How Connecticut Ended Up as the Odd Man Out

Stamford, Connecticut. Photo Credit: Lee Cannon, CC BY-SA 2.0

The Atlantic’s Derek Thompson has a nice piece out called “What on Earth Is Wrong With Connecticut?” that summarizes the problems with the Nutmeg State.

Despite being the richest state in the country, by per-capita income, Connecticut’s budget is a mess. Its pensions are woefully under-funded. Its deficit is projected to surpass $2 billion, or 12 percent of its total annual tax revenue. Hartford is approaching bankruptcy. Conservatives look at Connecticut and see a liberal dystopia, where high taxes have ruined the economy. Liberals, on the other hand, see a capitalist horror show, where the rich dwell in gilded mansions, ensconced in sylvan culs-de-sac, while nearby towns face rising poverty and bankruptcy. Why is America’s richest state floundering?

The first answer is: Corporations are leaving. Aetna, the insurance giant, is leaving Hartford, where it was founded 150 years ago. In early 2016, General Electric announced that it would move its global headquarters from Fairfield, Connecticut, to Boston. Caterpillar, Motorola, and Kraft Heinz have all moved offices or employees out of the state, as well.

The second answer is: People are leaving. It’s rare for any state to actually shrink, but Connecticut’s population has been falling for three straight years. Meanwhile, only Michigan, Ohio, and Mississippi had slower job growth than Connecticut did over the last two decades, according to Jed Kolko, the chief economist at Indeed, a job site.

Thompson references my analysis that one problem with Connecticut is that it is getting squeezed at both ends. At the high end, cities are back in fashion for top level executive jobs. You see this in the rise of the executive headquarters. At the low end, cities like Dallas and Charlotte are hoovering up white collar jobs in the back office.

The suburban office park might not be dead, but it’s an endangered species in high cost states like Connecticut.

A couple of other points about Connecticut.

First, the state didn’t even have an income tax until 1991. Connecticut was originally not just a suburban refuge from urban dysfunction, it was also a tax haven. Now it’s one of America’s highest tax states overall.

Secondly, a nugget about the Aetna executive headquarters relocation should cause locals to dig in more deeply. The Wall Street Journal noted that, “Many of the 250 employees that will be working at the new New York office will be new positions, according to an Aetna spokesman.”

It could be that this is referring to support staff, and Aetna is trying to soften the blow to Hartford. But remember, this is an executive HQ populated by top executives. Consider some other explanations for this that are more troubling for Connecticut, such as that Aetna couldn’t fill the positions in Hartford. Or worse, Aetna is looking to make personnel changes, suggesting challenges in the Connecticut talent base. This is something for the state to get to the bottom of.

In other news featuring Yours Truly recently, the Economist cited my research in a piece on the promise and perils of privatization. And the New York Times also cited me about privatization.

Also, I’ll remind you again that you can sign up for my free monthly email newsletter with exclusive content from me, including updates on what I’m up to and a roundup of the top news in urbanism and related topics. Sign up and you’ll also get a free PDF copy of my e-book The Urban State of Mind. Sign up on the right sidebar of my site.

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from Aaron M. Renn


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