City and State Fiddle as the Spitzer Agenda Burns

It’ll prove even harder to cut spending and impose fiscal discipline next year, with the governor’s reputation tarnished by the Bruno affair and his enemies in the state Senate up for re-election, and looking to bring every possible pork dollar home to their districts.

Likewise, Mr. Bloomberg ran in 2001 promising to cut taxes, and gave pride of place in his first state of the city speech not to 9/11, but to the unaffordable size of the city’s taxpayer-funded public workforce. Yet despite the pubic sentiment for shared sacrifice, the mayor announced just a few sentences later that lay-offs were off the table, voluntarily surrendering his negotiating leverage.

Instead of cutting from what’s by far the largest per-capita budget of any big city, he raised taxes and bet on a quick market recovery. The bet paid off, but he lost a rare chance to take control of America’s fourth-largest budget – it’s bigger than those of Texas or Florida — which functions in large part as one of the world’s least-efficient job creation programs, employing a workforce one-seventh the size of that of the federal government, not counting the military. The stifling effect on private sector entrepreneurship is evident: In every borough outside Manhattan, government jobs pay more on average than private sector work.

Despite knowing the problem—in 2005 he conceded that "this city spends more money than it takes in, in an average year”— the mayor has increased spending by 40 percent, more than twice the rate of inflation, and city spending as a proportion of personal income is just short of an all-time high. Mr. Bloomberg, whose ill-fated West Side stadium scheme took priority over rebuilding Downtown, has done little to help maintain Wall Street, save for lobbying Washington for Sarbanes-Oxley reform.

At the same time, upstate has suffered for belonging to the same high tax and expansive regulatory environment, and for its crippling dependence on aid extracted from the city. Since 2000, more New Yorkers (especially those who are young and well-educated) have left for other parts of the country than any other state – more, even, than hurricane-ravaged Louisiana.

Meanwhile, Mr. Spitzer is increasingly focusing his energies on the process reforms dear to the hearts of his backers at The New York Times, where columnist Gail Collins has called for the governor to return to the people’s business, and especially to campaign finance reform, which she called “the centerpiece of Spitzer’s first legislative session.” And with Mr. Bloomberg’s time in office nearly done, none of the candidates for mayor have yet offered a serious plan for curtailing spending, which is understandable, since such proposals are usually as popular with voters as restoring prohibition.

While overdependence on Wall Street may lack the glamour of a classic live-boy-or-dead-girl scandal, time is short and the stakes are high. Mr. Spitzer’s best chance to restore his tarnished reputation as a reformer just may be to make the spending cuts necessary to ensure New York remains the financial capital of the world, lest he be remembered as the governor who presided over the fall.

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