Finally, Rockefeller Drug Law Repeal

After 36 years, New York State has finally repealed the Rockefeller Drug Laws. The end has seemed near ever since the Democratic Party took over the New York State Senate this year for the first time in more than 45 years. It became official late last week when Governor Paterson signed the long-awaited repeal bill.

Laws That Needed to Be Repealed

The Rockefeller Drug Laws were enacted in 1973 and mandated that New Yorkers who were found guilty of possessing illegal drugs be sentenced to a minimum of 15 years in prison. The Rockefeller Drug Laws were designed to equate drug possession (a non-violent crime) with second-degree murder. In fact, there have been a number of New Yorkers who were imprisoned as first time offenders under the Rockefeller Drug Laws and who then saw those convicted of murdering their loved ones enter and leave prison before they left prison themselves as first-time, non-violent offenders.

The Rockefeller Drug Laws were abused by law enforcement and prosecutors to imprison a large number of young people of color for long periods of time despite their lack of a criminal record or any hint of violence. Ninety percent of those imprisoned in New York State under the Rockefeller Drug Laws are Black or latino despite the fact that white New Yorkers represent 73% of drug users in New York State.

That warrants repeating.

NINETY PERCENT of those imprisoned under New York's drug laws are Black or latino, but 73% of drug users are not Black or latino. The Rockefeller Drug Laws have been an excuse to imprison young people of color and have not been used to abuse the white population in the way that they have been used to abuse communities of color in New York State.

Elections Have Consequences

We argued prior to the November 2008 elections that New Yorkers needed to give the Democrats control of the New York State Senate in order to get legislative reform and other improvements in Albany. One of the key benefits of the victory that the Democrats achieved in November in New York State is the repeal of the Rockefeller Drug Laws.

It could not have happened without that Democratic victory, and it happened as a direct result of the votes we cast in November.

Fiscal Conservatism Supported Repeal

The repeal of the Rockefeller Drug laws will save hundreds of millions of dollars each year. New York State spends more than one half of a billion dollars each year to imprison non-violent drug offenders, and the reduction in the volume those incarcerations coupled with the reduced prison population that results from the retroactivity of the repeal of the Rockefeller Drug Laws will dramatically reduce New York State's expenditures on prisons. That reduction in spending will allow New York State to avoid some cuts in services and reduces the amount of increased taxation that New York State must undertake in order to balance its budget.

Praise for Albany - For A Change

New York State's elected officials are rarely praised, and often, the lack of praise is appropriate in light of the performance we see in Albany. The repeal of the Rockefeller Drug Laws shows that Albany can make the changes we need; Albany can make change quickly, and Albany can succeed despite heavy opposition from well organized groups (such as the District Attorneys in the case of the Rockefeller Drug Laws).

It took more than three decades for New York to correct this mistake, but it's finally happened. And, for a change, we can rejoice in an Albany achievement. - Gabe Pressman, NBC

Same Sex Marriage Would Improve the NYC Economy

Last week, Governor Paterson proposed that the New York State Legislature adopt legislation legalizing same sex marriage. We note that legalizing same sex marriage will improve New York City's economy while living up to our moral obligation to end the discrimination in our state and in our city against homosexual residents and the outcome of that fight will be determined in the New York State Senate. This fight for liberty and equality will be decided in the New York State Senate, and the outcome is completely uncertain.

State Senate at the Crossroads

The legislation proposed by Governor Paterson passed the New York State Assembly by a wide margin in 2007, but it failed to get to the floor of the New York State Senate. Since then, the Democrats have taken over the New York State Senate by a very thin majority, making adoption of the legislation more likely but uncertain.

It is rare in the New York State legislature for a vote to be taken in either chamber on a piece of legislation that the leadership of that chamber is not certain will obtain a majority vote. With this piece of legislation, the vote will be too close to call right up to the moments before the vote.

Economic Growth and Same Sex Marriage

City Comptroller Bill Thompson produced a report in 2007 that attempted to estimate the economic impact of legalizing same sex marriage. His analysis suggested that New York State would benefit from approximately $250 million of economic activity over three years simply from the weddings that would take place in the state after the legalization of same sex marriage. He also estimated that $175 million of the $250 million would be economic activity benefiting New York City.

Many couples living in New York City would take advantage of the new law and begin planning weddings, while both New York City and New York State would benefit from out-of-state couples coming to New York for their weddings. New York's hotels and banquet halls would see increased activity. The sooner New York State acts, the greater the benefit, as the lack of equivalent opportunities in neighboring states will increased the economic activity in New York State in the near term. Longer term, we'd expect neighboring states to follow our lead and provide equal rights to their residents irrespective of sexual orientation

Benefits of Marriage to New Yorkers

There are more than 1,100 federal rights and more than 1,300 New York State rights available to married couples that are not available to couples who are not married. Therefore, the prohibition against marriage for same sex couples in New York State who wish to marry is equivalent to the systematic denial of nearly 2,500 rights to those New Yorkers.

An excellent example of the types of rights that only married couple enjoy is the spousal privilege - a married person cannot be compelled to testify in court about communications with his or her spouse. Without marriage, there is no privilege, and same sex couples who wish to marry are left without this crucial protection.

Beyond the enormous psychological benefits of marriage, we must recognize that there are thousands of important rights that are available only to individuals who are married and that, by preventing some of our fellow New Yorkers from gaining the status of being married, we are participants in a state-sponsored discrimination exercise that attacks our neighbors.

Being a Better New York

Legalizing same sex marriage makes us all better. It continues the march to greater personal equality and freedom that our country has undertaken - from slavery to Jim Crow, women's suffrage, the Civil Rights Act, the Voting Rights Act, to today. It adds hundreds of millions of dollars to our economy and vindicates our self-image as a land of equal opportunity.

We urge the New York State Senate to support Governor Paterson in this historic battle.

Tax Day in Manhattan - 2009

Two days from today, it will be Tax Day in Manhattan as well as in all of the other 3,141 counties in the United States. This is an excellent time to look carefully at the level of taxation we face here in what is truly the capital of the world.

Tax Burden Falls Heavy on Manhattan

As taxpayers across our country prepare for the deadline for filing their tax returns, we look at the tax burden of our county, New York County, which is synonymous with the borough of Manhattan and find that Manhattan residents have a greater tax burden than residents of any other county in the United States.

Manhattan's highest-in-the-country tax burden is 20% of income, more than one-half of one percent higher than the next closest county, which is Fairfield County, a Connecticut county in the New York City area and the home of General Electric. Westchester County, the county immediately to the north of New York City's Bronx county, ranks as the fourth most burdened county in terms of taxes with a burden of 18% of income. Elsewhere in the top ten are two New Jersey counties in the New York City area. Those counties are Somerset and Morris counties.

Of the most taxed Congressional districts, three of the top five are in Manhattan, and the most taxed Congressional district in the country is the Manhattan district represented by Carolyn Maloney.

Manhattan's tax burden will likely increase in the near future as income tax increases are a part of the plan for future federal budgets and are already included in the New York State budget for next year. As we have stated previously, increasing taxes in New York State is a necessary evil, while the increase in federal taxes would be a mistake representing a poor understanding of macroeconomics. Because the New York State budget must always be balanced, revenue increases or budget cuts (or both) are necessary during economic downturns. The federal budget should run into deficit spending during economic downturns to spur economic growth. Unfortunately, our national leadership in Washington, DC is now planning to raise taxes despite the economic challenges facing our country, and those tax increases (particularly when coupled with the New York State tax increases already adopted by the New York State legislature) will increase the gap in tax burden between Manhattan and the rest of the counties in the United States.

New York State Also Leading the Country in Tax Burden

For nearly every year of the last 30+ years, New York State has been the most taxed state in the United States. From 2006 to the present, New York has been the second most taxed state in the country (New Jersey replaced New York as the most taxed state in 2006).

Therefore, Manhattan residents live in the most taxed county in the country and are surrounded by other counties with high tax burdens in a state that ranks second only to its neighboring state as the most taxed state in the United States.

Manhattan's Voice Is Needed

As we stated in the aftermath of the election of President Barack Obama, Manhattan led the way in the financing of the successful Obama campaign.

It is important that Manhattan, which has the greatest tax burden and played the greatest role in the election of the current President, have a strong voice in national policy. The leadership of our country has been on the attack against Manhattan for many weeks, and Manhattan must fight back. Our place as the capital of the world should give us the confidence to fight back. Our position as the most tax-burdened county gives us ample moral authority to demand that we be heard.

Manhattan's Educated Professionals Suffer in This Recession

The current recession has hit our city and our borough especially hard. In a manner reminiscent of the previous recession, the greatest pain has thus far been experienced by well-educated New Yorkers.

Previous Recession Saw Long-Term Unemployment Rise Amongst the Educated

In the recession that gripped the United States in the early part of this decade (March 2001 to November 2001), the unemployment rate rose across all categories of workers. The long-term unemployed (those unemployed for more that six months) grew in size dramatically during the period surrounding the 2001 recession, but the growth in long-term unemployment was far more dramatic amongst those with college educations than amongst the broader population. Interestingly, those Americans who had completed their college educations had their long-term unemployment numbers grow by approximately 300% during the period surrounding the recession of 2001, while the overall growth in long-term unemployment was only approximately 200% and the growth in long-term unemployment amongst those with no more than a high school diploma was only approximately 150%.

In the end, real economic pain is more severe for those with fewer resources, and in good times and in bad times, the levels of unemployment amongst educated Americans are far, far below the levels for those who have little education. The recession of 2001 and its aftermath demonstrated that modern recessions have the potential to impose greater pain on well-educated Americans than on those less educated, at least in terms of percentage increases in long-term unemployment.

Troubles Accelerate Amongst the Well Educated

As the New York Times reported yesterday, the current economic downturn has resulted in New York City residents with at least bachelors degrees losing their jobs at more than twice the rate of those who did not finish high school. As the Times noted, highly educated workers often benefit from significant severance packages that mask the true level of their unemployment in the early portion of an economic downturn because those receiving severance payments typically would not apply for unemployment benefits until those severance payments are exhausted. Therefore, the actual growth in unemployment amongst those with college degrees is likely significantly higher than the growth seen in the unemployment statistics, which are based on analyses of those who apply for unemployment benefits.

Manhattan is the borough with the largest percentage of its population possessing at least a bachelor's degree, and the unemployment trends we see in the current economic downturn combine with the intense difficulties facing the financial services sector to create an alarming picture for our borough. Communities with less of their economies linked to the financial services sector and those with less educated populations are likely to face shallower and shorter downturns than Manhattan, unless the New York City and New York State step in to help improve the prospects for Manhattan's workers and would-be workers.

Support Programs

New York State is considering opening an office in Manhattan to support the retraining of well-educated workers and aiding in their job searches, and New York City announced a plan with the same goals (and the additional goal of spurring entrepreneurship) in February. The State program remains under development, and the New York City program uses only $15 million of New York City money and combines it with the $30 million the the federal government is providing to New York City. Unfortunately, $15 million is not nearly a sufficient commitment to the work we must do to combat the rising unemployment in our community.

We hope that our elected leaders, in the midst of their own enormous challenges and undertaking efforts to balance their budgets against a backdrop of declining tax revenues, will make the efforts to reduce unemployment in our city a high priority.

Balancing the Budget in Albany During a Recession

Leadership in Albany is often criticized, and none of us have forgotten the study that showed the the New York State legislature was the most dysfunctional in the United States. The events of the last two days might be a sign that Albany is changing in ways that are healthy for New York State, New York City, and our borough of Manhattan.

Democratic Control Means Democratic Responsibility

The State Senate is in the control of the Democrats for the first time in many decades, and the Democrats now control the entire legislature and the Governor's mansion. It is far too early to give the elected leaders in Albany an overall grade, but they deserve extra credit points for the compromise they have reached regarding increasing tax revenues  to bring the New York State budget into balance in the coming fiscal year and those to follow immediately thereafter. During a recession, taking steps aimed at generating economic growth or avoiding steps likely to deepen the recession are paramount. The tax compromise reached in Albany late last week has all of the appearances of an honest attempt to solve two incompatible problems, increasing state government revenues and avoiding further harm to our state's economy.

The Democratic Party must continue to make these good-faith attempts to do what is right in these complex and controversial areas. It will not be easy, but it will be necessary. If the Democrats cannot develop a record of good-faith hard work and compromise in Albany, there won't be anyone willing to see the blame for those failures as shared with the Republicans. The Democrats must deliver or find themselves back to the structure of the past several decades, where Republican control of the State Senate made success on nearly all controversial issues impossible.

As we said the night of the November 2008 elections: 

With control of the Executive Branch and both houses of the legislature in both our nation's capitol and in Albany, the time has come for Democrats to deliver for the people. No excuses, and no blaming the Republicans . . . This election is the beginning of our journey rather than the end.

Economic Growth and Government Budgets

During economic downturns, the United States federal government should increase spending (and perhaps reduce taxes) in order to spur economic growth. The reduction in tax revenues from the reduced economic activity (coupled with lower taxes, potentially) and the increased government spending combine to result in deficits (or lower surpluses). The goal of ending recessions creates the environment in which deficits increase.

At the state level in the United States, budgets are less flexible. New York, like all fifty states, is required to have its revenues match its expenditures in each year's budget. It would not be wise to allow states to create deficits unless the sizes of those deficits were strictly limited. The capital markets would find it difficult to absorb the financing of large and growing deficits from fifty states, and only the Federal Reserve can create new cash. States would not be able to provide adequate certainty of repayment without strict limitations. The requirement of a balanced budget can promote longer recessions and slower recoveries by forcing state governments to reduce spending and raise taxes when the economy is in need of the opposite.

Here in the New York State, the government in Albany is in just that dilemma, and they are making the best of a bad situation.

Higher Taxes That Could Have Been Worse

Higher taxes, especially in a state like New York that is already at the top of the list of the states who impose the largest tax burden on their residents, are unwelcome and counterproductive. They are also often necessary during difficult economic times, and we are in such times.

The budget that is very close to becoming law in Albany could have been much worse on the taxation question. Many groups pushed for permanent or long term levels of much higher taxes. Others pushed for increases in sales taxes. Because both ideas were rejected in favor of a small increase in income taxes (a one percent increase for those earning over $250,000 per year and another approximately one percent for those earning over $500,000) for only 3 years, we should take a moment to appreciate the wisdom of the Governor, the State Senate, and the State Assembly in compromising amongst each other in what must appear to each of them to be a "no-win" situation.

New York State already relies heavily on regressive sales taxes, and because of that reliance, New York State's overall tax scheme is regressive (meaning that it imposes the greatest tax burden, as a percentage of income, on New Yorkers with the least income). Adding large new sales taxes to the New York State tax scheme would have made that bad situation worse.

A long term increase in income taxes would likely result in reduced economic activity as the workers subject to the higher tax rates move to other states or otherwise alter their economic behavior to reduce their tax burden. At least as important is that New Yorkers would reduce their spending to account for the reduced take-home pay resulting from the higher taxes.

With a short-term tax increase, New Yorkers are far less likely to reduce spending, leave New York State, or take other counterproductive actions that could have resulted from a longer term tax increase. The potential negative consequences are also mitigated by the small size of the tax increase. 

In the end, the leadership in Albany deserves credit for a job well done on taxes, and they are unlikely to be praised for it. Let's hope that they continue to pursue responsible compromises and earn praise in the months ahead.

Latest Battles in the War Against Manhattan

We have highlighted for you recently that the US government in Washington has been engaged in attacks on Manhattan in the form of legislation and through the lack of leadership from the US Department of Treasury. Since we raised these concerns earlier this month, the situation has become more troubling.

Bonus Tax

Last week, the House of Representatives approved (by a very wide margin) proposed legislation that would tax all bonuses at a 90% rate for employees of companies that are recipients of TARP funds whose annual income is more than $250,000. This continues a very troubling trend that we saw in a provision that became law as part of the Stimulus Bill.

We have expressed concern that, in New York City where more than one-third of all employee earnings come from the financial sector, limitations on bonuses are an attack on our city and on the borough of Manhattan. The bonus limitations that are currently law limit bonuses to one-third of base salary for all employees of TARP recipient companies. The House Bill, if it becomes law, would essentially eliminate all bonuses and amplify the counterproductive impact of the bonus limitations already in place.

Because the vast majority of compensation at financial services firms is in the form of bonuses, the push by the House of Representatives to eliminate bonuses has some very negative likely consequences  - 1) in the near term, it will retroactively tax recent bonuses at 90% and thereby confiscate the wealth of thousands of employees, many of whom live and/or work in Manhattan or the rest of New York City; the confiscation will further burden the economy of our city. 2) firms may be forced to increase salaries dramatically for their best employees in order to compensate for the bonuses that have disappeared, thereby increasing the cost base of those firms and reducing the incentives for those employees to make the sacrifices ad supply to effort to achieve the very best results possible. 3) the most effective employees from the divisions and groups with the best prospects will leave the TARP recipient firms for non-TARP large firms and boutiques; because the US taxpayers have invested hundreds of billions of dollars in the TARP firms, policies that shift the best employees out of TARP firms into other firms should be avoided.

It is our hope that the Senate or the President will prevent this disastrous legislation from becoming law - in order to protect our nation's financial sector and to avoid increasing economic pain for employees in this troubled economy.

Quantifying the Attack on Manhattan

The New York Post calculated the cost to New York City of the 90% tax on bonuses for employees of TARP recipient firms as $12 billion. The New York Post arrived at the $12 billion figure by calculating the bonuses recently paid by Goldman Sachs, Merrill Lynch, Morgan Stanley and Bank of America. The New York Post estimated that 50% of all bonuses paid by those four firms would end up as revenue for the US government through this confiscatory tax. The New York Post's methodology is flawed, but it ultimately understates the impact on New York City. The Post includes Merrill Lynch, but Merrill Lynch never received TARP funds. Merrill paid bonuses before it closed its sale to Bank of America, a TARP recipient. In the other direction, the Post's $12 billion estimate ignores Citigroup and JP Morgan Chase (which now includes Bear Stearns and Washington Mutual). Citigroup and JP Morgan Chase are massive financial institutions and might have bonus pools as large as or larger than the group that the Post considered. The Post failed to consider that not all employees live or work in the New York metro area.

Whether the correct figure is $12 billion to $15 billion or as high as $50 billion or more, the loss of such a large amount of wealth is a tragedy for our city and for our borough.

TALF - A Victim of the Attacks on Manhattan

Late last week, investors showed a real reluctance to apply for funds from the Federal Reserve to purchase "toxic assets." TALF - The Federal Reserve's Term Asset-Backed Securities Loan Facility is suffering because of the attacks on Manhattan. The toxic assets are securitized loans that were previously purchased by financial institutions at values far, far above the values that they would achieve in the open market today. A solution to the toxic assets problem is the single most important ingredient in the recovery of the financial sector that we all seek and that is so crucial to the economy of Manhattan and New York City.

Investors have not taken advantage of the offer by the Federal Reserve to loan them cash at favorable rates because they see the danger of accepting government assistance. 

In the TARP experience, Goldman Sachs and Morgan Stanley did not want to accept TARP money originally. After being forced by the Bush Administration to accept TARP money, the ex post facto restrictions on those firms have caused those firms to regret caving into the demands of the Bush Administration. The restrictions seem to get worse every few weeks, and now both of those firms are aggressively moving to pay back all of the TARP funds they received in order to escape the restrictions. By forcing firms to pay back TARP early (because of the foolish restrictions imposed after the TARP funds were initially dispersed), the US government is reducing liquidity in the US capital markets at exactly the wrong time. Our economy needs credit to flow, and our government is attempting to impose restrictions on financial institutions that will result in less credit availability.

For TALF to succeed, investors need confidence that they will not regret accepting the TALF funds and that there will not be Congressional attacks on TALF recipients when the public realizes that TALF recipients are making millions or billions of dollars in profits from investments that were heavily subsidized by the Federal Reserve. 

Based on the experiences we've seen in the TARP experiment, investors are smart to be very cautious on TALF.

Annex Governor's Island

The time is right for an historic island only one half mile from Manhattan to become a part of New York City. Governor's Island has been the site of several key moments in recent US and world history, and has been transformed very recently into a wonderful car-free playground for families from all over the New York City area. Ownership of Governor's Island has evolved from complete ownership by the United States Coast Guard (as part of the US Department of Transportation) to joint ownership by the state of New York and New York City. In its most recent incarnation, Governor's Island would be an appropriate and excellent addition to New York City.

Annexation Proposal

In 2003, the United States sold the 172 acre island to New York City and New York State for a purchase price of $1. Earlier this year, Mayor Bloomberg offered to have New York City take full responsibility for Governor's Island and another major park project in exchange for New York State taking full responsibility for Javits Center, New York City's key convention center located on the West Side of Manhattan.

The Mayor's proposal deserves serious consideration. Governor's Island is already a key part of the life of our city. The State of New York has proposed that it invest zero dollars in Governor's Island for the upcoming fiscal year, and the corporation that administers Governor's Island has proposed to cut its own budget by nearly 40% to attempt to respond to the difficult fiscal times facing New York City and New York State. In order to continue to improve the quality of the facilities and programs on Governor's Island and to make the location more and more a part of the lives on the people of New York City, additional funds will be necessary. If New York State will not support the financial investments needed on Governor's Island, New York City should take full ownership of the Island and fund its future infrastructure development without the help of the State.

We expect that Governor's Island would become part of the borough of Manhattan and add land area (but not population) to New York County. The southern tip of Governor's Island would be the southern most point of Manhattan.

Governor's Island is as important as ever to New York City, and it is more than appropriate for something so directly linked to the life of our city and our borough to be under the authority of our city's leadership. New York State has so many other priorities, including many priorities that would be orphaned without the careful guidance and attention from the state government. By making Governor's Island part of New York City, New York State will be free to focus on those priorities for which it has no able partner to move forward without assistance from the state government, and New York City will be free to make the most of the enormous opportunity that Governor's Island's 172 acres represent.

The History

Governor's Island has a rich history. The Governor's Island Accords, an attempt to bring peace to Haiti during the Clinton Administration, were negotiated and signed on Governor's Island. President Reagan and Mikhail Gorbachev of the Soviet Union met in 1988 on Governor's Island. It was a key strategic location for every military conflict that touched the New York City area from the 1660's until the War of 1812. Its location at the southern tip of Manhattan where the East River and the Hudson River meet made it the perfect place from which to defend southern Manhattan from naval attack. It was a prison for Confederate soldiers during the Civil War, and it was a key military supply post during World War I and World War II.

Memory of 1986

One of the most memorable events of my lifetime took place at Governor's Island. In July 1986, the Statue of Liberty celebrated its 100th anniversary, and the celebration was headquartered on Governor's Island. Elizabeth Dole, as the Secretary of Transportation at that time, was the host for the event, and Senator Bob Dole (only ten years before he would capture the Republican nomination for the President of the United States) stood silently by her side throughout the festivities. With the Cold War still raging, the celebration of 100 years of "Liberty" was also an attack on totalitarian regimes around the world and a direct rebuke of the Soviet Union. Soviet born comedian Yakov Smirnoff, performed on Governor's Island that day, and the largest fireworks display I have ever witnessed capped off that evening. From my vantage point on Governor's Island, it seemed that the fireworks were so close that I could have grabbed them with my hands as they exploded in the sky just overhead. The Statue of Liberty was re-lit, and its new shining torch held the attention of millions of viewers across the United States and around the world. As a 14 year old boy, I was lucky to be the son of a father who had a friend with connections at the Coast Guard; lucky to be in New York and on Governor's Island on such a special day. I cheered Lady Liberty, the Doles, and Smirnoff (who became a US citizen on that July day); I was proud to be in New York and proud to be an American.