It is breath-taking to consider how different New York looks this morning compared to only a week ago. Back then, Eliot Spitzer was seemingly ensconced in the governorship and Bear Stearns was a financial house valued by the market at something on the order of $30 billion...[Today the whole company was sold for 10% of its value of last Friday]. Seven years ago our city was attacked by a barbaric enemy, who came down out of the skies and killed thousands, destroying in the process the buildings that symbolized our commercial and trading spirit...But within only a few years, our city has rebuilt if not ground zero then the physical space needed to conduct our commerce, all in one of the greatest building booms and surges of optimism in history....The New York Sun, 3/17/2008.
If you've followed the story closely, as many New Yorkers have, it's more breathtaking than the editors at the Sun have written in today's lead editorial. Despite this brilliant recovery, New York State is dominated by tax and spend liberals in both parties. With tax receipts plummeting with the crisis in financial services, budget deficits are climbing rapidly in Albany and threatened in New York despite Mayor Bloomberg's best efforts. In the Democrat Assembly and the Republican Senate, politicians are falling over themselves to spend more money that we don't have, holding out the promise of taxes, more taxes on a state already taxed more heavily than any other, including California.
What's worse, many giant projects felt necessary by state and regional authorities have become financial disasters. The transportation center near ground zero is a total flop. While the MTA has rebuilt the basic elements of the network that crisscrossed downtown Manhattan, including the lines that went directly under the World Trade Center, the "center" is an empty lot. The Second Avenue Subway, a project already three years and several billion dollars late, won't open until 2012. The Ratner socialism-for-the-rich Atlantic Yards project, which depends heavily on eminent domain and the destruction of several neighborhoods, can't find private financing.
And yet, despite regulatory and tax conditions that would drive most entrepreneurs out of state, as so many have left upstate and western New York in the last two decades, vast numbers of new small businesses have swum against the flood of regulations, bureaucratic entanglements, and monsterous tax rates to build new, stable neighborhoods across the city. Politicians and political investment have done none of this. They have only stood in the way, hands out for more tax money.
It was a surge in which Bear Stearns was an important part, both in terms of its business, which surged until the latest downturn, and in terms of philanthropy, where managing directors were expected to give at least 4% of their annual compensation to charity... Bear aficionados searching for epitaphs may find themselves flipping through Alan C. Greenberg's book, "Memos From the Chairman," which includes one prescient note dated March 13, 1979: "It certainly looks like we have a dynamic future in store as long as we remember the words of the famous philosopher Haimchinkel Malintz Anaynikal: 'thou will do well in commerce as long as thou does not believe thine own odor is perfume.'"...(After the Bear, cont'd)
Greenberg's conception never bothered private citizen Spitzer, Governor Paterson's predecessor. His preposterous hypocrisy, while not quite rivaling Caligula, is, sadly, representative of a whole political class in New York State, a class that has, with rare exceptions, like Mayor Bloomberg, stood fast on the principle that nothing so serves their constituents as taking money and property from everybody else, a time-honored tradition going back to Roscoe Conkling. Private citizen Spitzer crossed the line, but there are many just on the other side.
And one should not imagine that the failure of one private company, and the tottering of another (Citigroup), is proof that the thieves in Albany were right. These disasters are instead a disturbing, real demonstration of the foolishness of the politically driven business model in New York: nothing is so good as the financial services industry; nothing else is worth giving tax incentives to. Fact is, banks and brokerages are the foundation of the New York State. The political judgment that promoted this result bears unpleasant comparison to farmers who plant one crop year after year. When that crop fails, there's nothing left. This is already close to the case in western New York, where you can drive for a hundred miles in some directions and find only ghost towns.
There will be much backward looking, as there was after September 11, 2001, at how the collapses we've just seen could have happened. Our own instinct, in the case of Bear Stearns, is to look to whether it is possible to transmit true price signals with an unsound currency. But this is a time to remember that the resilience that is the hallmark of New York and to work at fashioning the right policy prescriptions in the months and years ahead...(After the Bear, NY Sun, cont'd)
A creative political administration in Albany is the one that will find some way to attract a more complex business mix to the state. This will involve tax policy, development ideas, and negotiations with major unions. It will involve, as the new Governor of New York said in his inaugural address, "taking actions that we are not used to taking."
A new administration is being assembled in Albany, and before long another will be assembled in Washington. Both of them will be all too tempted to tax the most successful...at producing capital and other gains. There is growing talk among the Democrats of protectionism. It is a good moment to study how the Great Depression came upon us. What is needed now is a renewed commitment to protecting the ability of and, importantly, the incentives for people to take risks, to make investments, to create jobs, and to make profits. Many governors and financial houses have come and gone, but those principles have produced the resilience that has made New York so great. (After the Bear, Editorial NY Sun, 3/17/08, cont'd)
The ideas prominently expressed in The New York Sun are not often taken seriously in New York City, the home, after all, of left-liberal journalism from television networks to The Times. But one hopes that Governor Paterson of New York does. He shows more signs of doing so than the sanctimonious liar who preceded him, and it's a good thing. A lot more than the future of one former star from Yale is at stake. The future of New York State stands on the brink. The new Governor of New York knows that. The time is fast coming for action. May God bless Governor Paterson's search for answers with good sense and a willingness to deal with what is, and not with what seems to be.