Corzine Plots Economic Recovery Plan

It's a mixed bag. He says that he's going to increase state spending in some places, and cut it elsewhere. He says that he's going to push forward with building the new rail tunnels to New York (memo to Corzine - the Port Authority and feds were already funding that one and the state's share was minimal).

Governor Jon Corzine (D-NJ) is pushing an economic stimulus package in New Jersey that doesn't actually stimulate the economy and just shifts money around from one group to another without addressing underlying problems with the state's finances or the economic situation.

The governor, the former head of Wall Street’s Goldman Sachs investment firm, says his programs will cost $150 million.

Lawmakers must act, he said.

“We do have a say about our economic destiny. Being a bystander… standing idly by… is not an option. Initiative and hard work is the only path,” Corzine said.

To pay for it, he will use new federal funds in combination with state government cuts. State tax revenues, however, are dropping and officials expect to see $400 million less than planned.

“We will undoubtedly need more cuts. We may have to take more drastic steps in the months ahead,” Corzine said. “The one certain principle the public can count on is that spending will match revenues. At the end of this fiscal year spending will be less than the $32.9 billion approved in June.”

Corzine told a joint session of the Legislature that he wants to pay businesses $3,000 for every full-time job created. The state will push forward with massive public works projects, like a new tunnel under the Hudson River, to boost employment.

He also told lawmakers that the state should spend $150 million on programs to keep people in their homes. About 50,000 homeowners a year now face foreclosure in an economic collapse.

“Our efforts will include broadened financial counseling, mortgage restructuring, and house and mortgage acquisition,” Corzine said.

More money should go to food banks and to programs that help homeowners deal with rising heating costs, Corzine said.

Legal aid services for the poor, especially those facing home foreclosure, also need money, Corzine said.

The state will also help small banks by depositing some of its cash reserves into their accounts, Corzine said.

Let's focus on the foreclosure issue. Corzine claims 50,000 homeowners face foreclosure this year. How much of that is due to obscene property taxes? Job losses in New Jersey because of the obscene tax burden on companies doing business in New Jersey? How much is due to the turmoil on Wall Street and the financial crisis due to toxic paper created by subprime borrowing?

More to the point, what is the percentage of these foreclosures in relation to the overall real estate market statewide? Where is the problem most acute? Well, according to this story, we're talking about one out of every 200 homes is facing a foreclosure. That's 0.5% - one half of one percent of homes in the state. I know it's a crisis for someone who actually is facing a foreclosure, but does this really constitute a statewide crisis?

Corzine thinks saving those who are entering foreclosure is helpful to the real estate market? Hardly. It continues to prop up real estate prices in areas that are overheated and could be far more affordable to those who actually have the capacity to pay. Since much of this crisis is the result of pushing for affordable housing, the correction in the housing market is past due. I suspect areas that have been a mess for years, like Paterson, Newark, and Camden will see a disproportionate number of foreclosure filings, and that's directly attributed to subprime borrowing and the banks pressured into lending to those who lacked the ability to repay. Those areas will suffer more than the rest of the state, but the solution isn't to save those individuals who made those bad decisions - it's to let the prices sort themselves out and let the foreclosure process work so that those homes go back on the market at prices that are more affordable. Banks should not be pressured into lending to those who are subprime borrowers - that's how this crisis was started.

What Corzine must do is get costs under control, which means tackling the unions and state spending. It's something he's been reluctant to do for years, and state spending remains out of control.

Consider that he's calling for a new expanded jobs credit to entice businesses. How about providing a permanent corporate income tax cut which will affect all businesses, and the increased economic activity will bring in additional corporate, sales, and personal income tax revenues. Companies that are more secure in knowing that the tax burden is reduced are more likely to remain in New Jersey and expand existing operations here.