The virtue of restraint is rarely found among 21st-century politicians. New Yorkers can count themselves lucky that Mayor Michael Bloomberg is an exception. During his time in City Hall, as the city has enjoyed sunny economic growth, the mayor has always kept his umbrella close at hand, in preparation for a rainy day.
Policy-wise, this meant ignoring the yammering of City Council members who wanted to spend the city’s remarkable $3.7 billion budget surplus in fiscal 2006 on pet projects and tax cuts. Instead, Mr. Bloomberg chose to reduce debt and offset future pension and health care costs. Meanwhile, he’s cut the municipal work force by 18,000 employees, slashed $3 billion from city agencies, increased property taxes, and refused to give raises to union members without productivity gains. Consistently throughout both terms in office, the mayor has made it clear that firming up the city’s long-term economic health is more important to him than spending a surplus to create the appearance of prosperity.
And that’s a good thing. Because it appears the rainy days may be imminent. At the very least, some clouds are forming. As Frank Braconi, the chief economist in the city comptroller’s office, told The New York Times this week, “There’s a very high likelihood that, yes, several years of very healthy and well-balanced economic growth in the city are probably behind us.”
The first tremors are emanating, of course, from Wall Street, which has not been immune to the nationwide subprime loan crisis. The investment banks and financial firms are reporting lower profits and job cuts—over 40,000 employees of New York-based firms have been laid off in 2007. At the top end of the scale, you’d have to search far and wide to find anyone who thinks this year’s bonuses on Wall Street will approach the record $25 billion of 2006.
When Wall Street stumbles, the entire city feels the pain. Our treasury depends on revenue from income taxes, sales taxes and real estate transactions—all of which rely heavily on the creation of wealth downtown. Indeed, the Federal Reserve Bank of New York has long warned that the city economy is far too dependent on Wall Street.
All of the above would be cause for concern in any given year. But the rainy days are coming at a most inopportune time: By November of next year, the presidential race will be decided, and all eyes will be on the elections for mayor and the Council. Which means the next two budgets will be, in essence, election-year budgets. Legislators will be inclined to spend every dollar they can find in order to keep their constituents happy and get themselves reelected.
Which means action must be taken right now. It is time for new policies to control public spending, cut back on hiring, seek productivity gains from workers and limit new spending initiatives. The city and state are not going to be able to manage a fiscal crisis unless they are prepared for hard times. The pending city and state elections should not provide an excuse to delay the need to manage our public funds with intelligence and prudence; otherwise, we may face the worst of times: raising taxes in a recession, taking money out of an economy that is already declining.