FOLLOW THE FAT MAN:

Governor Chris Christie: GOP Darling: New Jersey Governor Christie is a rising national star. By taking on his state's bloated budget, he embodies the New Austerity. Will voters hate him for it? (Peter Coy , 8/25/10, Business Week)

Christie's most astute move was to curtail future local spending by cramping the primary means of funding it. After seeking a strict limit in the state constitution on increases in local property taxes, he settled for a law that held property tax hikes to 2 percent annually with few exceptions. The cap gives mayors and councils an incentive to support changes in civil-service rules sought by Christie that make it easier to lay off or cut employee pay.

The sequencing was masterful: Christie says he probably would not have the mayors' support for those cost-saving measures if he hadn't first gotten lawmakers to pass his cap. Next up is pension reform. "I'm working on all of these things at once because they're all interconnected," Christie says. "I don't see how any responsible governor has a choice anymore not to take on the public-sector unions." Says Tom Corbett, Pennsylvania Attorney General and Republican nominee for governor in this November's election: "He certainly sets an example I think other governors can follow." Even David Paterson, the Democratic governor of New York, has praised New Jersey's property-tax cap.

Despite his admirers, the Christie formula isn't easily transported to other states. Like an LBO specialist sent in to unlock the value of a badly managed company, Christie is working with a state that has great underlying strengths. Contrary to the image projected by MTV's Jersey Shore, New Jersey is educated and prosperous. It ranks second in the nation in per-capita income (behind Connecticut) and fifth in the percentage of people 25 and older who have bachelor's degrees, according to the Census Bureau. It's in the nation's densest urban zone, with New York City on one border and Philadelphia on another. Jersey City, across the Hudson from lower Manhattan, has sprouted a forest of tall buildings filled with financial firms like Goldman Sachs and Morgan Stanley (MS). The center of the state has vast campuses of pharmaceutical companies such as Bristol-Myers Squibb (BMY), Johnson & Johnson (JNJ), Roche, and Merck (MRK). And even though it's no longer the headquarters of the Bell System, New Jersey still has a web of telecom and data center infrastructure.

From the 1960s through the mid-1990s, New Jersey used lower taxes and cost of living to lure jobs out of New York City. But steadily rising taxation has lessened its allure, says the Manhattan Institute's Malanga. Much of the spending increase has occurred at the local level. In the well-to-do New York City suburb of Closter, N.J., which has a below-average crime rate, all but two of the 20 members of the police force are earning more than $100,000 this year, not including benefits or overtime. To blame: Arbitration rules that are tipped in unions' favor—and that Christie is trying to change. New Jersey ranked last in a Tax Foundation survey of states' business-tax climates. "What's particularly disturbing to us is that we have now fallen behind our regional competitors such as New York and Pennsylvania and Delaware and Connecticut," says Philip Kirschner, president of the New Jersey Business & Industry Assn.

Verizon New Jersey President Dennis M. Bone, interim chairman of a new public-private partnership called Choose New Jersey, says Christie has energized businesses by working to hold down their taxes, streamline regulation, and keep jobs in the state. Christie says when he heard that Honeywell International (HON) was about to move its 1,200-employee headquarters from Morris Township to Pennsylvania, he told CEO David M. Cote, "Give me a week." Christie offered tax credits that persuaded Honeywell to stay—and expand.

The friendly face Christie shows to business isn't in evidence in his confrontations with the New Jersey Education Assn. and other public-employee unions. His method is divide and conquer. On pensions he formed an alliance with Democrat Stephen M. Sweeney, the state senate president and treasurer of an Ironworkers union local in South Jersey. (It was Sweeney who began pushing pension reform in 2006.) Christie has also exploited regional divisions between Democrats in the legislature.

Party discipline is much tighter among the Republicans in Trenton and tighter still in the Christie administration. Some 24 of his appointees worked under him in the U.S. Attorney's office, including his attorney general, his chief counsel, his press secretary, and the head of the school development authority.

Being a Republican in a state with a Democratic legislature is not the handicap it might seem. While Corzine and other Democratic governors felt they needed to accommodate the wishes of the powerful county Democratic leaders to keep peace within the party, Christie feels no such compunction, says Ross Baker, a Rutgers University political scientist. "He just doesn't give a damn," says Baker. "One should never underestimate the value of fortitude in a politician. Chris Christie's got fortitude in abundance."