A Perfect Storm
There’s been a lot said, or rather whispered, about the city’s $6 billion budget gap and what this might mean. Most New Yorkers expect some uncomfortable belt-tightening, fewer dinners out, perhaps a slowdown in subway service. But the true magnitude of what the city is facing has yet to be stated plainly. Fortunately, there are some realists around who are making themselves heard, such as Abe Lackman, the respected former secretary of the New York State Senate Finance Committee, who sketched out his informed vision of what New Yorkers should expect in 2003 in a recent interview with New York Times columnist Joyce Purnick. Mr. Lackman argues, convincingly, that the city is headed for a fiscal crisis worse than the 1970’s.
Mr. Lackman uses a popular narrative-the movie The Perfect Storm -to get his message across. The storm occurred when three storm systems came together off the coast of New England in 1991, to devastating effect. “The metaphor to the perfect storm is, this incredible strong storm comes out of nowhere, and it comes with an enormous buildup of speed, and it’s going to hit state government, New York City, county governments and mass transit, all at once,” Mr. Lackman told The Times . “And it’s going to hit with a ferocity that has not been witnessed for almost 60 years …. If there is one piece of news I am trying to convey, it is that next year is not going to be a normal time.” Why might 2003 be even worse than the 1970’s? Back then, the crisis was confined to the city; the state was healthy. Now both city and state are teetering.
Mr. Lackman found that state revenues have declined two years in a row, something that hasn’t happened since the 1940’s. His culprits? The U.S. recession, Sept. 11, the tumbling stock market. And as he told The Times, corporate scandals reduced the state’s income from capital-gains taxes, as disillusioned investors refused to back new mergers and I.P.O.’s. He added that the wealthy are tying up their money in real estate and not the stock market, which has a higher turnover rate and thus can be taxed more frequently. He could also have added that Governor George Pataki, Assembly Speaker Sheldon Silver and Senate Majority Leader Joe Bruno have been on a reckless spending spree for the past four years. With state revenue from personal-income taxes down 25 percent since last April, that spending binge is about to make itself felt: Mr. Lackman forecasts that the state will experience a revenue shortfall of $8 billion to $10 billion next year.
For many New York City residents, the fiscal crisis of the 1970’s is something abstract. Yes, times may be tight, but surely the sun will keep shining on the city, especially after Sept. 11-look how the country embraced us. But those who expect the state or federal government to lend a hand are dreaming. Even if the state had the money, Governor Pataki’s priorities are upstate-witness his stubborn refusal to support a reinstatement of the commuter tax, which once brought the city hundreds of millions of dollars.
New Yorkers can be forgiven for being in denial about 2003. Last year, the city endured the worst terrorist attack in world history and emerged with its dignity and courage intact. But that won’t pay the bills. Which is why it’s all the more urgent that New Yorkers listen to realists such as Abe Lackman.
A Political Ground Zero
It wasn’t so long ago that New York was at the center of American politics. One of the two major political parties nominated a Governor from New York as its Presidential candidate in every election from 1928 to 1948. Meanwhile, New York’s Senators were shaping policy and debate on Capitol Hill. Their names are part of American history: Robert F. Wagner, Jacob Javits, Robert F. Kennedy, Daniel Patrick Moynihan. Now, however, all that has changed.
New York has been shedding political power for years, but today it stands outside the political mainstream as never before. Republicans from the West and the South run Washington now, and they’re not overly fond of New York, even though the state has a G.O.P. Governor and the city, for the first time since 1898, has elected Republican Mayors back-to-back. The Republican Party doesn’t need New York to win national elections. Indeed, it wins despite the Northeast.
In the end, this loss of power will come down to matters of dollars and sense. As former Senator Moynihan annually pointed out, New York gets less from Washington than it sends in tax revenue. Even when friendly Democrats were in power, budget experts estimated the city sent $14 billion more annually to Washington than it received. Now that deficit is going to get worse. New Yorkers ride mass transit; people in the West and South take highways to work. Guess which projects will get funded, and which won’t? New York has generous social services, but the “rugged individualism” of George W. Bush’s Republican Party isn’t particularly keen to dole out dollars for housing, social welfare or health-care services. Our two Senators, Charles Schumer and Hillary Clinton, can probably delay certain judicial appointments, but they can hardly drive policy in the new era of Republican hegemony.
As never before, the priorities of New York and the nation are at odds, and New York doesn’t have the power to do much about it. Fasten your seatbelts, it’s going to be a bumpy ride.
Top Economists Pick N.Y.U. and John Sexton
Further strengthening the school’s rapidly rising status as a training ground for the country’s economic elite, New York University has hired eight prominent economists away from other colleges. The new faces include Thomas Sargent, a leading economic theorist from Stanford University; Niall Ferguson, a noteworthy Oxford University financial historian; William Easterly, a former World Bank economist; and Jonathan Eaton, a former chairman of Boston University’s economics department. This further confirms N.Y.U.’s emerging position as one of the great universities of the 21st century.
“There is a sense that New York is establishing itself as an intellectual center,” Mr. Eaton told The Wall Street Journal. “There is just a lot of action here.”
Economics is a hot topic these days: At Ivy League colleges, students who declared economics as their major rose 33 percent between 1996 and 2000 alone. The critical importance of N.Y.U.’s economics department is due in part to the powerful synergy which exists between that department and the school’s strong graduate programs: the economics department services the law school, the business school and the school of public policy, thereby serving as a powerful linchpin of the university.
The man behind the new hires is John Sexton, who was recently named N.Y.U.’s 15th president. The extraordinary success he achieved as dean of the law school for the past 14 years will most certainly be repeated in the university at large.