We heard all the alarm bells one year ago. A massive financial crisis had served to bankrupt New York State’s finances resulting in the undeniable need for sharp reductions in public spending. Remember the whole “Doomsday Budget” thing? Well, Governor David Paterson is back again, this time armed with more than $1 billion in cuts. What slick tag should we propose for this one? “Savagery on the Hudson?” “The Even Bigger Doomsday Budget?”
Perhaps Paterson, and by extension Bloomberg, could have been given the benefit of the doubt last time. No one, less a few dozen Marxist economists, most socialist organizations, and anyone with a modicum of financial sanity, expected a financial crisis of this severity. Caught unprepared, politicians did what they always do – lay off the financial burden on the most vulnerable. Things would, they said, certainly turn around by 2010. This year, however, the burden falls squarely on the politicians’ shoulders.
Paterson and Bloomberg could have done something different. We gave them the prescription last time and they should have acted. The root of fiscal problem lies at the over dependence of state and local governments on tax receipts from the financial, insurance and real estate sectors (FIRE). New York City depends on Wall Street for nearly 33% of its budget and NY State some 15%. This is bad financial planning. Yet, one year later, we are right back where we started, lamenting the lack of revenue from the financial sector and preparing new rounds of cuts to necessary social services.
So, dust off the old prescription again. NY State and City need to create a progressive tax structure for income – the wealthier you are the higher rate you pay, no loopholes. We also need to think about creative, yet not very complex, ways to create new revenue streams through the taxation of wealth. Specifically, NY State could extend existing laws regarding property taxes to the ownership of stocks and bonds. Your house is surveyed for value and taxed, so should your stock holdings. Finally, the state needs to sponsor programs that fund a new green-economy democratically-managed cooperative sector in order to reduce the region’s dependency on the FIRE sector. We need to produce real things that people need, instead of living off the increasingly small amounts of fat being produced by Wall Street.
Three ideas that could put an end to the financial crisis in the State without necessitating budget cuts and while transforming our economy. In fact, I am guessing that so much revenue would be generated, that the state would need to solicit ideas on how it might be spent. Don’t expect movement on these issues by Paterson and Bloomberg. Expect more of the same – sob stories about financial misery, peppy speeches about belt tightening and sharp cuts in services that move closer toward the logic of privatization. We need to vote with our feet in the street – to let these ideas reverberate from every community in the city. Or else, next year we may just face the “Super Gigantic Terrible Budget” or the “Fiscal Godzilla Destroys New York Budget.”