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In New Jersey, the Progressive Future Has Already Arrived

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Tags U.S. EconomyU.S. History

03/21/2018

In the wake of scandals and Chris Christie beach chair memes, Democrats regained control of New Jersey’s governorship and senate. Now, Trenton is getting set — with an ever-growing host of Obama-affiliated officials — to enact broad changes

Let’s start with an early example. On January 16, Governor Phil Murphy signed new legislation barring state employers from asking about previous salary information. This simple regulation was billed as a valiant assault on the omnipresent “gender pay gap” — something endlessly refuted by economists and something endlessly useful as a rhetorical club.

How would this comparatively minor regulation - blown all out of proportion - stack up in practice? New Jersey, the densest state in the union, is a demographic hodgepodge: it is home to many of the most affluent communities in the United States, particularly those centered around the New York metropolitan area. It’s also home to some of America’s most infamously decrepit cities - Camden, Trenton, Paterson, and Newark all ought to sound familiar. Without access to some part of an employee’s past, employers will be that much less likely to even consider riskier prospects — the inability to pool risk is a primary challenge in the hiring process. If only marginally, this bill will make employers more cautious in hiring, in hopes of avoiding any "risky" hires, and is therefore likely to adversely affect the lowest-income and least-skilled female workers the most. 

Wealthy residents aren’t off the hook, either - Murphy has strongly hinted that a millionaire tax hike will be part of the March 13 budget. Considered as part of a proposal to fund education, the unreliable NJ Transit system, and public pensions, the tax is nonetheless bound to cause an outflow of capital, and subsequently, real wealth. Households constituting over $70 billion of wealth fled New Jersey between 2004 and 2008, in the aftermath of a tax hike in 2004, centered on households earning over $500,000. Even if the increased tax revenue were used as virtuously as possible in schools, jobs would be in shorter supply for graduating students. For poor residents, with the lowest economic mobility, already-scant opportunities for legitimate careers would become even scarcer. Improvements in public transportation, likewise, would be useless for those without jobs to commute to.

In addition, the public pension situation is a crisis of monstrous proportions, with a state budget of $35 billion facing off against unfunded retiree liabilities of over $200 billion. Public unions, like the New Jersey Education Association, take the lion’s share of the blame. New Jersey’s public schools are essentially closed shops, the NJEA having lobbied and motivated legislation requiring even non-unionized teachers to pay 85% of union dues. These “agency fees” come directly from teachers’ paychecks, ensuring a near-constant supply of funds. In addition to spending tens of millions on election funding, and hundreds of millions on “grassroots” teacher movements and other political ventures, it has consistently impeded pension reform, including proposals by the Christie administration that would have applied to new teachers.

The “non-forfeitable right” to pensions, sponsored by the NJEA in 1997 and subsequently legislated, is as meaningless as any “right” to a finite commodity, be it healthcare, social security, food, or anything else. If the wealth doesn’t exist to cover something, it simply cannot be provided — and capital outflows due to tax hikes will put the situation under even more dire conditions. If it’s any consolation, New Jersey’s inability to print money may well ensure a more timely — and less severe — crisis than the federal government’s unfunded liabilities, in excess of $210 trillion, may.

The NJEA is, in any case, a premier blueprint for a “public” union — a near-unstoppable political force, against both non-members and “consumers.” It is by far the highest-spending and most active political force in the state. Murphy is an endorsee of the NJEA — however, the behemoth could be said to have “bipartisan” support, with sponsored candidates of both major parties having dominated Trenton in recent decades.

One last proposal of Murphy’s is to subsidize the state’s wind power industry, currently localized to Atlantic City. By his administration’s outlook, one third of New Jersey’s electricity should originate from wind power by 2030. Government’s inability to innovate — to discover and uniquely connect pieces of information — and create wealth aside, wind farms are inefficient in the extreme. They take up orders of magnitude more space than oil refineries or coal power plants.  Even if the wind farms are too far from the Jersey shoreline to make it into a collective eyesore — and subsequently raze the tourism sector — construction and maintenance of marine farms will drastically increase energy costs. Forced redistribution of wealth, under the guise of subsidies, is both immoral and ineffective.

Murphy’s much-touted legalization of marijuana could induce comparatively small economic benefits. Nevertheless, New Jerseyans face many economic issues, exacerbated by further taxation and regulation - plenty of classic economic sophisms are on proudly on display here, with our state ranking dead last in finances. Given New Jersey’s vital position in the Northeast Megalopolis, our political tides demonstrate what may be approaching America’s population centers — and, as you can see, it’s not just California going off the deep end.

Liam Munz is a freelance writer in the Philadelphia metropolitan area, focusing on personal finance and economics. You can reach him or find out more at liammunz.com.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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