Under the previous New Jersey governor, Jim Florio, appropriations grew at an average annual rate of 6.3 percent. Figure 1 shows the difference between the prior trend of spending and actual spending by the Whitman administration. In Whitman's first term, appropriations grew at an average annual rate of merely 1.8 percent. Click here to see Figure 1. The paradox of government spending is that restraining current government spending will allow for economic growth that will provide greater government revenues in the future.
New Jersey helps illustrate that example.
With lower tax rates on corporations and individuals, New Jersey policy makers were faced with the necessity of controlling government expenditures. When New Jersey lowered corporate and personal income tax rates, the cost of living and doing business in New Jersey fell. These lower costs signaled to businesses and individuals that their current income would produce greater profits and well being. These signals induced more businesses and families to make New Jersey their home. The increase in business activity increased the jobs available in New Jersey and generated higher tax revenues.