I’m not a “no-new-taxes” absolutist. I don’t share the “draw-the-line-HERE” militancy of the Taxed Enough Already Party, but I respect it, and I hope the Tea Party serves to tug the nation toward smaller government.  But we are in a deep enough hole — a hole dug with great enthusiasm over the years by both Democrats and Republicans — that any effective course correction will have to include both tax revenue and spending cuts.

This is a matter of pragmatism more than principle.  If we could start with a blank page and design a tax system, it no doubt would be very different from what we have.  (My vision might vary radically from yours, but nobody can say with a straight face that the current tax code is optimal.) In a democracy that thrives on the clash of ideas, progress may be possible only at the margins — so that’s where we should direct our efforts.

Ideas can gain power over time; Social Security was called “the third rail of American politics” in the early 1980s, but today there is widespread (though not unanimous) agreement that at the very least, something must be done to slow growth the growth of entitlements.

The GOP has long been caricatured as the party of the rich.  That image is unfair, but Republicans ignore its existence at their peril.

Comes today the news that Republicans in the Senate blocked a proposal that would have “extended the payroll tax cut set to expire at the end of the year.”  If no extension is passed, payroll taxes will increase sharply less than a month from now.  A family with a $50,000 income in 2012 would have to pay $1,500 more than the same family with the same income in 2o11.  To pay for the tax cut extension, the Democrats’ bill would enact a 3.25% additional tax on incomes over $1 million.

In other words, according to a helpful chart at TaxPolicyCenter.org, the top marginal rate would increase from the current 35% to 38.25% — and that higher rate would be applied only to the portion of a taxpayer’s income that exceeds $1 million.

That helpful chart also shows that through most of the 20th Century, top tax rates were much higher.  From 1932 through 1981, the top rate ranged from a “low” of 63% to a high of 94%.  And throughout all or most of that time, I’ll bet the top rate kicked in at levels much lower than $1 million.

Here’s a White House sound bite to drive the point home:

President Barack Obama quickly blamed Republicans, saying in a statement that they “chose to raise taxes on nearly 160 million hardworking Americans because they refused to ask a few hundred thousand millionaires and billionaires to pay their fair share.”

In other words, this stalemate enables the Democrats to say that the GOP is using tax increases on the middle class to pay for tax cuts for the rich.  The Republicans can only counter with eye-glazing explanations about the role of investment and capital formation in providing companies of all sizes with both the ability and the motivation to hire new workers and expand their businesses.

The GOP’s position on the importance of capital formation may be true, but as an argument it’s both a snoozer and a loser.  If the Republicans don’t compromise on taxes for the highest earners, they’re going to blow the chance to put a Republican in the White House.

To enlarge the graphic, click on it, then click on it again

More than 30 months into the era of Obamanomics, the administration is still desperately seeking to blame all of the nation’s woes on George W. Bush. They’re getting less and less traction with that argument — Obama’s approval rating just hit a new low of 40%, according to Gallup’s tracking poll.

But Bush has been the go-to guy in Obama’s blame game since the beginning, and the administration keeps trying.  Megan McArdle, a consistently insightful economics columnist for the Atlantic, dissects a chart published by the White House this week that purports to show that of the $12.7 trillion added to the national debt over the past decade, $7 trillion is attributable to the Bush administration, with only $1.4 trillion attributable to Obamanomics.

[T]his graph attributes decisions made by Obama and an all-Democratic Congress–like doubling down in Afghanistan–to Bush, while taking responsibility for basically nothing except the stimulus.  When Obama extends the Bush tax cuts for the rich under pressure from Congressional Republicans, that disappears from his side of the ledger, because after all, he didn’t want to do it.  When Bush enacts Medicare Part D under pressure from Congressional Democrats, the full cost is charged against his presidency.  The list of such silliness goes on.  Our president seems set to coin another presidential motto: “The duck starts here.”

McArdle answers with charts of her own, showing that the deficit, which never reached more than about 3% of GDP during the eight years of the Bush administration, has ballooned to 10% of GDP after less than three years of the Obama administration.

Nor is it exactly obvious to look at the $2.4 trillion in additional debt incurred during Bush’s eight-year presidency, and say that he is nonetheless actually responsible for $7 trillion of our current debt load–and then turn to the $3.1 trillion of debt incurred during Barack Obama’s three-year presidency, and declare that his policies are actually responsible for only $1.4 trillion.

Obama needs a new scapegoat, and the administration has been fitting the House Republicans for that suit.  I worried three weeks ago that the Republicans — having forced Obama to concede that entitlement cuts are on the table — would hold out for no debt increase and get blamed for a government shutdown.

The GOP still could get blamed, of course — Newt Gingrich & Co. were blamed in 1994 even though Bill Clinton’s veto actually triggered the shutdown.  But now the House Republicans have voted not once but twice to raise the debt ceiling, overruling the Tea Partiers among them.

K-Lo describes the path forward from here:

So what does the new path look like? This tweaked Budget Control Act will pass the House. The Senate will strip out the BBA language. It will pass the Senate. When it goes back to the House, Boehner loses some of his caucus again, but Pelosi will have to get some of her members on board. If this is such a crisis moment, Democrats are the party in power. Boehner negotiated with his caucus and got an imperfect bill that the Democratic Senate could work with — with a statement of principles in it including the BBA. Then the Democrats, who do run Washington, after all, will have to step up to the plate.

Ball’s in your court, Harry Reid and Barack Obama, in other words.

The Senate already has tabled the Boehner bill, but pressure to accept one of the two House plans may rise over the weekend, leading to the scenario K-Lo describes.  Let’s hope so.  Then the election can go back to being about the phony stimulus and the wildly unpopular Obamacare.  Everybody knows who to blame for that.

.

Who would have predicted that Obama — or any Democratic president — would inspire a headline like this one in the Washington Post: “In debt talks, Obama offers Social Security cuts“? Isn’t Social Security supposed to be the third rail of politics?  Isn’t it the Democratic party that has inspired 249,000 Google hits on  the phrase “balancing the budget on the backs of the poor”?

As near as I can tell, Obama has expressed nothing more than a willingness to tinker with the formulas for calculating inflation for Social Security and other entitlement programs.  Only in Washington is slowing the growth of something considered a “cut”.

But it’s a huge step nonetheless. Kathleen Parker urges Republicans not to overlook

the enormous opportunity for conservatives that has taken shape since the beginning of the year. Just a few months ago, Obama was asking for a “clean” debt-limit increase. That is, an unconditional hike without spending cuts or reforms.Republicans responded by making clear that there would be no increase to the $14.3 trillion debt limit without fundamental reforms, including to entitlements, and without spending cuts larger than the debt-limit hike, enforceable limits on future spending, and no tax increases.

Fast-forward through a few months of intransigence — and a few friendly rounds of golf — and the conversation has become something much different. The president’s proposal for a deal that would save $4 trillion over the next 10 years through cuts to all major spending areas, including entitlements and the Pentagon, is otherwise known as a “sea change.”

Entitlement reform is essential not because of any rich-versus-poor calculus, but because the programs are unsustainable in their current form.  By signaling that some change in entitlements is inevitable, Obama is giving Republicans a bit of protective cover against toxic class-warfare rhetoric.

Republicans have gotten to this point by digging in their heels against tax increases and against raising the debt ceiling — but at the end of the day any budget deal is going to include tax increases, a higher debt ceiling, or most likely both.

If purists force a government shutdown in August to avoid exceeding the debt ceiling, each side will of course point fingers at the other.  But Republicans have seen this movie before.  In 1995, Bill Clinton triggered a government shutdown by vetoing budget bills — yet Republicans ended up shouldering the blame, and Clinton was re-elected.

Look to Greece, the cradle of democracy, to see what happens when the people no longer are able to vote themselves bread and circuses.

From the Voice of America:

Screen grab from a YouTube video - I can't embed it for some reason, but click image for video

Workers in Greece are in the second day of a 48-hour general strike, and the country is all but shut down by the protest action against the new round of austerity reforms.

Some 20,000 demonstrators gathered in Athens on the first day of the general strike Tuesday. Initially peaceful, the protest turned violent. At least 4,000 police officers armed with stun guns, tear gas and batons fought protesters who hurled rocks and firebombs.

Many protesters feel the $40 billion austerity plan will impose harsh penalties on workers and pensioners, while sparing the wealthy.

EU officials had warned that Greece had no choice but to adopt the austerity plan.

Eventually somebody takes the credit card away.

(Update: I fixed  the image link — NOW you can get to the video by clicking the image.)

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Bond investor Bill Gross

In the midst of the coverage this past week of the various pathologies of Muammar Gaddafi, the Wisconsin legislature and Charlie Sheen, some of the most ominous news was largely overlooked.

• Pacific Investment Management Co. (Pimco) confirmed that billionaire Bill Gross, manager of the world’s largest bond fund, had completely eliminated U.S. Treasury Bonds from his flagship portfolio.
• About the same time, the bipartisan co-chairs of President Obama’s deficit reduction commission were telling a Senate Budget Committee hearing that the United States faces “the most predictable economic crisis in history” within just one to two years, unless drastic steps are taken to bring the government’s spending in line with its revenues.

It’s hard to overstate the iconic status of U.S. Treasury Bonds as a safe haven for investors.  For generations, the Treasury’s 30-year “long bond” was the talisman of the debt markets, although that role in recent years has been taken over by 10-year Treasurys.  Think of Treasurys as the debt-market equivalent of the Dow, only more so.

In National Review’s The Corner, where I first saw these two events linked, Cornerite Andrew Stiles explains the danger:

If fewer people are willing to lend us money, the more we’ll have to shell out in higher interest payments. And if bond buyers lose confidence in our ability to make good on that debt, things could get really ugly, really fast. Much more on this from Kevin Williamson here.

As Sen. Tom Coburn (R., Okla.), who served on the deficit commission and supported its recommendations, pointed out at a press conference this week, the United States has, historically, paid an average of 6 percent interest on its debt. It currently pays about 2 percent. If rates were to return simply to that historical average, it would involve an increase to our overall interest bill of $640 billion — to be paid immediately. “An impossible situation,” in Coburn’s words.

He quotes Gross on CNBC:

“We’ve moved into Brazil and Mexico and moved money, yes, at the margin into Spain, which has a better balance sheet than the United States,” Gross told CNBC. [emphasis added]

We’re quickly moving toward a situation where the combination of net interest payments and spending on entitlements (Medicare, Medicaid, Social Security, etc.) will absorb all of the government’s revenue.  The Ponzi scheme known as Social Security probably is the easiest part of the equation to solve.  But the Obama Administration, which made the problem much worse with its bloated and dishonest “Porkulus” legislation,  has made clear that it does not think Social Security has a problem.

In the early days of the Clinton Administration, Clintonista James Carville famously said, “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”  I fear a new generation of politicians is going to have to learn the hard way that the intimidation is appropriate.

Mary Meeker

Mary Meeker, the early Internet visionary who endured derisive criticism when she (correctly) predicted that Ebay’s stock would soar to more than $400*…

No, that doesn’t sound right.  Off to Wikipedia to refresh my memory.

I’m a huge Wikipedia fan, btw, and I have no patience for whining complaints to the effect that “Wikipedia isn’t authoritative because anybody can change it.”  In anticipation of such whining I rarely cite Wikipedia as an authority, but Jimmy Wales’s* brainchild is a global treasure nonetheless. It’s easy to get distracted following one link after another, but Wikipedia is a far better starting point for most research than Google is. It’s no accident that Wikipedia shows up on the front page of most many** simple Google searches.

Where was I?  Oh yes, Meeker — I’m writing a post about her recent epic analysis of America’s financial statements, the blandly titled* “USA Inc.: A Basic Summary of America’s Financial Statements“.  And wow, Wikipedia just saved me from TWO mistakes in a single scene-setting introductory clause.  The stock in question wasn’t eBay*(capitalization corrected), it was Amazon… and it wasn’t Mary Meeker making that prediction, it was Henry Blodget.

(Here’s an example of why Wikipedia should be the starting point, not the ending point, for any serious research.  Although I had the wrong company and the wrong person, I clearly remember the hubbub around Blodget’s 1998* prediction that a prominent Internet stock — already considered vastly overpriced by Internet skeptics — would soon soar to $400.  Blodget’s Wikipedia entry, however,  says* this: “In October 1998, he predicted that Amazon.com’s stock price would hit $40 (which it did a month later, gaining 128%).”

Now, I know the number was 400, not 40, so I figure there must have been stock splits totaling 10-for-1 (not 10-”to”-1) since then.

Hm, I wonder how Blodget’s prediction has held up over the years on a split-adjusted basis?*

Let’s start by fact-checking my 10-for-1 split theory. Whoa… Amazon’s investor relations site* says the stock has split three times in the company’s history: 2-for 1, 3-for-1 and 2-for-1.  Repeated stock splits have a multiplicative effect — hey, I learned a few things in 15 years as a Wall Street corpcomm gumby — and there is no combination of those three stock splits that multiplies to 10.  Turns out the first stock split was before Blodget’s prediction and the other two were afterward.***

So that implies a total of 6-for-1, and the $40 price isn’t split-adjusted, it’s just wrong. I’m a Wikipedian — I should go correct it! Except you’re not supposed to do original research for a Wikipedia article.

And I’m not confident about the 6-for-1 factoid.  Nothing affects a stock’s cost as dramatically as a split, but other events can tweak the cost-basis calculation — buybacks, special dividends, etc.  I don’t know how to do the calculations**, but I know how to find someone who does.  On May 23, 2007*, the New York Times’s respected**** “DealBook” column stated:

Henry Blodget, the former Internet analyst, is taking some pride from a little-noticed milestone … shares of Amazon have risen back above $400.

More precisely, they broke $400 after being adjusted for stock splits: the online retailer’s shares were trading at $71.61 at midday Wednesday. That’s the price target that Mr. Blodget set for the company back in 1998, in what may be the most famous stock call in history.

OK, so assuming** there have been no other cost-basis-affecting events since 2007, we’ll use $71.61 as our new cost basis. (Note that $400 is pretty close to 6 times $71.61!!)  Since touching that level in mid May 2007, the stock rose to near $100 before collapsing (along with everything else) in 2009 to below $40*.  The stock has more than recovered since then, closing at about $189 earlier this month*.

So let’s see… $189/$71.61 equals about 2.6*, so apply that multiplier to Blodget’s original $400 price target, and we see that with a long enough time horizon, Blodget could have justified a price target of more than $1,000.***

(Hm… digging up that factoid took well over an hour, and it’s tangential at best to my topic.)

Onward! Meeker’s early claim to fame was as lead author of a groundbreaking 1995* primer that was blandly titled  “The Internet Report.”

Wikipedia’s fairly brief entry on Meeker yields the following nugget*, which seems pertinent to this post:

Meeker was characterized by Andy Serwer in Fortune magazine in 2006 as “absolutely first rate when it comes to spotting big-picture trends before they come into focus. She gathers massive amounts of data and assembles it into voluminous reports that, while sometimes rambling and overambitious, are stuffed with a million jumping-off points.”

“Massive amounts of data” and “voluminous reports”: Check, and check.  “The Internet Report” was 322 pages*, and the spark of an idea for this blog post was when I noticed that a key chart in her latest masterpiece is part of a slide deck totaling a bizarre 447* slides.

Meeker has applied her background as a securities analyst to examine the federal budget and balance sheets as though the U.S. were a company.  Here’s slide # 49:

Note the red line around the three huge pie pieces to the right.  They represent spending on entitlements — Medicare, Medicaid, Social Security, unemployment insurance.  Entitlements collectively are nearly three times the size of defense spending, and entitlement spending is only going to accelerate as Baby Boomers move into retirement.  In fact, Meeker writes* (Slide 14): “Within 15 years (by 2025), entitlements plus net interest expenses will absorb all — yes, all – of USA Inc.’s annual revenue, per CBO.  That would require USA Inc. to borrow funds for defense, education, infrastructure and R&D spending.”

I came across the chart on FaceBook via the blogger TigerHawk — I am FaceBook friends with his not-so-secret identity.  He linked to an article about the analysis by Henry Blodget — hey, maybe that’s how I got confused!

Unlike me, TigerHawk “gets” blogging.  Here is the full text* of his post about the chart:

I propose a new rule: Any federal politician of either party who claims to care about our fiscal condition who is not also proposing steep reductions in entitlements is transportingly disingenuous and ought to be voted out of office.
More here. The link explains why “the U.S. is screwed,” but we are only screwed if we lack the courage to tame this monster. Until this problem is solved, no federal politician should ever again leave a meeting with constituents without having to answer the question “what is your proposal for reducing entitlements?”

Ah yes, brevity.  Maybe next time.

* Indicates a place where I interrupted  the flow of writing to do more research — often just confirming a fact or spell-checking.  After more than 400* substantive blog posts over two and a half years, I’ve realized that I just don’t “get” blogging.  The whole point is to make quick observations, right?  Some famous blogger (Andrew Sullivan?) once said that an average blog post should not try to make more than one point.  Check my headline: Fail!

**Indicates a place where I talked myself out of doing additional fact-checking.

*** Indicates a place where I feel entitled to more asterisks because I actually did quite a bit of research.

**** Meaning, I respect it today because it’s helping me make a point.

As longtime chairman of the House Financial Services Committee, Barney Frank was one of the key architects of the housing bubble, and of the crisis that followed the burst. Not the sole architect, of course — the roots of the crisis stretch back to the Carter administration. (See “In Defense of Wall Street Greed” nearly two years ago.)

But Frank has a lot to answer for.  As quoted in a previous post, here’s how Nobel Prize winning economist Gary Becker describes it:

During the run up to the crisis, Barney Frank and others in Congress encouraged Freddie and Fannie to absorb most of the subprime mortgages. In 2008 they held over half of all mortgages, and almost all the subprimes. They have absorbed even a larger fraction of the relatively few mortgages written after 2008. Freddie and Fannie deserve a considerable share of the blame for the crisis, but they continue to have strong political support. I would like to see both of them eventually dissolved, but that is unlikely to happen.

It may not be as unlikely as it seemed when Becker wrote those words in July.  Barney Frank’s on board with the idea.  Lawrence Kudlow takes up the story:

For years, Frank was a staunch supporter of Fannie Mae and Freddie Mac, the giant government housing agencies that played such an enormous role in the financial meltdown that thrust the economy into the Great Recession. But in a recent CNBC interview, Frank told me that he was ready to say goodbye to Fannie and Freddie.

“I hope by next year we’ll have abolished Fannie and Freddie,” he said. Remarkable. And he went on to say that “it was a great mistake to push lower-income people into housing they couldn’t afford and couldn’t really handle once they had it.” He then added, “I had been too sanguine about Fannie and Freddie.”

…

I think Chairman Frank watched these government behemoths descend into hell and then witnessed the financial catastrophe that ensued. And I think he has come to realize that the whole system of federal affordable-housing mandates that was central to the real-estate collapse — including the mandates on Fannie and Freddie and the myriad bad decisions made by private banks and other lenders in response to the government’s overreach — simply needs to be abolished.

Props to Barney Frank.  Let’s hope he can bring some of his fellow Democrats along with him.

USA Today, an early pioneer of soundbite journalism in written form, is admirably concise in setting the stage for elections soon to come:

Obama will likely trumpet a new financial regulation bill — the biggest overhaul of the system since the Great Depression — as one of his major first-term accomplishments, along with health care and the stimulus plan.

Republicans will likely argue that all three bills threaten prospects for economic recovery.

Ya think?

ObamaCare is such a train wreck that Americans support repealing it by a 2-1 margin.  Don’t even get me started on the wasteful and dishonest Porkulus fiasco, which will continue to increase deficits for years after the “need” for financial stimulus has passed.

And now comes yet another 2,000-plus page bill, a financial services “reform” measure that does a lot of things — but fails to address the actual causes of the financial meltdown that began nearly two years ago and has us staggering still. Here’s blogger (and Nobel-prize-winning economist) Gary Becker on the bill’s shortcomings (H/T: Freakanomics):

One of the most serious omissions is that the bill essentially says nothing about Freddie Mac or Fannie Mae. [KP Note: !?!?!?!?] In 2008 these organizations were placed into conservatorship of the Federal Housing Finance Agency. During the run up to the crisis, Barney Frank and others in Congress encouraged Freddie and Fannie to absorb most of the subprime mortgages. In 2008 they held over half of all mortgages, and almost all the subprimes. They have absorbed even a larger fraction of the relatively few mortgages written after 2008. Freddie and Fannie deserve a considerable share of the blame for the crisis, but they continue to have strong political support. I would like to see both of them eventually dissolved, but that is unlikely to happen. Instead we are promised that they will be dealt with in future legislation, but I am skeptical that anything will be done to terminate either organization, or even improve their functioning.

Many proposals in the bill will have highly uncertain impacts on the economy. These include, among many other provisions, the requirement that originators of mortgages and other assets retain at least 5% of the assets they originate, that many derivatives go on organized exchanges (may be an improvement but far from certain), that hedge funds become more closely regulated, and that consumer be “protected” from their financial decisions.

Most of these and other changes in the bill are not based on a serious analysis of what contributed to the financial crisis, but rather are the result of political and emotional reactions to the crisis. Usually, such reactions do more harm than good. That is likely to be the fate of the great majority of the provisions of the Dodd-Frank bill.

In simple terms, the primary enabler of the financial meltdown was the fact that financial institutions had incentives to take huge risks, knowing that any catastrophe would be socialized by a government that would have no choice.  WSJ columnist Holman Jenkins today cites new academic research in arguing that the bill doesn’t change that:

What was obvious to common sense, the naked eye and the open ear is now systematically upheld in the research of finance professors. To wit, shareholders of large, publicly traded banks have a higher appetite for risk than is compatible with our regulatory system.

Down this path lies the beginning of wisdom on how we can live with banks, which alone among businesses have the potential to bring down entire economies. Too bad such wisdom is absent from the financial regulation bill now before Congress. …

Let us be realistic about one thing, since most of us aren’t running for office: “Bailout” has become a curse word in populist diction, but “too big to fail” isn’t going away just because regulators pretend next time they would fold their arms and let the system blow up.

The government will and should continue to come to the rescue in a panic. We need better incentives to avoid creating such situations in the first place. But that discipline won’t come from shareholders, who will happily create the next 100-to-1 leveraged financial institution if the potential rewards are great enough. Bank depositors and other leverage suppliers are the ones who must be mobilized to make the system safer.

“… banks, which alone among businesses have the potential to bring down entire economies.” There in a nutshell is why I favored the “bank bailout” (on which the taxpayers are making a profit, btw) while staunchly opposing the auto industry bailout.

Becker and Jenkins both describe an opportunity lost that actually would have led to a better alignment of risk and reward.  Jenkins is the better writer, let him tell it:

Perhaps the best idea, though, is to require financial firms to fund themselves partly with a special kind of debt that would automatically be converted to equity when a bank’s capital or liquidity are imperiled. These debtholders then would have an incentive to monitor not just the amount of leverage, but the quality of the risks a bank is pursuing.

Bingo.  But instead we get another mammoth bill, chock full of unintended consequences, that increases the size of government to no good end, while failing to fulfill its primary purpose.  Add to this the public anger over the gulf oil blowout — although I think on that count, criticism of Obama is unfair — and you can see why Peter Wehner says “it’s getting ugly for the Democrats.”

New Jersey’s new governor is determined to reverse the state’s “failed experiment”, which consists of taxes chasing deficits in an ever-ascending spiral.  A Barron’s article does the most concise job I’ve seen of explaining what he’s up against, and why his efforts should be supported.

Photo: NY Post

Unlike his predecessors, Republican Gov. Chris Christie has recognized that high taxes were a problem, not the solutions to the state’s fiscal woes. The Tax Foundation ranks New Jersey as the highest in the nation in state and local taxes as a percentage of income. It’s especially bad for top earners: 4.4% of individuals account for 55% of personal income-tax revenue.

Even though the state faces a $10.7 billion deficit — equal to more than one-third of the total budget — in fiscal 2011 starting July, Christie has refused to raise taxes and further increase this tax burden. Indeed, he has recommended not renewing a 2% “millionaire tax” enacted by former Gov. Jon Corzine, so that the top state income-tax bracket will revert to 8.97%, still among the highest in the nation.

In addition, New Jersey homeowners pay the highest property taxes in the nation, $7,281 on average annually. That represents a 90% increase from 1999 to 2009 — a trend that is driving wealthy New Jerseyans to other states — mainly Florida, Pennsylvania and even New York, according to Boston College’s Center on Wealth and Philanthropy. As [municipal bond analyst Howard J.] Cure notes, for years the migration went in the other direction across the Hudson as heavily taxed New Yorkers sought relief in New Jersey.

When your budget deficit is more than a third of your total budget, you need more than tweaks and nudges to return to financial stability.  I strongly suspect that some additional taxation will occur, but when your taxes are the highest in the nation, “no tax increases” is the right starting point for debate.  In any discussion of New Jersey’s finances, the burden of proof should be on anyone who opposes spending cuts.  After taking on the powerful teachers unions, I hope Christie continues to play hardball.

New Jersey “should be seen as the failed experiment for other states and the country … Spend beyond your means and then kill your tax revenue base by raising taxes 115 times in eight years, and then you’re New Jersey.”

Who is this trash-talking, Jersey-bashing heretic attacking my beloved adopted state? Well, he’s the new Governor of New Jersey, Chris Christie.  And I find myself liking him more every time I hear him speak.

I reluctantly voted for Corzine in November, because of Christie’s vow to support a constitutional amendment banning same-sex marriage.  Then the cause of same-sex marriage in New Jersey suffered a serious setback when the Senate refused to pass a bill in the waning days of the Corzine administration.   That battle eventually will be refought, and I expect  I’ll take my shots at Governor Christie then.

But for now, I’m pleased that Christie’s fighting the good fight on fiscal responsibility.  The screen capture above from Christie’s recent interview with MSNBC’s token conservative, Joe Scarborough, tells the story starkly.   Firing up my calculator, the state budget deficit works out to be more than 36% of the total state budget.  It may not be an apples-to-apples comparison, but Obama’s larded-up federal budget deficit appears to work out to “only” 33%.

Christie is making the right kind of enemies.  One foolish teachers union official undermined the union’s cause by essentially praying for Christie’s death.  And what did the governor do to provoke this death wish? From The Daily Riff:

The proposal by Christie: No job cuts in the education sector if teachers contribute 1 and 1/2 percent of their salary to pay for benefits (approx. $750. per year) and have a one-year pay freeze.  If not, approximately 1300 jobs will be cut.

Wow, the teachers might have to pay a whole $750 per year (63 bucks a month, about the same as their union dues) for their generous public-employee health insurance. Between the reasonableness of the proposal and the outrageousness of the death wish, I think the governor will be on pretty solid ground when the layoffs inevitably start.

The 11-minute Scarborough interview is worth watching in its entirety for its look at the plain-spoken and candid governor, who talks to voters like adults.