Lamont tells a Connecticut ‘turnaround’ story to Wall Street
Gov. Ned Lamont and his top economic and budget officials worked Thursday to change the Wall Street Journal’s dim view of Connecticut as a place to do business, urging the Journal’s editorial writers and, separately, viewers on MSNBC and CNBC to see the state as firmly on the path to a fiscal turnaround.
Lamont began his day in New York at MSNBC’s “Morning Joe” and ended it on CNBC’s “Closing Bell.” In between, the governor visited the Journal, which recently skewered Connecticut’s tax policies and business climate, and attended a foreign policy address by his choice for president, Joe Biden.
He briefly visited Biden backstage after the speech, and called him “a good man” on “Morning Joe.” The Biden stop was a late addition to a day devoted to polishing Connecticut’s image for people influential with business, especially the editorial page of the Wall Street Journal.
At the Journal, his staff said, the governor talked about being a businessman who held the line on income-tax rates in his first budget and has vowed to minimize the use of giveaways to spur economic growth.
Connecticut Gov. Ned Lamont on making the state competitive from CNBC.
“I think the governor struck the right tone,” said David Lehman, the former Goldman Sachs partner who advises Lamont on economics and serves as his commissioner of economic and community development. “It was a really important day.”
Lehman and Melissa McCaw, who oversees the state budget as secretary of policy and management, joined Lamont for a private meeting at the Wall Street Journal, helping to rebut an editorial that criticized the state for tax increases on everyone and generous economic-development packages for a lucky few.
“Thus we have Connecticut’s business model: Raise costs for everyone and then leverage taxpayers to provide discounts for a politically favored few. A business that operated like this would lose customers and eventually go bankrupt,” the Journal wrote. “That may be where Connecticut is headed.”
The editorial noted that the state gave away more money in corporate incentives in 2016 than it brought in through a corporate tax increase imposed the previous year.
Maribel La Luz, who is leaving the governor’s office as communications director to become the senior advisor to Lehman on external affairs, said Lamont, Lehman and McCaw spent more than an hour talking about what has changed since Lamont took office in January.
It builds on a letter from Lamont that the Journal published on June 24, two days after the editorial. He called himself “a small-business Democrat, someone who knows what it means to balance a budget at the end of the month.”
“I wasn’t going to sign a budget that increased income-tax rates for anyone in the state. I announced a self-imposed Debt Diet that reduced authorizations to Connecticut’s decades-old addiction to bonding by 40%. I kept spending increases in line with inflation the first year of the budget, with a modest increase in the second year. And I maintained a rainy-day fund in excess of $2 billion—the largest in the state’s history.”
Connecticut still faces significant financial challenges, including one of the nation’s largest unfunded pension obligations, the result of generous benefits and decades of underfunding. Retirement benefits have been cut significantly for new employees, but there is no quick fix for the unfunded liability.
The Lamont administration is making the case the state is now moving in the right direction, seizing on a metric it hopes plays well on Wall Street — bond ratings.
The timing of the visit was propitious. The previous day, the bond-rating agency, Kroll, improved its outlook on Connecticut from negative to stable. Four months ago, Standard & Poor’s raised its outlook from stable to positive.
On CNBC, Lamont’s introduction by Sara Eisen included a mention that Connecticut was 35th in CNBC’s latest rankings of the best states for business.
“It’s a turnaround,” Lamont said. “We’re making progress.”
The state gets high grades for education and quality of life, but Eisen told him the new ranking show Connecticut with Ds on other key measures: its economy, infrastructure and cost of doing business.
“You’re a tough grader,” Lamont said, smiling. Then he noted the state had actually crept up from 37th to 35th.
“Here’s what we had to do,” Lamont said. “We had to get an honestly balanced budget done on time without raising taxes. We did that. That hasn’t happened in a long time in the state. Secondly, what we got to do is invest in infrastructure.”
Lamont did raise taxes. Later in the 4-minute interview, he correctly said he did not raise tax rates.
One of the graphics that popped up during Lamont’s appearance on CNBC.
While he spoke, several graphics flashed on screen, not all complimentary. One showed four prominent businessmen who have left Connecticut.
In a telephone interview on his trip back to Connecticut, Lehman said he thought the day went well, especially the visit to the Journal.
“They had a negative predisposition toward us in the past. I think it’s really important we change that and address it head on,” he said. “I hope this day was the first many in that effort.”
Lamont has not completely sworn off financial incentives to business, but he vows to minimize them. Lehman said they cannot be completely eliminated, as they are now baked into economic development.
“We’ve been consistent, and I hope clear, that while it is part of the dialogue, it’s not something we’re going to lead with,” he said. “I told the Journal, the free markets, I’m a believer in that, but ultimately incentives are part of the dialogue with businesses these days.”
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The mandatory .05% payroll deduction that he signed for FMLA is, by definition, an increase in the income tax rates.
Gov. Lamont did poorly on CNBC. However it was also not helpful and a little unfair for CNBC to run a really awful graphics package of how bad we are doing as a state while they interviewed him. I pictured a producer laughing in the control booth as they nailed facts and figures to the screen.
The worst part is about 30 seconds in when he says (paraphrase) “we have turned it around”, and then the host says you ranked … a D in overall economy, a D in infrastructure and a D in cost of doing business, and an F in cost of living, Lamont answered jokingly “yeah you guys are really tough graders”, no one laughed the host followed with “I don’t give the scores but that is what you got, you ranked 43rd in those categories”? Then nervous awkward laugh and they moved on. Not a good interview for promoting Connecticut, he needs training in front of the camera because that was a powderpuff interview and he got a D.
A Road Show designed to tout a message and promote wha you want to be true, does not skew reality. The State of Connecticut’s labor policies and fixed budget costs driven by union influence have crippled and destroyed the economic well being of our State. Until our Governor, and our legislature take this problem on, they can say what they want, but the real problem and issues will stay the same.
As the article observed, “Retirement benefits have been cut significantly for new employees, but there is no quick fix for the unfunded liability.”
The state has spread retirement benefit payments for teachers and state employees, so the annual problem has been reduced.
CT’s economic difficulties are real, but labor costs are not the main factor.
Ideas and practical applications of ideas and resources made Connecticut synonymous with ingenuity/invention, unparalelled manufacturing/industrial output, diversity of economy, and storied prosperity…
This state has been relatively short on ideas since P.T. Barnum — and we’ve had economic slippage, albeit with a couple of interruptions/bright spots — for most of the past 100 years…
Lamont needs to get a half-dozen, modern-day Barnums interested in Connecticut’s extant resources/potential… “Smart management,” of an economic entity that is hemorrhaging money, without stanching the hemorrhage (business retention) and administering transfusions/infusions (creating/recruiting business) is an oxymoron… The governor needs to recruit some visionaries and renaissance people to imagine and create a new Connecticut with a new economic-development model/plan…
Right now he seems to be on more of bs cruscade than a real, planned, economic redevelopment mission. The WSJ will see right through his masquerade…
Good points and we need to be considerate of what will happen to cities as millennials have families and seek space, better schools, more privacy etc. The issue at hand is not really should we invest in this city vs that one (we will never be Boston or NY City and do not need to be). The real issue is how do we restore our states competitive advantage for large businesses so we can get them back here. We MUST lower the cost of living here and that means less taxes, less regulation and far fewer mandates in essence reversing decades of democrat policy – that is NOT what Gov. Lamont is doing and as you correctly pointed out we have little time for policy mistakes or delaying the inevitable.
What could CT do to attract large businesses? The state is more or less inevitably a high cost producer. That’s why a lot of businesses disappeared. And CEO’s prefer to be in places with a lot of other important people.
The tax and regulatory problems could be reduced, possibly. But that’s not enough to persuade people to locate their companies here. Those higher income people who have left the state are responding to existing trends. Government alone can’t generate sufficient advantages.
CT’s economy has shrunk (inflation adjusted terms) nearly every year since 2008; 2018 saw some very modest but real growth. Still, the economy is about the size it was in 2004. Between 1997 and 2007, its real growth rate was 3% compounded annually–one of the better performances of any state in the nation. So what went wrong post 2008? There seems to be no interest in sorting this out and understanding how CT has done so poorly–the worst record of any state and dramatically different from our immediate neighbors, all of whom have fully recovered in employment and–more important–in state GDP. While Gov. Lamont may be addressing the fiscal challenges seriously, where is the strategy to restore economic vitality? There simply isn’t a credible argument that simply getting the state’s fiscal house in order will have anything more than a marginal impact on competitive performance.
Rhode Island isn’t doing well either.
New York state has NYC and Mass has Boston, so gains in those states can be explained.
CT doesn’t have advantages leading to growth. So the stagnation seems understandable.
Why do you consider these budgets better than those in the past? Washington policies produced more money for the state, which helped the revenue situation. The increase in revenue allowed the state to continue doing what it was doing with some increase for inflation.
Eliminating future deficits would require controversial actions. Especially when there are few future tax cuts to rescind, which was another big part of how these budgets were balanced.
The fiscal house can be expected to go out of order again in the future, with the same underlying causes.
CT has benefitted from increased military spending and money brought into the state by tax reform. But military policies can change, and tax reform’s effect can expect to stabilize, with a risk of declining.
The rest of the state’s economy is not growing. No city in the state is going to have the growth seen in a few cities elsewhere, including New York and Boston.
The budget was apparently balanced by the military and finance gains, along with eliminating tax cuts which had been promised. But there’s optimism in the budget projections, especially in payroll growth, savings from negotiations, and the hospital settlement. The state is probably going to be using some of the rainy day fund this year and next.
The small business reaction to policies enacted in the past legislative session is likely to do damage, but not enough to begin a downturn.
So the Governor can extol the luck from Washington policies, but the rest of CT’s economy will be stable. Another word for stable is stagnant. His campaign won’t change the minds of WSJ staff.
I like Ned Lamont, he seems like a very nice man but at age 65 and with more money than one can ever need why does he want the headache of being Governor of CT? Life is so short and Mr. Lamont’s heart is just not in it. The problems are massive and he does not appear willing to be even honest about them. My only question is when does he announce he won’t run for a second term or when does he just walk away. Who needs the grief?
This statement by the Governor is false: “Here’s what we had to do,” Lamont said. “We had to get an honestly balanced budget done on time without raising taxes. We did that. That hasn’t happened in a long time in the state. Secondly, what we got to do is invest in infrastructure.”
The budget includes $450 million in unidentified savings to be contributed by the unions. The last time this was tried the unions gave ZERO. Watch what will happen–no savings at all, the budget runs a $500 million deficit the whole year and the rainy day fund gets raided. The press allowing Gov. Lamont to say he presented a balanced budget is a journalism failure. The summer interns had better start fact checking!
The major business community is watching whether Gov. Lamont departs from past CT practice and avoids tax hikes and reduces spending. So far, despite good intentions, he hasn’t delivered on either. Together with 6 month stagnant employment on top of a stagnant decade the major business community seems “wait and see”.