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By Nicole Gelinas

After The Fall: Saving Capitalism From Wall Street--and Washington

City Journal

Nicole Gelinas
What the Rich Give to New York
The city’s private wealth pays for its vast public assets—which benefit everyone, especially the poor.
Summer 2014
ED BAILEY/AP PHOTO
Private philanthropists saved Central Park, a priceless public resource.

Let’s look at the numbers, because they’re quite shocking,” New York mayor Bill de Blasio told reporters in February, pointing to a chart showing how much wealth goes to the nation’s top 1 percent. “Income inequality in the United States—at levels not seen since the 1920s. . . . New York City? An even starker situation.” The mayor is right about the numbers. New York City has always been a place where the rich live alongside the poor, and the income differences have been widening since the 1980s. Yet the fact that New York remains home to so many fabulously rich people hasn’t been a bad thing for the city’s poor. For it is Gotham’s vast private wealth that disproportionately pays for the city’s vast public wealth, including mass transit, museums, libraries, and public parks—assets that seldom show up in the inequality debate, yet that New Yorkers without a lot of money can, and do, use to become more productive or improve their quality of life.

There’s no question that New York is unequal, at least when it comes to money. In 2011, 51.6 percent of New York householders made under $30,000 in nominal income (before taxes and tax credits), according to the city’s Independent Budget Office. By contrast, only 12 percent of New Yorkers brought in more than $100,000. New York’s top 1 percent took in a full 36.5 percent of the city’s earnings—more than the bottom 80 percent put together. The top 1 percent’s share of city income has tripled since the early 1980s. And wealth is just as concentrated: the top 1 percent took in 88.8 percent of money made in the city from capital gains—the sale of stock and other assets—as well as 64.7 percent of money made from dividends (payments made by companies to stockholders) and interest (payments made to bondholders). As for why the gap between rich and poor in New York has grown so wide, blame in part Western governments’ subsidization of global finance, which has sent more profits and income to the top in recent decades. Look also to rising costs of New York City living, which disproportionately affect middle-class families and drive many of them out. The rich can afford to pay these costs; the city’s poor are often cushioned from them, enjoying protection, for example, from high real-estate prices via rent regulation and public housing. (See “The Cost of New York.”)

If you’re poor and trying to get ahead, you may be better off in New York than in many less unequal cities. Of poor kids in America’s 50 largest cities—those born into the bottom-fifth income percentile—New York’s had the sixth-best chance of moving into the top economic fifth in adulthood, Harvard University economist Raj Chetty, Berkeley economist Emmanuel Saez, and their coauthors found in a 2013 study for the two universities’ Equality of Opportunity Project. By contrast, Atlanta and Charlotte—two cities often considered to have “fairer” economies—came in at 48 and 50.

Why? One answer is that tax money from the rich enables New York to invest directly in truly valuable assets like safe public transit and libraries, even as the city spends lots of money on ineffective social programs, including a billion dollars a year on inefficient homeless services, and too-high public-sector retirement benefits. The same top 1 percent who bring in more than a third of the income in Gotham pay 45.7 percent of the city’s income taxes, a share disproportionate even to their high pay. A second answer: private charity. According to their tax filings, the city’s top 1 percent donated a whopping $4.6 billion to charity in 2011—67 percent of New York’s itemized charitable deductions. (These figures are inexact, since poorer people generally don’t itemize their deductions and richer people must cap theirs, but the numbers’ imperfection doesn’t change the bigger picture.) Much of that charity stays right in New York City, transforming private wealth into public assets. A deeply troubled city like Detroit would love to have such inequality.

Even as New York has grown more economically unequal over the decades, its rising wealth has made it possible for it to bolster the asset that underpins all economic activity in the city: its mass transit system. More than two decades ago, New York had fewer millionaires and billionaires—and crumbling transit. Subway trains failed every 7,186 miles in the early 1980s, leaving hundreds stranded mid-commute every day. Trains were covered in graffiti, and they weren’t safe well through the early 1990s. “I gave them the money, and they shot me anyway,” one late-night 1992 commuter, Arthur Young, told police just before he died. Young had made a big mistake—riding the subway after 10 PM—and became one of 20 murder victims in the transit system that year. Other crimes were even more pervasive on the trains and platforms.

To see how much commuting has changed since then, take the E train from midtown Manhattan to JFK Airport. Even in the predawn hours, the train crowds with people, showing how confident today’s New Yorkers are that they won’t become crime victims. Yes, inequality is strikingly evident on the train: global businesspeople toting wheeled suitcases to catch their flights stand next to minimum-wage airplane cleaners on their way to work. But the poorer commuters have benefited from wealthier New Yorkers’ presence in the city. One thing the city’s tax dollars help pay for is a large police force, which reduced transit crime (and every other kind of crime) dramatically once the city began deploying officers intelligently in the 1990s. The subways saw just one murder in 2013. The wealthy’s political and financial support has helped fund much-improved service, too. Starting in the early 1980s, the state-run Metropolitan Transportation Authority began making a $73.8 billion (in today’s dollars) investment in the transit system, after then–MTA chairman Richard Ravitch persuaded New York’s business community to support a package of tax subsidies, so that the agency could borrow the funds. Because of that and successive massive investments—including a 2009 payroll tax that depends on downstate New Yorkers’ high incomes—trains are now 24 times more reliable than they were three decades ago, breaking down every 170,000 miles instead of every 7,186 miles.

A transit system that works (most of the time) is a good thing for every New Yorker, but it helps the poor disproportionately. After all, it cost $8,839 a year to own and operate the average medium-size car in 2013, according to the American Automobile Association. If, like most New Yorkers, you can take public transportation instead of a car, it will cost you around $1,300 annually. That’s $7,500 that you don’t have to devote to getting around. The less money you make, the more such avoided spending is worth to you. Someone making $75,000 might be able to shoulder a car payment and car repairs, as well as the unpredictable price of gasoline; someone making $25,000 cannot. A full 22 percent of the MTA’s riders live in households that earn less than $25,000 annually (not including schoolchildren, who ride free), while around 7 percent of riders earn more than $200,000. If you’re one of the MTA’s poorer riders, it’s a good thing you might find yourself standing next to a wealthier straphanger. It’s a sign that rich riders still have a stake in keeping up the system.

Wealthy New Yorkers’ investment in the city’s educational and cultural institutions also assists the poor. Think about the city’s public library systems, which took in $79.7 million in donations last year, about 15 percent of their half a billion dollars in annual revenues, with most of the rest coming from the city. That half a billion dollars or so is a small portion of a massive $75.5 billion city budget, but it’s some of the smartest spending that the city and its donors do, because it helps regular New Yorkers to help themselves.

Guillermina Quintero, an enthusiastic patron of the Bronx Library Center, is one such person. A seasonal parks department worker, Quintero would like to get a permanent job, and she knows that her deficient reading and writing ability gets in the way. “You know your position” if you can’t read well, she notes, and adds that her 14-year-old daughter’s good performance in public school has inspired her to try to improve her own skills. So twice a week, Quintero travels by subway from the Soundview neighborhood to Fordham Road to participate in one of the library’s free two-hour literacy courses. One Thursday night in May, she sat in a class with 20 other students, listening, talking, and learning. The teacher of the intermediate-level course, Tito Donovan, sporting a neatly trimmed beard and a three-piece suit, patiently helped the adult students learn how to spell and pronounce words, starting in the middle of a word and working his way out (“an,” “ant,” “rant,” “hydrant”). “Relax,” he told students who second-guessed themselves. “Speed is only needed when you’re late. You don’t need it; don’t use it. . . . Trust your skills. If you don’t believe you’re smart, the ball game is over.”

In a beginning literacy class next door, the teacher, Emily Skallet, stood in a sleeveless summer shirt in front of a class of 27. Among the students was a woman in a niqab covering her hair and most of her face, a black leather glove even covering the hand that clutched her pencil. A video screen showed a crying baby. “The word is ‘sob,’ ” Skallet instructed. Do you know ‘sob’?” She explained that “sob” is a higher degree of crying than just tearing up. “Your word is ‘go,’ she noted as a slide of a traffic intersection came up. “When cars have a green light, it is safe to go.” The students repeated and wrote down the word. “I want to introduce a new letter today,” Skallet continued. “The letter is ‘i.’ ” She showed them on the board how to make the line, and where to place the dot.

Many of them working low-wage jobs and caring for children, the students, ranging from recent West African immigrants to born-and-bred New Yorkers, seemed committed. Isabel, 45, is a living testament to how New Yorkers can smartly use the city’s abundant assets to get ahead. A lifelong Bronx resident, raised in the Castle Hill housing projects by a single mother on welfare, she left high school early without knowing how to read. But she always wanted to work. She remembers older relatives warning her as a child that “the government is talking about cutting [welfare] off. There may be no money.” After an eight-month jail stint as a young woman—“I got frustrated that my mother couldn’t afford the things she needed”—she determined to get a job. “I can’t read,” Isabel remembers saying to herself, “but I can drive people around.” She took advantage of a state program that helped her get a driver’s license and started driving a cab. That work experience, as well as other training certifications she earned over the years, landed her a job in a group home.

Isabel, like Quintero, knows that she can’t move up without gaining skills. “My supervisor says, ‘You could be a supervisor, too, but you have to write up reports,’ ” she tells me. There’s another reason she wants more skills: her girlfriend’s young children are in preschool and elementary school now and are “starting to ask questions.” So Isabel, one of the library center’s most dedicated students, is learning, though, she admits, “it’s harder as you get older.” More than half of the students in classes like these in the city come from families with incomes of less than $25,000. “The libraries are the pride of the city,” says Quintero.

New York’s libraries also have initiatives to help poorer children get a better start in life than Isabel did. Upper Manhattan’s Inwood neighborhood is one of five library branches in a pilot program of “enrichment zones” that give school-age children extra help after school (the number will double next year). The 80 Inwood kids enrolled in the program—also two-hour sessions, twice weekly—sit with tutors to finish homework, and then turn to math, reading, and other projects. Some pick out books to read or, in small groups, write stories. “The kids are fantastic,” says tutor Maura Clifford, noting that her charges are eager to study everything from the parts of a whale to ritual Aztec killings. Gisele (not her real name), 14, attends the after-school program with her younger brother. “I’m good with the subjects” in school, particularly math, the eighth-grader says, but she tends to freeze up at test time. The extra aid at the library has made her more confident of her knowledge and more relaxed for tests, improving her performance in school.

The New York Public Library’s new “bridge to college” initiative, “an intensive college-readiness and anti-poverty program,” is solely the result of private generosity—a $15 million grant from the late Helen Gurley Brown’s trust. Poor kids can benefit because the Cosmo editor lived in Manhattan until she died at 90, in 2012, and wanted to give something back to the city’s children. Brown’s presence made the city more unequal, true; her accomplishments brought her considerable wealth. But because she chose New York as her home, other people have had a better chance to leave their mark, too.

New York’s museums—another remarkable urban asset—also give the city’s poor opportunities that they wouldn’t get in more equal places. For instance, the Museum of the City of New York, located on Fifth Avenue as it enters East Harlem, provides neighborhood residents and other New Yorkers a way to learn about Gotham’s rich history and culture. One day in June, fifth-graders from the Bronx’s P.S. 19 listened attentively as student-program manager Joanna Steinberg asked where the New Yorkers of three centuries ago, prohibited by the Dutch from praying publicly, might have prayed instead (in their homes, the students answered, correctly). The children made up just one of 936 school groups—more than 29,000 students—trooping through the museum in a given year, with each student getting a family pass to invite his or her parents and siblings back for a visit.

The museum offers formal classes, as well, for students looking to improve their school performance. Two semesters a year, it hosts a free Saturday Academy for 450 Central and East Harlem kids to prepare themselves for the SAT college-entrance exam, as well as for high school history exams. Last year, says Steinberg, 63 percent of academy participants repeating the SAT test increased their scores—by 140.7 points on average. And last year, the museum started conducting an intensive prep course for the high school Regents history test, instructing 30 students over 29 two-hour sessions.

The museum also runs an internship program for 18- to 23-year-olds. The interns help museum staffers run tours for the public and for field-trip students, among other duties. The work exposes them to a career in the arts, something they might not otherwise have considered. “They gain some confidence and see that it’s achievable,” says Franny Kent, director of the museum’s children’s center, which helps run the program. Cinque Williams, 23, a lifelong Harlem resident, is one of this year’s 12 interns. The high school graduate had previously worked as a document courier, “but I didn’t feel like I was using my strengths,” he says. He “started to look into other options” and found the internship opportunity through a local neighborhood center. The museum “has pointed me in the right direction,” he claims; in particular, helping to guide field-trip and public tours of the museum has given him confidence in public speaking. “It’s changed my grammar,” he explains—“simplified it.” Williams is now looking into taking college classes, perhaps in acting. “It isn’t out of my range,” he adds.

New York’s enormous private wealth not only helps the city’s poorer residents get ahead materially; it also enriches their lives in less tangible ways. Central Park is a priceless public asset, enriched by $700 million in mostly private investment over the past three and a half decades. “The park was in such bad condition” before 1980, when the Central Park Conservancy took over its management from the city, which owns it, observes Doug Blonsky, the Conservancy’s head and the park’s administrator. “It’s gone from being perceived as the worst park in the world” to a global model, thanks to the donors, who provide three-quarters of its $58.3 million annual budget. (See “Parks and Re-creation,” Summer 2011.)

Central Park is in the middle of wealthy Manhattan, yes, but each year, 2.8 million visitors from less wealthy Harlem and Morningside Heights on the northern side of the park come, enjoying some of the park’s most beautiful areas without having to go very far. The rebuilt Conservatory Garden at 105th Street is one of Central Park’s gems. Weekend visitors include global tourists as well as Spanish Harlem residents watching their children race around the fountains. A visitor to the Harlem Meer will likewise see dozens of local families picnicking and playing.

Thanks to the city’s crime turnaround, New Yorkers rich and poor can enjoy the park in relative safety. As Blonsky notes, Central Park has gone “from 12 million visitors in the early Eighties [and] 1,000 major crimes to 40 million visitors and under 100 crimes” a year. Indeed, the park had 152 robberies in 1990; last year, the figure was 16. Thirty years ago, park workers were wary of even driving to the northern reaches of the park. Today, people of all incomes cycle the northern end of the park well after dark, without thinking twice about it. Blonsky notes that the park, “created to be the grand democratic space,” now fulfills its purpose.

Central Park’s donors—ranging from nine-figure hedge-fund magnates who give substantial gifts to thousands who donate just hundreds of dollars a year, if that—enable the park to serve 55,000 kids from nearby neighborhoods via sports and recreation clinics. Countless others—of all income levels—enjoy renovated sports fields and basketball courts. The park supports four smaller parks in Harlem as well as downtown’s City Hall and Bowling Green Park, taking pressure off the city’s own Parks Department budget. Just as it doesn’t hurt a poor person to share a subway car with a rich person, it doesn’t harm him or her to sunbathe alongside a rich person in the park. Both have a stake in keeping the park in good shape.

Brooklyn, too, has its urban oases: Prospect Park, of course, but also the Brooklyn Botanic Garden, where you can lie under a cherry tree to escape the city, thanks in part to $3 million annually in private donations. To serve the poorer neighborhoods that surround it, the garden works with Brooklyn’s lower-income public schools, training teachers to teach kids about horticulture and inviting public school students for tours every year. The garden also works with the borough’s poorer schools to offer “very selective” internships: 24 students a year in the fourth, fifth, sixth, and seventh grades, who take buses from all over Brooklyn to spend six weeks in the summer learning about plants and flowers three days a week, culminating in a camping trip that’s about “getting out of the city,” says Sara Epstein, supervising instructor for the garden’s education initiative. Epstein notes that the children who participate come from homes in which, in all, more than 20 languages are spoken. Parents are working hard to “find opportunity for their children,” she says.

But poorer Brooklynites don’t need a formal program to walk the expertly curated rose and spice gardens. The garden, which generally charges $10 admission, is free on Tuesdays and free Saturday mornings—and free all the time to children under 12. More than 325,000 people took advantage of free days last year.

Bill de Blasio won the mayoralty last year running his “tale of two cities” campaign. But the risk is that some of his and his allies’ efforts to fix inequality will actually worsen poverty and harm poorer New Yorkers’ quality of life. The mayor’s new contract with the teachers’ union, for example, has quadrupled the city’s future budget deficits, from less than $2 billion over three years to nearly $8 billion. Such unfunded commitments harm New York’s ability to invest in the city’s real public assets: the transportation, education, cultural, and recreational infrastructure that makes all New Yorkers richer. Raising taxes even higher to pay for this future spending not only will squeeze middle-class residents; it will also motivate wealthy New Yorkers to start shielding their income from taxes, including by spending less time in the city. Part-time New Yorkers have less of an interest in giving to local charities.

A 13.2 percent spike in shootings through the first half of this year is also worrisome. Yes, a spike is not a long-term trend, as police commissioner William Bratton pointed out in early June. But the new mayor, by agreeing to a federal settlement and other measures that hamper the NYPD’s “stop, question, and frisk” practices, has made it tougher for the police to fight crime, especially by getting illegal guns off the street. A sustained rise in crime would make all New Yorkers poorer—not least by damaging the city’s public assets, including the subway system and Central Park.

Let’s hope that those amenities can be maintained. Up until now, they have been, in no small part because New York remains a place where successful people want to be—and where, thanks to the city’s resulting prosperity, the poor can enjoy many of the same amenities that the wealthy do.

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