Monday, May 4, 2009

Bloomberg's Regressive Budget Solution

The latest budget proposal from Mayor Bloomberg avoids making tough choices and takes a regressive approach to increasing revenue for NYC. We are surprised and disappointed by the approach taken by the Mayor's finance team, and we are expecting voters in our city to note that the Mayor who called himself indispensable is showing himself to be anything but indispensable.

Budget Mess

Mayor Bloomberg says that he is indispensable and that we must re-write the rules that govern our great city (the world's greatest city by any objective analysis) to allow him to serve a third term as the city's chief executive. But, he also says that his 7+ years in leading our city have led us into a fiscal crisis. The two concepts are incompatible. If Bloomberg has led us into the mess we're in, how can he argue with a straight face that he is the only person prepared to clean up his mess. As President Barack Obama stated in one of his most effective attacks on Secretary of State Hillary Clinton when they were both US Senators fighting for the Democratic Party's nomination for President of the United States:
"Once we had driven the bus into the ditch, there were only so many ways we could get out. The question is: Who's making the decision initially to drive the bus into the ditch?"

Indeed. Who drove us into this ditch?

Who was at the helm when we developed the $4 billion deficit we now endure? Could the person who led us into the ditch possibly be indispensable as the leader to help us dig out of the mess he created?

The current mayor in New York City has a tremendous challenge in front of him in terms of explaining why it was important to overturn the will of the voters to allow him to seek a third term and why he, of all people, should be in charge of leading the city through this dark time after his leadership brought the darkness to us.

In a poetic move that underscores the lack of creativity and the lack of leadership in the Mayor's office at this time, the Mayor unveiled his budget last week, and he was proud to announce that he was leaving it to the individuals with the lowest incomes to fill the budget deficit by paying higher taxes.

Ugly Solution

Regressive taxation should be avoided. By asking those with the lowest incomes to pay more of their income in taxes than those with the highest income, we increase inequality, punish poverty, dampen spirits, and promote social ills. We also lose moral authority. For privileged people to demand more of those with lesser privilege than they do of themselves creates an impression of reverse-Robin Hood politics - shifting wealth and income from poorer individuals to wealthier individuals based on a belief that wealthier people will make better use of the wealth being shifted. Mayor Bloomberg, as a multi-billionaire, may hold a view that wealthier people should have greater wealth than they do today and that poorer people should have less, but such a position is political untenable, morally repugnant, and contrary to basic principals of macroeconomics. When poorer people obtain additional wealth, they increase demand in the economy, which creates jobs and increases profits for businesses. Wealthier people are more like to save or invest additional cash - activities that are not unhealthy but that cannot create the level of economic growth that consumer spending does.

Unfortunately, Mayor Bloomberg's approach to closing the huge budget deficit that emerged under his leadership is to raise revenues for the government through a regressive sales tax increase. The sales taxes are implemented as an equal percentage for all purchasers. Therefore, those with the lowest incomes will pay the greatest percentage of their income in sales taxes. This proposed sales tax increase takes a regressive tax and amplifies its impact.

Ironically, anyone could have proposed placing the burden on the lowest earners, and such a suggestion is far more aggravating coming from a billionaire than from a Mayor of lesser means. Yet, the billionaire Mayor who says he is indispensable has nothing more to offer than to increase the most regressive tax we have in our city's system.

It Gets Worse

The Bloomberg budget proposal includes many other objectionable provisions, but its most glaring flaw is that it conveniently avoids hard choices and offers no long-term solutions. It is a stop-gap, election-year gambit, and we doubt that the sophisticated people of New York City will fall for this gambit.

Interest groups are attacking his cuts in homeless services.

Others concerns include his reliance on cuts in the city payroll and his reduction in services in New York City's correctional facilities.

We are focused on the disconnect between Mayor Bloomberg's self-described role as the indispensable redeemer of our city's fiscal and economic health and his real-world role as unimaginative regressive-tax promoting politician. His recent performance helps explain why he will not agree to limit his campaign spending.

We hope that you will demand better performance from the Mayor as he closes out his second term and morphs into a full-time candidate.


  1. Although it could be argued that everyone must make sacrifices, it is hardly logically sound or even fiscally prudent to expect to fill deficits on the slanted shoulders of the poor who are already suffering via increases in the cost of consumer goods and even worse losing their jobs. More than likely, the economic models used to forecast the city's revenues are inherently flawed from the onset. And you are correct in that the budget does not provide for a long term solution which is a characteristic of many city and state budgets across this country.

    Everyone must make sacrifices but a regressive tax (i.e., sales tax) should not be the ultimate solution. A sales tax affects everyone but it disproportionately affects the poor. Increased fees on transportation services also does not help in a time when the slightest increase in these services severely affects already tight budgets. People need their transportation money to get them to the very jobs they are trying to hold on to. Now, transportation costs increase (wages don't) which results in cuts in other budgeted items which will ultimately lead - decrease in sales tax collections, loss in business revenue and maybe even resulting in a busiess shutting its doors (hence the flaw with sales tax collections and trickle down economics for that matter).

    As for voting Bloomberg for a third term, it is for the voters to decide. I will say that there is sound logic for having two term limits on New York's mayor just as there is sound reasoning for terms limits on the President of the United States (now if only there were term limits on members of congress).

    Regardless, Mr. Walker's point is well taken. Do you really want to bring the bus driver back who landed you in the ditch in the first place? I'd argue no. I'd also argue that there are many capable individuals who can lead a great city like New York back to black. I really don't believe Bloomberg has a monopoly on good ideas, but he does have a financial crisis on his hands. If I were a New Yorkers, I'd be nervous if this is the mayor's master plan just as I'd be nervous voting to give the driver a third term and in essence the keys to the bus with its worn wheels, gas tank on 'e', shaky suspension, severe thunderstorms forecast and if I didn't know any better, the mapped route looks to have plenty more ditches along the way.

    richard lives in orlando and just felt like giving two cents.

  2. Thanks for this Richard. Good luck with your show. I will use your line "back to black" going forward. We need leaders to lead us back into the black rather than the ones who led us into the red.