Spitzer-think in Montpelier 
By Martin Harris

I’m indebted to one Peter Bernstein, octogenarian financial analyst, for remembering a trenchant quote; and to The Wall Street Journal for publishing it. The quote itself comes from (former New York State Governor) Elliot Spitzer, a Democrat who had been successfully following a three-score-of-years-old Republican-designed career path (Thomas Dewey, DA to Guv, then a try for Prez derailed by one Harry Truman) until he was dismounted by a zipper problem (Spitzer, not Dewey or Truman). The quote reads as follows: "I am doing something dangerous, but because of who I am, and how smart I am, it is not going to come back to haunt me". I thought the quote trenchant because (opinion, as befits an opinion column) it seems to me that there’s a lot of Spitzer-think, albeit not so clearly articulated, under Montpelier’s Golden Dome.

Regular readers of this column may recall a few instances wherein I’ve argued that the Golden Dome folks (GD for short) have for some time now been embarked on what I’ve called "The Great Experiment" to see whether a small state, its voting majority fervently opposed to private-sector economic growth, capital investment, urban and rural development, and so on, can re-structure its financial foundation so as to depend more heavily on various forms of taxpayer passive income and less heavily on active income, both individual and business. To this end, I’ve mustered income-source data, over the last dozen or so years, from the IRS (the State Tax Department claimed they had no such data) to show the very substantial growth –several hundred percent—in passive income, while there was only inflation-equaling growth in non-farm income and not even that in farm income. It was, and still is, my opinion (as befits an opinion column) that such an economic strategy is quite do-able, if managed with prudence and intelligence. These are attributes the GD folks claim to hold (just ask them) in abundance. Keeping this "sustainable"/faux-bucolic Vermont-as-theme-park long-term strategy in mind helps make explicable the hostile behavior of the GD folks toward IBM and Vermont Yankee, for examples at the macro end of the economic scale, toward such entities as big-box stores in the middle and even toward (comparatively) little Starbuck’s stores at the micro end. 

It’s true that communities and counties here and there have successfully structured their economies around taxable passive income, and in fact I’ve cited North Carolina’s Henderson County as a bright example of the latter. But doing the same thing at State level is cutting-edge: it hasn’t been done before. Even retirement-haven Florida’s citizens generate most of their income the old-fashioned way: by earning it. No reason an unearned-income structure can’t be done, but it is new territory, unexplored, and therefore, to use an adjective in the Spitzer quote, "dangerous". It’s dangerous because there are two dominant threads to the long-term strategy of the GD folks: one is to eschew the sorts of private-sector development and infra-structure which both broaden the tax base and lower costs-of-living (think WalMart and Vermont Yankee) in favor of more expensive consumer goods and energy sources; the other is to embrace growth in existing and new governmental-services area (think public education and health care) with the presumption that the ever-growing costs of such growth can be readily accommodated by "closing loopholes" in the tax structure or enacting new surtaxes (think capital gains and higher-end personal income). 

My speculation that yes, because of "who and how smart they are" the GD folk can manage the trust-funder-faux-bucolic economy at State level, is weakened by what seems to be coming with regard to their strategy calling for consciously raising both living costs and taxes. Maybe, being smarter than I, they can insure that those who will pay the ever-increasing bills will willingly pay even more and won’t flee: mostly, they haven’t fled up to now. In fact, in small numbers, the same sorts of upper-income quintile folks continue to migrate in, one reason why housing prices have held remarkably strong. Those who have fled –young, lower- to middle-income families – aren’t really needed in their new paradigm anyway. If the GD politicians succeed, they will have proven the Spitzer thesis: "yes, I’m smarter than you and I can handle this". If they don’t, there’s this question: will they end up as he did? You might call it a lady–or-tiger conclusion, but don’t quiz your recent high school grad on the reference.
 

Martin Harris is a former Chairman of Citizens for Property Rights