By Dan Haar, New Haven Register, click to read online
Think back to the first week of 2010.
The reigning champion UConn women’s basketball team was
steaming toward five more rings in the next seven years. A former Stamford
mayor who lost the Democratic primary for governor four years earlier was about
to win the seat and hold it for most of the decade.
Obamacare was adopted but not yet in place. The Sandy Hook
tragedy was three years away. And the Great Recession had hammered Connecticut
along with the rest of the nation.
As the decade opened, Wall Street had started back upward
but Main Street still reeled at rock bottom, facing a tough slog. Exactly ten
years later, the nation has recovered heartily and then some, under two
presidents.
Connecticut? A lost decade by just about every economic
measure.
A lost decade — and worst of all, we’re not in the clear
yet. One more decade like the one that just ended and we are basically western
New York, a place with some great assets that’s on the way to someplace else,
looking to recapture its old glory.
The hopeful news is, we can still avoid another 10-year
meltdown. We need some demographic breaks, a solid dose of attitude changes and
an embrace of the elusive political middle.
Let’s look at the numbers first.
A lost chunk of the state
Connecticut’s jobs count, the most important measure of how
we’re doing, grew by 4 percent in the decade, a total of 66,000 positions if we
count annual averages including preliminary 2019 totals through November. By
contrast, Massachusetts and the United States both added 15 percent.
Those are just numbers. Consider what it really means. If
Connecticut had gained jobs at the same rate as the nation, we would have added
another 179,000 — enough to support as many households as there are in New
Haven, Hartford, Fairfield and Greenwich combined.
It’s as if we lopped off a hefty chunk of the state, heavily
populated by young college graduates. And the housing market reflects that
haircut.
When the decade started, a single-family house at the median
among all sales — where half sold for more and half less — stood at $242,000,
in shooting range of the Massachusetts median of $285,000, according to The
Warren Group, which tracks house sales. As of 2019, Connecticut was up just 8
percent to $261,000.
In Massachusetts, that median house in 2019 fetched an even
$400,000 — a 40 percent jump. And although there are no official figures for
national median prices, one fastidious website calculates the U.S. gain at 44
percent for the decade.
What does that mean for the typical Connecticut homeowner?
If you owned a house that was worth $350,000 in Connecticut a decade ago, you
missed out on $112,000 of price gains that people in Massachusetts and most
other states realized in just those ten years. Some parts of Connecticut,
notably Fairfield County, fared even worse.
Shrinking in an expansion
If you’re counting income, we’re still the richest state in
average income per person and we’re in the top ten in how much typical families
earn. But we’re slipping there, too. That’s harder to measure because the
reported numbers bounce around due to small Census sample sizes.
We do know this: The biggest picture of all — the total
value of goods and services produced — shows Connecticut’s lost decade at its
starkest. The total product for Connecticut actually shrank by 0.5 percent,
adjusted for inflation, when we compare the average for all of 2009 with the
average for the 12 months ending last June, the latest data we hav
That’s a shrinking economy after the U.S. recession ended,
friends. One slice that meant thousands of livelihoods — the manufacturing of
non-durable goods such as food, pharmaceuticals and household items — slipped
by almost half, to $6.9 billion a year. The much larger, higher paying finance
and insurance sector cratered by 23 percent.
Massachusetts, ignited by the allure of Boston and explosive
gains in bio-sciences, shot ahead by 20 percent overall even as we shrank. And
the nation as a whole, which grew slower than Connecticut from 2005 to the end
of 2009, expanded by 19 percent in the decade that just ended.
What Connecticut doesn’t have is an unemployment problem, as
we track the nation in jobless rates. That’s partly because we don’t have vast
tracts of poverty, another strength of Connecticut. And it’s partly that many
people just leave if they’re out of work or under-employed. The Census numbers
show an average of 24,000 people a year moving to other states over the last
five years, making Connecticut the 4th worst in the continental United States,
ahead of only Illinois, New York and New Jersey.
I’ve studied Connecticut prosperity full-time for four
months shy of 25 years as an economics reporter, columnist and business editor.
I knew these numbers intellectually. Seeing them all together, calculating them
as a decade in the mirror, I feel a punch in the gut, a wistful tear for lost
opportunity as a transplanted Connecticut homeowner by choice, an employee in a
struggling industry and the father of a newly minted teacher in Boston who’s
not coming back.
What happened?
We’ve argued the causes of Connecticut’s relentless recession
from the very start. Tax increases, driven by decades-old debts and
obligations, piled up even as former Gov. Dannel P. Malloy cut the size of
government by eliminating more than 5,000 state jobs.
We’re in the hole by as much as $100 billion including
pensions and future health care for public employees, despite restructuring the
debts and benefits multiple times. The problem isn’t today’s benefits, though
they’re too high for older state employees. It’s that for decades, Democrats
and Republicans alike failed to set aside money.
Costs for utilities, education, entertainment and health
care have climbed as they have in the rest of coastal America. But the
perceived value of living in Connecticut didn’t keep pace in large part because
we lacked, and still lack, a true magnet city with enough critical mass to
attract millennial college graduates.
Leafy suburbs unconnected to major cities fell out of favor
and the center-cities Connecticut does have are not able to compete with
second-tier metros such as Minneapolis, Dallas and Pittsburgh, let alone the
giants.
The Trump-led tax reform of late 2017 didn’t help. Although
high-income earners have seen a nice break, the new limit of $10,000 on federal
income tax deductions for state and local taxes hurts the entire Northeast,
costing Connecticut residents an estimated $2 billion a year.
What we have, in short, is a vicious cycle in which people
leave or stay away because costs are high in comparison to perceived value, or
they leave or stay away because we don’t have any large cities in Connecticut.
And that of course drives up costs further because it lowers the tax base.
Warren Buffett, the multi-billionaire corporate investor, didn’t help matters
by warning people to avoid states with high unfunded liabilities.
Rena Carreiro was among those who felt herself moving
sideways during the decade. She had worked as an office manager for a
manufacturer since 1993. Over the last ten years the business retrenched in
Connecticut, moving work elsewhere.
Carreiro performed finance, human resources, production
control and inventory tasks, taking on more work as people left. “It was
wonderful to learn all those new things,” the Waterbury resident said.
But there were few opportunities for career advancement. The
company — which Carreiro didn’t want to name — closed her plant at the end of
2019. She landed a job at Parker Medical in Bridgewater, a growing company
where she has high hopes and new optimism.
Solutions
Like Rena Carreiro, we as a state can take measures to avoid
another lost economic decade. Here’s a 6-point plan:
TAKE A MIDDLE PATH ON POLICY— Democrats and
Republicans need to meet in the middle. That means Republicans need to tone
down the two-note chorus about taxes and state employee benefits, and help
govern like they did briefly in 2017, when the Senate was split 18-18. And it
means Democrats must pull back on the throttle for great programs we can’t
afford. It’s no coincidence that Massachusetts does well with Republican
governors and Democratic legislatures, and the nation does well under centrist
presidents such as Bill Clinton. The middle path means Republicans need to stop
trashing the unions and Democrats need to stop protecting every iota of their
benefits. Modest givebacks on retiree health co-payments and cost-of-living
adjustments won’t kill anyone and will help the state. And the middle path
means pushing hard for efficiency gains in government at the state and
especially in cities and towns, where property taxes are way too high.
SHOW SOME CONNECTICUT PRIDE — Yeah, that was
the name of a basketball team but it’s hard to find a place that trashes itself
as much as we do in this state. Knock it off. You know who you are. Connecticut
has great education, access to mountains, oceans and countryside and a lot of
smart and innovative people. We have good cities, not great ones, with truly
notable food and music, and access — there’s that word again — to two of the
greatest cities in the world. Lack of growth has left us more open space and
less sprawl. Enjoy it. Get psyched. Work hard, play hard and stop feeding the
collective depression. It’s a small state, go make something happen.
EMBRACE RISK — What do finance, insurance and
defense manufacturing have in common? They’re all built around controlling
risk. That’s what we do and it shows in the personality of the state. When it
comes to business, we need the culture of put-it-out-there enterprise that
seems to make no sense, like Amazon, Facebook, Tesla and Microsoft at their
founding. We had it in the 19th and early 20th centuries and lost it.
MARKET TO IMMIGRANTS AND YOUNG PARENTS -
That’s our sweet spot because it’s more about education and family than urban
lifestyle. Connecticut does welcome immigrants in contrast to Trump’s America
and that can help us. We do have a good record of attracting people in their
30s. We need to reach those groups more actively with targeted campaigns.
KEEP WORKING ON CITIES AND TRANSPORTATION -
Connecticut will never compete on price with North Dakota and Mississippi, nor
should we try. Building the place up matters even though it costs money. It’s
working in Stamford.
LET EQUILIBRIUM HAPPEN -- State Sen. Matt
Lesser, D-Middletown, thinks it’s fine that houses are not overvalued. More
opportunity for buyers, he says. It’s a matter of balance and equilibrium. At
some point, millennial professionals might figure out that living in a great
house in Milford or New Haven’s East Rock neighborhood, with a 15-minute
commute, beats five to an apartment in Brooklyn and two hours a day on the
subway. That may mean house prices have to fall even further, which sucks for
us homeowners. But it’s a path that will work. Embracing equilibrium means
understanding that bike lanes in and out of cities, and saving historic
landmarks such as the Sanborn Library in Bridgeport, which was tragically
demolished in August, will add up.
The cul-de-sac
Following a balanced path leaves plenty of room for debate
over whether we more urgently need to cut taxes — the Republican solution — or,
as Democrats insist, increase value by adding amenities to make the state more
hospitable.
The same argument unfolds issue by issue: paid family and
medical leave, a $15 minimum wage, housing subsidies for the poor, housing
subsidies for the rich (yeah, apartments in Hartford at a cost of tens of
millions for state taxpayers), corporate handouts, expanded Medicaid and on and
on. In each one, there is a middle path of compromise that get too little
attention. Paid family and medical leave, for example, is too rich a program,
too soon, although it’s worthy.
All the while, we lost a decade.
Twenty-one years ago, a regional economic report warned that
Connecticut was in danger of becoming a “cul-de-sac,” an economic dead-end, in
part because it lacked “dynamism” in the coming century of urbanization and
globalization. Hmmm.
“Right now investment is bypassing the state and we have
become in many respects that cul-de-sac,” said Donald Klepper-Smith, a longtime
economist who has, as of 2020, entered semi-retirement and moved to
Massachusetts and South Carolina.
Klepper-Smith’s view: We need leadership and strategy to
achieve fiscal discipline. “I don’t think it gets fixed in my lifetime because
I don’t think we have the political will to fix it,” he said.
I’m more optimistic but only slightly. But there are many
fronts in this war. Clearly, after the lost decade Connecticut just endured,
there is no more wiggle room.
Rich Dupont, a manufacturing consultant, is helping the
community college system, especially at Housatonic in Bridgeport, train
machinists for the thousands of open jobs in advanced manufacturing that will
disappear if qualified people don’t materialize. What he says about that battle
also applies to the entire state economy.
“We are teetering on the edge.”
