Larry Littlefield's blog
You think that Bloomberg might be different. That Spitzer might be different. That Andrew Cuomo might be different. But in the end they do the same things. The Governor proposes to drastically underfund the state pension funds, which also cover local government (and school) employees in the rest of New York State, and make up the money later. Comptroller DiNapoli had pushed through a proposal to do the same a few years ago, but the higher payments from that deal are now due. Now Cuomo wants to pay for yesterday's pensions over up to 45 years, with disaster if optimistic assumptions do not come true. For reality, read the comments from outraged taxpayers and public employees, not just the article.
I guess the kind of tax burden we have, and declining quality of services we have, in New York City (for the second time) is not acceptable in the rest of the state.
New York's pension rules automatically allow the taxpayer contributions that are theoretically required today to be put off until tomorrow, through "smoothing." That makes it easier to, among other things, retroactively enhance pensions while deferring the costs until they could be blamed on something else. But that wasn't enough for State Comptroller Thomas DiNapoli, who proposed that the pension contributions by the State of New York and local governments outside New York City be re-smoothed – by borrowing money from the pension funds to defer costs until the stock market went back up. Then-Governor Paterson and the State Legislature readily agreed back in 2010. Well, the stock market went back up and now it’s time to pay back the pension funds under the DiNapoli deal, but guess what? No one wants to do that. So now-Governor Andrew Cuomo has proposed re- re-smoothing by having school districts borrow against the pension funds yet again. This will be counted as state school aid.
It seems like only yesterday that Jay Walder left his post as Chairman of the MTA, and I wrote a sarcastic “job posting” for his replacement. The job of the MTA Chairman, I asserted, was to preside over the re-destruction of the metro New York mass transit system, and eventually therefore its economy, while shielding those responsible for it from blame and providing rationalizations. At first by denying it was occurring, and then by taking the blame for it. It is no surprise that like Jay Walder, Joe Lhota has decided to leave that job to someone else.
So this time I’m going to say what the job of the MTA Chairman actually should be, given the situation that has been created by the decisions, non-decisions and deals of the past, if the transit system – or at least some weaker, worse version of it, is to be saved. The job of the MTA Chairman should be to tell people to go to hell. The transit unions, the riders’ advocates, the construction unions and contractors, taxpayers, the state legislature, the City Council, the Mayor and even the Governor. To always bring up the past when discussing the future. As in “you or those who preceded you decided to hand out these benefits to your interest group then, and shift the cost to a future that has now arrived. And any attempt to avoid your share of the resulting pain now is simply a social injustice against everyone else.” The job would consist of a desperate, angry battle with no friends and as many enemies as possible, a constant and much resented attempt to break down any sense of entitlement. That is what would be required to save not only the mass transit system, but also any other institution, in the public or private sectors, in the wake of Generation Greed.
Bet you didn’t you see this one coming. Merry Christmas. “Just over 200 years since traders first met under a buttonwood tree on Wall Street, the institution they created, the New York Stock Exchange, was acquired by an upstart electronic marketplace, the IntercontintalExchange (ICE), nominally based in Atlanta, Georgia, but more accurately located in the electronic stratosphere,” according to The Economist magazine.
“The deal was announced on December 20th, with little advance leakage, possibly because the participants did a particularly good job of keeping it a secret, or possibly because the importance of the exchange, owned by NYSE Euronext, has faded so much that few cared.” The stock exchange was already merged into Euronext in a “merger of equals.” No such fig leaf now.
State budget crisis.org, the Ravitch/Volker group, has just released its report on New York State's financial situation. Among the findings (p. 28) is yet another analysis showing the New York State pension plans, which also cover local employees outside NYC, are among the best funded in the country, with the NYC plans among the worst -- worse than New Jersey. Even though NYC taxpayers have paid far more into the plans over the decades as a percent of employee wages, according to data from the U.S. Census Bureau.
The report is a disappointment, in that it doesn't explain this. No one else had either. And the text is almost exclusively about the state plans, not the city plans. How taxpayer contribution levels fell to zero around 2000, how they are now soaring (to a level far below NYC but they don't say so), etc.
In my previous post, I rehashed some arguments that were made when federal tax policies now in effect were first proposed, and showed that the promises of the time were not realized. Yet the same arguments are still made for the same policies, by national Republicans and certain economists. Without much thought about why things went wrong, and with no thought of adjustment. The Republican era at the federal level, now seemingly coming to a close, was not without its successes, but even in those cases lessons were not learned.
Let me join the "fiscal cliff" negotiations. That is sure to lessen the hostility between the supposedly two irreconcilable sides. Because after hearing from me, it would be clear that the two are mostly on the same side.
This may be hard for anyone under age 40 to believe, but at one time in the recent past the Republican Party was the party of ideas. While older generations of Democrats simply repeated nostrums from the 1930s, and younger generations of Democrats chanted slogans from the 1960s, Republicans were examining evidence of what did and did not work, and proposing solutions. And many of those solutions were implemented during the 30 years of Republican political dominance, often with the support or at least acquiescence of Democrats who couldn’t come up with anything better.
Times sure have changed. Some of those Republican/Conservative/Free Market ideas worked as promised. But most others have failed miserably, except as means to redistribute income upward, and from worse off younger generations to older generations that voted Republican, which is NOT what was promised. So, are Republicans examining the evidence and proposing alternatives? Hardly. They are simply saying the same things over and over, but shouting instead of speaking reasonably. I’m not just talking about Tea Party fools, and spinning candidates for office. I’m talking about think tanks and PhD’s, such as R Glenn Hubbard and Greg Mankiw. Those with conservative leanings but open eyes, such as David Frum, are no longer welcome. This isn’t an ideology anymore. It’s a cult. Since they won’t, let’s get in the wayback machine, look at some of the promises, and some of the results.
State and local government employment has been falling, and the propaganda machine has noticed. “There is something historically different about this recession and its aftermath: in the past, local government employment has been almost recession-proof. This time it’s not. Going back as long as the data have been collected (1955), with the one exception of the 1981 recession, local government employment continued to grow almost every month regardless of what the economy threw at it. But since the latest recession began, local government employment has fallen by 3 percent, and is still falling.” And why is that? Tax cuts? Republicans in Congress? “Note that a Republican was president after the 1981, 1990 and 2000 recessions. Public-sector austerity looks a lot better to conservatives when they’re out of power than when they’re in it.”
Austerity, huh? So state and local taxes, not just federal taxes, have been falling as a share of the economy? And therefore we deserve less in public services in return? Is that what is going on? I’ve seen several reports implying this is so. But let’s look a little closer at what this austerity constitutes.
Can be found in a single blog post from The Economist magazine. Read this and you will understand the situation we are in, and what we are facing. Read it, and you will understand why we are facing ten-plus years of decisions about who will be made worse off, and in what way, due to the financial and fiscal frat party of the past 30 years. It wasn't just the public sector. It was businesses and individual households. It was beyond my understanding, and contrary to my values.
The popular thing to do, what most people wanted to do, was to satisfy the "I want for me now!" impulse. This was done by selling the future. The deal was cut in New York, and the fees were large. And now it is the future. The executive/financial class may promise three percent GDP growth if you keep their taxes low and their pay sky high, and the political/union class may promise seven percent returns on public employee pension funds to put off sacrificing the rest of us for the deals they did with themselves. Not true.
In the wake of the Frankenstorm disaster, New York Governor Andrew Cuomo has called for New York to be built smarter, given the likelihood of rising seas and more powerful storms. But that is not the way rebuilding generally occurs. What you have, rather, is a rush to get shattered lives back to normal as quickly as possible, which usually means putting back a somewhat cheaper and worse-built version of what was there before. Witness the reaction, to politicians from elsewhere, to the assertion in 2005 that that parts of New Orleans should be rebuilt elsewhere, instead of below sea level, in the wake of Hurricane Katrina. Or, for those with less power and fewer resources, the consequence is often no rebuilding at all. As one sees in that city’s Lower 9th Ward.
Some combination of these two is what is likely to occur on the Rockaways and in Staten Island, more likely due to a series of non-decisions than to any decisions. Any suggestion of possible change in the current emotional post-disaster political climate is likely to provide an opportunity for a cheap political shot, and be about as popular as holding the New York City Marathon as planned. And by the time feelings have cooled, any available resources are likely to have been already committed. If people come back later with demands for more resources to rebuild a second time, this time differently, other needs elsewhere will almost certainly take priority. But what if it actually were possible to come with alternatives quickly? I spent 15 minutes thinking about it, just slightly less than those who might want to make (or even allow) changes would have, and here is what I came up with.
It’s no secret that there is an election on for President, although a vote in New York State is less significant because it is not a swing state. The more significant vote is for U.S. Senate, or the U.S. House of Representatives if you happen to live in a contested district. For most of us, however, there are no real elections for the House of Representatives, New York State Senate or New York State Assembly. The only candidates, or the only active candidates with real campaigns, are perpetual incumbents who have already been chosen by the insiders. And fake elections is just the way those who have been grabbing at the expense of those without power and the common future like it. While New York State does not suppress voting the way some swing states do, it does all it can to ensure that when people show up, there is no one to vote for, by keeping people off the ballot. The media cooperates by providing no attention to those challengers who manage to sneak through.
But they tripped up. With the new voting system, write-in votes have become extremely easy. And therefore, I intend to vote for myself, Lawrence D. Littlefield, for the House of Representatives, State Senate, and Assembly. Not because I think I’m that great, sadly, but because of what I think of what these ignoble assemblies have done, with the local pols fully part of it or doing nothing to stop it. Eight years ago I had to lose my job and struggle to get on the ballot to make a similar protest, but not now. If you aren’t in a place with a real election, and agree with what I said then, which you can still read here, feel free to write in my name also. It doesn’t matter where you live, because it’s just a protest. If you don’t agree, but are similarly disappointed with the perpetual incumbents, you can write in your own name, or the name of someone you wish was on the ballot. A message needs to be sent about the sell out of our future, which is now the present, so I don’t see any reason to vote for the incumbents. You’d be better off writing in Donald Duck.
I’m going to repeat the style I used to discuss public employment this year, and toss off some comments on trends in public finance rather than provide, yet again, an exhaustive number-laden description. I assume there are many Room Eight readers who have read these over and over are as bored with it as I am, but I’ll keep doing it as long as New York’s public agencies – the City Comptroller, the State Comptroller, the Independent Budget Office, etc. do not.
There is much in our relative situation that doesn’t fit the propaganda narrative that the public employee union and contractor interests that control most of our state and local politicians wish to hear. Notably the high tax burden here, which raises questions about what is being provided in return, even among those who would otherwise be inclined to be “pro-government.” Thus to the extent you see government finance data discussed, in its totality rather than selectively only when favorable, it is generally the right wing Manhattan Institute and its Empire Center doing the talking. But the facts don’t fully fit the right wing narrative either. Notably the fact that the high taxes cannot be entirely or even primarily explained by the minority immigrant urban poor. And the fact that costs deferred from the past do explain a great deal of the excess burden, given that somehow since 1980 “conservative” has come to mean “buy now pay later.” But on to an attempt to say the unsaid and, unusually for me, say it briefly.
I had an amusing thought. A while back I came across the movie “Blue State” on Netflix, “a romantic comedy about a disgruntled Democrat who actually follows through on a drunken campaign promise to move to Canada if George ‘Dubya’ Bush gets re-elected” back in 2004. Didn’t want to live in that kind of country anymore. The movie wasn’t great, and I didn’t watch it to the end, but it was an interesting premise. Disgruntled Democrats had lots of countries to flee to at the time. Almost all of Europe, for example.
This is a rare occasion where I would say “fortunately” to the fact we don’t live in a swing state, because we are being spared the deluge of deception and overwrought emotion being pumped in there. Those of us who don’t have cable, at least. But I’d bet there would be plenty of people out in the Red States who would have a similarly nuts reaction to an Obama re-election. The question is, what countries will disgruntled Republicans be able to flee to if Obama is re-elected in 2012? I couldn’t think of any, and of course the idea of calling them “red countries,” for those of us who were around before 1989, is ironic in itself. Switzerland, Monaco and Hong Kong don’t count, except for those in Romney’s tax bracket, who probably have multiple countries to flee to anyway. But lots of people like that from elsewhere are buying condos in New York. Any suggestions?
The fiscal 2010 state and local finance data compilation has been released by the U.S. Census Bureau, and I spent one and one-half days of a weekend putting it into a readily comparable form for local governments in the U.S., New York State, New Jersey, New York City, and (by subtraction) the rest of New York State. You can follow my work step by step in the series of worksheets in the “Local Government Finance 2010” spreadsheet, which can be downloaded from Archive.com here. Look to the left and click on “Excel” to download it. I did the work on my own time because providing comparisons with the national average and other states is something neither the City of New York nor the State of New York, which between them spent $3.3 billion on agencies in the Census Bureau’s “Financial Administration” category, have seen fit to do. In the “Added” worksheet, you can hopefully print the FY 2010 data on two pages. The “FY 2002 and FY 2010” worksheet provides that comparison for those who have good eyes.
How much should people concern themselves with this data, and with the New York State legislators and New York council members who pass the budgets that have decided what the data show? Consider this. In FY 2010, the money New York City local governments (including the Port Authority and New York City Transit) directly spent equaled 20.8% of all of the personal income earned by all New York City residents. Of that amount, the equivalent of 12.8% of the income of city residents was extracted directly from city residents and others spending time here in taxes, fees, fines and other revenues, with the equivalent of 8.0% coming from the federal government and the State of New York (with some of the state money originating with the federal government). The State of New York exercises indirect control over the entire 20.8% of everyone’s income that is spent by the city, and also directly spends the equivalent of 12.8% of the income of state residents. Taken together, New York City’s state and local governments spent the equivalent of about one-third of everything New York City residents earn. On public services and benefits that are, or can be, absolutely essential, but which the city and state and those who work for it have no contractual obligation to provide with any quality.