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Overview
A State in Disarray
A tour of colonial New York soon after the Revolutionary War is said to have
inspired George Washington to describe the nascent state as the “Seat of
Empire.”[1] For much of the next two centuries, the
Empire State would more than live up to his assessment and would have few serious
rivals in global commerce, finance, and manufacturing. Nurturing new enterprise
and creating millions of new jobs, New York was truly an economic empire unto
itself.
More recently, however, the New York State economy has been far from imperial.
Between 1979 and 2004—a period that saw two sustained U.S. economic booms—New
York created new jobs at less than half the national pace,[2]
underperforming even the “old and cold” states of the upper Midwest.[3]
New York’s share of total U.S. personal income dropped by nearly 10 percent
during the same period, and its share of all states’ economic output dropped
by 12 percent.[4]
 New Yorkers, lured by more lucrative opportunities elsewhere, have been voting
with their feet: from 1995 to 2004, New York lost nearly 1.7 million residents
to other states.[5] New York’s rate of outmigration
was well over the northeast region’s average and the worst of any state
from 2000 to 2004, according to census estimates.[6] An
influx of foreign immigrants and their higher birthrates have kept New York’s
total population from dropping, but the relative loss of residents to the rest
of the U.S. has been severe enough to cost the state ten congressional seats
since 1980.[7]
A microcosm of New York’s economic and policy woes can be found in Buffalo,
the once-great industrial city on the shore of Lake Erie. Not long ago, Buffalo
was a vibrant symbol of America’s industrial urban might, with thousands
of productive and well-paid factory workers helping to shape steel, cars, and
the nation’s image as an industrial powerhouse. Buffalo today is peppered
with shuttered and decaying factories. The city and the surrounding western
New York region are losing jobs and people at an alarming pace. In just three
years, from 2000 to 2003, as the nation’s population grew by about half
a percent, Erie County’s population shrank by 4.25 percent, or more than
40,000 residents.[8] The region has also suffered steep
job losses over many years. From 1990 through 2004, the Buffalo-Niagara region
actually lost jobs, with a growth rate of -0.1 percent; the nation, during the
same period, added jobs at a rate of 20.1 percent.[9]
 But
these problems are not confined to the upstate region. While Mayor Michael Bloomberg
“touts gains in real-estate prices . . . and increases in tax revenues
as signs of economic life, the real truth is that New York [City] is no longer
a cauldron of economic opportunity.” [10] The city’s
once-mighty manufacturing sector “has shrunk beyond recognition”;
Gotham shed jobs in construction, advertising, management consulting, and computer
services even during the supposed “recovery” year of 2003.[11]
In the Big Apple, as in most of upstate New York, most of what passes for private-sector
job growth in recent years has been concentrated in the heavily tax-subsidized
health-care and social-services industries—which don’t create wealth
but merely redistribute it.[12]
Of course, long-settled regions in states across the Northeast and midwestern
Rust Belt have been affected by similar problems in the last several decades.
But to a significant degree, as reflected by economic and demographic statistics,
the problems of New York have been far worse than average. There’s something
else at work here—something that drags down these already vulnerable regions
like an anchor.
That
something is, in a word, government. New York’s political class
spends, taxes, and borrows far more than the national average, consistently
ranking at or near the top of the list in every measure of the burden that government
imposes on citizens and businesses.
Empire State government has become an industry run for the benefit of the few
rather than in service to the many. This monolithic industry churns relentlessly
in Albany to preserve and expand its power over New York’s economy and
citizens. Efforts to reduce the swelling in New York’s government sector
are fiercely resisted by the powerful interest groups—especially public-sector
unions, trial lawyers, healthcare providers, and other state-subsidized industries—that
have become most adept at gaming the system in Albany. These groups exert influence
in Albany the old-fashioned way: they buy it, through tens of millions
of dollars in campaign contributions and lobbying expenditures during every
two-year legislative election and session cycle. Huge favors, ranging from direct
subsidies to regulatory preferences, flow to the biggest contributors. Close
former associates and relatives of powerful officeholders openly trade on their
relationships, and the pols themselves reciprocate by embracing special-interest
agendas—all lending credence to the impression that lawmaking in the state
capital is strictly a pay-to-play game.[13]
These
political realities help explain why New York’s state government does so
little to address the obvious need for reform. New York’s decline has been
enabled, if not accelerated, by a dysfunctional state legislature that asks
rank-and-file members to do little, leaves them plenty of time to conduct their
political fund-raisers,[14] and—thanks to ubiquitous
gerrymandering—rarely subjects them to truly competitive election campaigns.[15]
There is a limit to what New Yorkers will put up with, as Buffalo-area politicians
are learning. Reeling under the burden of continued high spending on schools
and local governments, residents of Erie County in early 2005 erupted in a full-fledged
taxpayer revolt pitting “taxpayers versus tax-eaters.”[16]
Through talk radio, the Internet, and newspaper editorial pages, taxpayers forcefully
said no to a proposed increase in the county sales taxes—and local politicians
retreated, forcing the county instead to make massive spending cuts in county
employment and services.
Unfortunately, just as occurred in New York City in the mid-1970s, the largest
city and county in upstate New York had to be virtually bankrupt before citizens
and local leaders
awoke to the real source of the problem. The entire state could face the same
fate unless more is done to disrupt the cozy deals that grease the wheels of
“Albany, Inc.”
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New Yorkers Speak Out—and Move Out
More and more New Yorkers are showing mounting frustration
with New York’s rising taxes and spending as well as with its sluggish
growth in employment and population.
Typical is a complaint from C. J. Wilson of Pompey, in Onondaga County:
“Every raise I get at work is eaten up by taxes,” Wilson said
when asked about a significant school-tax hike. “I cannot easily
afford a $100+ increase per month in taxes.”[17]
David Lum of Pittsford, in Monroe County, connects the dots between New
York’s mounting tax burden and lackluster job growth: “The
lack of jobs hurts not only the unemployed but also means higher taxes
for those who are employed. These higher taxes (the highest in the nation)
drive out existing businesses and halt the move-in of potential employers.”[18]
Others decry the role of special interests in undermining New York’s
prosperity. “The party politicians, along with the unions, lobbyists
and special interests, have decimated the economy and population of Western
New York. The status quo doesn’t work. It’s a failure,”
says Bill Stetz of Elma, in Erie County.[19]
High taxes leave more than a few New Yorkers feeling trapped. “This
is . . . the worst-run state in the nation,” declared Ellen J. Manthey
of Erie County’s Williamsville. “If I could move I would,
and anyone under 50 who stays here will not prosper. Their discretionary
money will be eaten by high taxes.”[20] And
young people do leave. Michael Krajewski of Amherst urges: “We
need to keep [the] highly trained graduates of the area’s universities.”[21]
In May 2005, Terrence Davignon of Utica announced his plans to move to
Virginia. “My 34-year-old daughter and [her] husband moved to a
development south of Richmond rated the 17th-best place to live in the
nation,” he said. “Their property taxes are half what they
paid in Cazenovia [in Madison County] on a similar half-million-dollar
home.”[22]
Tami Hasbrouck found “a different world” after she followed
many other New Yorkers across the border to Pike County, Pennsylvania.
She was a lifelong Orange County resident until her modest Middletown
home proved too small for a family of five. Her family’s new house
in Shohola, Pennsylvania, is twice as big—with significantly lower
property taxes. “We never could’ve built this over there,”
she says. “The taxes alone would have killed us.”[23]
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1. Peter Eisenstadt, editor in chief, The Encyclopedia of
New York State, Syracuse University Press, 2005, p. 502.
2. Total nonagricultural payroll jobs data from U.S. Department of Labor, Bureau
of Labor Statistics, available at www.bls.gov.
3. Ibid.
4. Based on personal income and gross state product data as reported by the
U.S. Department of Commerce, Bureau of Economic Analysis and available at http://www.bea.gov.
5. U.S. Census Bureau data obtained from http://factfinder.census.gov.
6. Data from U.S. Census Bureau, Table 4: Cumulative Estimates of the Components
of Population Change for the United States and States: April 1, 2000, to July
1, 2004, available at
http://www.census.gov/popest/states/NST-comp-chg.html.
Rate of outmigration for each state calculated as net internal migration from
2000 to 2004 divided by total population as in
the base year of 2000.
7. U.S. Census Bureau data obtained from http://factfinder.census.gov.
8. Ibid.
9. U.S. Bureau of Labor Statistics data cited by the Public Policy Institute
of New York State at http://www.upstateblog.net/upstate_jobs.pdf.
10. Steven Malanga, “Gotham Stalls Out,” City Journal, Summer
2005.
11. Ibid.
12. Ibid.
13. See a list of the state’s top ten spenders on lobbying, available at
www.nylobby.state.ny.us/app_grev.html.
Of the top ten, three are hospital interests, one is a teachers’ union,
and one is the trial lawyers’ lobby.
14. “PAC-ing It In: Political Action Committees’ Contributions in
New York State 2004,” a report from Citizens Union, Common Cause/NY, the
League of Women Voters/NYS, and the New York Public Interest Research Group,
April 2005, p. 1. Report is available at http://www.nypirg.org/goodgov/pacreport.html.
15. E. J. McMahon Jr., “Albany Has Plenty Left to Repair,” Syracuse
Post-Standard op-ed, April 19, 2005.
16. Steven Malanga, “Taxpayers Revolt,” New York Sun, February
23, 2005.
17. “Fabius-Pompey voters had it up to here,” Syracuse Post-Standard
letter to the editor, May 22, 2005.
18. “Ask lawmakers why jobs are scarce here,” letter to the editor,
May 20, 2005, Rochester Democrat and Chronicle, available at http://www.democratandchronicle.com/apps/pbcs.dll/article?AID=/20050520/OPINION03/505200380/1040/OPINION.
19. “Failing governments are a widespread problem,” Buffalo News
letter to the editor, May 10, 2005.
20. “There’s no such thing as a temporary tax here,” ibid., June
26, 2005.
21. “Leaders must step up efforts to attract jobs to Erie County,”
Buffalo News letter to the editor, May 11, 2005.
22. “Red state a more appealing place to live,” Utica Observer-Dispatch
letter to the editor, May 26, 2005.
23.“Promised Land Waits Just Down I-84,” Middletown Times Herald-Record,
February 13, 2005.
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