Why a special issue of City Journal? Both New York City and New York State need a policy revolution to ensure their future prosperity. New Yorks Tomorrow offers the ideas that should drive that revolution.
The Wall Street meltdown has made apparent huge problems with New York that were masked by the financial boom of recent years. In 2007, Wall Street wages, salaries, and bonuses accounted for over one-third of the tax revenues generated in New York, with the city taking in over 40 percent more in taxes than it had in 2000. Instead of using the boom years to put the city on a more competitive footing, however, the mayor and city council used the extra money to drive spending through the roof. Since Michael Bloomberg arrived in City Hall, city spending, already extravagant, has increased almost a quarter after inflation. State spending, too, has increased year after year after year, under a succession of governors, as E. J. McMahon shows in The Budget New York Needs.
To sustain this level of spending without supersize Wall Street revenues is impossible without job-killing tax increases. But New York is already massively overtaxed. A 2007 Independent Budget Office study found that the citys tax bite was 90 percent higher than the American big-city average. And businesses pay a big chunk of it: as Steven Malanga points out in Life in Taxopolis, commercial property taxes are higher in New York City than in any other city in the country. The states tax burden is comparably out of whackthe major reason that, as economist Wendell Cox documents in Escape from New York, it is bleeding population.
At the heart of New Yorks predicament is a corruption of politics, for the main beneficiaries of a now-unsustainable tax-and-spend regime have been powerful public-sector unions, which exercise ruthless control over most Albany and Gotham lawmakers. As historian Fred Siegel puts it in Madisons Nightmare: In a paradox insufficiently appreciated, the Wall Street boom funded the government spending boom that funded the public-sector unions, whose ever-mounting imposed costs drove businesses out of New York.
A special City Journal issue isnt unprecedented. Back in the early days of the magazine, a special issue was produced that looked at the bleak and seemingly hopeless New York of the Dinkins years. Years later, after the conclusion of a mayoralty that proved that the ungovernable city could be governed after all, Rudy Giuliani brandished a marked-up copy of that issue at a Manhattan Institute event, crediting it as the source of many of his reform ideas. Similarly, after September 11, editor Myron Magnet realized the futility of publishing an ordinary issue while the World Trade Center was still smoldering. Many readers considered the special issue of City Journal that resulted one of the most relevant things published in the aftermath of that awful day.
Todays crisis is very different from 9/11, of course, and the city, at least, is in a far better position than it was during the pre-Giuliani years. (Imagine if todays financial meltdown were occurring against the backdrop of thousands of murders a year, instead of hundreds, or of welfare rolls of 1.1 million, instead of 343,000.) But the current dilemma is deadly serious.
Indeed, if it were any less serious, it wouldnt represent so huge an opportunity for constructive change. In New Yorks Tomorrow, some of the best policy minds in the nation provide a detailed blueprint for making the state and the city prosperous, thriving places of long-term growth. The issue covers not just New Yorks fiscal woesthough it shows in clear, achievable steps how to ease those woesbut myriad other areas crying out for reform. These include the states absurdly high energy costs, which repel manufacturers from an already-near-death upstate economy (Max Schulzs Energize!); the citys vulnerability to litigation (John Avlons Sue City); the Metropolitan Transportation Authoritys ridiculous inefficiencies, which deprive it of funds for crucial long-term infrastructure investments (Nicole Gelinass Transit for Tomorrow); and the citys antidemocratic politics (Myron Magnets The Obsolete New York Model).
New Yorks Tomorrow also offers new ideas for improving Gothams schools (Sol Stern) and makes the case that the NYPD is the citys primary economic-development agency (Heather Mac Donald). It gives us reasons to be optimistic about the citys future (Edward Glaesers The Reinventive City and Stefan Kanfers Booms and Busts), but also reasons to worry about whether it will retain its preeminence as a financial capital (Luigi Zingaless Wall Street 2015). And since this is City Journal, culture isnt neglected: readers will discover a portfolio of William Meyerss photographs of New Yorks outer boroughs, with accompanying text by essayist Phillip Lopate, as well as a look at how the citys arts institutions are handling the economic downturn (not well, says James Panero in The Culture Crash).
Brian C. Anderson
Ten Ways to Make New Yorks Tomorrow Brighter
In New Yorks Tomorrow, youll find no shortage of bold, visionary ideas, from rezoning New York City to tort reform in New York State to building the power plants that drive the economy to enacting a Taxpayer Bill of Rights. All could help New York stay afloat and even flourish in the wake of the financial meltdown. Here are ten to start:
1. Slash city spending. The only way to avoid job-killing tax hikes is to reduce government expenditures. A one-year wage freeze for city employees would save $1.2 billion; increasing classroom sizes by two to four students would save as much as $380 million.
2. Start phasing out Gothams public housing. Selling these buildings could raise billions, free up property for all sorts of constructive uses, and rescue thousands of families from dependency.
3. Contract city services to private companiesstarting with buses. Many cities let private companies compete for bus routes, achieving 20 percent to 50 percent savings. In New York, that would mean at least $425 million a year.
4. Maintain NYPD force levels. The NYPD is the citys Number One economic-development agency. There are better ways to save money in the department than cutting its headcount.
5. Replace public employees defined-benefit pensions with defined-contribution pensions. Guaranteed incomes for government workers retirementsa benefit increasingly rare in the private sectorconstitute unpredictable and unlimited obligations for taxpayers. Workers should get 401(k)s instead, saving taxpayers $40 billion over the next 30 years.
6. Move disabled and elderly Medicaid recipients into managed care. New York States Medicaid program consumes one-third of the state budget and is by far the nations priciest. If New York removed the most expensive patients from traditional fee-for-service Medicaid and instead paid private managed-care plans to cover them, it could contain costs without abandoning the needy.
7. Scrap guaranteed issue and community rating for private health insurance. Forcing insurance companies to sell policies to anyoneand to offer the same price to everyonetempts the healthy not to buy private insurance, driving up its cost and sending people into the arms of Medicaid.
8. Revise MTA track workers schedules. Were currently paying them to do nothing for nearly a quarter of each workday, wasting tens of millions of dollars yearly.
9. Institute school vouchers for special education. Like Florida, Georgia, and Utah, New York should let the parents of disabled children choose the schools they want. That would control the cost of special ed and improve its quality at the same time.
10. Cut taxeseverywhere. The top personal income-tax rate in New York State has climbed to 8.97 percentand in New York City, its now 12.62 percent, far and away the highest state and local income tax in the nation. No wonder New Yorkers have been fleeing in droves (page 70) and imperiling the economy. Enough already!