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Rountable on NYS Economy

December 15th, 2009

Overview:  This is the third Empire Page roundtable.  The question I've asked my four in-house columnists to discuss is:  What do we need to do to build a stronger economy in NYS? 

After each sets forth an initial statement, we'll invite some other folks to chime in as well.  You can comment at any time in the comment box below...or if you have a full-thought out statement of betweeen 500 and 1500 words that you'd like to contribute, please send it to us.

 

Larry Hirsch, Democratic Party State Committeeman:

There are a number of things that need to be done, all in the name of diversifying our economic base. For the past two-three decades, we have relied on the financial and other service sectors of the economies, while our manufacturing base has dwindled. Some of this is due to companies moving to where they can pay lower wages both in other areas of the country though much was due to policies that did not favor retaining them. Our idea of economic development downstate was to rely on Wall Street and upstate it has been to wait fot the economic savior of casino gambling. This seemingly worked well while money was easy and Wall Street was booming, but the shorsightedness has been shown over the past year.
 
Now we must diversify our economy. We must recruit companies that will employ people to produce things and pay them living wages. I know this is classic Keynesian economics, but money multiplies in the economy. People do not do as well with low wage service jobs and therefore less money flows through the economy. Many of these jobs are in the "green economy," but it is not only developing wind farms but getting the factories to produce them or electric cars. We should also look to other productive industries that we can get to locate in New York.
 
We also need housing for workers so they can live where they work. Housing development can and should be part of economic development. It will create jobs and provide needed housing for New Yorkers.
 
FInally, our tax policy must incentivize the creation of good jobs, not reducing income taxes for the wealthy.  A progressive tax policy that rewards employers for creating good paying jobs, not paying out year end cash bonuses,
 
Much of what I have discussed is happening in a limited way, but needs to be expanded to provide a strong diverse economic base for New York.


Doug Boettner, Former Staffer in Office of the State Comptroller:

Let’s try to figure this out logically.  A healthy economy is one where the supply and demand for goods and services work in harmony.   That is goods are produced and services are provided at reasonable costs and that reasonable and competitive costs will trigger robust sales.  Robust sales will generate profits and a low unemployment rate means people will be making enough money to afford housing, food and other living expenses in addition to having disposal income for the purchase of non-essential goods and services.

Further, when the unemployment rate is low, NYS will receive state income taxes in an amount that should be sufficient to fund the operation of NYS government without experiencing annual deficits.  A hardy demand for goods and services usually means that the stock markets are experiencing growth and since NYS receives about 20 percent of all its income tax revenues from Wall Street this would ensure that the NYS coffers remain full.

Okay, that being said, what went wrong with the NYS economy and what is currently wrong?  These answers should provide a roadmap as to how to fix the problem.

New York State taxes the @#$J#! out of its businesses, property owners and individuals.  This may be the single biggest factor in resolving the problem. Taxes need to be lowered or frozen, at a minimum.

Higher taxes on businesses requires them to charge more for their goods and services, which in turn can hurt sales, which in turn can increase unemployment, which in turn results in less tax revenue and the additional pay out of unemployment insurance and assistance payments.  None of this being good for the economy.

In order for business and income taxes to be lowered, the cost of providing government services needs to be lowered.  This can be accomplished by cutting expenses and/or by consolidating services.  It also can be accomplished by eliminating major entitlement programs that were created in a time when the State was flush with money.  The time has come to “tighten our belt” and take a long, hard look at each and every one of these programs and at the operational expenses of each and every State agency.  Being a former high-level career State official I am painfully aware of the excesses that are prevalent in each and every State agency.  I am confident the number of state employees could be selectively trimmed back by at least 1 percent, and maybe more, without any diminution of services.  There’s that much fat in the system.

As far as reducing property taxes, municipalities need to consolidate their services through regionalization.  Counties, towns and villages need to consolidate standard services to reduce their expenses.  NYS needs to stop saddling municipalities, mostly counties, with unfunded mandates.  If NYS doesn’t have the money to fund a program directly the cost should not be transferred to the counties without the requisite funding following the mandate.  Municipalities also need to take a long hard look at cutting their operational costs, including trimming the fat from their payrolls.

None of these are popular concepts or choices for governmental agencies or more importantly for elected representatives, but they must be done at some point.  In my opinion the solutions are basic.  Just as in your household, you can’t continue to live beyond your means for extended periods of time without filing bankruptcy.  At some point you need to cut your household expenses, cut out unnecessary disposable income expenses (luxuries), stop borrowing to pay for your living expenses, or you need to increase your income in some manner. The budget must be balanced.

Let me summarize.  NYS has to create a business friendly, tax friendly environment.  It is already at a disadvantage to other states in terms of our adverse climate, they should not heap on an excessive tax burden to further eliminate any competitive edge to NYS at all.

When business comes back to NYS, or at least stops leaving, regardless of the industry, most of the ills of the current economy will disappear.

Okay, roll up your sleeves and let’s get started.

 

Paul M. Bray, Esq: Road to economic revival:

The mantra I have heard from the proponents of economic development for decades has been simple: cut back regulations and cut taxes. Nationally, they got to remove regulation when it came to the financial services sector and for that we got the Great Recession we are struggling through. Bush 2 cut taxes and we could debate whether that started us on the road to the deficits we have now.

I am of another school when it comes to economic development and moving to prosperity. It is based on being entrepreneurial and competitive with your assets including strategic investment in public assets.

The irony I see in New York is we have bountiful and diverse economic assets. In fact, it is remarkable we are not able to realize as great a benefit as there should be.

Look at some of our assets as reported recently by the Governor’s Task Force on Diversifying the New York State Economy through Industry-Higher Education Partnerships.

  1. New York has more than 300 colleges and universities of higher education with more than $4 billion in research and development spending, second only to California, a much more populated state.
  2. Approximately 32% of State residents hold Bachelors or more advanced degrees, 8th most in the nation.
  3. Despite being home to Wall Street, New York attracts only 4% of the nation’s venture capital investment while California gets 47%.

Name the assets and we have them including an educated and diverse workforce, brains for the industries of the mind, a quality environment including abundant water, a world class city, a strong agriculture sector, major financial, cultural and communication sectors and so on and so forth.

Yet, as exemplified when it comes to attracting venture capital goes, we are not regionally in the northeast, nationally or globally competitive.  I don’t know the reason. Perhaps it is complacency or intra-competitiveness rather that getting our act together to compete on the world stage.

What we do not have and have not had since the days of former Governor Nelson Rockefeller, is state planning and a state vision to be the best we can be from having pure water to having a first class state university system.

How can we chart a course for competitiveness in our economic sectors without overall planning and investment in all our assets? We also don’t have much in the way of regional planning. Our politicians call for inter-governmental collaboration for greater service efficiency. With so many cities, towns, villages and counties, service efficiency would be great. But what we really need, as regionalist David Rusk has pointed out in many speeches across the State, is inter-governmental collaboration for greater “regional effectiveness” for regional infrastructure planning and development, regional and unified economic development programs and regional tax-base sharing.

As I pointed out in an Eye column when I wrote about the divide between downstate and upstate, we are one state, stupid, or, at least we have to see and act like we are one state if we are to be competitive.  Downstate’s strengths complement upstate’s assets. By planning and working together, the end result is significant economic competitiveness.

 

Mike Elmendorf, New York State Director, National Federation of Independent Business (NFIB):

What do we need to do to build a stronger economy in New York?  Without question, it starts with lowering taxes and spending, which will lead to a lower cost of doing business, more investment, more jobs and more opportunities--and a stronger tax base.

New York State government is at the brink of financial ruin, collapsing under its own weight after years of unsustainable spending and a devastating tax burden to support it.  As a result, our economy is in shambles, and people, jobs and opportunities are fleeing our state at a breakneck pace.  The numbers are as stark as they should be startling:

 

  • New York’s state and local tax burden is the highest in the nation, 60% above the national average.[1]

 

  • New York’s 2009 business tax climate ranks 49th, which includes a combination of corporate taxes, individual income taxes, sales taxes, unemployment insurance taxes, and taxes on property.[2]

 

  • New York’s cost of doing business is the 2nd highest in the nation.  Only Hawaii--out in the middle of the Pacific Ocean--is a more expensive state in which to do business.[3]

 

  • Per capita state and local spending in New York is 2nd highest in the nation, trailing only Alaska, which is a unique state.[4]

 

  • New York lost 2 million people to other states between 1998 and 2007--the nation’s largest net domestic migration outflow in that time.[5]

 

As if all those figures are not troubling enough, this year New York’s taxpayers and employers were hit with the biggest tax increase in state history--more than $8 billion, in a budget that also contained the largest increase in spending in state history.  And, did we mention that this coincided with the worst economic crisis since the Great Depression?  Is it any wonder our economy is on the ropes?  Higher taxes mean fewer jobs.  These backward tax and spending policies continue to drive job creators and opportunities from our state, increase costs on virtually every man, woman, child and business in New York, and make it all that more difficult for small businesses to survive. 

 

Small business owners make tough choices every day to keep their businesses running and their employees working.  They also know they cannot spend more than they take in.  State government must do the same.  That means cutting spending, avoiding the usual fiscal gimmickry and one-shots, and enacting reforms that will bring the cost of government down over time, such as a spending cap and property tax cap.  And it means saying no to job-killing proposals that would increase costs on employers, such as a paid family leave mandate.

 

New York’s small business owners are the backbone of our economy.  Small business is responsible for most of the new job creation in our economy, and it is small business that will grow New York out of its economic slump--that is, if government will get out of their way and out of their pockets to allow them to do so.


[1] U.S. Census Bureau Data

[2] Tax Foundation

[3] Milken Institute 2007 Cost of Doing Business Index

[4] U.S. Census Bureau Data

[5] American Legislative Exchange Council (ALEC)

 

Posted by admin Filed in Improving New York

5 Responses to “Rountable on NYS Economy”

  1. Gary Kiddney Says:
    December 16th, 2009 at 06:36 AM As a small business owner I can tell you raising the minimum wage would be certain death. Those of us who are attempting to provide any type of decent wage and benefit are barley meeting these expenses. Options?? Unfortunately, like in medicine, I truly don't believe there is a "magic pill" to the solution. Some emotional growth perhaps might do our state some good. For instance, expanding the Casino Gambling beyond the reservations so that the benefit came to NYS does appear that it could make a significant difference. Passing the Gay Marriage act would also (believe it or not) produce an influx of cash into this and every other state in the union. If the churches choose not to marry, fine, the state should provide equal rights to all of it's citizens (and take all their money). Upstate, NY could truly benefit from a store such as an IKEA which would draw folks from three different states and Canada - I could almost guarantee you that. Unfortunately, my micro-mini small business is not one to bring it here to Troy! These are not the solutions to end all, however, there is nothing saying they are not a start. We simply need to go beyond emotion and move forward into the 21st Century of which we have been in for ten years now! Agreed?
  2. Douglas Boettner Says:
    December 17th, 2009 at 07:37 AM Gary, I agree with most of what you have said but it is not on a scale that will significantly bring New Yok State's economy back to life. Agreed, every little bit will help in the long term. But NYS is in more dire straits. We're looking at possibly a $50 billion deficit over the next three to four years depending on what happens on Wall Street. Actions need to start taking place now and we need to get to the root causes of the dusfunction in the legislature and pull it out by the roots and spray the ground with the weed killer RoundUp. I believe every elected official and perpesentative knows what needs to be done, they just seem to lack the nerve, courage and integrity to fight the good fight. In my most humble opinion.
  3. Gary Kiddney Says:
    December 17th, 2009 at 08:35 AM Doug, I understand, however I do notice, with NYS and the country we want THE solution NOW. Guess deep down I am an old soul, I still hear... "pennies make dollars". If we would simply START something, instead of talking to death, we may actually get somewhere. I.E. HEALTHCARE - Once they get past the chatter and pass it, they will be able to change it to what it needs to be. CHANGE, has to BEGIN first. TALK IS CHEAP. Those of us who go into the world (or NYS) to venture a business do so with blind faith, there are absolutely no guarantees anymore. As entrepreneurs, if we were to follow any MODELS, there would be no micro-mini businesses in our small villages or towns. That's what entrepreneurs do, we set emotions aside and plunge forward to make it work. Why? Because it can. Again, "pennies make dollars". It may be simplistic, but... it's kept me in business for twenty something years, and in Upstate NY! Thanks for the perspective.
  4. Gene Chaas Says:
    December 22nd, 2009 at 11:12 PM It is noteworthy that Larry, Doug, Mike and Paul point to nearly the same causes of the symptomatic economic malaise we face in New York. It is also noteworthy that nothing has been done about it by our elected representatives for decades. The reason is clear, the system as it is set up does not aloow the citizens' voices to be heard and acted upon in Albany. Oh they may be heard alright, but action or inaction in this case, only knows big pools of money as its champion. The solution then , is not nearly what one might imagine when speaking of economic development. Bolstering the formation of small business, using our public goods ( like hydroelectric power or the Thruway)for public benefit and not economic profit and capturing the huge brain trust we are endowed with as New Yokers in inventiv,e creative endeavors here in New York are clearly the solutions. The barriers are not taxes and regulation gentlemen. And this is why we have not gained an inch. The barrier, you see, is the New York State Government itself. It has ceased to be an engine of the public good and has turned into something akin to a cabal. Until we organically and fundamentally change the way the business of government is done in New York, the barrier will remain and the spiraling cost of government, particularly promised future employee benefits, will continue to be spread upon an ever shrinking tax base, exacerbating the negative trend. I represent a nascient but rapidly growing political movement, here in NY and around the country, that puts methodology ahead of ideology, process in front of politics, and ethics and fiduciary committment to the citizens' trust above it all. We beleive the solution is nothing short of a revolution in the relationship between citizens and the government that they, the People, will again control. It requires a new breed of citizen representative, new rules of openess and transparency, and a reinvolvment of citizens in the policy discussions of today. And we have no better place to prove it to the rest of this Great Country than right here in New York. Indeed the Whigs are back, in a 21st century context, and stepping off by adopting open processes and strict self impsoed ethics, to clear the good name of Whig stained by the last Whig governor of New York , Myron Clark. That is the problem ladies and gentlemen, we need to tip the apple cart upside and inject "best practices" of governance into the system. Tammany Hall is not dead. It floated up the Hudson over one hundred years ago; latched onto the political process like a zebra mussle, and now is strangling its host. Past time to float it back out to sea. Permanently.
  5. Douglas Boettner Says:
    January 3rd, 2010 at 05:04 AM Gene, If our discussion topic had been how do we fix the dysfunction in New York State government and give the government back to the People, I agrees with most of your points. The Three men in a room way of operating NYS government is flawed beyond repair.Even the separately elected members of the Assembly and Senate don't carry any weight in the process; so in effect, their constituents go largely unrepresented. But the discussion topic was "What do we need to do to build a stronger economy in NYS?". I suggest that a few of your options should be included in any plan to fix the economy.

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