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By Nicole Gelinas

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

Eye on the News

Nicole Gelinas
How Not to Save the Middle Class
A new study offers “solutions” that will only make life costlier for New Yorkers.
6 April 2007

A report out this week on “Saving Our Middle Class” doesn’t present any real news on how hard it is for regular New Yorkers to raise families here. Rather, it’s a bleak reminder that the city’s leadership elite continues to embrace the kind of stale big-government ideas that hurt the middle class instead of helping it.

The Drum Major Institute unveiled its findings at a conference Monday attended by several future mayoral candidates, including Brooklyn congressman Anthony Weiner and Bronx borough president Adolfo Carrion, Jr. The study presented the opinions of 101 city “leaders” drawn from academia, social advocacy, politics, business, and other fields. Participants agreed that it’s harder to become middle-class in New York than it was a decade ago, and that middle-class families with kids need to bring home at least $75,000 a year to live in reasonable comfort within the five boroughs. They also said that it’s hard to find a decent apartment or public school here.

Few New Yorkers would quibble with those findings. But the group doesn’t offer any real solutions—only more spending.

On housing, for example, respondents put “building more government-funded, permanent affordable housing” at the top of the study’s list of “effective” tools to strengthen the middle class. Not far behind were “increasing [public-school] funding,” “reducing class sizes in public schools,” and strengthening rent regulations. And a full 92 percent of participants thought that extending Medicaid-style health care to more middle-class New Yorkers would be “beneficial.”

But if a government-run housing market, lavish school spending, and high Medicaid participation were the keys to a thriving middle class, New York would be a middle-class paradise. Consider: New York has regulated most of its rental apartments for over half a century, and the Bloomberg administration will wind up adding 165,000-plus units to the ranks of government-controlled apartments during the mayor’s two terms. School spending is up 42 percent since Bloomberg took office. As for Medicaid, one out of every four New Yorkers is already enrolled in the program.

The real obstacle to a thriving middle class in New York is too much government involvement in people's lives. In housing, for example, reasonable economists from across the political spectrum agree that constricting the supply of apartments through regulation makes rents, on average, more expensive, not less. As for schools and Medicaid, all of the $58 billion Gotham spends annually must come from somewhere, and it comes from high taxes.

As the city’s independent budget office noted in February, state and local taxes within the five boroughs are the highest in the nation, nearly 50 percent higher than in the average city. In large part because of these high taxes, big corporations and small businesses alike have a hard time locating middle-class jobs here. Banks like Goldman Sachs and Citigroup don’t mind shelling out extra to keep star workers in Gotham; those employees make so much money for the firm that they justify their high costs. But it’s more difficult for a Citigroup to justify keeping five-figure secretarial jobs in high-cost New York. Just last week, in fact, Citi was firming up plans to move some middle-class New York City jobs to lower-cost areas like Buffalo, according to press reports.

New York must make itself more attractive, not less, to middle-class employers. And it must attract entrepreneurs to start businesses here. But the “leaders” surveyed in the Drum Major study would rather do the opposite.

More than 70 percent of respondents thought that the city should hike income taxes on the “wealthy” to pay for all of the new subsidized housing and health care they propose, while nearly 90 percent think it’s a good idea to hike business taxes by closing “loopholes.” In contrast, “cutting income taxes for everyone” was the group’s lowest priority.

And who are those “wealthy” taxpayers who should be paying more to fund these programs, anyway? Most participants said that once a family of four earns $135,000, it’s “no longer middle class.” That would come as a surprise to, say, an executive assistant and an auto mechanic earning in the low six figures between them and struggling to afford a modest house in Queens.

And to see further how out of touch the participants are with regular New Yorkers, just look at their responses to a question on charter schools. “Leaders” split evenly on whether creating more such schools would have a “positive” or a “negative” impact on the middle class, with 29 percent saying “positive” and 27 percent saying “negative” (others said charter schools would have no impact, or had no opinion). But New Yorkers have already voiced their own opinion: charter schools must hold lotteries for admissions because so many working-class and middle-class parents want to enroll their kids.

Voters had better hope that there’s a mayoral candidate lurking out there somewhere who’s willing to buck the worn-out ideas proposed in the Drum Major report. Otherwise, New York’s middle class, facing even higher taxes, inevitably will give up and leave.

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