Institutions Matter: Can New Jersey Reverse Course?

George Mason University Mercatus Center Working Paper No. 09-30

76 Pages Posted: 29 Mar 2010

See all articles by Eileen Norcross

Eileen Norcross

George Mason University - Mercatus Center

Frederic Sautet

The Catholic University of America (CUA) - Busch School of Business

Date Written: July 1, 2009

Abstract

New Jersey entered the 2008 recession in a weakened fiscal and economic condition. With the state’s economy and revenues closely linked to Wall Street, the collapse of the financial sector and its aftershocks - rising unemployment and falling income leaves New Jersey facing “a historic revenue collapse, and the most significant downturn in its modern history,” according to the state’s Treasurer. The recession is severe, but, this fiscal dilemma is not new. The state has experienced structural deficits regularly over the past 20 years.

This paper presents a series of reforms based on the successful experience of other governments. We begin with a background discussion of the challenges New Jersey will face in implementing these reforms, by reviewing the state of the state and the loss of the “Old-Time Fiscal Religion,” the foundation of public finance until the Keynesian revolution of the 1940s. We explain the limits of public policy and government intervention. We explore the importance of inter-jurisdictional competition and direct democracy and conclude with recommendations for institutional and policy reforms.

Keywords: New Jersey, Fiscal Crisis, Taxation, Public Spending

JEL Classification: H00, H1, H2, H7

Suggested Citation

Norcross, Eileen and Sautet, Frederic E., Institutions Matter: Can New Jersey Reverse Course? (July 1, 2009). George Mason University Mercatus Center Working Paper No. 09-30. Available at SSRN: https://ssrn.com/abstract=1579772 or http://dx.doi.org/10.2139/ssrn.1579772

Eileen Norcross

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States
703-993-4930 (Phone)

HOME PAGE: http://https://www.mercatus.org/eileen-norcross

Frederic E. Sautet (Contact Author)

The Catholic University of America (CUA) - Busch School of Business ( email )

Maloney Hall
620 Michigan Ave, NE
Washington, DC 20064
United States

HOME PAGE: http://business.cua.edu/faculty/sautet.cfm

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