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Malloy in the Middle

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Malloy in the Middle

The Connecticut governor is finally facing fiscal reality—and progressives don’t like it. June 16, 2016
Economy, finance, and budgets
Politics and law

In politics, dreams can turn quickly into nightmares. Just ask Connecticut governor Dannel Malloy. Not long ago, the Daily Beast touted him as the “dream progressive governor” who raised taxes, boosted the minimum wage, introduced mandatory paid sick leave, tightened gun control, and still managed to get reelected. Feeling his oats, Malloy even challenged other Democrats to “grow a pair” by sticking to their progressive principles. That was barely 18 months ago, but it seems an entire political lifetime.

Now, Malloy is being attacked by supporters of progressivism’s standard bearer, Bernie Sanders, for not being faithful to the cause. The criticism comes even as the governor has alienated the state’s business community, provoked criticism from Wall Street for his fiscal management, and garnered among the lowest approval ratings from the general population of any current governor. It’s hard to alienate so many people across the ideological spectrum so thoroughly, but Malloy has managed to do it.

Connecticut is a state with deep fiscal problems. Malloy’s biggest miscalculation was his belief that he could sock residents and businesses with taxes and regulations and then somehow rely on the economy to bail him out. Malloy rammed through a $2 billion tax increase in 2011, promising unspecified budget savings to help balance the books. He cut a mere 1,000 jobs out of a state workforce of 58,000, made only modest reforms to Connecticut’s deeply indebted pension system, and declared victory. Enough residents believed him that he eked out a narrow electoral triumph in 2014.

No sooner had Malloy been reelected than the state’s sinking economy helped create a massive $1.3 billion new deficit problem. Connecticut’s Democratic legislature responded by giving the governor a second round of steep tax increases. Businesses and residents yelped. Connecticut’s largest private employer, General Electric, began a public hunt for new headquarters in another state. Even as government union leaders and Democratic legislators argued that GE was only bluffing (because of course businesses don’t care about taxes), Malloy began backpedaling. He committed progressive heresy by suggesting that people and companies might actually change their behavior in response to high taxes. He scrapped some of his tax increases and instead promised to cut the budget by $800 million. He’s promised to trim an additional 3,000 jobs from the workforce and has cut funding for social services and reduced aid to municipalities. Still, he’s left with some $200 million in unspecified further cuts that he promises to make.

All of this might have remained a local concern except that Hillary Clinton tapped Malloy to co-chair the Democratic Party’s Platform Committee at this summer’s nominating convention. Sanders strenuously objected, referring to Malloy, a Clinton supporter, as one of her “aggressive attack surrogates.” Sanders supporters in Connecticut and nationwide have taken the cue to slam Malloy for being insufficiently progressive. Dan Cantor, who helped found the New York Working Families Party and is national director of the union-backed group, told Salon last month that Malloy was “a major disappointment” who is “pulling from the Republican playbook.” The director of Connecticut Citizen Action Group, another progressive organization, told CTMirror.org that Malloy is “more inclined now to play favorably with the corporate community.”

Even as the Left attacks, Malloy’s budget moves have hardly won plaudits from the financial community. Last month, both Fitch and Standard & Poor’s lowered Connecticut’s credit rating—the first time in 40 years that the state received a double-downgrade. Fitch said it was “unclear whether the state has succeeded in fully aligning its budget to potential future economic and revenue performance.” A new study by the Mercatus Center at George Mason University rates Connecticut dead last among the states in fiscal performance (only Puerto Rico, also included in the study, ranked lower). “Connecticut’s fiscal position is poor across all categories,” the study noted.

The state’s residents, meanwhile, are hardly enthralled with the man they narrowly reelected. In a recent poll by the Morning Consult, Connecticut residents gave Malloy a mere 29 percent approval rating—among the lowest for any governor. Adding insult to injury, the governor with the highest approval rating was Charlie Baker in neighboring Massachusetts, the state to which GE eventually fled. Now, Malloy is caught in a high-tax governor’s nightmare: more firms are threatening to leave the state, and he’s already dished out millions in tax breaks to keep Bridgewater Associates—one of the world’s most profitable hedge funds—from relocating. That’s a strategy that neither the Left nor the Right approves of, to say nothing of hard-pressed residents watching their tax dollars go to corporate subsidies.

Malloy claims that his popularity has taken a hit because he’s making the tough decisions, but he’s in trouble in large part because he put off those decisions for four years. There is one potential bright spot for the Connecticut governor in all this: if Hillary Clinton succeeds in her bid for the White House, there’s probably a job waiting for him in Washington.

Photo by John Moore/Getty Images

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