Dannel Malloy, Connecticut’s Democratic and Working Families Party Governor, told citizens of his state last year that the highest tax increase in the history of Connecticut, including a retroactive state income tax hike, would balance his state’s budget. It appears he was wrong. Bloomberg has reported that Connecticut will have a $94.9 million revenue shortfall in fiscal year 2012. In addition, official estimates indicate that the state’s revenues will trail by $139 million in fiscal year 2013.

Minimizing the significance of the shortfall, Gov. Malloy said in a press release:

All today’s announcement means is that, as is the case in other states with high wage earners, fourth quarter revenue is coming up short of expectations. That’s why today, I’ve instructed Secretary Barnes to pare back on current year expenses.  But let there be no confusion – we will end the current fiscal year in the black, and in a more stable fashion than this state has seen in many years.

Blaming the shortfall on the “uncertainty surrounding the extension of the Bush-era tax cuts,” Mr. Malloy said that such “uncertainty at the federal level” resulted in taxpayers’ shift of capital gains and income, as well as declines in bonus levels in the financial service industry.

Last year, Gov. Malloy used the tax hike to balance his state’s budget against a public sector union concession package that actually required few concessions of unions: no layoffs for four years and no furloughs; wages frozen for two years, then followed by three annual 3 percent raises; retirement age raised by only two years, and not until after 2022; and minor changes in health benefits such as mandatory annual physician visits and mail-order prescription plans.

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That’s the way Winston Churchill, whose 1939 words we borrowed for our headline this week, were he asked about America, might answer that question today.  In foreign affairs we have spent much of the past two years trying to reset our relationships with the rest, or much of the rest, of the world.  So far we have little, perhaps nothing, to show for it other than the alienation of some old friends and no new friends.

Domestically (according to the non-partisan Congressional Budget Office) we’ll overspend to the tune of $1.5 trillion this year, on top of the $1.3 trillion we overspent last year.  At the rate we’re going, we’ll add more to our debt during President Obama’s first term than all the debt accumulated by all of his predecessors combined, according to Michael Boskin, professor of economics at Stanford University.

Does the Administration want to see real economic growth in the country?  Of course.  Obama can’t retain the White House without a strong economic turnaround. Has he been pursuing policies to achieve that goal? Hardly. Quite the contrary.  His Administration is spending much more effort stoking the fiscal fire than dousing it. The President has largely ignored the recommendations of his own Debt and Deficit Commission, making it easy for those Republicans and Democrats who oppose the commission’s recommendations to have rendered the report dead on arrival.  There is a growing expectation among analysts and economists including Douglas Holtz-Eakin, the former director of the Congressional Budget Office that U.S. debt will lose its AAA credit rating within the next three years.

And while we have written, at great length, about the sad state of the federal fisc, the financial condition of the many states is worse.  At least the federal government can, in a pinch, print money to meet its obligations.  The states, collectively, seem to be a train wreck waiting to happen.

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From Bloomburg:

Illinois lawmakers will try this week to accomplish in a few days what they have been unable to do in the past two years — resolve the state’s worst financial crisis.

The legislative session that begins today will take aim at a budget deficit of at least $13 billion, including a backlog of more than $6 billion in unpaid bills and almost $4 billion in missed payments to underfunded state pensions.

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A Schwarzenegger hangover saved California Democrats from a wipeout as the Tea Party wave washed harmlessly up the High Sierra’s eastern slope.  Democrats won eight of nine statewide offices, with the race for attorney general looking more Republican as the late ballots get tallied.  Democrats also racked up their largest State Assembly majority since the Watergate blowout year of 1974 (52 seats of 80).  And, the passage of union-sponsored Prop. 25 allows Democrats to enact a budget with a simple majority vote.  But for visual confirmation of this election’s connection to the failed “Republican” governor, one need only look at governor-elect Jerry Brown’s ad showing Arnold Schwarzenegger side-by-side with Meg Whitman uttering the same platitudinous inanities we’ve come to expect from self-funded dilettantes who neither have the time to vote nor the inclination to first seek a lesser office so as to gain political experience.

It isn’t hard to see where things went awry in California: just look back to the heady years of the historic 2003 recall of Gray Davis.  Davis was swept out of office due a massive deficit brought on by his rapid expansion of state government during the dot com economy combined with his mishandling of the state’s electricity crisis.  Candidate Schwarzenegger won on a platform of “blowing up the boxes” of bureaucracy while “cutting up” the state’s “credit cards” – Schwarzenegger did neither.  Instead, he gave California seven years of uneven leadership, veering from the right to the left while calling his erratic leadership “post-partisanship.” Schwarzenegger pushed through the largest state tax increase in U.S. history, expanded government spending, debt and regulatory hurdles while shrinking the sphere of liberty – curious actions for a self-avowed fan of the late Milton Friedman.  Schwarzenegger’s voter approval rating hit 22 percent this summer, matching Gray Davis’ recall-eve rating – something Davis, if he wishes to indulge in schadenfreude, might see as poetic symmetry.

While the Democrats had a great election night in the Golden State, there are some signs of hope for the majority of Californians who don’t take their ideological cues from San Francisco.

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New Jersey Governor Chris Christie is traveling to Springfield, Illinois today to do a fundraiser for Bill Brady, the Republican gubernatorial candidate. While he’s in town, Christie should drop by the capitol and give Illinois Governor Pat Quinn, a Democrat, a lesson on how to trim state labor costs.

While Governor Christie has sensibly challenged the public employee union status quo in the name of fighting deficits, Governor Quinn is cementing union perks in place even as the state’s fiscal condition deteriorates.

The recent announcement of a deal between Quinn and AFSCME to stop any public employee union member layoffs and facility closings through June 2012 is causing a minor uproar in the Prairie State. Illinois is facing a record $4.7 billion backlog in unpaid bills, and the union’s agreement to accept a measly $50 million in savings in return for the concessions doesn’t pass the smell test.

The fact that AFSCME endorsed Quinn just days earlier brings up unpleasant reminders of Illinois’s history of a “pay to play” state. According to reports, Quinn’s budget director David Vaught attended a union endorsement session, albeit on his personal time.

Labor costs make up one in four dollars spent from Illinois’s general funds, and walling off a major chunk of the state budget from any spending reforms makes balancing the books infinitely more difficult. Under the Quinn deal, changes to the collective bargaining agreement would be forbidden until one-third of the way through the next gubernatorial term. By then, Illinois could be bankrupt. The state needs more flexibility to deal with public sector unions, not less.

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Is there a political answer to every problem? Most of my colleagues feel this is the case. I disagree.

In the past day, there was a spate of news articles about California’s trans-fat ban due to go into effect on New Year’s Day. I voted against this new law.

California has the 4th-highest unemployment rate, a $21 billion budget deficit, and a severe water shortage, so, what do lawmakers do?  Pass a law that will fine restaurants $1,000 for using margarine in their foods.

One of the articles said:

Assemblyman Chuck DeVore, R-Irvine, criticized the new law as an example of nanny government with little beneficial impact.
“Not every human problem deserves a political solution,” he said. “That’s the fallacy my colleagues engage in.”

I’ve been criticized for voting against all sorts of nanny state bills that expand the police power of government in the name of making us safe from ourselves. I’ve often argued that we might as well pass a blanket bill outlawing stupidity and rudeness in California.

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