Last week, at Gov. David Paterson's order, the state paid legislators thousands of dollars to hold a special session to cut the state budget. For two days rank and file members griped about wanting to return to their districts, while leaders negotiated without reaching a deal. On Tuesday, they passed two bills on unrelated issues, packed up and went home.
Paterson, however, still held out hope. He told a small group of reporters that after months of talk about cutting the budget, negotiations had finally gotten serious. Legislators have promised to return today (Nov. 16) to finally pass a deficit reduction plan. What shape that plan might take, though, remains very much in doubt.
With most members back home, negotiations in Albany continued behind closed doors.
On Thursday, during a call open to the press, Paterson and legislative leaders gave the public a peek behind the curtain, and what they saw wasn't pretty.
"We're talking to each of you separately," Paterson said to the leaders. "When we were meeting together, everybody was kind of hesitant to make the first cut, thinking they’d get blamed for it," he said. The point that leaders can't manage to work together was driven home as Senate Minority Leader Dean Skelos laced into Assembly Speaker Sheldon Silver.
"What cuts in spending does he support?" Skelos demanded. "Again, my question is, what real cuts are being supported by the speaker? And frankly we have the right to know this as we negotiate."
Silver was evasive. "Senator, I don't believe that the secretary of state swore you in as a district attorney or a prosecutor," he responded before Paterson broke up the exchange.
Paterson defended holding such compartmentalized negotiating sessions on the grounds that special interest groups' opposition to proposed cuts has scared legislative leaders from taking a public stand. He insisted that a deal to cut the deficit is about "three quarters" complete. He also admitted that he was becoming less committed to specific cuts, including those he proposed earlier this year, than to somehow reducing the state's huge gap.
"I am less and less ideological about deficit reduction," Paterson said. "We just have to do it."
So, for example, Paterson indicated his office was reviewing the possibility of refinancing the state's tobacco bonds to generate revenues. Senate Conference Leader John Sampson had pushed the idea weeks earlier, only to have Paterson tell him the idea was dead on arrival.
The state sold tobacco bonds to receive cash for a 1998 lawsuit with cigarette companies. The Senate has proposedrefinancing the bonds since tobacco bonds have been a popular form of investment this year. Doing so, they say, could produce up to $500 million. Paterson had earlier questioned that estimate, saying he thought it might only produce $25 million. Other states such as Wisconsin have refinanced their tobacco bonds to raise cash.
Exactly which leader stands for what cuts remains unclear.
Sampson reiterated that he opposes the nearly $700 million in cuts to education aid contained in Paterson's plan. Meanwhile, Assembly Democrats are said to be working with the governor to reduce his proposed $300 million in cuts to health care. They say the cuts will devastate the health care industry.
Assemblyman Jose Peralta of Queens said Paterson's plan will disproportionally affect his predominantly low-income district. "The package the governor put out is unacceptable to my district because there will be huge cuts in service, especially to health care and education," he said. "I am really against the governor's version; we need to find revenue enhancers." He did not specifically any measures he had in mind.
But Peralta said he and his Assembly colleagues are not as diametrically opposed to the governor's plan as the Senate Democrats appear to be. "I think the Senate does the opposite of what the governor is doing, perhaps for political reasons, but at the end of the day we will all sit down and realize we have a problem. We will run out of cash and we are not crying wolf. Even the most progressive of us realize that services will be cut," Peralta said.
Sen. Bill Perkins agreed. "No one says this is all nonsense. The legislature just has a different perspective than the governor. Our system of government is not designed for us to go in front of the governor and just sign off."
Although Perkins expressed fears about what Paterson's cuts might do to services in his Harlem district, he gave Paterson credit for the way he has handled the deficit problem and said he might still be in control of the situation.
"David has been here a long time, he was a legislator for years, so he knows the legislature better than most governors. From our point of view he knows us better than we know ourselves," Perkins said.
So if legislators get their way and see the harshest cuts removed from the budget, how will the state patch its deficit hole? Senate Democrats have proposed a number of one-time ways to raise cash. They would raise $30 million by reducing the state's reliance on contractors, $500 million by refinancing tobacco bonds, and sweep cash from different state authorities into the state budget. Some of the proposed sweeps include $200 million from the Port Authority, $160 million from the New York State Health Insurance Plan and $40 million from the Workers Compensation disability fund.
They have also proposed increasing the Video Lottery Terminal parlor hours, a move they estimate will raise $39 million.
Senate leaders have also indicated that they agree with millions of dollars in cuts to state agencies that Paterson has proposed.
Just as this year's budget was negotiated in private and served up as a package with other legislation (such as reform of the Rockefeller drug laws), this deficit reduction package will likely will be negotiated and delivered in a similar manner.
"As a taxpayer I want them to fix the budget however they do it," said Blair Horner of the New York Public Interest Research Group. But he said if he had a "magic wand," the governor would have put his proposal forward earlier in the year to allow the legislature to counter with formal proposals and then work out the differences in conference committees. Instead, now the governor and legislature have little time to prevent the state from running out of cash, and, despite some public hearings, generally are negotiating in secret.
With the budget cutting process happening in closed-door negotiations, other legislative issues, including same-sex marriage and perhaps authority reform, may be getting mixed up in the deal.
Paterson demanded that the Senate take up a vote on legalizing same-sex marriage during the special session last week. Senate Democrats needed some Republican votes to pass the measure, but Republicans who had indicated they might lend their support were leery about voting for gay marriage without having completed a budget deal.
There has been talk around the capitol that Republican members are looking to trade votes on gay marriage for gains in budget negotiations.
Liz Benjamin reported on Friday that getting Republican votes for gay marriage "depends on what a [budget] deal looks like." Republicans are said to be looking for real cuts to the budget rather than just revenue enhancers. So the future of gay marriage in New York State may hinge on exactly how Assembly and Senate Democrats go about cutting the budget.
"It is much better to deal with one issue at a time," said Horner, "But it's been a historical fact that issues get wrapped up in one big deal. We call it the 'big ugly.'"
Republicans and fiscally conservative groups like the Empire Center for New York State Policy insist that real cuts need to be made to ensure that the state's finances do not collapse. Next year legislators will face a deficit estimated to be around $7 billion. It is also is an election year so legislators will likely be even more reluctant to make real cuts then.
A number of Democratic legislators say they believe the economy is on the way up and the state will soon find itself in better financial waters. "The Dow is indicative of our future, and the Dow is improving," Peralta said.
He said that he has faith that Silver has a firm grasp of the state's economic situation. "Shelly's staff was months ahead warning us about the economy. So you have to give it to him. I have faith that Shelly knows how to handle this," Peralta said.
Representatives from Paterson's office and the comptroller's office say that it is too soon to rely on an economic upturn to save the state.
With little hope of Wall Street bouncing back to the rescue, Paterson has continued to insist that he sees no way to fill the state's $3.2 billion budget gap without serious cuts to education and health care. "I don't see how health care and education cuts could not be part of the plan, because they're 55 percent of the budget," Paterson said.
Paterson has called for special session for today and Tuesday. Legislators say they hope there will be a deal but will not make any promises.
"If there is a deal, will I vote for it?" asked Peralta rhetorically. "It depends on what's in it."
New York is running out of cash. It is expected that the state's general fund will end the month of November in the red, forcing the government to borrow money from its short term investment pool in order to meet its scheduled payments.
And that isn't the biggest problem. The state faces an escalating deficit and Comptroller Thomas DiNapoli has estimated that New York could face a $38 billion dollar spending gap by 2013.
The message from Gov. David Paterson and his budget director, Robert Megna, has been clear: State spending has to be reigned in or New York will end up like California, a state that has had to issue IOUs and seen its credit rating cut to near junk bond status.
Paterson's way out of this mess, a deficit reduction package worth $5 billion, would make significant cuts to health care and education and provide for one-time influxes of cash into state coffers with a tax amnesty program and transfers from quasi-governmental public authorities.
This is not the first time Paterson has tried to reduce spending -- and indications are that he will, once again, meet opposition, Already representatives of education and health care groups have warned of disaster, and some senators have resisted the governor's call. Many, hoping to avoid slashing services, see salvation in reports from Wall Street promising bigger bonuses and higher profits in the finance industry in the months to come.
In December the state is scheduled to make $2.5 billion in payments for STAR, the property tax relief program, as well as $1.6 billion in School Aid Funding, $500 million in funding for city governments and $500 million in funding for county governments. According to current projections, it will have to borrow to meet those obligations.
Estimates of the state's long term fiscal crunch vary but they all paint a fairly dire picture. By the end of the year, the state's deficit is expected to reach anywhere from $3.2 billion to the $4.1 billion. The Paterson administration now predicts the state faces a deficit of $44.2 billion over the next two-and-a-half years.
A recent financial condition report issued by DiNapoli's office shows that state spending has increased by 21 percent over the last four years. Revenues have drastically decreased. And New York is the second most indebted state in the nation, behind only California.
Although DiNapoli's office warns the deficit will be $4.1 billion by the end of this year, the Department of Budget is proposing only $3 billion in cuts. Even so, when asked to preview his plan earlier this month Paterson said simply "Pain."
For a number of sectors -- and for New York City -- pain is exactly what Paterson's plan delivers. More than two third of state spending goes to health care and education, so both sectors face hefty cuts.
Under Paterson's proposal, school aid would be reduced by $686 million this year. That translates into $223 million in cuts for the five boroughs. Paterson's plan also includes reductions in tuition assistance and cuts to the budgets of the city and state universities. CUNY tuition will increase from $4,000 a year for undergraduate students to $4,600. The state will reduce per-student aid to the college by around 10 percent.
The Metropolitan Transportation Authority would lose $113 million.
The health care sector, including Medicaid and health service providers, will be cut by $471 million. AIDS programs and home care providers are also scheduled to for reductions.
The city would lose $41 million in Aid and Incentives Payments -- state assistance funding for municipalities that was just added in the 2008-2009. The city will still receive a payment of $205 million for 2008 '09.
"It's not clear yet how the city will absorb the cuts," said Doug Turetsky of the city Independent Budget Office, adding, "The thing to keep in mind is that there is a hit directly to the city budget, and then cuts that don't flow through the city budget that hit non-profit organizations and cut services that we don't measure."
Others are more certain about how the plan will affect the city and the state.
James Parrot of the Fiscal Policy Institute said Paterson's plan is potentially disastrous for New York's economy. Parrot estimates that the state could lose 25,000 jobs if the cuts to education and health care funding go through. He said the job loss will not "prime" New York's economy, as Paterson has said his cuts will do, but hurt it.
E.J. McMahon, director of the fiscally conservative Empire Center for New York State Policy, sees things much differently. McMahon said that Paterson's cuts should only be the first of many. "He keeps talking about this December," said McMahon. "This is just the beginning."
Most observers would like to see an alternative to cuts -- and some think there may very be one.
Parrot wants Paterson and the legislature to wait until the end of the fiscal year before making any drastic cuts to see if revenue collection improves. "The way to address the cash flow problem in December is to borrow short term 'til the end of the fiscal year," said Parrot, who further suggests the state tap into its rainy day funds to get through December.
Paterson, though, has insisted that he does not want to tap the state's rainy day funds or do anything that might downgrade the state's financial rating.
Parrot believes borrowing short term will not hurt the state's financial rating, and he notes that short-term interest rates are low. "It's foolish not to do it," he said. Parrot also expects the federal government to continue the stimulus program that has sent cash directly into the state budget.
McMahon disagrees. "It gets worse after this," McMahon said. He thinks those who expect Washington to extend the stimulus are dreaming and playing dangerous games with the state's finances. He said the state will see stimulus funding drop off and be left with even larger deficits.
The collapse on Wall Street helped get the state into its current mess. So can the improved situation in the finance industry save the state? Parrot said he expects tax collections to improve by January, spurred by expected bonuses on Wall Street. "There has been a quick recovery on Wall Street. It is clearly much better than it was last year. I would want to wait to see the collections," said Parrot.
Others agree. "I think it would be prudent to wait and see what happens at the end of the year with Wall Street," said Billy Easton of the Alliance for Quality Education. "You hear everyday about executives getting bonuses that could offset fiscal problems."
Mayor Michael Bloomberg has said that he expects Wall Street to help bolster the city budget.
State officials though, do not share that optimism.
Matt Anderson, spokesperson for the state budget office, said that early indications are that the bonuses and money from Wall Street will not be significant enough to dig the state out of its financial hole. "The rebound is a good thing, but we are tempering our enthusiasm when it comes to bonuses," said Anderson.
Anderson pointed out that a number of firms that paid bonuses last year no longer exist, At the same time many firms have been paying bonuses in stock, which does not send money into the state's coffers.
The budget office is expected to release a revenue update this week, and, Anderson said, "There isn't much sign for optimism for a rapid rebound."
"You'd need $20 billion in bonuses for it to make a difference," said McMahon, who warned that the state can't delay making significant budget cuts.
DiNapoli's office agrees.” Although we are seeing encouraging signs on Wall Street and there have been recent news reports suggesting a rebound in compensation, it is important to note that the securities industry is undergoing a fundamental transformation, which could result in reduced profits and therefore less tax revenue," said Robert Whalen, spokesman for the comptroller's office. "Simply put, New York cannot count on Wall Street to save the day. Further delay will only make matters worse."
"Through the lens of the city budget, Wall Street profitability certainly spells good news," said Turetsky," but he noted that Wall Street has been "extremely volatile."
Even some state senators who oppose Paterson's cuts remain skeptical about a rescue from Wall Street.
"We hope it will continue," Austin Shafran, spokesman for the Senate Democrats said of the rebound, "but it usually takes a while for the public sector to catch up with the private sector. It does not take away from the need to come up with a balanced budget."
Paterson has staked his governorship on a fiscally responsible message. He has repeatedly mentioned how hard it is for him to cut education and health care but reiterated that the state's fiscal situation demands it.
It seems the majority of the New York Assembly would go along. The Assembly held hearings this month and then issued a report basically agreeing that the state's finances are in disarray. Sources say they are ready to act if they have assurances the Senate is on board.
Senate Democrats, who are concerned with retaining their majority in 2010, have seemed less ready to commit to Paterson's cuts. A number of senators have indicated that they would at least like to take their time before slashing the budget. Some have even indicated privately that they feel Paterson has blown the state's financial peril out of proportion. They defer to the message delivered by representatives of health care and education groups who would bear the cuts.
After overseeing two public hearings, Senate Finance Committee Chair Carl Kruger issued a statement attacking Paterson's plan. Kruger indicated that he agreed with Paterson's proposal to raise funds by cutting spending at state agencies and by transferring funds from authorities, but he slammed the reductions in health care and education.
"Dramatic reductions to higher education opportunity programs for low-income students and developmental disabilities services are poorly devised ideas passed off as solutions," he said in the statement. "Also, the governor’s Medicaid and healthcare cuts place disproportionate pain on hospitals and nursing homes given they have weathered a number of cuts already. We have to do better, and those who do not recognize that responsibility lack the imagination or inclination to come up with new answers to old problems."
Following a hearing on the cuts on Long Island, Sen. Bill Perkins said he was impressed that about half members of the audience stood up to protest cuts to education. Perkins said representatives from the hospitals in his upper Manhattan district have stressed what Paterson's proposed cuts would mean to health care services. "In that respect, service cuts are going to be very hard on the community," he said.
Perkins said that he had no doubt that it is important to make budget cuts in a timely fashion but said that he needed more information and time to decide how to go forward. "There is no question about the urgency, but it's most important that the cuts we make to fill our budget shortfall are done fairly," he said.
Shafran echoed Perkins' sentiment. "What is most important is for us to get it right," he said. "People have been critical in the past, and rightly so, that we were not open to the public with the scope of the deficit …. This deficit is not just for the legislature; it is for every man and woman in New York, and they must have their say."
In the meantime, some senators and advocates from the healthcare and education sectors have urged the state to look for alternate short-term revenue until revenues improve.
A recent New York State United Teachers commercial against the cuts suggested that, to free up cash, the state reduce its Empire Zone program which gives funding and tax breaks to businesses to lure them to certain parts of the state, and tax soda and plastic bags.
Both sides also look to rainy day funds.
Paterson's office says that 95 percent of school districts have rainy day funds that could more than cover the cuts he has proposed. He has suggested that school districts offset cuts in state aid by tapping into those funds. Easton counters that a number of New York City districts do not have rainy day funds at all. Instead, he suggests the state tap into its own rainy day fund. Brian Conway, vice president of media relations for the Greater New York Hospital Association, said his industry understands the state's financial peril.
"We don't have our head in the sand at all as far as the state's fiscal situation goes," said Conway, "No one has sacrificed or given more."
He warned, though that if Paterson's cuts go into effect people can expect hospital care to deteriorate greatly. "We are not crying wolf. We are warning this will happen. Layoffs, reductions in service and possible closure." Conway said the recent closure of two Queens hospitals would look "tame" in comparison to the havoc Paterson's proposed new cuts will wreak on health care in New York City.
Paterson has pressed the legislature for months to come to a special session to propose their own cuts or to vote on his. Eventually, Paterson pushed back his requested dates to Nov. 10 to allow the Senate and Assembly to hold their hearings. "I think we will be there," one senator said, "The question is will we have an agreement."
Paterson plans to address both houses of the legislature on Nov. 9 to discuss the state's financial problems. That appears to some to be a last ditch effort to lead a group of legislators who have proven this year to be un-leadable.
At a leaders’ meeting in the governor's New York City office on Thursday, Paterson seemed to reach a breaking point. Senate Conference Leader John Sampson repeatedly expressed how important it was for his caucus to hold public meetings and hear from average New Yorkers.
Paterson reacted sharply. "In the state of California they heard from the people in that state. They had a referendum about what they would cut, and they got nothing -- except the legislators' salaries." Paterson then added, "Anybody who tries to, in any way, differentiate or confuse this issue is not serving the public."
A few years ago, when my colleague, David Dyssegaard Kallick, and I assessed Mayor Rudolph Guiliani's economic record, we concluded:
"Mayor Giuliani often took credit for New York’s booming economy in the 1990s, but the trick in managing New York’s volatile economy during boom times isn't keeping real estate prices up. The difficult job is making sure the benefits are widespread, diversifying the city's economic base, and preparing for the eventual crash. On all three measures, over time Mayor Giuliani's legacy is looking worse and worse."
Boom and bust still characterize the local economy, and despite many ways in which Mayor Michael Bloomberg's tenure has been an improvement over Guiliani's record, his economic leadership similarly has fallen short in ensuring that the benefits of growth are more broadly shared. He has refused to advocate for better wages, missed a major opportunity to curtail the use of property tax breaks and hasn't re-oriented the investment of city economic development resources away from real estate toward human capital.
Fundamentally, the twists and turns of New York City's economy depend on the national economy. Mayors aren't responsible for everything that happens on the local economic front, good or bad. Rather, their economic leadership should be evaluated based on how they respond to the challenges thrown up by broader changes in the economy. Have they done things to counter the negative trends and help New Yorkers better adapt to economic change? Have they worked with leaders in Albany and Washington to shape economic policies in a way that benefits the average New Yorker?
Bloomberg has continued the progress made during Giuliani's two terms in the fight against crime, helping to improve the city's quality of life and keeping the city attractive to domestic and foreign migrants. And there is no doubt that Bloomberg's fiscal stewardship is vastly better than his predecessor's. While Giuliani repeatedly reduced taxes and made them less progressive, paving the way for a severe fiscal crisis in the early years of Bloomberg's first term, Bloomberg held back some of the surplus revenues during the boom years, anticipating a cyclical downturn that would lower tax receipts. However, facing a significant revenue shortfall earlier this year, Bloomberg raised the regressive sales tax. He also supported business tax changes that likely will cost the city tax revenues five or six years down the road.
First, a few indicators of how the local economy has changed.
The economy during the Bloomberg years was precarious one most New York workers and their families. The economic upswing, in New York City and nationally, was characterized by an unsustainable housing bubble, speculative financial frenzy, and excessive borrowing by households seeking to maintain living standards in the face of escalating housing prices and stagnant wages. Here in the city, the 2003-2008 "boom" created a local labor market with fewer well-paying jobs and more lower-paying ones, and stagnant wages and family incomes.
Despite these challenges and the mayor's hugely successful career as an innovative and entrepreneurial businessman, his management of New York City's economic fortunes has been pretty conventional. And given the mayor's background in the financial sector, it is a little puzzling that he seemed to be as caught as off guard as he was by the financial sector implosion, the forces that gave rise to it and the effects that were playing out in New York City as a result of the housing bubble. In fact, as recently as January 2007, the mayor released a city study that called for further financial deregulation.
Bloomberg, like many mayors before him, has focused the city's economic development resources on mega-real estate deals, re-zoning land for more intensive high-rise commercial and luxury residential development, and lavishing tax breaks and low-cost financing on large and profitable corporations (think Goldman Sachs, Bank of America, New York Yankees and New York Mets).
The economic vision behind the re-zoning of the 60-acre Hudson Yards area -- particularly after the prospects for erecting a professional football stadium on the Far West Side of Manhattan faded -- was of skyscrapers filled with enormous trading floors for an endlessly expanding financial sector. When the subject of jobs for New Yorkers was raised, officials usually pointed to the retail, restaurant and service jobs that the development would generate. Most of these jobs pay very low wages, often at or only slightly above the poverty level.
Wages for many New York workers do not have to be as low as they are. The city has considerable influence it can wield to require developers to pay decent wages and benefits. It can rezone land, creating an enormous windfall for developers, and it provides generous tax breaks. Under Bloomberg, the city generally has refused to use that leverage to establish wage and benefit standards despite the fact that job standards are the norm in many cities and states, including Los Angeles and New Jersey. Even Houston requires recipients of city subsidies to provide 100 percent employer-paid health insurance.
City economic development officials argue that businesses will raise wages when it is good for them so there is no need to compel them to do so. This ignores the history of labor standards in this country and the evidence of what happens when the wage floor is raised. Employers adopt more efficient ways of utilizing workers, turnover and recruitment costs decline, and productivity increases. Moreover, federal government data indicate that the worker productivity (value added per worker) of most sectors in New York City is well above national averages. In the hospitality sector, the productivity of a New York worker is 75 percent greater than the national average, and in retail, the New York workforce is 39 percent more productive. New York businesses can afford to pay workers better.
The city's continuing refusal to establish wage standards for subsidized development deals is evident in the Kingsbridge Armory case currently before the City Council. The Bloomberg administration has agreed to heavily subsidize the project by selling the property to the developer well below market value and providing $14 million in city tax breaks. A coalition has been pressing for the project to require a living wage, local hiring and community amenities. The mayor has rejected the coalition’s agenda in favor of giving the developer a freer hand.
The challenge of low wages and the city’s increasing working, but poor, population was highlighted by the Mayor's Commission for Economic Opportunity (aka the "Poverty Commission") in its 2006 report to the mayor. The commission pointed out that "for too many families, work is no longer a ticket out of poverty."
One way to change that is to help workers train for more highly paying jobs. However, during the Bloomberg administration, the city has paid far less attention to improving the human capital of New York's workforce through skills training and career-related vocational education than to the steady stream of real estate deals and mega-projects. Since most companies rarely invest much in the skills of their workforce (partly out of concern that such "investments" can walk out the door), the city needs to make optimal use of the limited federal government workforce development funding and encourage more businesses and industries to develop career ladders that support and reward workers seeking to improve their skills.
While education is the key to success in the labor market, according to the latest 10-year occupational projections a disproportionate share of New York City's projected net job growth is expected to occur in jobs that require little formal education or skills training, and that are likely to pay wages insufficient to support a family. It is imperative for the city to do more to promote human capital investments, to increase skill requirements, and to foster the development and expansion of homegrown businesses that rely on more skilled workers. MIT labor economist Paul Osterman has argued that wage standards are an effective way to put pressure on businesses to make jobs more productive.
In 2006, the city’s Economic Development Corp. enlisted the assistance of outside economists to help evaluate the city's largest economic development tax break program, the Industrial and Commercial Incentive Program. In a surging real estate market, the cost of the program was rapidly increasing and recently reached an annual cost of $500 million. The evaluation concluded that a huge portion of program's breaks were unnecessary, since most companies probably would have made the investments without getting a tax break. The evaluation suggested that incentives could be curtailed entirely in midtown Manhattan and that retail projects should be sharply limited since retail investments typically follow market opportunities. Despite these findings, only relatively minor modifications were made to the tax subsidy program.
The real estate community argued that the tax incentives were necessary in midtown -- one of the most desirable and sought-after business locations in the world -- since the city had committed to providing generous commercial property tax breaks in the Hudson Yards district, west of midtown. Here was a case where City Hall's desire to engage in "creative," off-budget capital financing for one project had locked in decades of commercial property tax breaks. At the time, Sen, Charles Schumer merely stated the obvious when he remarked that massive public investment in the form of the number 7 subway line extension, parks and other amenities, should have been sufficient inducement to get developers to build along the Hudson River not far from Penn Station, the Javits Convention Center and the Theater District.
During the recent real estate boom, when demand for Manhattan office development was literally sky-high, the city had the opportunity to back away from granting costly commercial property tax breaks. It failed to do so.
Particularly in the wake of seismic financial market shifts, everyone wants to see the local economy move away from its over-reliance on Wall Street. For example, there is justifiably a lot of interest in exploiting opportunities posed by a transition to a "greener" economy. It's a triple play -- reduced consumption of fossil fuels, a cleaner environment and new jobs to boot. But along with adding new industries, we should be concerned that the jobs created in them are good jobs, offering decent pay, benefits, training and advancement, and that they employ city residents. We should also seek to promote real minority entrepreneurial involvement in new and emerging industries.
The mayor's PlaNYC 2030 underscored the environmental benefits of a greener economy. The various green jobs components of the federal stimulus program (e.g. residential weatherization and public building retrofits) will add tremendous resources at an opportune moment, provided the city has the strategic vision to build a local "green jobs" sector.
In this Great Recession, New York City’s unemployment rate has crossed into double digits and is likely to stay unacceptably high for several months, possibly years, to come. When discouraged workers and the under-employed are factored in, the city’s "real" unemployment rate is about 16 percent. For blacks and Hispanics, real unemployment is 20 to 25 percent. And New York has a lot of company -- 30 million Americans are either unemployed, under-employed or have dropped out of the labor market because jobs are so scarce.
For national economic policy, there is little recourse but an expansive job creation program. The mayor of New York City should be working closely with our elected officials in Washington to design a program that will help struggling small businesses, worried families, our distressed neighborhoods, and that will buttress the provision of critical public services.
James Parrott is deputy director and chief economist of the Fiscal Policy Institute.