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Blue Death Spiral In New York

A familiar national battle is heating up in New York state: the debate over tax levels on the wealthy. Like many blue states, New York is a model of income inequality and it has both large numbers of millionaires and billionaires and large, hungry public employee unions.

Despite opposition from Governor Cuomo, various interest groups and their friends in the state legislature have begun to push hard for an extension of the current tax surcharge on those with incomes above one million dollars. From the New York Times:

Mr. Cuomo insisted that under no circumstances would he consider backing the extension of the surcharge, saying it would encourage residents and businesses to move to other states. He said he would support a federal millionaires’ tax, because it would treat residents of all states equally.

The governor, aided by Senate Republicans, this year succeeded in warding off efforts by Democratic lawmakers during the legislative session to extend the surcharge, which expires Dec. 31.

But the Occupy Wall Street movement and the spreading protests it has inspired — scores of people gathered at the Capitol on Saturday, and an occupation is planned in Albany beginning at noon Friday — have reinvigorated lawmakers, organized labor and community groups that advocate for the tax’s extension. The surcharge was a primary topic of conversation at a retreat hosted by the New York State Black, Puerto Rican, Hispanic and Asian Legislative Caucus on Friday; those lawmakers overwhelmingly agreed that they wanted to press further in favor of extending the measure.

And on Monday, various advocacy groups and labor unions, including New York State United Teachers and many of the state’s other largest unions, formed a coalition to start what they described as a “renewed” push for the surcharge’s extension. They are calling themselves 99 New York, a reference to Occupy Wall Street’s theme of representing 99 percent of Americans rather than the richest 1 percent.

Note the deep wishful thinking about OWS.  When a proposal with massive trade union backing can rally only “a few scores” of demonstrators to the union-worker rich state capital, this is not a sign of a political groundswell.  It is just the opposite: a sign of advanced arteriosclerosis and apathy.  Turning out crowds for demonstrations is one of those things that unions do; that they haven’t bothered with more than token crowds is a sign of the weakness of the OWS brand, not, as the Times coverage glibly suggests, its strength. And to suggest that the hacks and timeserving careerists who run the state government lobby groups for powerful vested interests were ‘inspired’ by these protests into actions they weren’t already planning is delusional.  The fight over this tax extension is a central piece of the legislative strategy of the union lobby, and there is no doubt that the lobby would be making a powerful push — OWS or none, tiny demo in Albany or not.

The Times is simply repeating talking points and spin here without a grain of thought or real journalism.  Bad, and dumb.

One wishes Governor Cuomo well.  There are certain situations where a tax surcharge could be justified — especially if the money raised were paired with budget cuts and used to stabilize the state’s shaky finances. New York badly needs to stabilize local and state government finances as the municipal and state bond markets could force higher interest rates on overly indebted, slow growing government units in times to come.

But a cursory look at the groups lobbying for the surcharge extension shows that the fight is about getting another fix, and not about cleaning up the state’s fiscal act. Powerful public sector unions and various liberal interest groups are the primary backers of the measure, and the plan is to use new revenue to prevent budget cuts. This is about making the state’s problems worse, not helping to fix them: advocates want to prolong the party that got the state in trouble in the first place.

The real problem with these demands isn’t so much the tax surcharge itself, but what it says about state politics.  Public employee unions and other vested interest groups retain outsize power in the political system and they are utterly determined to prevent the deep reforms that could rebuild the upstate economy and help New York City prepare for a future in which Wall Street is decentralizing away from the region.

For generations, New York state and New York city were powerful job generating machines.  Now both are living on capital, strangled by taxes and regulations, unable to maintain infrastructure or provide decent services at a price they can afford — and increasingly dependent on the financial industry for revenue and growth.  The state’s elite is almost entirely indifferent to the state’s health and well being; our state is crumbling around us and almost nobody cares.

Having driven out one industry after another, the state’s all powerful anti-growth, pro-tax lobby has turned its gimlet eye on the one goose on the farm that still lays golden eggs: the millionaires and billionaires in the financial service sector.  This will not end well for the state or the city; New York needs to reduce its dependency on Wall Street, not to increase its dependency on Wall Street while simultaneously giving Wall Street more reasons to flee.

The notoriously slack New York Times coverage of state politics is one of the reasons New York is one of the country’s worst governed states; sadly, nothing seems to be changing.

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  • WigWag

    Well, I guess I shouldn’t complain; after all, Professor Mead managed to write six interesting paragraphs before he wrote something that was mind numbingly ridiculous. Mead says,

    “Public employee unions and other vested interest groups retain outsize power in the political system…”

    Yes, that’s right; the influence of public employee unions in New York is just so powerful; much more powerful than the lobbyists for Goldman Sachs or J.P Morgan Chase or any of the billionaires who run New York hedge funds.

    Lloyd Blankfein, Jamie Dimon, John Mack, Paul Tudor Jones and John Paulson just cower in fear and genuflect before the awe-inspiring power of UFT President, Michael Mulgrew. They worship at the altar of PBA President Pat Lynch. They bow deeply when greeting Uniformed Fire Fighters Association President, Steve Cassidy.

    Does Professor Mead bother to pause for a thought for even a moment before applying his fingers to the computer keyboard? Does he really believe that public employee unions have “outsized” influence compared to financial industry executives, lobbyists for New York retailers, advertising industry lobbyists, the titans of New York Real Estate or even owners of taxi medallions?

    Perhaps Professor Mead can inform us about what it is about the way these unions exercise their power that he finds so objectionable. Is it the fact that union leaders write press releases, talk to reporters and give television interviews that he doesn’t like? Is it the fact that they urge their members to vote for candidates who support public employees that he finds so objectionable? Is it the ability of union members to make political contributions to the candidates of their choice that Mead finds so nefarious? Is it the fact that unionized workers occasionally write or even visit with their elected representatives that Mead thinks is so heinous?

    What exactly does Professor Mead think that public employee unions have done to acquire so much power? After all, they can’t strike; in New York, that’s illegal. Do they take hostages? Do they surreptitiously poison the soup of politicians? Do they point loaded weapons at government officials?

    Perhaps Professor Mead has been in China for too long; he seems to be increasingly fond of their political system. This post makes clear that he finds it abhorrent when working men and women use the tools of democracy to promote their self-interest. Maybe he thinks it would be good if Governor Cuomo used the same techniques on policemen, fire fighters and school teachers that the Chinese used in Tiananmen Square. That would surely cut the oversized influence of these unions down to size.

    But at least Professor Mead has made clear what he really thinks; he believes we need to start reducing the power of working people and start protecting the millionaires and billionaires who are so misunderstood, put upon and starved of influence.

    This post illustrates perfectly why Professor Mead should disclose to his loyal readers who paid for his trip to China. If the funds that underwrite his travel had their origins in the pockets of one of those New York millionaires or billionaires shouldn’t his readers be able to determine for themselves whether his feelings about the “millionaires’ tax” are related to the party or parties that are paying for his trip?

    • Walter Russell Mead

      Nothing like ad hominem insinuations to top off a disagreement. Thanks for the smear, Wigwag. Have a nice day!

  • Chase Crucil

    While it’s true that things aren’t going well in NYC, it might be productive to take a broader look at all the fifty states to put things in perspective. A month ago, I came across a washington post interactive map that allowed the viewer to see the unemployment numbers in any county in America. And somewhat to my suprise, the counties in suburban NYC have a an unemployment rate – Westchester stood at an impressive 4% – that is much lower than the national average. Furthermore, the state of Massachusetts, a blue state, has an overall unemployment rate of 7%. (Compare this with South Carolina, the quintessential Red State, which has one of the highest unemployment rates in the country.)

    If these numbers were available in a southern state, the local politicians would claim it as a victory for the Republican political ideology. Yet when good unemployment dates comes out in a blue state, they tend to be dismissed as an anomaly.

    Also, just to show that I haven’t had to much Kool-aid this morning, I think that the Dems in New York should follow Coumo and Bloomberg’s lead and be kind to Wall Street, which is critical to the city’s economy.

  • Jacksonian Libertarian

    We must anti-trust the labor gang monopolies, we are all workers, and they shouldn’t get special monopoly privileges under the law, we should all be treated equally. There is a reason why so many labor gang leaders go to prison; extortion is part of the criminal skill set.

  • Larry, San Francisco

    My brother in law works for the AFT in New York City. He is quite left, HATES the rich and is extremely excited by the OWS movement. I tried to point out to him that a large portion of New York taxes are paid by the super rich and if they get hurt it will seriously harm him and his union. He does not believe me.

  • FX Meaney

    The deals public unions and politicians make to their mutual advantage are unaffordable in many if not most states and their costs crowd out necesary functions of government and drive up taxes that causes an exodus of the fed-up taxpayer. It’s happening in Cal and in NY. Rush Limbaugh bade farewall to New York years ago because he and successful people like him had became a tax target of the city and state.

  • Luke Lea

    “Note the deep wishful thinking about OWS. When a proposal with massive trade union backing can rally only “a few scores” of demonstrators to the union-worker rich state capital, this is not a sign of a political groundswell. It is just the opposite: a sign of advanced arteriosclerosis and apathy.”

    Well, aren’t you assuming that the interests of OWS and the labor unions are aligned? Of course the unions would like to think so, but for them to assume the OWS agrees may be a bridge too far.

    As Mead certainly realizes and economists have long pointed our (and I agree with him and them here) the interests of old-line labor unions are at variance with the interests of the public at large. Maybe OWS knows that somehow instinctively in their collective wisdom?
    In any event their committment to the Quaker model of General Assemblies and human mikes makes them immune to co-optation by organized labor, charismatic leaders, self-appointed spokesmen of all kinds. (Unlike the Tea Party this last one especially.)

    Dimes to doughnuts one or the other of us is right. I guess we’ll see pretty soon who is wishfully (or in your case unwishfully) thinking.

  • Andrew

    While I agree that WigWag’s reply was far too glib and replete with ad hominem/personal attacks, he DID make one point that is worth noting…the lumping of “Public employee unions” with “other vested interest groups” that “retain outsize power in the poitical system” and altogether are adamantly opposed to reform.

    Do Public Employee Unions enjoy political power in some measure beyond the standard? If so, what standard? Can we not say the same of ANY interest group (public, private, personal, or otherwise)? Do unions’ political power outstrip your assessment of their population proportion? The same must be said of Wall Street lobbies, then…indeed, even more so. No, political power is measured not by representation, but by money (as the Supreme Court affirmed last year). So is it that Unions shouldn’t have as much money to lobby as they do to which you object? Now, I personally think labor unions have largely become the same corrupt pyramidal bureaucracies they were formed to counter, but I cannot glean from your blog here why it is that they, in your view, wield “outsize” power in the political system compared to, say, any other interest group, other than that they lobby for policy with which you disagree. What is that reason, if not simply that you disagree with them?

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