The Mob That Whacked Jersey

By Steven Malanga
Spring 2006

http://www.city-journal.org/html/16_2_new_jersey.html

When Cy Thannikary left India to come work at the UN in Manhattan, he settled in Flushing, Queens, and loved the excitement of living in the city. After starting a family, though, he traded New York's hubbub for Freehold, New Jersey, a quiet suburb with lower taxes and affordable housing. That was 25 years ago. These days, Thannikary sometimes feels like he's back in Gotham as he watches his taxes soar and hears neighbors grumble. He has started a new group, Citizens for Property Tax Reform, to fight the special interests that have turned both state and local government into profligate spenders. "Politicians in New Jersey have treated their citizens as ATMs," he complains. "They have no idea how ! to restrain spending, and more and more people are saying they can't afford to live here anymore."

For more than a century and a half, New Jersey, nestled between New York City and Philadelphia, offered commuters like Thannikary affordable living in pleasant communities. Wall Street tycoons, middle managers fleeing high-priced Gotham once they'd married and had kids, and immigrants who settled first in New York but quickly discovered that they could pursue the American dream more easily across the Hudson--all flocked into the Garden State. Eventually, New Jersey's congenial living attracted even corporations escaping New York's rising crime and taxes. The state flourished.

But today Jersey is a cautionary example of how to cripple a thriving state. Increasingly muscular public-sector unions have won billions in outlandish benefits and wages from compliant officeholders. A powerful public education cartel has driven school spending skyward, making Jersey among the nation's biggest education spenders, even as student achievement lags. Inept, often corrupt, politicians have squandered yet more billions wrung from suburban taxpayers, supposedly to uplift the poor in the state's troubled cities, which have nevertheless continued to crumble despite the record spending. To fund this extravagance, the state has relentlessly raised taxes on both residents and businesses, while localities have jacked up property taxes furiously. Jersey's cost advantage over its free-spending neighbors has vanished: it is now among the nation's most heavily taxed places. And despite the extra levies, new governor Jon Corzine faces a $4.5 billion deficit and a! stagnant economy during a national boom.

Unless Garden State leaders can stand up to entrenched interests--and the signs aren't promising--the state may find itself permanently relegated to second-class economic status. New Jersey "could become the next California, with budget problems too big to solve without a lot of pain," warns former Jersey City mayor Bret Schundler. "The old way of raising taxes to solve budget problems has been tried, and it's done nothing but make things worse."

Once a farming corridor connecting New York and Philadelphia, the state that Benjamin Franklin called "a keg tapped at both ends" began its rapid evolution in the nineteenth century, spurred by the growth of the railroads. Enterprising New Yorkers like merchant Matthias Ogden Halsted led the way. In 1837, he repossessed a 100-acre farm in Orange, New Jersey--about 12 miles west of Manhattan--and built a magnificent mansion, featuring Corinthian columns that one historian celebrated as "unlike anything the area had ever seen." He subdivided the rest of the farm to provide homes for city friends. These new suburban commuters even chipped in to help build a railway station on the nearby Lackawanna train line--a stop that still serves commuters today.

In 1853, following Halsted's example, Manhattan drug wholesaler Llewellyn Solomon Haskell bought land along a ridge of the Orange Mountains, laid down roads, and built grand homes. Thus was born Llewellyn Park, America's first gated community. Described by the New York Times in 1865 as "a rough, shaggy mountain site, now transformed into an enchanted ground," Llewellyn Park soon attracted such eminent residents as Thomas Edison, and it boasted magnificent houses designed by noted architects, including Stanford White, Charles McKim, and Calvert Vaux. Soon the entire area around the Oranges blossomed, with stylish homes on broad boulevards. Fashionable New York stores like B. Altman and Best & Co. turned the area's dazzling main shopping strip into the rightly nicknamed "Fifth Avenue of the suburbs."

Jersey's development accelerated during the second half of the nineteenth and the early twentieth centuries, as more and more workers opted for suburban comfort. A new railroad line here, a bridge or road there, would unlock a whole new swath of the state to commuters, igniting countless mini-real-estate booms.

Two rail lines transformed Montclair in the mid-nineteenth century from a sleepy trading post into a bustling New York commuter town, filled with spacious Tudor- and Queen Anne-style homes. Montclair's biggest houses, on a ridge at the foot of the Watchung Mountains facing New York, would one day house many of Gotham's financial elite, including, during the late 1980s, the chief executives of three of Manhattan's biggest banks. In the same way, a causeway over the Shrewsbury River in 1870, linking farmland communities like Fair Haven and Rumson to ferries on the Atlantic, prompted a number of New York financiers, including Jacob Schiff, to build estates in the area and begin commuting across New York harbor to work.

Some 60 miles north of Rumson and 50 years later, construction of the George Washington Bridge, connecting upper Manhattan and the Bronx to northern New Jersey, led to a different kind of housing boom in places like Teaneck, a middle-class town where developers erected English Tudors, Dutch Colonials, and smaller houses of stucco and brick. In the decade leading up to the bridge's opening, Teaneck's population grew fourfold, part of a population upsurge that remade northern Jersey.

As inexpensive mass transportation expanded, Jersey sprouted a dense network of middle-class suburbs, home to many Manhattan middle managers--the traders, back-office managers, and salesmen who serve as corporate New York's foot soldiers. In the 1960s, the Levitt family, famous for converting Long Island farmland into the middle-class suburb of Levittown after World War II, replicated the project on a more modest scale in Somerset, New Jersey, building nearly 1,000 houses in William Levitt's classic Cape Cod design. Middle-income New Yorkers came in droves. Farther north, in Hillsdale, where the Hackensack & New York Railroad once had a terminus, hundreds of modest two- and three-bedroom prewar colonial houses, originally built for railroad workers, formed the core of a housing market dominated by Manhattan commuters. Eisenhower-era ranch houses in Middleton, Morristown townhouse developments, condos on former industrial land in Jersey City and Secaucus--all attr! acted commuters, so that now more than 300,000 Gotham workers call Jersey home.

Jersey would even cultivate its own patrician dynasties of Gothamites. Shortly before launching the New York-based financial magazine bearing his name in 1917, B. C. Forbes moved his family from Bay Ridge, Brooklyn, to Englewood, New Jersey, on the western slope of the Palisades. After his magazine took off and Forbes became prominent within Englewood--by then home to many of Manhattan's financial elite--his son Malcolm married one of the town's finest, Roberta Laidlaw, whose family owned the New York investment firm Laidlaw & Co. The pair moved into a baronial estate in the rolling hills of Somerset County, deep in the Jersey heartland. Among their neighbors: Aristotle and Jacqueline Kennedy Onassis, former secretary of state Cyrus Vance, and longtime Dillon Read chairman and ex-treasury secretary Douglas Dillon.

The commuters have given New Jersey the highest average family income in the country--$74,000-plus a year. In one five-year period during the mid-1990s, Jersey had a net gain of $2.8 billion in family income from New York, thanks to between-state migration, the Empire State Foundation found.

The ex-New Yorkers who formed the Jersey towns favored small government and low taxes, which came to define the state's politics. As early as 1840, the mayor of Jersey City--then a settlement of just over 3,000--boasted of his town's "small amount of taxes levied to support state, county and city government compared to New York and Brooklyn" (an independent municipality at the time). Jerseyans could be downright ornery about taxation. During the Depression, the state's Republican governor, Harold Hoffman, enacted a sales tax; so great was the backlash that the legislature quickly rescinded the levy. By the early 1960s, Jersey was one of only two states without a sales or an income tax; New York had both. Jersey ranked 40th among states in total tax burden, 13 percent below the national average.

The presence of a white-collar commuting workforce--and the low-tax economic climate it helped create--would help New Jersey lure firms fleeing New York. By 1910, more than half the state's urban and suburban residents worked in office jobs, as clerks, typists, managers, and executives. When Gotham's corporations, at first seeking space and then, beginning in the sixties, pushed by high taxes and escalating crime, began to abandon the city, Jersey was an attractive option. AT&T, Chubb Insurance, American Standard, Bristol-Myers Squibb, and others began flocking to where many of their employees already lived. Technological advances also helped Jersey draw the back-office operations of major finance players like Merrill Lynch, which kept its Manhattan headquarters but now employed thousands of support workers in cheaper Garden State digs, connected by phone and computer.

The New York corporate exiles nourished New Jersey's economy, just as the commuters did. Starting in the 1950s, Jersey's economy began growing at twice the pace of New York State's and easily outperformed it for most of the rest of the century. Even in finance, New York City's economic engine, New Jersey has almost matched Gotham's growth in recent decades. It added 143,000 financial-sector jobs between 1970 and 2000, compared with 154,000 new jobs in New York City over the same period, as financial wizards no longer chose only to live in the Garden State but also to work there. Even soon-to-be New York mayor Michael Bloomberg got in on the action. From a small Princeton office in the late 1980s, the mayor's company, Bloomberg LP, grew to employ 1,500 in New Jersey by the early twenty-first century.

The features that lured commuters and firms to the Garden State began slowly to erode in the late 1960s, as an expanding state government started shoveling massive amounts of taxpayer money into urban anti-poverty programs and education, usually with little result. Two interlocking forces drove the spending: first, the rise of powerful public-sector unions that pushed effectively for higher pay and benefits, bloating municipal and school budgets and blocking needed reforms not just in cities but across the state; second, the growth in Jersey cities of a new kind of political machine that diverted federal and state urban aid into political favors and patronage, wasting billions on useless and often crooked programs, and turning the cities into expensive wards of the state.

Until the 1960s, Jersey's cities, though small, had been self-sustaining and relatively successful, playing a minor role in the larger regional economy governed by New York. Newark, for instance, became a port town, with a small manufacturing hub that, at its peak in 1930, employed some 66,000 workers out of the city's 450,000 inhabitants. But when race riots and unrest broke out in Newark, Camden, and other Jersey cities during the late 1960s, many residents and businesses fled to the same suburbs that New Yorkers had been flooding into for decades. Cities like Newark ended up with little economic life and mostly indigent populations.

Further encouraging the exodus was the widespread awareness that the cities had fallen into the grip of corrupt, rapacious political machines. After Newark's riots, federal prosecutors bore down on then-mayor Hugh Addonizio, who had given control of much of the city to Mafia bosses Ruggiero "Richie the Boot" Boiardo (whose crime family inspired The Sopranos) and Ray DeCarlo. After the feds convicted Addonizio and several subordinates for corruption, the "reformers" who took over were anything but. New mayor Kenneth Gibson, pledging to end the sleaze and revive Newark, faced ceaseless investigations into his administration, resulting in a string of indictments--including his own on charges of providing a no-show job. Though never convicted, Gibson left office a failure.

Corruption probes into the administration of the next mayor, Sharpe James, over nearly 20 years brought down city councilmen, the mayor's own chief of staff, and the police commissioner, who pled guilty in 1996 to pillaging a fund that financed undercover narcotics investigations. Nor was Camden any less shady: since 1981, three of its mayors have been convicted of corruption and deposed.

The persistent corruption, vaporizing billions of taxpayer dollars, gave public-sector unions the leverage to wrest control of the state's urban agenda for their own benefit, leading to even greater waste. Newark's teachers' union, for example, used Gibson's legal woes to seize control of the schools from the mayor and deliver it to a school board--which the union, with more than 4,000 voting members, could easily elect. The result: a long period of school-system mismanagement and fraud, documented in a damning 1994 state investigation, which culminated in state takeover of the system the next year. In his book Black Mayors and School Politics, political scientist Wilbur Rich blames the school failure on "the public education cartel" and says that claims by teachers and board members that poverty caused the system to fail "is an insult to the Newark community."

Jersey's cities have never recovered. Newark now has only 280,000 residents, down from 450,000 in happier times. State taxpayers pay about three-quarters of a billion dollars annually to prop up the city's schools and its municipal government. Crime is rampant, jobs scarce. Newark's problems have radiated to neighboring towns, too, blighting once-healthy communities. East Orange--where Matthias Ogden Halsted brought his Manhattan pals--seethes with gang violence, with a crime rate three times the national average. Family income is less than half the state average; once-grand homes sit abandoned and boarded up. Irvington, which Philip Roth in Portnoy's Complaint depicted as filled with alluring shiksas living in Norman Rockwellesque tranquillity, is today one of New Jersey's poorest communities, wracked by double-digit unemployment and a crime rate as bad as East Orange's.

In Camden, the nation's murder capital, the state had to take over the failed school system and the city's out-of-control finances. Trenton, Paterson, and other Jersey cities are similarly dysfunctional.

The latest installment of this ruinously expensive mess is a court-ordered state effort to rebuild dysfunctional urban school systems. In a series of decisions beginning in the 1990s, the New Jersey Supreme Court has forced the state to boost spending dramatically in city schools. Going beyond fiscal equity cases in other states, which demand that prosperous suburban residents contribute more to poor urban school systems, the Jersey supremes mandated that each district be able to spend as much as the state's richest jurisdictions--up to $18,000 per pupil. The court also required the state to establish universal preschool and to embark on a $2 billion school building program.

Once the courts decreed this modern-day exercise in taxation without representation, union-backed pols piled on. In 2001, the state legislature inflated the school construction program to a budget-busting $8.6 billion--a gift not only to the education lobby but also to the construction unions and other tax eaters. To evade voter approval (which the state constitution requires) for the lavish spending, the legislature created a largely unaccountable bond-issuing authority, a constitutional dodge that Jersey's courts blessed. The patronage-ridden authority proved so corrupt that it quickly spent all its borrowed money, while completing only half of its building projects, leaving taxpayers under court order to pour in yet more funds.

By the 2003-04 school year, state taxpayers, in a colossal income transfer, were handing over a jaw-dropping $4 billion annually to support education spending in Jersey cities. Taxpayers from elsewhere in the state footed fully 90 percent of Camden's education bill, while the city itself contributed a mere 2 percent, says the school reform group EducateNJ. In Trenton, state taxpayers paid 82 percent of the education bill; local sources ponied up just 8 percent.

Yet even as Garden State taxpayers have showered nearly $30 billion on city schools over the last decade, neither the courts nor the officials overseeing the urban school districts have demanded fundamental reform of the school bureaucracies, let alone innovative solutions like vouchers. The money thus has made little difference. True, state tests show a recent uptick in fourth-grade reading and math proficiency (though little gain for eighth-graders and high school students). But the improvements, such as they are, result at least partially from the state dumbing down its tests over the last few years. Soberingly, on national tests, Jersey students show insignificant gains for all grade levels since 1992 and considerably lower levels of math and reading proficiency than the state tests claim.

In recent state legislative testimony, the vice president of Newark's Public School Advisory Board starkly framed the lack of progress. "There has been little, if any, real success that the minority and low-income children of my city can claim," she said, thanks to the "abysmal failure of our system." In Camden and Newark, that system spends nearly $1 billion in state funds annually--to produce a scant 2,000 high school grads a year.

It's hard to overstate the might that public-sector unions--the teachers' union, above all--now wield in New Jersey. With 62 percent of its state and local workers organized, New Jersey has the second-highest level of public-sector unionization in the country, behind only New York, according to unionstats.com.

The unions have wielded their clout to win among the richest benefits and highest pay of government workers anywhere. Teachers earn an average of $56,000 a year, with some of the highest salaries going to teachers in the state-financed urban districts. Not only are health and pension benefits for state workers--including the possibility of retiring at 55 with cost-of-living pension adjustments for life--plusher than the private-sector norm; on average, they're 10 to 15 percent above what other state governments grant workers. Last year, pension and health benefits cost the state $2.5 billion, or 9 percent of the total budget. By 2008, the tab will grow to nearly $5 billion, and by 2010, $6.7 billion--21 percent of the projected state budget.

The unions ferociously protect their spoils. The New Jersey Education Association was the prime mover of a $300,000 ad campaign opposing a thus-far-unsuccessful effort by taxpayer groups to call a constitutional convention to fix Jersey's tax woes. Two years ago, facing taxpayer pressure, the state legislature took up a bill to limit annual school spending hikes to 2.5 percent, or the rate of inflation, whichever was less. The teachers' union leaned on legislators and got the word "less" changed to "greater," inverting the bill's intent. The Communications Workers of America, representing government employees, strongly backed a recent $1 billion increase in taxes on Jersey businesses, running radio ads demanding that firms pay their "fair share."

All the union- and court-driven spending and misspending has burdened New Jersey citizens and firms with heavy taxes and led to a multi-billion-dollar redistribution of income from suburban counties to the state's urban core--and from private to public employees. Jersey's wealth belt--six adjacent counties in the state's center (Hunterdon, Mercer, Middlesex, Monmouth, Morris, and Somerset)--handed over $4.2 billion in sales and income taxes in 2003 but got just $2.2 billion back from the state in spending, a Rutgers University study found. By contrast, Jersey's most urban counties--Camden, Essex, Hudson, Passaic--paid $1.6 billion in taxes in 2003 but enjoyed $3.6 billion in aid.

Jersey's progressive income tax accounts for much of this skewed distribution. Statewide, families making $150,000 a year or more are just 9 percent of tax filers but pay 55 percent of income taxes--a percentage likely to rise after last year's levying of a so-called millionaires' tax that hiked rates for residents making $500,000 or more, giving them a top rate of nearly 9 percent. (Neighboring Pennsylvania has a flat 3.07 percent rate for all taxpayers.)

Since their residents get precious little in return for their state taxes, most of Jersey's suburban governments must finance their operations through property taxes--one reason those taxes are the nation's highest, according to the Tax Foundation. Today, Jersey suburbanites find themselves paying for two sets of local governments and two school systems: their own (through property taxes) and those of cities like Camden and Newark (through income and sales taxes).

Many ordinary, hardworking New Jersey residents feel like the taxman won't rest until he's pushed them out of the state. Citizens for Property Tax Reform member Jo-Anne David lives in a small duplex on a 3,000-foot lot in rural Jamesburg but pays some $5,000 a year in property taxes. She bluntly sums up her situation: "I can't wait to retire and get out of this state. I can't afford to live here, and it's a shame." Leaving Jersey has become the sensible option for middle-class retirees, says Lou Albright of suburban Gloucester Township. "I have lived and worked in New Jersey all my life and now in retirement can no longer afford to live here," he observes. "In so many ways the state tells you when you have completed your working life: We don't want you--move on to Delaware or some other tax-friendly state."

Hefty tax hikes are also leading many New York workers to reconsider their choice to live in Jersey. When Jerry Cantrell moved to Randolph, New Jersey, from a Pennsylvania suburb ten years ago so that his wife could take a New York corporate job, he knew that his property taxes would go up--from $1,800 in Pennsylvania to $5,000 in Jersey. But he didn't expect them to keep rising--nearly 50 percent since he moved, so that he now shells out nearly $7,500 a year. "Somehow you don't believe they can keep going up so much," complains Cantrell, who leads the Silver Brigade, another taxpayer rights group. Cantrell has gotten more than he bargained for in Jersey in other ways. After leading a campaign to defeat a $45 million school building plan that the local education establishment supported, he had his house pelted with eggs and found threatening notes stuffed in his mailbox.

Jersey's taxes have arced upward for 40 years, interrupted only briefly by then-governor Christine Todd Whitman's mid-1990s income tax cuts. But state taxes rose most radically from 2002 through 2004, after Democrat James McGreevey became governor and the Dems, with union backing, seized control of the legislature.

McGreevey jacked up taxes and fees 33 times--totaling a whopping $3.6 billion--during his short tenure, which ended in less than three years, after the public learned that he had given a state job to his purported homosexual lover. Though his new "millionaires' tax" got most of the attention, the middle class has taken a hard hit. McGreevey hugely hiked the tax on home sales, for instance, affecting some 140,000 families yearly, most of them middle-class. A Jerseyan who sells his $450,000 home must now pay a whopping $3,695 tax, an 80 percent increase; selling a modest $300,000 house would require shelling out $2,200, a 72 percent hike.

Under McGreevey, New Jersey also instituted its own estate tax, kicking in at $675,000 in assets, well below the $2 million starting point for the federal death tax. Now a Jersey resident dying with $1.9 million in savings will owe the state nearly $100,000--an egregious levy that makes Jersey Number One in the country in per-capita death-tax collections. Perhaps to protect its residents from dying with too much wealth, the state also raised taxes on retirees with $100,000 or more in annual income, charging them extra to help pay public-sector retirees.

Spending as wildly as he taxed, McGreevey borrowed nearly $2 billion to finance a colossal 17 percent increase in his last budget. Though the state supreme court judged that move unconstitutional, it let the action stand, because the money had already been appropriated.

Such reckless taxing and spending will surely intensify the flight from a state that once drew residents from elsewhere in the U.S. The Garden State recorded the fourth-highest net domestic out-migration in the country from 1995 to 2000--losing 182,000 more residents to other states than it gained. Every one of the state's 21 counties lost more residents to other states than it gained, a bleak contrast from the 1960 census, which estimated that Jersey had a net in-migration of more than 500,000 residents.

The shift isn't just costing the state its residents. In 2004 alone, New Jersey netted a loss of more than $1 billion in personal income from out-migration, according to Internal Revenue Service data. "Jersey has blown a golden opportunity," says former Republican presidential candidate Steve Forbes, a resident of Far Hills, New Jersey. "It could have been like Hong Kong, a haven for wealth and industry among high-tax neighbors like New York. Instead, Jersey's now losing its own residents to places like North Carolina."

McGreevey also chilled the state's already inhospitable business climate. He boosted corporate taxes and ended the ability of struggling companies to deduct losses from their tax bills--one of the most ruinous corporate tax schemes in the nation. When the head of Cincinnati-based Federated Department Stores, one of Jersey's biggest employers, noted that its state tax bill would more than double (to $10 million) and that it would reconsider any further expansion in the state, McGreevey attacked the company, challenging it to slash executive pay. His tax regime "drastically alters New Jersey's corporate tax landscape, making it inhospitable to large corporations," observed Glenn Newman, former deputy commissioner in New York City's Department of Finance.

Meanwhile, Democratic legislative leaders installed as heads of the assembly and senate labor committees two lawmakers who also are union officials--thereby putting labor legislation into the hands of union bosses. Since then, the legislature has passed draconian new laws that require companies on public projects to pay union wages and that subject violators to criminal charges, not just civil fines. Jersey solons have also passed an "instant unionization" bill that lets union locals organize workplaces simply by getting a majority of workers to sign cards--no need for a secret ballot anymore. "It seems Trenton looks for ways to discourage firms from moving here or expanding here," corporate CEO Fred Barré told a gathering of the state's manufacturers last fall.

Not surprisingly, a place that big employers once viewed as a safe haven now ranks low on the list of places to do business. The Beacon Hill Institute, an economic research group, recently ranked New Jersey as the seventh-worst state in the country for business--and noted that Jersey had fallen more than any state since its previous survey a couple of years back. The Tax Foundation finds the state's business-tax burden the country's second-worst. Economy.com calculates the cost of doing business there the third-highest in the U.S.

The higher taxes and tangle of new regulations have nearly halted what was once a regional jobs locomotive. Though the state's economy easily outperformed the rest of its region for the past 50 years (and occasionally even outpaced the nation), it has grown at only one-half its 1990s rate, and only one-third the rate of its 1980s boom, during the current robust national expansion. In a report issued late last year, Rutgers economists James Hughes and Joseph Seneca identified as a chief culprit in Jersey's economic decline the state's "recent intense focus on income redistribution."

Can New Jersey break the stranglehold that unions have on its government? Might it restrain spending, cut taxes, and improve the state's dismal business climate? So far, Jersey doesn't seem headed in that direction under the new Democratic governor, Jon Corzine.

During his five years as U.S. senator from New Jersey, the former Wall Street executive was consistently one of the Senate's most liberal members, with a long record of favoring higher taxes and greater spending. He won the 2005 Jersey gubernatorial election on a platform that promised over $1 billion in tax relief to property owners, but--just like his hapless Republican opponent, Douglas Forrester--he identified no significant cuts in state spending to free up that revenue. The money would come from revenue growth, he claimed--an unrealistic goal in a state with a struggling economy and a colossal deficit. Faced with the reality of governing, Corzine has acknowledged that the state's fiscal condition is worse than he thought, and his advisors have begun floating tax increases as a solution.

Corzine unfortunately gives no sign of taking on the culture of political bosses and corruption that plagues the state. In a dismaying early move, he selected as his Senate replacement Representative Robert Menendez, the de facto leader of the Hudson County Democratic political machine. Even the liberal New York Times objected.

A crucial question for Jersey's future is whether taxpayers can force Corzine to stick to his campaign pledges on taxes and corruption. The state's growing taxpayer movement is not as effective as the revolt against Democratic governor Jim Florio's 1991 tax hikes, which sparked a Republican takeover of the legislature the next year and Florio's own electoral loss to Whitman in 1993. Today, angry Jersey taxpayer groups feel frustrated, having watched better-organized unions block their constitutional-convention plans. Like taxpayer groups around the country, Jersey taxpayers are discovering that, since the last big taxpayer revolt of the early 1990s, their opponents, especially the public-sector unions, have grown stronger and smarter, making ad hoc citizen anti-tax campaigns more difficult. Aided by the courts and the vast expansion of budgets during the flush 1990s, New Jersey's tax eaters have little by little created a full-fledged example of the kind of regio! nal government that the Left touts these days--a government that forces businesses and residents who have fled the dysfunction of the cities to pay the tab for those urban problems, whether they like it or not.

Further, Jersey is part of a cultural shift that is changing politics in many northeastern areas, as some high earners abandon traditional middle- and upper-class fiscally conservative values and vote liberal instead. In national elections, Jersey today is now reliably in the "blue" column. The trend is also showing up in local elections, where longtime Republican strongholds like Millburn, Summit, and Madison have elected Democratic city councils and mayors for the first time. Jersey may soon resemble its neighbor, New York City, as a place where the rich who tolerate high taxes or consider them a social obligation live side by side with the poor, but with a shrinking middle class.

In short, it may be that New Jersey, having for years enthusiastically welcomed New York's residents and jobs, is now watching the Empire State take a measure of revenge as its neighbor settles into a familiar high-tax, low-growth inertia. Jersey has caught a bad case of the blue-state blues.