“Invest in the future.” In New York, Governor Andrew Cuomo follows in a long line of political leaders who, using some version of those words, said that they wanted to invest in jobs and growth—and then did little to follow through. If Cuomo and others really wanted to make such investments, they would have reduced taxes, both for individuals and businesses, and streamlined regulation. Either move would have fostered long-term job growth and prosperity by encouraging people to start new businesses in New York, move existing businesses there, and expand them within the state. And if Cuomo and others really wanted to invest in the future, they could have directed budgetary priorities toward areas that promote growth and employment. For example, smart investment in improved infrastructure—roads, ports, water, and power facilities—would assure all New Yorkers that they could pursue commercial interests reliably and live comfortably.
Alas, neither Cuomo nor other recent New York governors have made these choices. For decades, New York has been one of the highest-tax states in the union. According to recent Tax Foundation research, the state’s overall tax burden, some 25 percent above the national average, ranks second-heaviest among all 50 states plus the District of Columbia. When it comes to regulatory red tape, the U.S. Chamber of Commerce ranks New York’s burden 35th out of the 50 states and D.C.
It’s hard to see how a company would want to locate or expand in New York. Burdensome tax and regulatory policies encourage New York-based firms either to move to other states or pursue their expansion elsewhere. Foreign firms also hesitate to choose New York when considering locations in the United States. Governor Cuomo’s “Global NY” initiative, targeting Mexican, Canadian, Israeli, Chinese, and Italian firms, while also paying for the governor to lead a trade mission to Cuba, does not appear to have lured any significant business to the Empire State.
Spending on education can be viewed as an investment in the future, and no one would suggest that New York State spends frugally on it—the state ranked first in per-pupil spending nationally, according to the latest Census data. Yet the growth in state education spending since 1980 (5.2 percent) surprisingly lags spending growth in the rest of the budget (5.8 percent). This difference may seem small on an annual basis, but it mounts up over time—over 35 years, education spending has expanded 524 percent versus 620 percent for everything else. And spending on transportation, a big portion of infrastructure, has grown 5.5 percent annually since 1980, faster than education but still considerably slower than the nearly 6 percent average annual growth of the rest of the budget.
From a political perspective, New York’s budgetary neglect of infrastructure, in particular, is more significant than its failures on tax and regulatory reform, areas so freighted with special interests that changing policy meaningfully usually requires the work of several gubernatorial administrations. A single administration, however, can make its priorities felt in the budget, and even minor changes in relative growth rates can make a big difference over time. Failure to invest in policies that actually grow the economy, then, demonstrates that the constant talk of investment is pure rhetoric.
More telling still is where the budgetary emphasis has gone. Without exception, spending has grown fastest in areas best described as current consumption. Outlays for pensions, for instance, have soared 8 percent a year on average since 1980—far faster than any other area of the budget except outlays on health care, mostly Medicaid, which have increased 8.3 percent a year. Pensions and health care deserve attention, of course, but it’s hard to call them “investment.” They’re more akin to a family’s spending on groceries and health insurance—essential, but not part of any plan to build a more prosperous future.
It’s the nature of spending on pension and entitlements, once the systems are put in place and the promises are made, to grow of its own accord, regardless of other priorities set by government. The only temporary exception in this regard was welfare spending, which actually fell after the landmark reforms of the 1990s. But welfare spending is growing again, up over 80 percent during the past 15 years, faster than every other major budget category except pensions and health care. It looks as though it might take a revolution to reorient spending toward the investments that Cuomo and others have spoken about for so long. Failing that, if New York’s leadership won’t—or can’t—change course, the least it could do is spare voters the lip service.