Talking About Tolls

We were in Norway this summer, where oil money provides most citizens with a very good quality of life.  In an effort to be responsible with the windfall, the Norwegian government is trying to make sure that infrastructure investments are replenished.  Hence, they have heavy tolls on their roads, which are very controversial.  One of the citizens I met was surprised that this was a big issue where I came from as well!

And it certainly is.  Governor Lamont has been trying all year to get the Connecticut Legislature to adopt some version of tolls.  We have lots of bridges and highways that need repair, and most neighboring states have tolls already.  Yet businesses and taxpayers seem up in arms about tolls, even though (or perhaps because) we pay among the highest gas and cigarette taxes in the country, not to mention our steep income, sales, and corporate taxes.  Is the addition of tolls just a bridge too far (pun intended--I couldn't resist)?

One of the strongest and most surprising opponents has been the Connecticut Business and Industry Association.  Thirty years ago, it weighed in on the side of an income tax, but this time it raised its voice against tolls.  The argument, which isn't crazy, is that CBIA doesn't trust the Legislature to restrict the spending from tolls to transportation infrastructure.  Since they've learned to raid the general fund and get around the spending cap, this is a reasonable fear.  Yet it's a little like saying that you won't give a kid lunch money, because you don't think he'll spend it on lunch, but being unhappy that he didn't get to eat.  Unless you don't believe that we need to spend money on roads, bridges, rail, and airports--and there is pretty unanimous agreement on that--you must believe that the money will come from somewhere. Why not have it come from a related use, and one that taxes all the free riders (again, couldn't resist that pun!) that come through the state?  We are paying in other states, yet not taxing those who drive on our roads.

Another argument against tolls is that people will pay to get to work.  That's almost as bad as the argument that putting up tollbooths (which doesn't happen anymore) is too expensive.  Commuters can get tax credits, or their employers can get tax credits for reimbursing employees who pay.  Or we could have tolls only at non-commuting times, or only in some directions, as the Mass Pike did.  The point is that those are all reasons that can be nullified with a little creativity.

Are people here just feeling overtaxed?  That's certainly a feeling many of us share, and worry about, since workers and business owners are leaving the State.  But might they not prosper more if getting around were easier?  And wouldn't those inside the State have an advantage over those driving in from further distances with products?  Nothing is entirely clear, but I for one am willing to give tolls a try.

Conn. Economy Falls Behind State Posted Negative Economic Growth for 2012.

Wall Street Journal, June 6, 2013
By JOSEPH DE AVILA

Connecticut was the only state to post negative economic growth in 2012, the latest indication of its sluggish recovery from the recession and the financial crisis.

Connecticut's gross domestic product shrank by 0.1%, the worst performance in the U.S., according to a U.S. Bureau of Economic Analysis report released Thursday. Job losses in financial services, the real-estate industry and federal, state and local government were the big reasons why.

New Jersey and New York both grew 1.3% and ranked 36th and 37th in the U.S. respectively. The rest of the country grew more rapidly. The nation's GDP expanded by 2.5%.

"The Connecticut economy is coming back inch by inch instead of yard by yard," said Don Klepper-Smith, chief economist at DataCore Partners, an economic and demographic research firm in New Haven, Conn. "The recovery has been spotty at best."

Connecticut's Democratic governor, Dannel Malloy, pointed to weakness in the European economy—an important trading partner—as one reason why the state's economic performance has been shaky. "We need to do better," he said. "I'll go with the statistic that there is general agreement on—that we created 26,000 private-sector jobs in the last two years, the fastest two-year increase in jobs since the 1990s."

Mr. Malloy has made investing in technology and engineering one of the pillars of his economic-development plan. The Legislature on Wednesday approved a $1.5 billion plan for the University of Connecticut to expand its focus on science and technology. The state also spent $291 million to lure genetics research nonprofit Jackson Laboratory from Maine.

Those are long-term projects that can't fix the state's short-term jobs slump. It has regained only 47% of the jobs it lost during the recession, the state labor department said. The state's unemployment rate is 8%, compared with 7.5% for the U.S.

Connecticut's poor GDP growth took some economists by surprise. "I wasn't expecting it to be so bad," said Steven Lanza, an economist with the University of Connecticut.

That surprise stemmed from Connecticut's high marks in 2011, when the Bureau of Economic Analysis pegged its GDP growth at 2%, among the best in the U.S. On Thursday, the 2011 number was revised to -0.1%.

The weak performance from financial-services and real-estate firms shows the financial crisis and the collapse of the housing bubble continue to drag on Connecticut's economic performance, Mr. Lanza said.

The financial-activities sector, which also includes real-estate jobs, fell by 2,200 between December 2011 and December 2012. Construction jobs fell by 1,800 during that same time.

Government layoffs also have weighed down economic growth in Connecticut, the federal report said. Only Florida, Wisconsin and Louisiana's governments shrank more. "One of the things that Connecticut has done…is shrink the size of its government faster than just about any other state," Mr. Malloy said.

The state shed 1,000 government jobs from December 2011 to December 2012.

Economists said the U.S. has begun to experience a housing rebound that Connecticut has yet to join. Median sales prices in Connecticut are still down 30% from the peak levels of the housing boom, Mr. Lanza said.

"You don't have a sustainable recovery until you have a housing recovery. And we don't have a housing recovery here yet," said Peter Gioia, an economist with the Connecticut Business and Industry Association in Hartford, Conn.

There were bright spots in the BEA report for Connecticut. Durable-goods manufacturing and management of companies—which typically reflects corporate headquarters—both posted gains in 2012.