One of the more telling moments in last week’s presidential debate came when moderator Jim Lehrer asked each of the candidates to explain, in detail, which federal programs or services would have to be cut in order to accommodate the $700 billion financial-services rescue plan. Sen. John McCain went after his favorite target — congressional earmarks — and promised to veto any and all pork-barrel spending bills, like the one authorizing $3 million to study the DNA of bears in Montana, that might come across his desk. He said he would root out waste and corruption, and would consider (but wouldn’t, for the moment, commit himself to) a freeze on all federal spending with the exception of entitlements, national defense and veterans’ benefits.
Sen. Barack Obama listed all the things he wants to do if he gets to the White House — aggressively promote and fund alternative energy technology, cut taxes on the middle class, provide health care coverage for all, invest in education, rebuild infrastructure — but then acknowledged that some of these efforts might have to be delayed, or phased in, while Washington was busy staving off economic disaster. Like Sen. McCain, he would not specify precisely how, or where, his budget ax might fall.
It’s understandable that neither candidate would allow himself to be pinned down to the line-by-line cuts that might be necessitated by the $700 billion bailout. For one thing, nobody knows — or can safely predict — at this point what the full impact of the Wall Street meltdown is going to be. The markets plunged on Monday, after the plan went down to defeat in the House of Representatives. For another, specifying the federal programs that might be targeted for cuts would serve only to alienate the constituencies served by these programs — not a wise strategy to employ in the stretch run of an election campaign.
So the candidates for the nation’s highest office dodged the question, and they will no doubt continue to do so right up until Nov. 4. Even then, they will have until Jan. 20 to weigh their options, knowing full well that whatever tough — and politically unpopular — decisions need to made before then will be in the hands of the lame-duck Bush administration.
Unfortunately, Gov. Jon Corzine and the New Jersey Legislature enjoy no such luxury. The precariously balanced state budget they cobbled together in June is already showing signs of sliding toward a deficit — and next year’s outlook is far worse. What’s more, the aftershocks of the economic earthquake that hit Lower Manhattan these past few weeks are going to be felt for the next several months, and perhaps years, on this side of the Hudson River.
In state income tax revenues alone, New Jersey is going to take a major hit from Lehman Brothers’ bankruptcy and Merrill Lynch’s takeover by Bank of America. Lehman employed more than 2,000 New Jersey residents, many of them in high-paying executive jobs. Merrill Lynch has a New Jersey workforce of more than 6,000 — and Bank of America is expected to pare about $7 billion in costs, most of it in payroll.
Business tax revenues are also likely to suffer as New Jersey corporations, large and small, find their access to capital restricted, if not cut off completely. The credit crunch is likewise affecting consumer spending, which has serious implications for sales tax revenues. And at the county and municipal levels, a reeling real-estate market — further battered by a rash of subprime mortgage foreclosures — has officials deeply worried about property tax collections.
Both presidential candidates have vowed not to let the woes of Wall Street fall too heavily on the residents of Main Street. In New Jersey, that’s already happening — and our political leaders can’t postpone the day of reckoning until next month or next year. Not just on Main Street but on every street in the Garden State, the ride is about to become uncomfortably bumpy.
