Economics

Guest Post by State Senator Jeb Bradley 

New Hampshire residents weary of dreary summer rain received a frightening jolt of lightening when a Judge blocked Governor John Lynch’s attempt to transfer $110 million dollars of private funds to State coffers.  Belknap County Superior Court Justice Kathleen McGuire ruled that an extremely controversial provision in the recently enacted New Hampshire Budget, which transferred $110 million from a fund controlled by the Joint Underwriting Association (JUA) to the State’s General Fund to balance the budget, is unconstitutional.  Justice McGuire’s well researched, clearly written and completely unambiguous ruling, held that Governor Lynch and members of the Legislature who supported this proposed $110 million transfer, are in violation of both the ‘takings’ and ‘contracts’ clauses of the New Hampshire Constitution and the Fifth and Fourteenth Amendments to the United States Constitution. Governor Lynch has already indicated the State will appeal the decision but it is hard to imagine, given McGuire’s opinion, that the Supreme Court will overrule her.

The JUA was formed in 1975 to provide medical liability insurance to physicians and currently provides over 20% of the medical liability coverage in New Hampshire. The Judge ruled the JUA is independent from the State. More importantly, physicians, not the State, contribute to its funding and when the JUA faced a deficit in 1985 a surcharge on doctor’s policies was assessed to cover the gap–not State funding. Twice in the past, the JUA distributed surplus funds to policy holders–not the State. Given these facts, it’s political hubris and arrogance seldom seen in our State, for the Democratic supporters of this budget to simply expropriate $110 million. These unseemly political shenanigans, now defy both our state and federal constitutions.

The sanctity of contracts is one of the underpinnings of our society, as is the prohibition of the government taking a person’s property without just compensation.  Good for Justice McGuire for upholding constitutional principles and shame on politicians who believe the State can simply break contracts and take property it doesn’t own, to enable the gravy train of a 10.5% state spending increase.

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Guest post by NH State Senator Jeb Bradley…

Supporters of the recently enacted State of New Hampshire budget were quick to claim that it was responsible and that they made tough decisions during difficult economic times. Talk about myth and spin – this budget fits the bill – literally!

Myth #1:  State spending will decrease in the next two years.  Sounds great doesn’t it? Unfortunately, this is flat out wrong. Here are the facts: According to the Legislative Budget Assistant–the non-partisan office that is charged with preparing budget figures–total authorized spending in the current budget, which will close June 30, is $10.408 billion. The budget that was just approved and will begin July 1 authorizes spending of $11.499 billion, an increase of $1.091 billion or 10.48% by every known method of mathematics! How can these budget supporters possibly justify this huge increase when people are struggling to pay their bills and now will struggle to pay the higher taxes and fees contained in the budget? This 10.48% increase also comes at a time when other states around the nation on average are actually reducing spending!

Myth #2: The new tax on campsites closes a loophole. If budget writers really thought this tax on camping was closing a loophole it is hard to imagine why they would have introduced it in the wee hours of the night without a public hearing. The fact is that it is a brand new 9% tax on camping. It is positively amazing how supporters of this budget claim to be the politicians that support the little guy.  This budget not only taxes camping, it hikes taxes or fees on meals, tobacco, boat & car registration, salt water fishing licenses and most importantly, property taxes. Nothing can hide the fact that New Hampshire citizens of modest means will be digging deeper into their already empty wallets.

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So, Treasury Secretary Timothy F. Geithner and the Obama Administration have now made a proposal for financial regulatory reform. Clearly, such a proposal was very much needed. But the proposal that the U.S. Treasury has now presented is sorely off target. It is neither comprehensive enough, nor does it address the core problems that everyone on Wall Street knows exist. It merely tinkers on the margins.

Until the fundamental problems are addressed, all we have been given is a fig leaf. This is dangerous as it has the potential of lulling us into a false sense of complacency. We have been here before with smaller crisis (such as with the Long Term Capital fiasco) and nothing was learned. Let’s not repeat our mistakes.

One of the principal reasons for the current financial crisis was the gross failure of the existing regulatory institutions. President Obama himself openly acknowledged this when he announced his reform package. Regulatory reform has been very much needed for a long time and very little has been done to fix the problems that plague our financial institutions.

The Geithner plan calls for a massive expansion of the powers of the Federal Reserve. Without a doubt, of the financial regulators that are examining the banks, the Federal Reserve is the most sophisticated. But, this is off a very low base. The Fed’s regulators are too young, inexperienced, under compensated and hardly the best we can get in the financial markets.

Nor is it clear…

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In a time of high unemployment, why isn’t NH doing more to promote job creation?

Despite all of our problems, America remains the most attractive market in the world for almost every product imaginable. In large part, this is why most American businesses don’t immediately think of exporting their products abroad – a major failing of ours. But foreign companies are well aware of the opportunities that exist in the U.S. markets. Anyone doubting this should immediately look at the auto industry. The U.S. still produces some of the best cars in the world. But, we do so primarily in the south, in such states as South Carolina, Kentucky, and Alabama and they bear the brand logos of BMW, Toyota, Honda, Infinity, etc.

And it is not just cars; Honda Aviation, for example, recently opened a new plant in North Carolina which will help offset that state’s loss of its old textile mills. Nor is it just manufacturing; the list of businesses is almost limitless, and includes high tech companies, software companies, call centers, etc. Indeed, without such businesses, American consumers would immediately encounter a steep bout of inflation and unemployment.

So here is the question: when Kia Motors or Hyundai were recently looking to open new assembly plants, why is it that no one tried to persuade them to build a plant in NH? With New Hampshire’s great lifestyle, low taxes, our high tech base and our business environment, our state should be an excellent destination for all kinds of business operations. More often than not, foreign businesses are looking to establish operations where the enabling business environment is considerably better than in their home countries. This usually means the U.S.A. It should also mean New Hampshire.

With New Hampshire’s economy softening, 

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In today’s economic environment, helping small businesses create new jobs needs to be our leading priority. Yes, we must take care of the displaced, but we must do it through job creation. The Democrats in Concord can’t seem to understand this.  They keep adding more and more weight onto the state’s business community, expecting them to continue to fly. They have just done it again this week by adding more social safety net legislation at the expense of job creation. While they will now crow about “helping people” their policies will have the exact opposite impact.

America’s economic safety net undoubtedly plays an important role in stabilizing the economy when events or economic situations take a turn for the worse. Markets have always had an unfortunate tendency to over-react in the short run. Therefore, such measures as unemployment insurance serve as a good short term shock absorber to slow the descent while economic policies and normal market forces bring the economy back into balance. Other social safety net policies can also be helpful to an economy and the quality of life.

But as the saying goes, “Taken to an extreme, any virtue can be turned into a vice.” Just as a wrong sized shock absorber on a car can be counter productive, so it is in economics. The Europeans have been seeing this in spades over the last few decades. Several countries like France and Germany have adopted such inflated unemployment and other social benefits that businesses are now very reluctant to hire new people. As a result, unemployment is the overriding problem because existing businesses can’t bear the load. This also means that new businesses are hard to start and job creating innovation is much slower than in the faster paced economies. There is clearly a balance to be struck.

America’s business community is now struggling to survive in the worst economic downturn in the past seventy years. Even the largest and once most successful of businesses are holding on by their fingernails. In the past year we have seen the bankruptcy of some of America’s business icons such as Chrysler and General Motors, Merrill Lynch, Circuit City, and many others. At the same time businesses have been scaling back and closing stores at an alarming pace. As a result, the country’s jobless rate jumped to 9.4 percent in May, the highest in twenty-five years. This figure is already higher than the “worse case scenario” of the government’s just completed stress tests. And there is more to come as unemployment will surely pass into the double digits.

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