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.
Leaving aside whether the purported solution is desirable or even possible, population and job growth will always be slower than the national average in New York for reasons that have nothing to do with taxes. Two-thirds of the state’s population lives Downstate; 44 percent lives in New York City. These areas are fully built out at a very high density over a very large area, leaving little room to grow horizontally without extreme commutes. New York City had approximately the same level of population and payroll employment in 2005 that it did in 1950. In that time, the U.S. population has doubled (census data); U.S. employment has nearly tripled (thanks to a rising share of the population in the labor force, according to CES data from the BLS). Could similar rates of growth have been achieved in New York City?
Similar rates of growth were achieved in the first half of the 20th Century. That required the development of more than half of New York City’s land and the construction of associated streets, sewers, and water pipes, the construction of most of its existing schools, the development of three-quarters of its reservoir capacity, the construction of the entire subway system, and the construction of a significant share of the highways, bridges and tunnels. Do the Post, Manhattan Institute, and Public Policy Institute propose putting up taxes high enough to build that much again – at a vastly higher cost, because the existing city would have to be built around and far-off water sources tapped?
In the private space market, vertical growth is something only the rich can afford. New high-rise development has to amortize the cost of the buildings to be replaced, lacks economies of scale possible in large new development on a greenfield site, and incurs many other additional costs building in a crowded, active place. In congested New York, as the price of housing and office space skyrockets, additional housing and office space is built, perhaps with a little more infrastructure to accommodate it (or more likely not), but eventually high prices lead people and businesses to move to other areas where cheaper space can be constructed.
Any assumption that the city’s population will grow by even 1 million, as Dan Doctoroff seems to believe, assumes that a rising number of rich people will be willing to pay vastly more for less space with fewer public and private amenities to be in New York. Sure people will pay more for less for less to be here, but at some point the cost difference becomes ridiculous. The portions of Doctoroff’s plans that have been leaked feature incredibly expensive construction on platforms over highways and rail yards. Where the water will come from, and how the city will afford many new subway lines when it hasn’t been able to build one for 65 years, is not yet known. The city’s own rising prices will drive people and businesses elsewhere, slowing the growth. And it is always possible that if the infrastructure and built stock are expanded, that expansion will be used for a higher quality of life, not more people.
For a while the city’s growth spilled into the suburbs. From 1952 to 1989, payroll employment quadrupled in Nassau and Suffolk Counties. Today, however, even the suburbs are now built out, at the level of density suburbanites are prepared to accept, 50 miles out from the Manhattan. With all Downstate development now costly redevelopment, the city’s population and employment growth has actually outpaced suburban growth since 1990, since there is more underutilized space available to redevelop in the older sections of the region. At least for now.
Bottom line: two-thirds of the state’s people, and even more of its private sector jobs, are located in a place where growth is limited to the number of very affluent people and firms willing to pay top dollar for new space in an already crowded location. The national average level of growth is created by large scale, low rise development on in expensive greenfield sites, something that is no longer possible here. The rate of growth within the boundaries of fully developed areas elsewhere, high tax or low, is no different than in Downstate New York. The Manhattan Institute, the Public Policy Institute, and the New York Post are free to advocate for lower taxes, but they should come up with a less disingenuous argument. The failure of New York’s growth to keep up with the national average is a phony issue.