Friday, April 18, 2008

Governor Paterson's First Month

"What I want you to understand is that this is not a new governor responding to an economic crisis. This is a new governor trying to create fiscal reality.” [Governor Paterson of NY, April 7] The governor’s words give some hope that he is serious about fixing New York’s budget problems, slowly easing the tax burden, and staunching the losses from a fleeing middle class...But New Yorkers need action, not words—and certainly not the nearly $122 billion state budget that Paterson is expected to sign barely a week after his speech. While he has pared almost $2 billion from earlier budget proposals, state spending will still rise by close to 5 percent this year. To balance the budget, Paterson and the legislature did what past governors and legislatures have done: find creative ways to levy nearly $1.5 billion in new taxes and fees on New York residents and businesses....Words Not Deeds, Nicole Salinas, City Journal, 4/14/2008

For those seriously considering moving out of state to join the hundreds of thousands of tax refugees from New York City and New York State, Governor Paterson's speech was almost as startling as hearing Bill Clinton chime in with New Gingrich in 1995 about welfare reform. It was a direct assault on the assumptions that guide New York's waltz into bankruptcy. Perhaps Governor Paterson forgot something, however.

Even though Paterson is the head of a state government, an unelected Governor has no mandate to do anything but follow the legislature's lead. This bodes ill for New York State's future, because the legislature in Albany, and not just the Democrats as George Pataki's last term demonstrated, is leading the state on a spending and taxation binge that, as Mayor Bloomberg noted yesterday, is more likely to drive wealth out of state than balance a burgeoning budget. What's worse is that in New York State's major cities, including the biggest one, political discourse is entirely one-sided. In New York City, a Republican office-seeker is rarer than a snail darter in Tennesee. The local party has had to adopt Democrats, such as Mike Bloomberg, to offer serious candidates. A state lurching on the edge of bankruptcy, without serious political discussion, is more like a tottering socialist country in South America than an American state. The primary option for protecting one's self, one's family, and one's company is taxpayer and employer flight.

As Galinas and many other writers have made abundantly clear, as have we on this blog, the heart of New York State's economy is an industry that could move in toto to Jersey City in eighteen months. Modern markets or, for that matter, modern stores, don't depend on brick and mortar headquarters in a given city or state. That's why New York City has thrown billions of tax rebates to the wolves of banking and Wall Street. That same industry, financial services, is also stumbling into a major recession with the current credit crunch. Tax collection in New York State from financial services businesses, as Governor Paterson pointed out, is down 75% from last year. Bonuses will shrink, further suppressing tax revenues. Tens of thousands are likely to be laid off.

Unless the Governor can start making a governing alliance out of members of his own and what's left of the other party, and now, New York State is going to slide backwards toward 1975, a generation's work of reconstruction gone to waste.


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