City comptroller Bill Thompson — who’s also running for mayor — released a report yesterday that termed the city’s fiscal outlook “extremely sobering.”

The most sobering aspect is the extent to which New York has allowed its dependence on Wall Street to transform its budget into something so volatile as to be unpredictable. New York, fiscally, has mirrored Wall Street’s own failed modern business model. 

Thompson notes that the mayor’s deficit-closing program for 2010, the fiscal year that starts in just a few weeks, is “risk-laden.” 

He goes on to estimate deficits for next year that are all over the map; one might as well pick a random number out of a hat. 

Thompson estimates that for fiscal year 2011, which is 13 months away, the deficit could clock in at anywhere from $4.6 to $6.7 billion.

The 2012 gap could range from $5.2 to $7.5 billion, and the estimated deficit after that, in 2013, ranges from $5.4 to $8.3 billion. 

It’s not just that these deficits are unpredictable right now. As the future has gotten closer, uncertainty has increased rather than decreased, the opposite of what should happen. 

Two years ago, Bloomberg had projected a 2011 gap of $4.3 billion.

But Thompson, arguing at that time that tax revenues would be stronger than the mayor thought, had said that the deficit would be just shy of $4 billion.

Back then, the difference between the two estimates was only 7 percent of the average between the expected low and high. 

Today, the difference in expectations for the very same year — as it gets closer and closer and thus should seem more in focus, rather than less — is 37 percent.

One thing is certain, though, absent a short-term Wall Street miracle.

The projected deficits are all big. They each represent more than 10 percent of city-funded spending, even at the low end. 

Taxes are falling, sure. The city expects them to fall 3.8 percent in 2010, after a 5.3 percent fall in 2009.

But they’re falling unpredictably.

That’s why, even after having slashed its revenue projections several times over the past two years, the city, just since January, has once again had to slash its predictions for 2010 tax revenues by another $800 million. That’s after accounting for an expected hike in the sales tax. 

The city is scrambling to make some sense out of the plummeting numbers largely because it gets nearly one-third of its tax revenues from personal income and business-related taxes taxes that are far too sensitive to Wall Street. 

These taxes have already fallen 17 percent and 7 percent respectively in the past year, and the city now expects new falls of 20 and 21 percent.

Half of the city’s projected decrease since January is due to expected changes in these tax categories. 

After that, the city predicts double-digit growth in these taxes. If such growth doesn’t happen, we’re all in even more trouble.

But who really knows? To predict these tax revenues, one has to predict Wall Street’s performance, which is impossible to do.

Over the years, the city grew more dependent on Wall Street over the years even as Wall Street grew more inscrutable. 

During Wall Street’s boom era, financial analysts said that it was impossible to study the earnings pattern at “black box” companies like AIG and Bear, Stearns (although they didn’t mind as long as the money was poring in).

The city was the same way. A few years back, unexpected surpluses were nearly as big as today’s unexpected deficits. The city didn’t find this volatility particularly worrisome. 

Now, because the city patterned its own budgets after its major industry, future budgets are just as impossible to discern in the bad times.

Well, who cares?

The problem is that it takes months of careful planning just to pare $1 billion out of the budget without unduly impacting basic services. Mysterious deficits make this job even harder, since a billion-dollar deficit can materialize in an instant. 

Thompson the candidate could use these numbers to mount a case against Bloomberg’s fiscal stewardship.

He could say that the idea that the current crisis was unpreventable is a canard.

The city could not have prevented Wall Street’s crisis, no. But the mayor could have better insulated the city budget from Wall Street during the good times. He could have worked with Albany to cut top personal- and business-income tax rates.

Such cuts would have had two effects. They would have made the city less dependent on these sources of revenues, making surpluses smaller in the good times and deficits smaller now.

And, lower taxes on businesses and entrepreneurs wold have attracted non-financial business to the city, further lessening our dependence on Wall Street. 

So far, Thompson has missed this opportunity.

Campaigning over the weekend, Thompson railed against Bloomberg, saying that “it is time that we had a mayor … who will stand up and fight for us, who understands it isn’t about the rich.”

But New York’s problem stems from the fact that Bloomberg did the opposite of Thompson’s vague accusation of favoring the rich.

The mayor, through passive tax policy, steadily took money from rich people and companies and transferred it to poorer people, by actively pushing through increases in funding for public schools.

Since Bloomberg took office, city spending on schools — the part that comes from our taxes, not from federal or state subsidies — has nearly doubled, to $11 billion.

Now, many of the people and companies whom the city depends on for money are no longer quite as rich, and they may not get that way again anytime soon.

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