State and City Facing
Crisis in Rising Debt.
Politicians Untroubled,
CBC, NYCivic Worry

By Henry J. Stern
December 4, 2003

    As I write on public affairs, I find an increasing trichotomy between 1) what people actually know or believe, 2) what is published in the newspapers and aired on radio and TV, and 3) reality.

    1) is quite variable.  Some people know a great deal and others know little or nothing about public issues, and many are familiar with some issues, but not others   2) isn't that clear either.  Because of the variety of media, a lot of news is published in one or several places, and ignored in others.  3) is relatively easy to determine as to facts, but far less so when one is considering policy projections or alternatives.

     For example, I believe that the State of New York is operating in a financially irresponsible way.  The state often spends more money than it receives, and borrows money each year to make up the difference.  The Empire State had the largest public debt of any of the fifty states until the new Governor of California proposed borrowing fifteen billion dollars to make up his state's deficit.  That would drop New York State to second place (out of fifty) in state debt.  But don't feel badly about our being No. 2, New York City is in third place and the Port Authority and NYS Dormitory Authority are high up there in the debt market.  The authorities, at least, incur capital debt for construction, rather than operating deficits.

     Not only is there ever-mounting state and local debt, but no one in government has even talked about a strategy to start to reduce it.  The situation is even worse at the federal level.  The President does not seem overly concerned over the swelling national debt, which now is about 6.9 trillion dollars.  Reading that sum as a number, it is $6,900,000,000,000.00 (that's eleven zeroes, not counting the cents).  According to the US Treasury, since September 30, the debt has increased at the rate of two billion, one hundred twenty million dollars per day.  But it costs less as you go along, only 88,333,333.33 dollars per hour, or $1,472,222.22 per minute.

     So, dear reader, what is to be done?   There are three classic remedies for a deficit, whether household or governmental.  They are 1) raise public taxes (or personal income) 2) reduce expenses, which for local government means primarily labor costs.  This is usually done by layoffs and service reductions.  3) increase efficiency.  This strategy is basically the best to begin to balance a budget.

    The Mayor has been unsympathetic to waste-busters; "You can't just say let's go cut out corruption, waste and the meaningless programs, because fundamentally, they're not there." (NY Times, 11-25-02).  I cannot agree.  In a 43 billion dollar budget, it is beyond reason that every cent is spent wisely.  People may differ as to how much can be saved, but it is important to make the effort.  There are ways to improve city operations, but you need people who know or can find out where the waste is.

    In fairness, inefficiency is not, by far, the largest part of the fiscal shortfall.  It would, however, enhance confidence in government if the City recognized that waste exists, and asked for the help of the public in rooting it out.  Although the city has taken many steps to reduce costs, there is a wide perception, partially justified, that this administration is not intensely interested in inefficiency.

     There is no indication to date of any desire on the part of the State or City government to either raise taxes or reduce services.  In fact, the mayor and the council hope for property tax reductions, for which they can each claim credit, even though they would simply be trimming the increases they adopted last June.  Lower property taxes may win votes, but will only worsen the city's financial plight.

     Since 2004 is a year of State legislative elections, and 2005 a year where the Mayor, 5 Borough Presidents and 51 Councilmembers go before the voters, this is not the time to expect increased responsibility from elected officials.  Look for intensified pandering, as the candidates compete to be regarded as both taxpayer-friendly and city employee-friendly.  Those two positions, popular as they may be, involve basic and fundamental conflict.  What you get from one group you pay to the other.  This is called a zero-sum situation.

     External reality rarely impedes politicians from doing or saying whatever they believe will help them get elected or re-elected.  Even if city term limits preclude their continuance in their current jobs, many take the opportunity to run for higher city office, which they are able to do, while having their campaign funds matched at 4:1 by the taxpayers.  Whether they are sure winners or sure losers, the city pays 80% of their bills.

     The only way the merry-go-round of fiscal irresponsibility will be stopped is if someone pulls the plug on the carousel.  In 1974 and '75 this was done by the large banks, which refused to roll over city notes. So far we have seen no sign of similar awareness on their part.  After recent revelations of lending practices, some banks have the moral capital of bartenders serving drunks.  And, of course, since the banks cheerfully financed Enron, and Adelphia, et al. why should they impose a higher credit standard on the State or City of New York.  And besides, the greater the perceived risk, the higher the interest rate that may be charged.

    Perhaps one should appeal to the agency with historical responsibility in this area, the New York State Department of Banking, to look into the matter of credit-worthiness and consider what effect, if any, the prospect of state or municipal default would have on the security of New Yorkers' personal and business deposits.  That would be a solution devoutly to be sought.

     Objective observers like the Citizens Budget Commission have documented the data on State finances and made serious proposals.  Rather than repeat or summarize them, I suggest you visit their website.  CBC held a two-day conference on the subject in November where several hundred people, including Governor Hugh Carey, discussed these issues, without serious disagreement.  Now it is early December. What is the next step?  How can CBC's common sense remedies be translated into realities?

    It is frustrating to watch what we perceive as a disaster impend, and yet be unable to avert it, or even to persuade our leaders of the approaching danger.

    This is not crying "Wolf", which was a false alarm until the wolf actually appears.

    It is not yelling "Fire" in a crowded theater, which can cause a panic and stampede, whether there is a fire or not.

    It is shouting "Ice" on the Titanic, trying to get the captain to pay attention to what surely lies ahead.

    ICE.

Henry J. Stern is the director of NYCivic.