Author: Larry Littlefield

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…

In the past, I have generally found NY Times editorials hard to read, as their tendency had been to come up with lame excuses to back the incumbent, when they weren’t just endorsing the Democrat for President.  But things have been getting better.  With the exception of the final decision, I found myself agreeing with much of what was said about Spitzer and Suozzi as candidates for Governor today.  The Times acknowledges Spitzer’s substantial accomplishments, but points out that Suozzi’s accomplishments are in some ways greater, because they were more difficult and involved greater personal risk.  The Times all but says that although Spitzer’s record is excellent, Suozzi may be the better candidate. 

Last week was Medicaid week, based on data I have collected and want to let people see. That was planned.  This week is turning out to be public employee pension week.  That was not planned, but is in response to an excellent series the Times has produced on the subject.  Better than anything the Times has done on any subject where I have specific knowledge in years.  Today, the Times smoked out the three remaining major party candidates for Governor on the state legislature’s practice of granting New York City public employee pension sweeteners over the objection of New York City.  For the most part, all three candidates answered the same, but even so, Suozzi had the best answer.

May I call your attention to the latest NY Times articles here and here.  And let me repeat what I said yesterday:  these pensions will not be paid! 

Twenty years from now, when the burden of debt and senior citizen benefits is leading to public service and benefit cuts, soaring taxes, and a crashing standard of living, and seniors of my generation, and those after, realize that they will have to work until physically unable and then face poverty rather than having the cruise-ship lifestyle of those who came before, then public employees who retired in their 40s and 50s will be as unpopular as the tobacco companies are today.  Back room deals will be cut, and budgets passed with little review, but to their detriment, not their benefit.  With no one else benefiting from this largess, they will be a big target for desperate times. 

With the Second Avenue Subway, the Long Island Railroad to Grand Central, and other major rail projects planned, borrowed for, financially diverted from and abandoned, in some cases several times, new politicians on the block face a dilemma.  Come up with even more money to carry out those plans, and they get the blame for the cost and disruption while the irresponsible pols that preceded them get credit for the improvement.  Fail to do so and they might get blamed for the absence of such improvements.  Thus, a few ambitious up and comers have hit upon water transportation as a new mode they can get credit for supporting, and have hit upon calls for public subsidies as a way to get their name in the news.  Unfortunately, such subsidies would divert scarce resources from the existing subway system most New Yorkers rely on, to a new luxury mode that almost exclusively serves the better off — and relatively few of them at that.  On a populist basis, such a proposal is easily and fairly attacked.  There is, however, a potential transformational investment to that very subway system, one not on anybody’s radar screen, that would permanently increase the potential of ferry service as a transport mode.  The opportunity to make that investment is about to close as a result of a development that would be built in its path.  That investment is…

Imagine it’s 20 years from now, the year 2026.   After 43 years in which Social Security payroll taxes had been greater than Social Security payments, with the surplus used to finance the rest of the federal government (but also promised to future retirees), the Social Security system will have begun to run a deficit in 2018.  Taxes will have been substantially increased, and many kinds of federal spending (housing subsidies at the top of the list) slashed to pay Social Security back, but now Congress has no choice but to bite the bullet and drastically slash Social Security benefits for future retirees.  That’s bad for the 50% of private sector workers who have no retirement plan other than Social Security, and bad for the additional 30% who only have a 401K plan – a plan they now realize has nowhere near enough money to pay for decent retirement.   The poverty rate among the elderly, who have been the richest and most privileged of Americans for the past 60 years, begins to soar.

Society faces a dilemma.  It does not want to see children and the elderly suffer from the neglect of family members.  When it assumes the role of “family of last resort,” however, it encourages the selfish to shift family burdens onto the community, taxing those who meet such obligations to pay for it.  Concerns about burden shifting by parents led to the Welfare Reform Act of 1996, which cut them off from assistance after five years even at the risk of suffering by the children.  Yet the modest, and now miniscule, cost of welfare is dwarfed by the cost of custodial care for the elderly, and as the population ages that cost is set to explode, with consequences that dwarf those of baby boom retirement and the unfunded cost of Social Security.  This may be the most important financial issue we face as a society.   And for New York, which has more generous services for the elderly than any other state, it is a greater issue still.