New York by the Numbers: State & City in Perpetual Crisis by Raymond J. Keating

A Data- and Graph-Filled Book on New York's Game of Fiscal and Regulatory Russian Roulette

Madison Books • 997 • 640 pages • $29.95

William Peterson is a Heritage Foundation adjunct scholar and Distinguished Lundy Professor Emeritus of Business Philosophy at Campbell University in North Carolina.

“The power to tax involves the power to destroy.”

So U.S. Chief Justice John Marshall presciently declared in McCulloch v. Maryland in 1803. And so has much destruction followed, especially since passage of the Sixteenth Amendment, which permitted income taxation, in 1913. Case in point: tax-mad New York.

In New York State:

Economic growth, business formation, and job creation lag behind the nation and have for years.

Average U.S. per capita spending for state and local governments is topped by 52 percent. Only Alaska and the District of Columbia spend more.

Welfare spending tops the national average by 83 percent. Only D.C. spends more per capita.

Medicaid payments per recipient are America’s highest.

Per capita state and local debt tops the national average by 70 percent.

In New York City:

There are fewer private-sector jobs than there were in 1958.

There is the highest combined state and city corporate and personal income tax rates in the nation.

Per capita spending tops the large-city average by 120 percent.

Per capita welfare spending tops the large-city average by 270 percent.

Per capita income taxes top the large-city average by almost 1,000 percent.

No wonder Ray Keating, also author of D.C. by the Numbers: A State of Failure, subtitles his data-and-graph-filled book on New York’s fiscal and regulatory game of Russian roulette “State and City in Perpetual Crisis.”

And no wonder publisher and 1996 presidential candidate Steve Forbes says in the foreword that the crisis has led to a pervasive citizen attitude in the city and state of dependency on government in lieu of old-fashioned individual responsibility. Says Forbes: “Incentives matter and freedom works. Understanding this simple lesson would give New York a fighting chance.”

The question is, however, do New York’s top leaders, all presumably free marketeers, understand the lesson? Unfortunately, no. Witness the attempt in 1997 to undo New York City’s perverse rent control scheme, which harks all the way back to World War II. Upshot: city tenants by the busload noisily descended on Albany, their placards attacking “Greedy Landlords” and “Heartless Legislators.” Some Big Apple.

So guess what? Republican Governor George Pataki retreated. New York City Republican Mayor Rudolph Giuliani retreated. And New York’s pugnacious Republican U.S. Senator Alfonse D’Amato retreated. Three retreaters out of three, or politics wins again.

But Keating understands the lesson well, and in his last chapter lays out a road for New York State’s Renaissance—for staff and budget downsizing of the state regulatory bureaucracies, for holding them accountable, for setting term limits for the governor and state legislators (New York City has already made welcome moves in this direction), for improving economic growth and job creation via supply-side tax cuts. He would eliminate the state’s capital gains and estate tax, phase out the state’s personal income tax, and chop the state corporate income tax in half, from 9 percent to 4.5 percent. Audacious.

Similarly for New York City’s Renaissance Road, Keating maps out sharp staff and budget downsizing and tax cuts. He would, for example, eliminate the New York City Department of Cultural Affairs and its budget of some $225 million. He would phase out and progressively privatize the City University of New York to save more than $400 million annually. He would achieve further fat savings by privatizing the city’s giant bus and subway system. And Keating would wipe out the city’s rent control scheme.

Where there is a will there is a way. Even New York State and New York City have been slowly hitting Renaissance Road while encountering yawning political potholes along the way.

Memo for Messrs. Pataki, Giuliani, and D’Amato: Check out New York by the Numbers. Fast.