Feeble 4's Fiscal Follies
Dems' mayoral spending dreams
NEW York taxpayers who vote in Tuesday's Democratic mayoral primary had better hold on to their wallets in the booth. The four candidates propose to add an average of 51.7 billion each to next year's $53.9 billion city budget — and they'd all hike taxes to pay for it.
New Yorkers might be forgiven for thinking that times are good, and that the city's biggest problem is trying to figure out how to spend all of its extra billions. The truth is exactly the opposite. Even without the Dems' spending dreams, Gotham faces a $4.5 billion budget shortfall by next July — and whoever is mayor must take steps to close that deficit within weeks after his or her swearing-in in January.
Yes, Mayor Bloomberg closed a similar deficit earlier this year — thanks to a record windfall from real-estate taxes and Wall Street profits. No such luck next year: The city's economic outlook over the next few months is far from rosy.
New York City still hasn't recovered jobs lost after the bursting of the stockÂ¬market bubble in 2000 and after 9/11. And no one knows quite how Hurricane Katrina will affect the city economy or Wall Street profits.
Add to that volatile mix the city's perennial budget problems — escalating pension costs for city workers, Medicaid costs for the indigent and fraudulent and $50 billion in debt — and it's clear that any prudent candidate for mayor would unveil proposals on how to cut city spending, not hike it.
But not this bunch.
Frontrunner Fernando Ferrer, the former Bronx borough president, would add more than $2 billion to the city's budget. He's already made headlines with his plan to hike the $14 billion schools budget by another $1 billion a year. Plus, he'd spend hundreds of millions more to enÂ¬roll a half-million eligible New Yorkers in Medicaid and to build more subsidized low-income housing. He'd earmark another $250 million to "strengthen and modernize Wall Street" (as if Wall Street can't do that without Freddy's help), and $135 million to put more cops on the street.
Despite his claims to be the moderate in the race, Rep. Anthony Weiner's spending plans lead the pack: He'd add more than $2.2 billion a year in annual outlays. Weiner wants nearly $900 million more each year for education, mostly for generous teacher raises. He'd match Ferrer on new Medicaid spending, and raise Ferrer on new cops. He'd earmark an added $546 million for investments in mass transit, and spend $113 million on subsidized housing, plus $77 million a year to build a wireless network to connect all of New York to the Internet.
City Council Speaker Gifford Miller would add $1.5 billion to the city budget — mostly to cut class sizes, invest in mass transit, build more "affordable housing" and hire more cops.
Manhattan Borough President Virginia Fields, with $832 million worth of spending proposals, would hike education spending by nearly $500 million a year, spend more than $100 million a year to hire new police officers and invest millions in mass transit and subsidized housing. She'd also create a "deputy mayor for full employment" to put chronically unemployed New Yorkers to work.
A few of the candidates' proposals might be worthy — the city no doubt needs to keep its invaluable mass-transit system and professional police force in decent shape (Some proposals, though, plainly aren't worthy — before spending more on education, for example, the city needs to figure out why current spending buys such poor results.)
But new spending must come from somewhere — and the candidates aren't proposing to cut back anywhere else to pay for their pet programs.
Sure, Weiner and Fields pay lip service to finding room in the existing budget for their new spending. But while their plans to spend are specific, their plans to save are vague or unworkable. Weiner, for one, says he'd cut hundreds of millions from the city's capital budget — but that would be, at best, a one-shot savings that couldn't fund new spending year after year.
And all four candidates insist they can wring new billions from Albany and Washington. But if Bloomberg — a Republican mayor lobbying a Republican governor, a Republican president and a Republican Congress — couldn't get those billions, how will a Dem?
So each of the candidates would hike taxes — not as a last resort in a fiscal emergency, but as a first resort to fund a bigger budget. (Not that Bloomberg has set a good example: He's raised property taxes, and, temporarily, income and sales taxes.)
Ferrer would hike taxes on Wall Street investors and on vacant-property owners. Miller and Weiner would each make permanent the "temporary" tax surcharge on New York's most affluent earners. Plus, Weiner would actually hike taxes on the wealthiest New Yorkers — those who create jobs — by 28 percent. Miller would impose a tax on insurance companies. Both Fields and Miller would implement a tax on commuters who don't live in the city. (Each candidate would need cooperation from Albany to hike taxes.)
All these proposed new taxes would only exacerbate the city's boom-and-bust budget cycle. Weiner, Miller and Ferrer, in particular, would hike taxes on the part's of the economy that are most acutely sensitive to economic cycles: Wall Street and the city's top earners.
Yet these "wells" of revenue nearly always "dry up" in rough times. When the next downturn comes, tax revenues from these businesses and workers likely will plummet, as they did in 2001. But city spending won't plummet — indeed, higher spending will just widen the deficit, and likely necessitate even more taxes.
Then, too, such taxes would drive investors and employers away from New York. When it comes to taxation, once principal holds: When you tax something more, you get less of it. New York must compete fiercely against other cities in America and around the world for economic growth — but the entrepreneurs who create jobs thrive in low-tax environments.
Keep hiking taxes on high-income entrepreneurs, investors and employers, and more of them will leave the city —which means New York will have ever more trouble funding the huge budget it already has.