Chris Christie's New Jersey Nightmare: Why Economic Recovery Hasn't Touched the Garden State

We are already there.

Twenty-first century New Jersey is a state so disconnected from the national narrative of “recovery” it might as well be its own country. The fact that the major media has ignored this story for so long is a tribute to Governor Christie’s prowess as a great entertainer. Not since the arrival of the Great Pandas from China has the major media been so distracted by sideshow antics.

New Jersey is only one of three states where poverty has gone up according to the latest U.S. Census data. (New Mexico and Washington are the two others.) Back in 2007, 8.6 percent of the state lived below the poverty line. That went up to 9.4 percent in 2009 and in 2013 hit 11.4 percent.

By 2013, close to the end of Gov. Christie’s first term, Advocates for Children New Jersey had documented that poverty, historically confined to the state’s urban core and rural areas, was getting worse state wide and was now getting a foothold in the state’s traditionally affluent suburbs. Cecilia Zalkind, executive director of the non-profit advocacy group told New Jersey Public TV that “almost a third on New Jersey’s children” were now living “in low income” households.

But the top-line poverty numbers were only part of a wider New Jersey macro trend that portends a kind of economic unraveling on Gov. Christie’s watch. Last fall, the United Way of Northern New Jersey teamed up with Rutgers University to look at a broader slice of the state’s population that, by the numbers, were above the federal poverty level but financially struggling to make ends meet.

The report entitled ALICE, looked at Jersey residents that were Asset Limited, Income Constrained, but Employed. What they found was that when they added up the families living in poverty to this larger ALICE cohort, there were 1.2 million households, nearly 40 percent of the state, that were struggling on a weekly basis to “afford the basics of housing, food, transportation, childcare and health care despite working.”

While inflation was 7 percent from 2007 through 2012, the period of the United Way analysis, the costs for a family of four to cover the basics like housing and childcare had spiked by 19 percent. At the same time the state’s inflation adjusted median annual income for Jersey households continued to decline from $75,316 in 2007 down to $70,165 in 2013, four years after the National Bureau of Economic Research declared the Great Recession over.

New Jersey has the highest percentage of working-age adults in the country still grappling with long-term unemployment. Last year when Congress chose not to extend the nation’s emergency unemployment benefits, 140,000 Jersey residents were cut off. Even as the state’s unemployment rate was dropping last year, experts attributed the decline, not to a rebound, but to a shrinking workforce as more discouraged workers dropped out of the job market.

“Since the recession was declared over the trends have remained grim here in New Jersey,” says Gordon MacInnes, with New Jersey Policy Perspective, a nonprofit progressive think tank. “New Jersey has just gotten 50 percent of the jobs back it lost in the Great Recession while the country added 119 percent and neighboring New York recovered 200 percent of those jobs.”

In an effort to spark a recovery, the Christie administration has handed out more than $4 billion in corporate tax subsidies to companies like JPMorgan, Goldman Sachs and Prudential. In Prudential’s case the company got $210 million in tax credits  for building a new office tower, two blocks from its original location in Newark.

In June, the state gave the Philadelphia 76ers basketball team $82 million in tax credits to build a practice facility also in Camden. The team committed to create 250 jobs, which meant the state was giving up $328,000 tax credits per job.

By last month the state’s Economic Development Authority upped the ante, paying out three times that for creating a new job when it awarded a $118 million tax subsidy package to Subaru to build their headquarters in Camden. Subaru, which was already based at two locations in New Jersey, had to only commit to creating 100 jobs, meaning that each new job was being subsidized to the tune of a million dollars.

But even as the Christie administration doubled down on its expensive tax subsidy strategy, luxury car maker Mercedes announced that after 50 years it was leaving northern New Jersey for Atlanta taking its prestige and 1,000 good-paying jobs with it. Mercedes made the move despite a plea from Christie to stay put, which included an undisclosed incentive package. The New York Times quoted Christie’s spokesman as saying the German automaker said the cost of doing business in New Jersey, as well as its taxes, were all just too high when compared to a state like Georgia.

New Jersey’s current predicament cannot be blamed entirely on the governor or the current state Legislature. Long before these folks were in elective office, Jersey was feeling the impacts of predator capitalism. Since the 1960s, New Jersey lost hundreds of thousands of good paying manufacturing jobs as U.S. corporations closed their stateside operation and shifted to countries where they could pay lower, non-union wages and exploit weaker environmental standards.

Much of what ails New Jersey can be traced back to a lack of meaningful long-term economic planning in the public interest. For years now, American corporations, in pursuit of short-term profits, have abandoned their financial commitment to basic scientific research so much of which occurred in New Jersey.

There’s no better example of this abdication than the gutting of New Jersey’s Bell Labs. In the years that followed the 1984 breakup of AT&T, the world-renowned lab that produced breakthroughs like the transistor, long-distance TV, the photovoltaic cell and cellular technology was radically downsized.

Even as last as 2001 Bell Labs had 30,000 employees but now has just 1,000 according to Adrian Slywotsky in his 2009 Bloomberg Business week analysis entitled, “Where Have You Gone Bell Labs.” Slywotsky makes the case that this short-sightedness by corporate America has made it harder for the U.S. economy to produce the kind of high-paying jobs that comes with major innovation. “The pipeline is dry because the U.S. business model is broken. Our growth engine has run out of fuel—critical mass, basic scientific research,”Slywotsky wrote.

Over the last few years, the state has also been hit hard by a major erosion in its pharmaceutical sector, which once earned the state the title as the nation’s medicine chest. A few years after Merck’s 2009 acquisition of Schering Plough, it laid off more than 15,000 people enterprise-wide. In 2012 Roche, the Swiss drug multinational, announced that it would close its sprawling campus it had operated in Nutley for 80 years. At one time the Nutley site employed 10,000 people.

While much of New Jersey’s new job creation remains anemic compared to what’s going on in adjacent states like New York and Pennsylvania, there are some spots in the Garden State in a Depression-like free fall. Consider Atlantic City, which is in a catastrophic collapse with statewide, even national ramifications. Last year four of the state’s 12 casinos closed. A fifth is already in bankruptcy and a sixth is expected to file later this month.

So far 10,000 people who worked in the shuttered casinos have lost their jobs. As a consequence of the casino meltdown Atlantic City’s municipal government is in dire fiscal straights because its is so heavily reliant on the gaming industry for tax revenue. Options include laying off Atlantic city’s police force. Property values have declined by 45 percent even as property taxes have doubled.

What happens in Atlantic City does not stay in Atlantic City. Professor Deborah Figart, labor economist from Stockton College of New Jersey, told the Star Ledger that the casino closures are having economic reverberations well beyond Atlantic City’s borders. The casinos were served by as many as 15,000 businesses who are vendors from throughout New Jersey and the rest of the country. “So, you take one City like Atlantic City, and you throw a pebble in the water, and you watch those ripples. Those ripples are going to tech northern New Jersey and to the rest of the country. It’s going to hurt,” Figart says.

Atlantic City is not the only New Jersey municipal government facing a serious structural crisis set into motion by the whipsaw action of declining property values and a shrinking tax base that officials have tried to make up for by raising property taxes. Neward has seen close to a $2 billion erosion in its ratable base that officials compensated for with a 42 percent hike in property taxes over the last four years.

Foreclosures remain a major problem with thousands of vacant zombie residential properties throughout the state’s urban core. Some estimates put the total at close to 10,000 abandoned homes even as the state’s homeless population spiked last year by 16 percent. Empty commercial properties can be a problem as well.

Squatters and drug dealers break into them and make them their own while the banks do their best to avoid taking responsibility for ownership. Fires are a regular occurrence. In Newark in 2012 such a fire killed five people—three of them children.

And there’s no sign of a turnaround and no comprehensive response from the Christie administration. Housing advocates have complained for years that Christie redirected money that should have gone to help homeowners to close his budget gaps. Just a fraction of the federal money from settlements with the banking industry to settle claims against them for the mortgage meltdown has gotten into the hands of the at risk homeowners for which it was intended.

Nationally, out of the five hardest-hit cities with the highest percentage of home mortgages underwater, where what is owed the bank is at least 20 percent higher than the actually value of the home, three are in New Jersey. In these three, Newark, Elizabeth and Paterson, close to half of all the residential mortgages held fall into this category.

Just before Thanksgiving New Jersey led the nation in the percentage of mortgage delinquencies and foreclosures. While across the country the Mortgage Bankers Association reported a return to pre-recession delinquency and foreclosure rates, New Jersey just continued to bleed out. Just before the holidays more than one in six New Jersey mortgages were either delinquent or already somewhere in the foreclosure process. Nationally, back in November just 2.4 percent of mortgages were in foreclosure, compared to 8 percent in New Jersey.

But it is not just an urban problem. Former vibrant homesteads, that once housed families, that are now deteriorating, lifeless liabilities, can be found throughout the state even in Mendham Township, the governor’s affluent hometown. But wherever these homes are, they fall into disrepair and pull down the property values for the adjacent households that try and stick it out.

On the bright side, the ongoing Jersey foreclosure crisis has spawned a new business opportunity for landscapers who are now paid to make sure the lawns are mowed in front of these zombie homes where nobody is ever home. Local governments have passed laws to make sure that the financial interests holding these empty homes at least keep up appearances.