

To read the entire column by Senator Kyrillos (who was endorsed by PENPAC for re-election this year), click here.

The UAW's Awakening

Yours truly was on vacation toward the end of last week, but even in the far reaches of the desert, we received this column in Saturday's Wall Street Journal. The Journal hails the new agreement between the UAW and GM as another step forward in bringing union contract negotiations more in line with what is economically possible in a competitive global economy. The editorial writers also point out the same flaws in the modern labor movement we noted during our posts on the mistitled Employee Free Choice Act,

Our friends in the AFL-CIO often think we're too critical, but we're not responsible for taking union membership down to 7.4% of the non-government American labor force last year. (See nearby chart.) The reality of a dynamic world economy did that, assisted by the failure to adapt by union leaders and corporate managers. These columns support collective bargaining, and our belief has long been that if a company's workers vote to join a union, they and the company deserve what they get.

The problem with unions is not all that dissimilar to that posed by entrenched management: Once they win comfortable contracts, they often become impediments to the kind of innovation and flexibility essential to success in today's economy. So in the name of "job security," they undermine a company's--or a nation's--competitiveness. The result, over time, is less job security for everyone, especially the union workforce. There's no better example of this than GM, where the UAW now represents about 74,000 hourly workers, compared to 246,000 in 1994. Some security.