Monday, May 12, 2003
This editorial from Robert Bartley joins in on the pile on against Mayor Fudd...er Bloomberg. Bartley does a pretty good job of pointing out the mayor's weakness in the job. Still, here's what I would point to as the money quote:
The mayor's position is asinine for a number of reasons. First of all, there's the obvious point Bartley alludes to. The luxury good aspect of living in New York is clearly not universally shared. That homemaker Mr. Bartley refers to isn't here because she gets to have great nightlife or world-class culture. She's here because this is where her job is. Mayor Bloomberg seems to spend so much of his life ensconced in his little Upper East Side cocoon that he fails to realize that the people waiting on his tables, doing his drycleaning, or providing police and fire protection aren't here because they want to enjoy the "luxury good" of living in New York. They're here because they're either trying to work their way up the economic ladder or even just get by. His cavalier attitude toward high tax rates makes these more difficult tasks for these people.
Still, I find the mayor's view on high tax rates somewhat illuminating. As a free market conservative who's doing fairly well economically, I'm often cast as not giving a rat's ass about those who aren't as well off as I am. Here, though, we see precisely that attitude coming from someone advocating policies at odds with my views. At the end of the day, if you believe the mayor's position of living in New York as a "luxury good", then it follows that, if you can't afford the cost of living here, as imposed through high tax rates, then you should just give up that luxury good and get the hell out of here. But, what this means is that our ever-so-caring mayor is saying that the peasants should just begone and leave the city to, well, its rightful inhabitants (presumably the mayor and the enlightened denizens of the Upper East Side).
More importantly, though, Hizzoner's position pointedly ignores the actual effects of high tax rates. While the top of the economic pyramid might be able to deal with the high taxes he's so comfortable with, the net effect will be to chase jobs from the City. Inevitably, firms in a high tax environment must pay their employees more money to provide them with the same ultimate economic benefit that they would receive in a relatively low-tax environment. This, in turn, means that the higher tax environment is, ceteris paribus, at a relative disadvantage to the lower tax location.
Consider an industry that both Bloomberg and Bartley should be familiar with: financial services. Sure, no matter what the tax rate, there is a huge advantage to having your bankers, deal-makers, and traders in Manhattan. There is a pronounced network effect. If you're doing these things, its a hell of a lot easier be successful at them if you're around other successful bankers, deal-makers, and traders. And, yes, these are the sorts of people well-paid enough that the tax burden isn't so terrible. But consider the rest of the business. What about the people who run the back office: the guys doing the settlements, the people sending out customer statements, and so-on? These sorts of positions can really just as easily be accomplished in Jersey City, Tampa, or North Carolina. Higher tax rates mean that firms can put these jobs in these sorts of second tier cities (its a national labor market) and, because they're providing a larger take-home pay package, still attract a capable labor force. Throw on top of this all of the people providing computer support, the customer service people, the secretaries, temps, and support people servicing all these functions, and you loose a lot of jobs.
Sometimes, even the jobs benefiting from the network effect can be profitably moved away. UBS, for example, headquarters its US investment banking out of Stamford. CNN operates out of Atlanta, while Fox is almost completely decentralized. Bank of America has risen to become a money center institution comparable to JPMorgan Chase or Citigroup without barely any presence in the New York market. Investment banking, broadcasting, and commercial banking: these are some of the pillars of the modern New York economy. The handwriting is on the wall. Technology is weakening the network effect that the City's economy needs to thrive and throwing further disincentives to do business in New York will chase business away.
Whether you buy into Mayor Bloomberg's notion of living in New York as a luxury good or not, these higher taxes chase away the industries this city needs. And New York isn't a luxury that can be financed on financial data and tourist trips to Ground Zero.
"The state comptroller reported in April that the city accounted for half of the 293,000 jobs the state lost in that time period. Heaping on new taxes can only accelerate the loss. Businesses and residents have been fleeing New York for years. A decline in manufacturing has been offset by growth in financial services, but with modern communications these firms are not tied to any one location. And of course, the upper-income individuals targeted by the income tax surcharge are the most mobile taxpayers.
These realities are propounded in detail by the Manhattan Institute, one of the nation's premier think tanks and an important source of advice for initiatives such as the Giuliani crime program. At a campaign lunch at the institute, Mayor Bloomberg said he didn't mind paying high taxes because life in New York is a luxury good..
After his hosts explained the life of a housewife in Queens, he did give a few speeches on fiscal responsibility, but since then his message has been mixed, sometimes comparing the city and federal work forces, and sometimes saying he could find no corruption or waste in the budget. His signal success as mayor, establishing control over the sprawling board of education, seems to be slipping away as the supposed phonics program turns out not to be a phonics program."
The mayor's position is asinine for a number of reasons. First of all, there's the obvious point Bartley alludes to. The luxury good aspect of living in New York is clearly not universally shared. That homemaker Mr. Bartley refers to isn't here because she gets to have great nightlife or world-class culture. She's here because this is where her job is. Mayor Bloomberg seems to spend so much of his life ensconced in his little Upper East Side cocoon that he fails to realize that the people waiting on his tables, doing his drycleaning, or providing police and fire protection aren't here because they want to enjoy the "luxury good" of living in New York. They're here because they're either trying to work their way up the economic ladder or even just get by. His cavalier attitude toward high tax rates makes these more difficult tasks for these people.
Still, I find the mayor's view on high tax rates somewhat illuminating. As a free market conservative who's doing fairly well economically, I'm often cast as not giving a rat's ass about those who aren't as well off as I am. Here, though, we see precisely that attitude coming from someone advocating policies at odds with my views. At the end of the day, if you believe the mayor's position of living in New York as a "luxury good", then it follows that, if you can't afford the cost of living here, as imposed through high tax rates, then you should just give up that luxury good and get the hell out of here. But, what this means is that our ever-so-caring mayor is saying that the peasants should just begone and leave the city to, well, its rightful inhabitants (presumably the mayor and the enlightened denizens of the Upper East Side).
More importantly, though, Hizzoner's position pointedly ignores the actual effects of high tax rates. While the top of the economic pyramid might be able to deal with the high taxes he's so comfortable with, the net effect will be to chase jobs from the City. Inevitably, firms in a high tax environment must pay their employees more money to provide them with the same ultimate economic benefit that they would receive in a relatively low-tax environment. This, in turn, means that the higher tax environment is, ceteris paribus, at a relative disadvantage to the lower tax location.
Consider an industry that both Bloomberg and Bartley should be familiar with: financial services. Sure, no matter what the tax rate, there is a huge advantage to having your bankers, deal-makers, and traders in Manhattan. There is a pronounced network effect. If you're doing these things, its a hell of a lot easier be successful at them if you're around other successful bankers, deal-makers, and traders. And, yes, these are the sorts of people well-paid enough that the tax burden isn't so terrible. But consider the rest of the business. What about the people who run the back office: the guys doing the settlements, the people sending out customer statements, and so-on? These sorts of positions can really just as easily be accomplished in Jersey City, Tampa, or North Carolina. Higher tax rates mean that firms can put these jobs in these sorts of second tier cities (its a national labor market) and, because they're providing a larger take-home pay package, still attract a capable labor force. Throw on top of this all of the people providing computer support, the customer service people, the secretaries, temps, and support people servicing all these functions, and you loose a lot of jobs.
Sometimes, even the jobs benefiting from the network effect can be profitably moved away. UBS, for example, headquarters its US investment banking out of Stamford. CNN operates out of Atlanta, while Fox is almost completely decentralized. Bank of America has risen to become a money center institution comparable to JPMorgan Chase or Citigroup without barely any presence in the New York market. Investment banking, broadcasting, and commercial banking: these are some of the pillars of the modern New York economy. The handwriting is on the wall. Technology is weakening the network effect that the City's economy needs to thrive and throwing further disincentives to do business in New York will chase business away.
Whether you buy into Mayor Bloomberg's notion of living in New York as a luxury good or not, these higher taxes chase away the industries this city needs. And New York isn't a luxury that can be financed on financial data and tourist trips to Ground Zero.
Friday, May 09, 2003
Instapundit has a good posting up on Mayor Bloomberg's recent showing in the polls. I absolutely agree with him. Bloomberg isn't a weak politician; he's just a putz. I sent Reynolds the following in an e-mail
Mr. Reynolds,I'll be shocked if Bloomberg gets a second term.
I absolutely agree with your post regarding Mayor Bloomberg. Whatsmore, I think also agree that it is a huge mistake to fault his unpopularity to a lack of political acumen. The guy has gotten a very large part of his political agenda enacted. The problem, as you astutely point out, is what that agenda is. The smoking ban is bad enough (although its widely flouted, even by the police), but add on top of that a major tax hike, cuts in the police and fire departments (despite his using the threat of cutbacks to wring more money from Albany), and a visible increase in things like vandalism and public sanitation, as well as the Mayor's vehement opposition to a cut in state tax rates. Its not a bad politician - its a bad leader. A lot of people (including myself), supported Bloomberg's candidacy because we thought he'd take some of the edge off of Giuliani's legacy. Instead, what we found that we got was a mayor who, if anything heightened the authoritarian streak of the Giuliani era, while pretty much eroding that legacy's accomplishments.
Bill Dalasio
New York
Thursday, May 08, 2003
I guess I'll start it off with this one: Apparently, the Europeans have a thriving trade in cat and dog skins. This coming from a continent that increasingly bans kosher/halal butchering (This article only covers the kosher aspect). I'm sorry, but something is seriously, seriously, wrong with these people.
