New York City’s independent budget office (IBO) thinks that Gotham will take in $1.3 billion more than the mayor is projecting over the rest of this fiscal year and next. The extra cash will alleviate some pressure on the city’s projected $4.1 billion deficit (itself already revised downward once from $4.9 billion by the mayor’s own budget office).
Whence the new money?
IBO notes that Wall Street may earn a “staggering” $58.9 billion profit for calendar year 2009, followed by “healthy” profits of $16.2 billion next year. It attributes the turnaround to “reduced interest expenses resulting from interest costs near historic lows, various forms of Federal Reserve backing for financial firms’ securities and loans, the field of competitors reduced, and workforce and other operating costs down.”
Better bonuses mean that personal income in the city likely won’t fall as much as thought.
In May, IBO had projected a 2.9 percent drop in personal income for this year, followed by a dead-cat bounce of 0.9 percent next year. Now, it projects a drop of just a third of a percentage point drop this year and an identical drop next year.
Personal-income can hold its own only because of all of those federal guarantees of Wall Street. Although the securities industry likely will have lost 40,700 jobs by the time this is all over — more than one-fifth of its jobs — “Wall Street bonuses at the end of this year are expected to nearly equal the income lost” from all of the city’s 84,100 2009 job losses.