Carolyn Maloneys congressional district includes perhaps the greatest concentration of businesses in the countrysome 40,000 firms operating throughout whole swathes of midtown Manhattan and bustling commercial neighborhoods in Queens. But this rich business environment, providing jobs for hundreds of thousands of New Yorkers, is invisible on Maloneys radar screen. In the last session of Congress, the Upper East Sider so consistently voted against the interests of business that a Washington lobbying groupthe Small Business Survival Committeegave her its lowest rating possible: zero. Still, in the 107th Congress, Maloney did propose one piece of business legislation: a bill that would give tax credits to companies that set up lactating stations so that mothers can breast-feed their children on the job. Not surprisingly, the breast-feeding legislation is low on the priorities list of New Yorks major business groups.
Far from being an anomaly, Maloney is typical of Gothams overwhelmingly Democratic congressional delegation, which increasingly votes against the economic well-being of the global capital center that is New York. The citys representatives stridently oppose business-friendly initiatives, battle free-trade legislation that would boost Gothams global services sector, and vote down tax cuts that might bring relief to a city whose residents pay disproportionately more in federal taxes because they are more affluent and hence get hit harder by the nations progressive tax code. Instead, the New York delegation campaigns almost exclusively for ever more social spending for a city already so awash in social services subsidies that major new federal spending in Gotham is unlikely any time soon.
Although New York has long had a liberal tradition somewhat at odds with its role as Americas center of capital and wealth, the citys congressional delegation is veering further and further leftward, so far out of the mainstream that many of its members have become almost irrelevant in Washington on issues of economic and fiscal importance to the city. The delegation today is little more than a shrill chorus of Bush-administration critics. But even during the Clinton presidency, when New York congressmen should have been powerbrokers, most largely opposed their own party leader on key legislation and hence played almost no role in shaping significant tax and trade legislation. Says one former Giuliani-administration deputy mayor: When it came to lobbying in Washington for what we needed, mostly we just did end runs around them, because the New York delegation rarely got beyond the idea that what we always need from Washington is more spending. They fit the stereotype in Washington of the money-grubbing New Yorker.
Up until the mid-1970s, the city often enough elected business-friendly Democratic congressmen like Hugh Carey, who preached fiscal discipline and became a tax cutter as governor, or Ed Koch, who leaped from the House of Representatives to Gracie Mansion by taking on the public-employee unions and emphasizing the need to restrain the citys budget. But then the local party organizations that had produced such candidates gave way to the rising power of municipal employeeswho after they gained the right to collective bargaining in 1958 inexorably shaped themselves into a dominant New York political forceand to social services organizations and advocacy groups that sprang up in response to Great Society federal spending. Slowly, those interest groups began to put forth a new breed of candidate with an agenda more narrowly focused on increasing government expenditure and raising taxes to pay for it. The candidatesoften facing token opposition or no opposition at all from Gothams hapless GOP, so that they are the only choice the voters havemade their way first into the state legislature and City Council and from there have assumed their place in the citys congressional delegation.
The result is a Gotham delegation increasingly manned by former public employees, social advocates, and lifetime political operatives, whose priorities rarely coincide with the citys economic interests. Maloney is a case in point: a former public school teacher, she spent ten largely undistinguished years in the City Council before winning her seat in Congress, where her most recent legislative agenda has included, in addition to her corporate lactation bill, support for parental leave for federal employees and a bill to protect the civil rights of victims of gender motivated violence. Maloney plays politics in Washington as if she were in the midst of some raucous Manhattan community board meeting, which is one reason its easy for her Washington colleagues to dismiss her as a grating New Yorker with little of substance to offer. Shortly after President Bush took office, Maloney used a casual, get-acquainted meeting between the president and the Democratic caucus to hector Bush, which prompted one reporter to observe that Maloney treated the president like an antagonist in New York Citys left-wing Democratic politics. During the campaign for more federal aid for the city after September 11, the New York Times described her as among the most strident of the citys delegation, more anxious to browbeat Bush than to push tax cuts to help New York recover.
Vying with Maloney as one of the delegations furthest-left members is West Sider Jerrold Nadler, who represents most of the wealthy Manhattan residential neighborhoods and thriving business areas that are not part of Maloneys district. Like Maloney, Nadler has racked up one of the most rabidly anti-business, anti-tax-cutting voting records in Congress. Thats not surprising for someone who has spent his working life in governmentsigning on as a legislative aide in Albany shortly after college, then winning a seat in the Assembly in 1976, which he held for 16 years before leaping into Congress. Like Maloney, Nadler favors the kind of strident overstatement that places him on the fringes of most national debates, as when he intoned in the midst of the Florida recount after the 2000 presidential election that there was a whiff of fascism in the air. The American Federation of Teachers and environmental groups give Nadler favorable ratings; but the man whose district encompasses lower Manhattan, including the site of the World Trade Center, garners among the lowest scores possible from business groups as an advocate of the free market.
Beyond Manhattan, even those delegation members who speak for solidly middle-class outer-borough neighborhoods that vote Republican when given the chance, as in the last three mayoral elections, now support more government spending and higher taxes. Anthony Weiner, for instance, represents a district that includes Queens neighborhoods like Forest Hills and Rego Park, along with Brooklyns Sheepshead Bayareas that have a higher-than-average family income and a poverty level only about half the city average. But Weiner votes closely with the delegations left-wingers on most bread-and-butter issues affecting New York, and consequently he also gets among the lowest ratings in Congress from business and anti-tax groups. Representing, as he does, a protected Democratic district, Weiner feels comfortable declaring, as he did to City Journal after 9/11, that the era of small government is over, and no one in my district is asking for tax cuts.
For two decades, though, his constituents have sure voted as if they wanted lower taxes. Queens was a strong home of Reagan Democrats, says Jeff Wiesenfeld, who founded a conservative Democratic club in the borough before becoming a Republican in 1998. From the white-collar families in Douglaston to blue-collar workers in Middle Village, these are people who voted for Reagan, Giuliani, and now Bloomberg. How can you say they dont favor tax cuts?
Even so, Weiners Queens colleague in the House, Rep. Joseph Crowley, sounds similar anti-tax-cut themes, even though he too hails from a solidly middle-class outer-borough district that includes Queens neighborhoods like Elmhurst and Flushing. In every year hes been in Congress, Crowley has earned an F rating from the National Taxpayers Union, a nonpartisan Washington watchdog group. Speaking with City Journal earlier this year, Crowley derided a highly reasonable capital-gains tax cut proposed after September 11 to help revive the citys securities industry, branding the idea the ultimate in trickle-down economics.
Because such attitudeshowever much favor they may find with the special interests that dominate the left wing of the Democratic partyhave helped marginalize many city representatives in Washington, New Yorks solons have drifted into trivial issues that rarely resonate in their districts. While Maloney floats off into the legislative never-never land of lactating stations, Rep. Gary Ackerman, who represents a wealthy Queens/Nassau district, has not only forged a reputation as an animal-rights extremist sponsoring legislation endorsed by People for the Ethical Treatment of Animals, but he also has campaigned for an end to the navy bombing on Vieques. Meanwhile, he scores among the lowest ratings from groups like the U.S. Chamber of Commerce.
Of course, beyond its thriving business districts and middle-class neighborhoods, New York also includes some of the countrys poorest congressional districts. Here, Gotham elects a slate of black and Hispanic officials who unfailingly tout expensive social programs as prescriptions for the citys economic ills, but who scoff at free-market initiatives that, when tried, have actually unleashed economic power in their neighborhoods. Hewing to such an agenda, the citys minority caucus has had almost no role in spurring the economic gains of the mid- and late 1990s, which were prompted by local tax cuts and big declines in crime that helped propel poorer neighborhoods like Greenpoint, Brooklyn, the Mott Haven section of the Bronx, and Central Harlem to solid increases in per-capita income.
Under the rubric of economic development, the minority members of the delegation have championed government spending on ineffective programs that have done little to help boost low-income neighborhoodsmost notably the federal empowerment-zone program that Charles Rangel, the dean of the group and the patronage panjandrum of Harlem, helped to create during the Clinton years. In its early stages, the program aimed to pour money into social services programs designed to eliminate the supposed root causes of poverty, but it did little to encourage the private investment that Harlem needed for sustained economic gains. Fortunately, the Pataki administration moved the program toward free-market initiatives that used public money to attract private investors and businesses uptown. That approach, aided by the Giuliani administrations successful war on crimean initiative condemned by most members of the citys minority congressional caucus, including Rangel, who was arrested while protesting Giulianis policies at police headquartershelped produce a burst of development in Harlem unparalleled in the last 50 years.
New Yorks minority congressmen are among the most ultra-left-wing legislators in Washington. Of the ten members of the House of Representatives rated the most liberal in the country by National Journal in 2001, four are New York City black or Hispanic congressmen, led by the Bronxs Jose Serrano. A staunch Al Sharpton supporter who last summer called on the national Democratic party to take Sharptons bid for the partys presidential nomination seriously, Serrano says that his designation as Congresss most liberal member reflects my concern for people like those in my community who dont always share in the economic prosperity of the country. But Serrano has a strange way of displaying concern for his communitys economic needs. In the last session of Congress, the only bills involving economic matters that the Bronx Democrat sponsored were aimed at moderating U.S. trade restrictions on Cuba.
In this vein, the New York delegations minority members often seem more concerned with the impact of legislation on Third World countries than on New York. In May, for instance, they all voted against a bill that would protect American textile makersbut only because they feared that the bill, by inhibiting free trade, would hurt manufacturers in South America and Africa. More usually, they are rabidly protectionist and vote against free-trade legislation beneficial to Gotham and heavily supported by New York industries.
In Washington, Gothams congressmen inevitably vote for higher government spending fueled by higher taxeseven though every time Washington raises taxes, the effect falls disproportionately on New Yorkers. Although there are no precise data on how much in federal taxes New York City residents pay, we do know that New York State residents have the fourth-highest per-capita federal tax burden in the country, because, with their higher-than-average incomes, they get hit harder by the countrys progressive tax code. Residents of New York State accounted for 6.6 percent of all federal income-tax filings in 1999 but paid 8.5 percent of the federal income tax, according to the Manhattan Institutes E. J. McMahon. New York City, with its big cluster of high earners, is subject to similar inequities.
Many of the states congressmen outside of New York City understand this added burden, which is why they generally vote against tax increases. But of Gothams 18 representatives in Congress, only Republican Vito Fossella, who represents Staten Island and portions of Brooklyn, opposes higher tax rates and advocates tax cuts even for those making above $100,000. He argues that what makes people rich somewhere else in the country only makes them middle-class in New York City. I am always amazed when those who represent New York City stand up in Congress and say that we dont need lower tax rates, Fossella says. In their view, if you are a police officer married to a schoolteacher in New York City, you are considered rich.
Most of the citys delegation has done all it can to derail tax cuts or, when reductions are inevitable, to skew the cuts away from higher-income earners, who make up a far larger portion of New York Citys population than the nations, and whose spending and job creation contribute so much to the citys economy. Nadler, for instance, led a Democratic group that tried to replace the Bush 2001 tax cut with a $300 tax credit for every taxpayer and dependent in every year that the federal government runs a surplus. This flat tax cut, by treating everyones tax refund equally, would have shortchanged New York residentsand especially the residents of Nadlers own district, where annual household income averages $90,232, or 65 percent above the national average.
By contrast, the tax cut Bush originally proposed early in 2001 would have brought New Yorkers an average refund of $1,600, because it included bigger cuts in higher-income-tax brackets. Even the federal tax cut eventually passed, though smaller than what Bush proposed, turned out to be a better deal for most New Yorkers than what city Democrats supported. It will amount to about $89 billion in savings for state residents over the next ten years, according to an analysis by the Manhattan Institutes McMahon, with more than three-quarters of those savings realized by taxpayers who live in New York City and its surrounding suburbs. Still, every Democratic member of Congress who represents New York City voted against the tax-cut package, and many derided the refunds that they and their constituents received this summer. Queenss Ackerman, for instance, told the New York Post that he would use his refund to buy lottery tickets to see if I can win some real money, while the Bronxs Elliot Engel said that he would use it to buy a years subscription to the Post.
The cavalier unconcern that New Yorks delegation displays toward taxpayers takes a sharper edge where Gothams biggest industries are concerned; city representatives are consistently hostile to tax and trade measures that would benefit the big companies and core businesses that create Gothams jobs and wealth. Exhibit A is the delegations steady opposition to lowering the federal tax on capital gains, despite evidence that cuts in this tax spur investment activity and fatten Wall Streets revenues, thereby improving the citys economy by boosting its Number One industry. The 1978 capital-gains tax cut, for instance, produced a flurry of stock and bond trading that resulted in a doubling of profits for New York securities firms in just two years, while securities employment in the city shot up by 22 percent in that same period, after having been flat for most of the 1970s.
In the mid-1990s, Wall Street began lobbying for a capital-gains tax cut, but Gotham Democrats opposed the move. Rep. Charles Rangel, whom the National Taxpayers Union recently branded as Congresss biggest spender and most ardent opponent of tax cuts, even proposed an alternate plan with a smaller gains tax cut to sidetrack the bill. Every Democratic representative from New York City voted against a version of the tax bill that included a Republican-sponsored cut. Only later, when President Clinton included a less substantial capital-gains cut as part of a tax compromise, did most New York City congressmen vote for the measure. But if the New York delegation had had its way, the gains cut that benefited their citys premier industry would never have been in the bill in the first place.
Although the tax cut helped ignite a boom on Wall Street, it didnt do much to change the tune of the citys intransigent legislators. For the three years after the 1997 cut, Wall Street firms earned nearly $45 billion, 50 percent more than any other three-year period in Wall Street history, and securities firms added 25,000 jobs in the city. Encouraged by those results, Mayor Giuliani strongly endorsed another capital-gains tax cut to revive the citys flagging economy after 9/11. But he got no support from his own New York delegation, even from those whose districts teem with securities-industry workers. I dont think a capital-gains tax has the kind of macro effect on the economy Giuliani expects, Queens congressman Anthony Weiner told City Journal. Added Weiner, whose district includes more than 37,000 residents who work in the finance, insurance, and real-estate industry: To the Republicans, capital-gains tax cuts are a cure for everything, including the common cold. The proposed cut never materialized.
The one issue as critical to New Yorks economic well-being as low taxes is free trade, and here too the citys federal legislators consistently fail their constituents. Gotham has become perhaps the ultimate world-business capital, benefiting as much as any city anywhere from globalization. The citys powerful financial institutions, along with its major consultants, law firms, accountants, and ad agencies, are all in great demand from overseas corporations and governments for their expertise. Wall Street firms alone bring about $1 billion in annual receipts from foreign sources, a hefty contribution to the New York economy.
But the citys congressional delegation consistently tries to block free-trade initiatives, even when the national Democratic leadership supports them. Every Democrat representing New York City, except Nita Lowey and Floyd Flake, voted against the North American Free Trade Agreement in 1993, even though the Clinton administration supported it heavily, and even though, as the New York Times noted before the vote, the areas most important employers, including banks, brokerage houses, insurance companies, pharmaceutical manufacturers and publishing concerns, would indisputably benefit, because those companies were all poised to boost revenues from Canada and Mexico once trade barriers fell. But the delegation put their loyalty to their big union contributors ahead of the interests of the city. As even the Times noted editorially during the NAFTA debate, labor political action committees had contributed a whopping $2.8 million over the previous ten years to New York NAFTA opponents.
Fortunately, Republicans and moderate Democrats pushed NAFTA through, and it proved a great local boon. Exports of goods and services between New York State and Mexico and Canada increased by an annual average of 7.2 percent in the six years after NAFTA, while exports between New York and all other countries increased by just 2.9 percent annually in those same years. Businesses as different as New York hotels like the St. Regis, which attracted more upscale Mexican tourists, benefited, as did New Yorks commercial and investment banksincluding Chase Manhattan, Goldman Sachs, and Merrill Lynchwhich emerged as major players in finance south of the border. Meanwhile, the Department of Labor estimated that NAFTA cost New York State fewer than 2,000 lost manufacturing jobs.
The Clinton administration ultimately learned how to woo some New York solons on trade issuesnot by patient economic argument but by offering even bigger payoffs than the New Yorkers could get from the unions. Clinton enticed Rep. Rangel to vote for favored trading status for China, for instance, by promising him a trade treaty with sub-Saharan African nationsa pet Rangel project, though not one that mattered to New Yorks economy. Rangel then brought Clinton the support of some members of the Congressional Black Caucus on China trade, including some New Yorkers. Still, labor stalwarts like Nadler and Crowley all voted against the China billeven though the regions businesses export more than $1 billion a year in goods and services to China. With Clinton gone, the New York delegation is becoming even more stridently antifree trade, with every one of its Democratic members voting against a bill last December to expand the ability of the president to make trade agreements, a bill strongly favored by a host of New York industries and the editorial pages of the citys dailies.
Instead of supporting free-market initiatives that would enrich Gotham, the citys congressional delegation pushes for increased public spending detrimental to New Yorks economy. Its members clearly think that it is better to lure money from Washington than to cut taxes and thus prevent the federal government from draining resources from the city in the first place. And so the delegation fights vigorously for funds for the citys bloated and inefficient hospital industry and its union allies. It resists welfare spending cuts, champions more money for subsidized housing, and backs an economic-development agenda that includes higher spending for job training, day care, and other programs that have proven ineffective at spurring the economy.
But it is a losing battle. The gap between what New York receives from Washington and what it sends in taxes is only growing larger, not smaller, and every trend suggests that it will continue to do so no matter how ardently the delegation fights for more federal money. Only tax cuts can significantly shift the balance back in New Yorks favor.
Nothing makes this point clearer than a close look at the money flows between Washington and New York, which reveals that the federal government is actually not shortchanging the city, especially on the social spending programs that are so dear to New Yorks congressional delegation. If we use former senator Daniel Patrick Moynihans method of weighing what a states residents and businesses pay in taxes against what they get back in federal dollars, we find that New York State had a balance of payments deficit with Washington of $890 per person in 1999, the last year for which data are available. Moreover, historical data show that the deficit has continued to grow through both Republican and Democratic administrations and is three times today what it was 20 years ago in current dollars. Although no comparable data exist for the city, its payments deficit is probably equal to that of the state, because Gotham receives about the same amount in federal spending per capita as New York State, and pays per-capita taxes that are higher than the U.S. average.
The citys congressional delegation has traditionally used this huge balance of payments deficit to argue for more federal spending; after 9/11 those calls intensified, and the delegation trotted out the Moynihan study again to show why New York deserved more. But a close look at Moynihans numbers demonstrates that the deficit with Washington is almost entirely a function of low government spending in just two areasdefense and social securitywhich hardly suggests that Washington is stiffing New York.
While defense spending nationally averages $835 per person, in the Empire State it averages just $295 per person and in the city a mere $75. But instead of working to redress this huge imbalance, the citys congressmen have often done quite the opposite, acting as ferocious critics of defense spending and therefore ensuring that New York does not get its share of these dollars. During the big Reagan defense buildup, the citys congressional delegation, led by the late congressman Ted Weiss, largely opposed efforts by Defense Secretary Casper Weinberger to open a naval base on Staten Island, while the City Council passed a resolution rejecting the base. Weinberger okayed the facility anyway, in part to boost defense spending in New York. Then, in the defense cutbacks that began in the early 1990s, members of the citys congressional delegation fought to close the Staten Island base, still under construction and unoccupiedas did the Dinkins administration. At one point, in fact, the citys chief lobbyist in Washington was working to get the base tabled, while the states lobbyist was striving to keep it open. Ultimately, the Clinton administration axed the basewhich would not only have pumped $100 million a year in federal payroll spending into New York but would also have resuscitated the Brooklyn shipbuilding and ship-repairing industry. But Washington also voted to keep open Fort Drum near Watertown, New York, an army base that upstate representatives helped to save. It has since contributed more than $1 billion to the upstate economy.
The second reason Washingtons flow of funds to New York City and State falls short is because federal Social Security payments to New Yorkers are slightly lower per capita than the national average. But this deficit has little to do with federal policies toward New York. It occurs because while city residents pay disproportionately more per capita in income taxes, Gothams over-65 population is proportionately smaller than the nations. This balance of payments deficit is unlikely to change soon unless New York takes steps to stem the migration of its seniors to places like Florida, with a friendlier tax climate to match its friendlier weather.
The citys congressional delegation contends that Washington should make up the federal spending gap by expending more in New York on social programs like Medicaid and welfare. Rep. Weiner, speaking with City Journal, scored Republicans in Congress, including House Ways and Means Committee chairman Bill Thomas, for shortchanging New York on Medicaid. Mayor Bloomberg has taken up their chant, too, disingenuously arguing that the city doesnt get its fair share of Medicaid funds.
But these arguments no longer resonate in Washington, because the city and state already receive such a disproportionate share of such federal monies that it becomes harder every day to contend that they deserve even more. The Moynihan report consistently finds that New York State ranks Number One in the nation in per-capita federal spending on assistance programs, led by Medicaid, and New York Citys proportional share of this pot is even huger than the states. For instance, federal Medicaid expenditures nationally average $425 per capitabut a gigantic $1,285 per capita in New York City. By contrast, Chicago only gets $514 per capita; Los Angeles, just $464. It is precisely because of these kinds of funding inequities in New Yorks favor that Medicaid became a huge target for cutbacks in the Balanced Budget Act of 1997, and the New York delegation stood by powerless as Republicans and moderate Democrats trimmed the program and Clinton signed the legislation.
Other federal assistance programs touted by the left-leaning New York congressional delegation also already disproportionately favor the city. New York receives more than double the national average of spending per capita on food stamps and Section 8 housing subsidies, and four times the national average of welfare spending. In all these areas, the city also receives significantly more per capita than big cities like Chicago and Los Angeles. These numbers show why New York City can hardly expect big infusions of spending unrelated to 9/11 from Washington any time soon, and why New York Citys political delegation has been reduced to arguing on the margins for a few dollars here and there.
By contrast, tax cuts could powerfully redress the spending federal balance of payments deficit with New York. The first round of the Bush tax cut returned an estimated $1 billion to New York City residents, according to the Manhattan Institutes McMahon. Over ten years, the tax cut could return as much as $40 billion to city residents. That is far more than the delegation could possibly extract from Washington in social spending programsa point that New Yorks congressional delegation would rather ignore.
The attack of September 11 brought the economic issues that face New York City into sharp focus. Unfortunately, it also served to reinforce the most counterproductive tendencies of the citys congressional delegation. They saw President Bushs promise of $20 billion in federal aid as the kind of Washington jackpot that any self-respecting New York legislator dreams about. But there are no other pots of gold out there for the delegation any time soon, and every trend in Washington suggests that New Yorks big spenders are likely to be on the defensive for years to come, no matter which party wins the White House. Unless the citys congressmen somehow change their tuneor unless the citys residents change their representativesNew Yorks House members are likely to be little more than marginal players in Washington for the foreseeable future. But thats better for the city they represent than if they were powerful.