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What New York Didn't Need

Mises Daily: Monday, December 30, 2002 by

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What the terrorists didn't do to New York, the politicians will. 

Mayor Michael Bloomberg recently signed an 18 percent real estate tax increase into law. This was designed to close the city's $5 billion dollar budget gap, a remarkable amount of red ink given that the city's bloated budget is some $42 billion. The Republican mayor was determined not to cut government jobs or programs. The taxpayers would have to bear just about the entire burden, even though the city finances were already mismanaged. 

"The city is bankrupt," said one member of the infamous New York City Council, which is dominated by Democrats. It voted 41–6 to pass the huge tax increase. How ridiculous is our leviathan New York City government? Several members of our infamous governing body didn't even show up to vote!

The six council dissenters, many of whom had the nerve to buck our imperial masters, were immediately threatened with all sorts of political repercussions by the first hooligan as well as the leadership of the City Council. One maverick councilman, in a futile attempt to stop this ripoff tax grab, actually said that he was voting his conscience because the taxes would be a hardship for many of his constituents. 

Can you imagine anyone saying such a thing in this Soviet republic on the Hudson? A politician who actually had some concerns for his overtaxed neighbors. Fancy that, Hedda! 

But fear not, comrades. This gentleman's intelligent objections were turned aside by the council's socialist majority that has ruled our city for at least half a century and will continue to do so up to the minute in which a New York Gorbachev throws up his hands and the Red flag is hauled down. 

Even in raising taxes with the promise of solving the city's perpetual budget woes there was more than a bit of fraud. Part of the mayor's plan to "balance" the budget—one of the funniest phrases in New York City's troubled history given the many attempts of so many previous mayors who practically invented Enron accounting techniques—was to reinstitute the commuter tax. This is a wonderful political move because, as an old city pol might have put it, "how many votes are there in the suburbs?" 

The only problem with bringing back this hated impost is that—unlike the real estate tax that sailed through the city council almost as quickly as pay raises for our estimable city Solons—this bit of theft requires the approval of the state legislature. And—this may surprise my fellow citizens of our slave municipality—many New Yorkers who live outside of the Rancid Apple just don't trust Gotham. Their stereotype of New York City is one of a spendthrift town that always expects to be bailed out by the rest of the state.

And who ever said stereotypes were wrong?

A key member of the state legislature told Michael to forget about the commuter tax. No matter, Mike is not discouraged. He's not stopping with taxing people who can't vote him out of office or people who own or rent property in this city. Madman Mike no sooner had his 18% property tax, than he announced plans to put still more geld in the city coffers. 

Big plans!

When the latest tax increase was signed into law—in the near record time of two weeks because no one wanted to have any extensive hearings on why this was again happening to overtaxed New York—our esteemed chief executive had a warning for his now benighted subjects: Next year, said he of Gracie Mansion, he is planning on raising the city income tax. But there is escape for the overtaxed citizens of our corrupt city.

Just think, fellow slaves, if you don't own or rent property, if you have no income--in other words if you're homeless and without a job—the mayor will not bother you. He will not reach into your empty pockets because there are far better pickings for the exploiter class elsewhere. However, if you're middle class, if you have a small or big business, if you own property here in New York, well then, look out! And don't expect the members of the local legislature to provide any relief or any substantive philosophical alternative to the mayor with a ravenous appetite for taxes, taxes and more taxes. 

Our sleazebag city council members are the proud successors to the infamous Tammany dominated Board of Alderman made famous by Boss Tweed and many other convicted felons. Indeed, Tweed's high priced courthouse—financed with the sweat and big tax increases of generations of previous New Yorkers—still stands today in back of City Hall. 

The Tweed courthouse is a stark reminder of the venality of our city politic. This is a city in which people work and sweat to finance their representatives' cellphones, limos and, of course, their sundry sycophants, who provide excuses for why their bosses don't attend meetings but continue to collect fat salaries. But, as veteran New Yorkers know, democracy is a pricey proposition.

This is a city in which each of the city's five counties has no county government, but in which each of these counties—called boroughs—there is the elected post of borough president. Sounds impressive, no? 

Still, under the city charter, revised some 10 years ago, these borough presidents have almost no power or responsibilities. Nevertheless, they all retained their six figure salaries and staffs, proof positive that New York City's public sector can no more be reduced than can the waistline of someone who lives on Donuts and thinks McDonalds is superior to French cuisine. 

If given enough time and power, this gang of well-fed running our city will destroy its remaining industries. They and their antecedents already have an impressive record of mayhem. So many industries have already departed New York in the last fifty years. This sad record can be viewed by taking a tour of the hundreds of empty factories throughout the outer boroughs of the city. They are places where our parents and grandparents once worked; places that were stepping-stones for their children to a middle class life. New York City's ruling classes—Democrats and, to a lesser extent, the supplicant Republicans, who are usually happy to take the crumbs of socialists running this city—are destroying this heritage of self-improvement. 

Queens, a borough with close to two million population, once housed hundreds of factories, most of which are now gone. The economy of the outer boroughs, once booming, was sacrificed by pols to the needs of the city's central districts, midtown and the financial area. Brooklyn was once a major industrial area. Today Brooklyn, a great city in the 19th century, has an economy that is a shell of what it was once. 

Our highly paid city planning commission has also contributed to the destruction of New York City's economy, which has an unemployment rate of about 50% greater than the national average in good times and bad. The planning commission signed on to white elephants such as the Javits Center, a problem plagued convention center built in the 1980s. The Javits Center was dogged by gross cost overruns from the first day of construction. Its bills were passed on to the taxpayers through the vehicle of public authorities that certainly are not answerable to the taxpayers. Worse was to come.

Ever since the Javits Center actually began its egregious operations, it has had a history of union problems, corruption and an inability to compete with convention centers in other cities. Pols in other cities are hungry for taxes, but few would say they have achieved the swinish standards of New York's ruling hogs.

Even the crown jewel of the city's economy, Manhattan, has lost much of its business. For example, the famed theater district, a huge part of the city's now fading tourist industry, once ran from 14st to 59st. The theater district is now a tiny fraction of that. It quits in the low 50s and doesn't begin until the high 30s. Two theater tickets are not only expensive—a recent performance of a revival of Man of LaMancha set one back in excess of $180—but they often contain extra service charges. That's even though our piggy governors swear they want to "help" the tourist industry, which, like countless other New York industries that suffered and died, is also on the decline.

The garment district is also a shell of what it once was. Railroads were once great here. No more. On the West Side of Manhattan is a relic of a once great freight line, the High Line, which in the early to mid 20th century provided a vitally needed freight service run by the New York Central. It also is now long gone. It was an engineering marvel that actually ran into some of the factories. Those factories are gone. The High Line is now a collection of weeds. 

Here is a delicious irony. The city's one party government is led by leftists/socialists who pride themselves on their pro-environment stands. Today, with freight train business derailed, the city is choking in truck fumes because it has no effective freight link. This is a testament to the many businesses that cried uncle after relentless regulation, taxes and pols who demanded that business be compassionate first and, possibly, a little profitable last. Of course, not too profitable, the politicos warn as they go about assassinating business after business. 

The cry of city pols that we're bankrupt so we're raising taxes is an old game that has been played with great flair by many of Bloomberg's sleazebag predecessors. For example, Robert Wagner was a popular mayor in the 1950s and 1960s. In a famous message in the early 1960s, Wagner, facing a similar fiscal crisis, blamed the bankers, who bought and sold city bonds, for the city's plight. 

Wagner, like Bloomberg today, wasn't going to cut precious public sector jobs. He promised that he wouldn't let the city's expanding debt stop his determined effort to make the city's welfare structure bigger, encouraging citizens to become dependent on an incompetent government instead of themselves. Although Wagner lied about many things, let's give the dear departed credit: He sure kept this promise. 

Wagner also basically handed much of the city over to power broker Robert Moses. The latter proceeded to wreck countless neighborhoods with his hideous highways and his policy of destroying the city's already crumbling mass transit, which had once been a great system under private management. The latter, by the way, was prohibited from ever raising its fares above a nickel during its 40 years of operation. However, under public control the subway fare has gone through the roof. But, unlike the previous private operation, there are no complaints about outrageous profits because there are never profits in the subways.

John Lindsay, the famous tower of jelly mayor who gave New York's already overburdened citizens its first city income tax, blamed Washington, private business and anyone and everyone for the city's problems in the 1960s and 1970s. 

Abe Beame, a longtime city controller who sanctioned so much of the city's questionable accounting practices, was Lindsay's successor. Beame, Lindsay, Wagner and other George Washington Plunkitts all made the city so dependent on debt, that, by the 1970s, New York City was the fiscal equivalent of a crack addict.The city was using debentures, short term notes, just to pay the day-to-day operations of the city. By this period the city was so hard up that even many routine construction measures had to be put off.

Beame, significantly enough the disciple of Bob Wagner, skirted bankruptcy. Of course, in true New York politco style, he said it was all someone else's fault. He and Lindsay also dreamed up the Yankee Stadium boondoggle, which had a city in the midst of fiscal problems, buy and renovate the House that Ruth Built. A supposed $20 million project ended up costing the city somewhere north of $100 million. 

Always a good friend of every mayor, King George Steinbrenner and his Yankees got along wonderfully with all our mayors (That is until the late 1990s when Georgie complained that Yankee Stadium wasn't good enough and the city should build him a new one. The owners of the cross-town Mets, in effect, said, "Where's Ours?"). 

The bills for the infamous Yankee Stadium renovation weren't sent to George. They were sent to the taxpayers, who also continue to subsidize possibly the most profitable franchise in sports through a sweetheart lease deal that affords the owner of the Pinstripes a ridiculously low rent. (And remember the landlord is the city, which is "bankrupt."). George makes up for the cheap rent by offering the mayor and council members cheap or free tickets to the games, while the taxpayers pay through the nose in several ways. And so it goes.

Still, two of the mayors who followed these payasos called Wagner, Lindsay and Beame were strong and might have tried to reform the city had they the will and the intellectual capacity to fight against the tide of runaway statism. 

Fat chance. 

They weren't interested in trying to turn the tide and New York City continued its long, slow decline that would lead Money Magazine, by the 1990s, to call our sorry municipality "tax hell."

Ed Koch and Rudolph Guliani were popular mayors in the 1970s, 1980s and 1990s who were lucky enough to see rising city tax revenues from a booming stock market, the city's last remaining big industry and one our myopic masters don't understand could be lost in the next few years given the development of electronic communications networks (ECNs). These two mayors had the political capital to attempt radical changes in the city's tax and regulatory changes. 

Unfortunately, they didn't even try.

They were more interested in winning elections than in roping in the city's runaway bureaucracies or taking on its special interests. These mayors weren't the types to lay off city workers or close any superfluous city agencies or institutions (One small example: The city pays for a law school in which mediocre college students, many of whom celebrated the Soviet Union, have been able to pretend that they have the scholarly abilities to become lawyers).

Any other bankrupt entity would be forced to reduce spending; to slim down its spending patterns; to go to a Betty Ford clinic for chronic overspenders. Not our city government, which, in its recent decision to raise taxes to the stratosphere, also decided on no major cutbacks. In fact, I recently read an announcement that the Queens library will expand its hours, offering Sunday service at the central library as well as several branches. But please remember: The city is "bankrupt."

My council representative, Democrat Melinda Katz, never met a big spending program that she would oppose or even trim. Her analysis of our sorry state? It's all because of the September 11 disaster and the national recession. How convenient. That lets off her and all her colleagues in crime. 

Katz, in response to my letter protesting the 18% increase, bragged about how most cuts were avoided in the Bloomberg "budget modification." (Honest to God, she paid one of her flunkies to use that term). She also crowed that "Youth beacon programs will continue" and  that "There will be no education cuts to the classroom." 

Fine. The city's notoriously egregious education establishment will continue to receive, misspend and lose tons of taxpayer money. It will continue to turn out tens of thousands of students who don't read, write or perform math at their grade levels. It will continue, even though kids in New York public schools receive an education far inferior to most private schools, to promote kids to the next grade in the famous New York policy of "social promotion." 

In the meantime, here's the Katz recipe—the typical career city pol analysis—for digging out of the city's perpetual fiscal problems: "The City needs time to re-establish itself and be able to move forward without having a major impact on our quality of life." 

Katz obviously is an expert in Doublespeak. So let me offer a translation: Don't expect us, the poltroonish pols of your venal city, to take the tough steps that will give the overburdened citizens a break. We're not going to cross the unions and other special interests that expect us to keep these ridiculously inept programs fat and well fed. Be sure to vote for me in the Democratic primary. Hey! You're welcome!

What is amazing about our city from Wagner to Bloomberg—from countless city councils of the past to the I am great Melinda Katzs of today, from the liberal republicans to the social democrats—is the continuity of crackpot leadership. What is it about New York City that produces myriad mountebanks?

Or maybe it is just that our ruling class is determined to prove Karl Marx right. The first time history repeats it is a tragedy, he said. The second time, it is a farce. Welcome to Farce City.

Every day when one reads the papers, one goes down Memory Lane. The names change, but the problems and philosophies of the Rancid Apple are always the same. The city taxes, regulates and spends too much. There's about as much mystery here as why people and institutions go bankrupt or why many Americans become obese. Some people can't stop eating so they get fat. Our city can't stop taxing and adding to the payroll so it claims bankruptcy while ordering a triple portion of taxation.

In the early 1980s, the city's public workforce was around 200,000. Today it is close to 300,000, a nearly 50 percent increase. That's even though the population is about the same. What's the excuse? The consistently corrupt nature of New York City politics.

It is waging a war through various and sundry taxing authorities against property, against business, against the spirit of self-improvement and, most of all, against middle-class New Yorkers with multiple jobs who always seem to be behind the eight ball. So many of the latter inevitably end up moving to New Jersey—another taxing clime, but an ostensible Cayman Islands compared to the People's Republic of New York. 

We live in a city in which ancient rent control laws going back to World War II—now junked in almost every other major city—continue on the city's books, benefiting many of the rich and well connected. Rent control provides more evidence of the crass economic illiteracy of the mayors and city councils that have ignored every warning of impending city fiscal disasters and pressed ahead with more and more taxes. Is it any wonder than many builders want no part of New York's arcane laws and price controls? Would I accept a limitation on how much I could make? A limitation on how much I could improve myself? I would not.

But despite Bloomberg's recent 18% tax hike, despite his promise that next year the hated city income tax will be hiked, another tax increase beyond these is looming on the horizon for New Yorkers. It is a tax increase that is another result of generations of municipal and state mismanagement. And even though it is unlikely to be recognized as a tax increase by millions of New Yorkers, most of whom just take these confisicatory imposts for granted, it is still another rip-off in a long series of rip-offs. 

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Gregory Bresiger, a business writer and editor living in Kew Gardens New York, is assistant managing editor of Traders Magazine. His work has also appeared in the Journal of Libertarian Studies, the Free Market, Financial Advisor and the New York Post. See his Mises.org Articles Archive, and send him MAIL