Author: Larry Littlefield

In an editorial on health care costs, the Times describes much U.S. health care as unnecessary, ineffective, or wasteful. But it also asks “if citizens of an extremely wealthy nation like the United States want to spend more on health care and less on a third car, a new computer or a vacation home, what’s wrong with that?” There is nothing wrong with that, if they are spending their own money as individuals by their own choice. There is something wrong if they are forcing other citizens to pay more and accept less — in the case of the uninsured possibly even basic health care, to pay for it.

With Sheldon Silver laying low since Eliot Spitzer become Governor, I’ve spent the last year focused on how bad Joe Bruno and his ilk are for our state. But lately, Silver has set out to even the score, possibly thwarting plans for congestion pricing, certainly to blame for stuffing a well thought out and long-argued New York City garbage plan. With congestion pricing, at least, it could be argued that if Silver allowed a vote the plan would be voted down, that it hasn’t yet been endorsed by the New York City Council, and that other alternatives should be considered before a final decision is made. Silver being Silver I doubt it, but an argument could be made his is being reasonable and we are still moving toward a reasonable outcome. The garbage plan, however, was passed by the New York City Council in a show of considerable political courage, particularly by the Speaker, and is the result of 20 years of arguments, with one interest or another, one concern after another blocking all prior plans. Garbage, like traffic, is one of those things that can never be made perfect, but the city’s plan was certainly vetted. The argument that it would encumber a park is a red herring – the “park” is a similar facility closed not long ago, probably mapped as parkland precisely to avoid its use for anything like a recycling station. And unlike the congestion pricing plan, the city’s garbage plan would certainly have won in a free vote. The question is what to do now.

What I first recognized as a late-1980s-type housing price bubble, which I then learned to be part of a financial bubble, may in fact have been the last leg of a 25-year excess consumption boom.  Now, instead of a necessary (and for tomorrow’s home buyers beneficial) return to normal housing prices with some collateral damage, we may be in for something much worse.  Remember the 1970s?  Next year is probably going to hurt.  Some time ago I said that by the time the 2008 election rolled around no one would be talking about Iraq.  I also said that the Democrats would be lucky not to be in the White House, and would have been better off not having control of Congress.  That was based on falling housing prices alone.  That prediction I repeat, in spades.  Given that I will be affected by the fiscal fallout no matter how well I have personally insulated myself from the consequences of other people’s decisions, I’m starting to get worried.  Let’s look at the scenarios.

As long time readers of my posts know, local governments in the rest of New York State (the portion outside New York City) have been on a hiring binge for nearly two decades, despite ongoing complaints about property taxes and a stagnant population. The trend has been particularly pronounced in education, where with the exception of New York City districts have been told that the more money they spend, the more back door school aid (via STAR) they would receive. New York City, on the other hand, has been under pressure to cut costs and staffing for 30 years. While good economic years have seen increases and bad ones cuts, the long term trend in New York City public employment has been down. In general, when fiscal times have been tight, the rest of the state hasn’t cut back at all. Rather, it is New York City’s share of state fiscal resources that has been reduced. Elsewhere, no amount of money has ever been enough, as long as New York City taxpayers, future state taxpayers, or the city’s children could be sacrificed to pay. Well this could just be a blip, or the result of sampling error or people filling out forms incorrectly, but the New York State Department of Labor reports that in October 2007 local government employment in the rest of New York State was 3,400 lower than it had been a year earlier (see attached).

From Bloomberg: “The Florida agency that manages about $50 billion of short-term investments for the state, school districts and local governments holds $2.2 billion of debt cut to junk status…Florida may not be in a position to bail out its funds, given how the construction slowdown is affecting its revenue and it has no income tax. ‘Where are you going to make this up? It has to come from the taxpayers, or spending cuts, or a combination.’” I’m shocked, shocked that politicians followed the advice of experts campaign contributors and invest in securities with a little extra promised short-term yield and a whole lot more long-term risk. “Florida isn't the only government whose short-term investments have been affected by rising mortgage defaults in the U.S. and investors' diminished appetite for the securities tied to them.” What’s in our public employee pension funds?

With people living longer and expecting to live better, the burden of retirees is becoming unmanageable throughout the developed world. The response has often been to preserve, or even enhance, benefits for older generations and those with power, while drastically increasing what must be paid in and reducing what will be available for younger generations. Few in my generation and those after have defined benefit pensions. Most do not even have 401K plans, or if they do have such plans, have been unable to save given their diminished circumstances. The retirement age for Social Security will be 67 for us, not 65, under a broken promise made 25 years ago; candidates are now proposing reduced benefits, or higher taxes, for us – but not for their generation. Yet in the face of this, there are those who feel entitled to work just 20 years, stop working at age 50, and live off the work of others for the rest of their lives. These people have a monopoly of an essential service — mass transit in a major, transit-dependent city — and are prepared to use blackmail to get what they want for themselves at the expense of others. Already entitled to a pension far more generous that others, they have already gone on strike recently and have indicated they will do so again, this time indefinitely.

There I was in the subway handing out flyers as part of my Don Quixote run for (or rather against) the state legislature. It was 2004. I was running, with no chance of winning, to try to call people’s attention to decision after decision the state was making to diminish our common future while providing up front benefits to those who matter in Albany, and the complicity of both political parties in those decisions. One day, someone asked who I supported for President. I said I certainly wouldn’t be voting for Bush, or any national Republican, on generational equity grounds, but for reasons I was prepared to explain I might not vote for Kerry either. “How could you even think of voting for that Benedict Arnold,” he screamed at me. “You’re a Benedict Arnold if you won’t vote against that draft-dodging war monger” a woman passing by screamed at me. Then they started screaming at each other, something that went on for a long time. About Vietnam. For them I had disappeared, and state and local government issues, the future, questions of fairness and fair value in public services and revenues, even current foreign policy issues didn’t matter. All that mattered was the time of life that mattered for the generation that mattered.

Tuesday is Election Day, but as far as I can tell (and from what I read here) the only election taking place is for judge. I have often said that since I, like most people, have no expertise or knowledge of legal issues, and since judges really ought to be administering the law and not making it, there is no basis for me to know who would be a good judge, and thus who to vote for. Thus, I have always held that judges should be appointed. When showing up to vote for other things, and finding an election for a judge on the ballot, I have generally voted for the person with the fewest ballot lines, out of a general contrariness that objects to the fix being in. Now I’ll have to go out of my way to vote for judge and nothing else, and with only limited knowledge of the office being contested and the people contesting it, that knowledge being discussed below. Should I vote on Tuesday?

I prefer not to repeat myself, but with so much disinformation being put out with regards to the proposed MTA fare increase, I feel compelled to respond. But before responding to the nonsense, let’s talk about what is real, and what no one is saying. For the past 15 years, advocates of lower taxes, lower fares, and richer pensions, and other spending priorities have had a deal – satisfy all of them by de-funding the transportation system, both road and transit. Why haven’t we noticed? Because billions of dollars were borrowed so the consequences of this would not become apparent until those who mattered have cashed in and moved out. The sums of money are so large that they make the whole fare increase discussion trivial. The MTA has a surplus? The agency’s buses, subway cars, tracks, structures and other equipment wear out at a steady rate, and if they aren’t replaced at that rate the transportation system falls apart. In order to pay for a barely break-even amount of normal replacement in the 2005 to 2009 period, the MTA is borrowing $12.5 billion or $2.5 billion a year. So how can an agency borrowing $2.5 billion per year to meet expenses that will continue indefinitely have a surplus? It’s like all those households borrowing against their home equity at low teaser rates to live large for a few years, but now facing foreclosure and bankruptcy. Massive borrowing by the MTA has going on since the early 1990s, because like sub-prime mortgage borrowers, many of us didn’t want to read all the boring budget documents. Our so-called leaders, like predatory lenders, didn’t mention the eventual bill, only the short-term monthly payment, which they were considered heroes for keeping as low as possible.

There are reports that Merrill Lynch & Company will move its headquarters out of Lower Manhattan to a new skyscraper adjacent to Penn Station. This is described as a “blow” to city and state efforts to revitalize Lower Manhattan in the wake of 9/11. Efforts to revitalize Lower Manhattan, however, pre-date 9/11, and the World Trade Center itself was part of one such effort. All of these efforts, which have been led by real estate interests seeking higher office rents and sales prices, have assumed that Lower Manhattan needs to be a competitive location for the central offices of large U.S. corporations with employees located throughout the New York Metropolitan region. Downtown is at a disadvantage competing with Midtown for such facilities, because Midtown is directly accessible not only by subway from the city but also commuter rail from the suburbs. Suburban commuters must transfer to a subway or the PATH to get to Downtown. For fifty years the state and city have sought to offset this disadvantage by offering bribe to corporations such as Goldman Sachs to locate Downtown, and considering proposals to extend the commuter rail lines to Lower Manhattan at an unimaginable and unaffordable cost. But whether Merrill Lynch locates in Midtown or Downtown, its jobs will be accessible to New York City and State residents, and it will pay New York City and State taxes to support public services. And even if all large corporations were to exit Lower Manhattan, the area could still be as vibrant as it was before 9/11. More vibrant, in fact.