I recently wrote a series of essays on what I consider to be phony or exaggerated economic issues in New York State. Now I’m going to write a series of essays on the real problems, as I see them. For New York City, perhaps the biggest problem is the low share of its adults who work, or look for work. The support of the non-working is a burden the working have to carry, and to the extent that burden is concentrated on those who live in their proximity, it is a particular burden in New York. But that liability is small compared with the impact of the absence of employment on the non-employed themselves. It is one of several ways New York’s poor are less well off now than in the 1950s – though, as we shall see, better off than in the mid-1990s.

The news broke earlier this week that the latest planning process for the redevelopment of Governors’ Island has been scrapped, and the agency charged with the redevelopment of the island would start over.  Again.

The latest plans called for a variety of uses, including hotels, condos, conference centers, and an amusement park.  Mayor Bloomberg’s earlier plan called for moving the CUNY campuses there, and using the existing campuses for public schools.  Mayor Giuliani’s plan called for a casino.  The next failed plan, which will no doubt provide positive publicity (and that is the point isn’t it?), will be the fourth.  Under the circumstances, you may be interested in what I suggested, while working at the Department of City Planning, when the first plan was being cooked up – moving the United Nations and all related embassies to the island.  That proposal may be read after clicking “read more."

American doesn’t love a loser, so today is not a day many people will be thanking Tom Suozzi for his work and his campaign.  I was going to drop him a note, but I’m a blogger now, so what the hell, I’ll do it here. 

Thank you for turning your back on the safe path of careerism, trading favors, waiting for the death or indictment of an incumbent, and occupying a seat.  Instead you took on the corrupt and seemingly impregnable Nassau County Republican machine, made many of the hard short run decisions – higher taxes, reduced services, tougher labor negotiations – required to begin turning the situation around for the long run.  Thanks even more for taking on the disgrace our state government, once one of the best in the nation, has become.  That was even harder, because it required that you not only call out the other side, but also your own side and its supporters.  It made a lot of enemies, which has cost you.  But from my point of view, they include many of the right enemies.  And thanks for running for Governor.  You offered your service.  The voters decided to choose otherwise.  So be it.  That isn’t anything for Tom Suozzi to feel bad about.

For a decade or more the status and needs of Upstate New York’s economy has been the number one issue in virtually every statewide political campaign.  In 1994, Republican George Pataki unseated his predecessor as Governor, Democrat Mario Cuomo, in part by blaming Cuomo for Upstate’s economic decline.  In 1998, Democrat Chuck Schumer unseated his predecessor as Senator, Republican Al D’Amato, by blaming the Republicans for failing to revive the Upstate economy; meanwhile, Governor Pataki criticized his opponent, New York City Council Speaker Peter Vallone, for not caring enough about Upstate New York.   In 2000, future Senator Hillary Clinton scored points by “listening” to Upstate New York while her opponent, Republican Rick Lazio, committed a “gaffe” by claiming that Upstate New York was improving.  And one of the few risks in George Pataki’s 2002 re-election campaign was potential Upstate resentment at his “unjustified” attention to New York City in the wake of a minor incident with a couple of airplanes.  In this election, Eliot Spitzer compared Upstate to Appalachia, Tom Suozzi said upstate needs jobs, and John Faso is running in the tradition of candidates who believe lazy, undeserving New York City needs to be cut off to help hard working, deserving Upstate.

During the Pataki administration, New York City’s pleas from the business community for overall lower taxes, and from poverty advocates for more spending on the poor, have largely been ignored.  Not so the whines of suburban New York about its high cost of living – high property taxes, high housing costs, and the lack of alternatives to multiple automobile ownership, all of which are pricing out the young.  When our politicians talk about bringing down the high cost of living, however, their “solutions” have generally involved subsidizing the high costs with taxes collected elsewhere, rather than reducing those costs.  Reducing taxes in the suburbs is difficult (but not impossible) because suburban living is expensive by design, and in some ways by choice.  And unless and until suburbanites become willing to change their choices and bring the cost of living down, the high cost of suburban living will remain a phony issue.

The big story in New York real estate in recent weeks has been the potential sale, for a purported asking price of $5 billion, of Stuyvesant Town and Peter Cooper Village, two huge “middle class” housing developments on Manhattan’s East Side, by the Metropolitan Life Insurance Company, their developer and long time owner.  Metlife had previously sold its other large New York City housing projects, such as Parkchester in the Bronx.  Immediately, politicos have rallied to the side of the potentially embattled tenants of these developments, most of whom benefit from rent stabilization.  The local council member has proposed a tenant buyout, which he says will be possible with union pension fund money, “socially conscious” investors, and city subsidies.  If the existing tenants want to make a bid for the place, more power to them, although I advise that we are in a real estate bubble and any buyer will likely pay too much – one reason Metlife is selling.  But if they want to put city pension fund money at risk, given that the city would be required to raise taxes and cut services to make up any losses, and to receive tax breaks, I say forget it.  Since Stuytown and Peter Cooper village are large enough to be their own census tracts, we can use 2000 census data to find out some characteristics of those who live there.  And like Waterside Plaza, another development that was granted a city tax subsidy in exchange for a continued great rent deal for the tenants, residents of these developments are MUCH better off than most of the rest of us.

Most New Yorkers would agree that poverty and inequality are bad, and the data confirms that both are far above average in New York City.  Advocates for the poor report this constantly.  Their solution:  more money for their organizations, and more places for the poor to live.

As I wrote here, poverty and inequality may be explained by economic and social conditions and public policy at the national level.  At the local level, however, the level of poverty is primarily a product of migration:  who moves in (or is kept out), who moves out (or is pushed out), who is born and who dies off.  Local changes in the poverty rate may have nothing to do with whether individuals are getting richer or poorer whatsoever.  Even if the city succeeded in helping every poor person within its borders to advance out of poverty, its poverty rate would not go down if those formerly poor people moved out and were replaced by new poor people seeking to move up.  When people advocate for more low-income housing in New York City, they are advocating for the opportunity for more low-income people to live here, and thus a higher poverty rate.  Places with low poverty rates are generally affluent suburban jurisdictions that seek to exclude the poor, through zoning rules that keep the price of housing high (more on that in future essays).  Thus, the city’s high poverty rate is an inevitable by product of its accessibility to the poor, something that is in other ways desirable.

The Manhattan Institute, the Public Policy Institute, and the New York Post continually moan about the extent to which New York State’s economy and population grow more slowly than the national average.  The reason, they assert, is because New York’s state and local taxes are high, and the solution is to cut taxes on people like themselves until they are near or below the national average.  Since New York has more pension obligations and debts than the national average, and the federal government covers a lower share of Medicaid and social services costs here, this would require spending on public services and benefits that were much lower than the national average.  In other words, all public services in the state, or at least those outside certain affluent suburbs, would have to be funded like New York City’s schools.

Happy Labor Day.  I began the day looking through the news, and seeing the usual round of Labor Day stories about the New York economy.  There is no doubt New York State’s economy is not the strongest in the country.  There is no doubt there are people in this state with economic problems.  And there is no doubt that bad state and local government policies play a role in creating those problems. 

And yet, hearing what is said in the media, by interest groups, and by elected and would-be elected officials, I find that the state’s problems are generally vastly exaggerated and misdiagnosed.  Some of the purported problems are inherent conditions which cannot be remedied; others are the flip side of good things New Yorkers would be loath to give up.  Some of the exaggerated problems are little more than a disingenuous excuse for more public money for interests that aren’t necessarily the most in need – a plea for the continuation, or even expansion, of policies that were bad to begin with.  Meanwhile the state’s actual economic problems, as I see them, are generally not on the state government agenda, mainly because there isn’t an organized group giving campaign contributions that is interested in them.  I’ll discuss the real problems, and my suggested solutions, in later essays (probably next week).  First, however, I’ll go over what I see as phony or exaggerated problems:  slow job and population growth in New York City, poverty and income inequality in New York City, the high cost of living in the Downstate Suburbs, and job losses and decline in Upstate New York.

The U.S. Census Bureau released 2005 economic data from its American Community Survey data yesterday, and having looked at those numbers and having analyzed similar numbers professionally for 20 years, the first-day stories in the newspapers surprised me.  As far as I am concerned, everyone got it wrong – so wrong that they must have written the stories before they came out and plopped in the numbers when they arrived.

The story as reported is that poverty is unchanged, and this shows that New York City is not a good place for the poor.  The view appears to have been pushed by poverty advocates, who are advocating for more money to be sent their way.  The reality is that poverty has declined significantly, but this isn’t necessarily good news for the poor either, because the advocates and analysts fundamentally misunderstand the factors that influence the poverty rate at the local level.  At the national level, the poverty rate is determined by changes in the economy, in society, and in public policy.  The national poverty rate was significantly higher in 2005 than in 2000, though slightly lower than in 2004.  At the local level, on the other hand, the poverty rate it is a function of who moves in (or is kept out), who moves out (or is pushed out), who is born and who dies off.  Local changes in the poverty rate may have nothing to do with whether individuals are getting richer or poorer whatsoever.

This is a slow week, so it’s not the best time to post anything that takes a lot of work.  But it is a good time to post a prediction, so it can be referenced if it turns out to be true, but will be forgotten if it isn’t.  Especially a about something I know nothing about. 

The New York political blogosphere has evolved at an opportune time, with a Presidential election in 2004, a Mayoral election in 2005, and a Gubernatorial election in 2006.  In 2007, however, this fledgling medium will face a year of dead air, with no election scheduled for that November.  There is the likelihood that major public policy decisions and non-decisions will be made, especially in Albany, that will affect my life, my friend’s and neighbors lives, and my children’s lives into the far-off future.  But if people paid attention to such decisions more people would read my posts, and someone other than myself and Daniel Millstone (who is that guy? I ought to meet him for a beer and save some bandwidth) would post on Gotham Gazette.   So the political appointees, consultants, and activists who inhabit the blogosphere will probably go silent.  Until something happens to make the 2007 election significant.  That something will be…

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