cookedgoose-300x300-9314821

Wall Street, the goose that laid golden eggs for New York’s public sector for more than 25 years before the Great Recession, is “still working through the fallout from the financial crisis,” as Comptroller Thomas DiNapoli reported earlier this week.  The problem, as the Manhattan Institute’s Nicole Gelinas writes in the Post today, is that “both the state and city governments, which depend on Wall Street to pay the bills, are still partying like it’s 2007.”

“Unless they sober up soon,” she adds, “they’re in transition to nowhere.

Her article underscores what is probably the single most important point to grasp about the outlook for government finances in Albany, in New York’s City Hall, and in localities throughout the state: while the private sector is adjusting to the Great Recession economy because it has to, government — despite all the headlines about cutbacks — is still far behind the curve.

Think the state under Governor Cuomo or the city under Mayor Bloomberg have fully recovered from the 2008 financial sector meltdown?  Think again.  From Nicole’s summation:

In 2008, Wall Street covered about $4.5 billion of the city’s tax payments — 12 percent of the total. Last year, it was $2.8 billion — 7 percent.

The state, meanwhile, got $8.7 billion from the securities industry last year, or 14 percent of its tax dollars. That was down from $12 billion — or 20 percent — in 2008. (The state numbers are bigger because Albany relies so heavily on income taxes.)

New York’s private sector can adjust to all this perfectly well. Yes, the conventional wisdom is that every Wall Street job creates two other jobs in the city (and one in the suburbs), through outsized spending and tax payments.

But Wall Street’s shrinking means cheaper real-estate prices, both residential and commercial — which will bring new people in new industries. Global tourism, too, supports retail jobs.

It’s government that’s refusing to adjust. Those new jobs will never pay what bubble-era Wall Street paid — and so tax revenues will stay slumped.

But the state and city haven’t cut spending accordingly. The state will spend $59.2 billion from its general fund this year — up 11 percent from $53.3 billion in 2008, when the crisis was setting in. The city has goosed spending 17.4 percent, to $52.7 billion from $44.9 billion in 2008.

For all the hand-wringing we’ve heard about belt-tightening and pension reforms in the past few years, mostly what the pols have been doing is waiting for Wall Street to return to the bubble years. They’ve replaced the “temporary” loss in revenues with a variety of one-shots, raids on rainy-day funds and similar gimmicks.

But it’s not temporary — even Wall Street is giving up getting back to bubble-era prosperity. As DiNapoli put it, the financial industry has had a chance to “restructure and position itself.”

New York government had the same opportunity — but didn’t seize it.

About the Author

E.J. McMahon

Edmund J. McMahon is a senior fellow at the Empire Center.

Read more by E.J. McMahon

You may also like

Fewer Workers, Not More Jobs, Explains NY’s September Unemployment Rate Drop

New York State's unemployment rate has fallen sharply since the economically devastating pandemic lockdown last spring. But as state Comptroller Thomas DiNapoli points out in  his latest economic report, the jobless rate doesn't tell the whole story. Read More

It’s Official: New York State’s Second Quarter Economic Crash Was the Worst on Record

Further evidence of the massive damage done to New York’s economy by the coronavirus pandemic shutdown has emerged in the latest gross domestic product (GDP) data from the federal Commerce Department's Bureau of Economic Affairs. Read More

Sluggish Reopening: NY’s Private Job Count Down 1.1 Million From Pre-Pandemic Level

Six months into the novel coronavirus pandemic, New York State's private-sector employment recovery was the slowest in the 48 contiguous states—and getting slower. Read More

NY’s Slow Job Climb Continued in July, But Unemployment Rate Unchanged

As the economy continued its slow post-pandemic reopening, New York State continued to slowly regain jobs—but preliminary data indicate there was no improvement in the state's unemployment rate in July. Read More

New Data Confirm New York State’s Q1 Economic Plunge

New York's economy ended the first quarter of this year in virtual free fall, the latest federal data show. Read More

NY outlook: worse than 2008-09

#NYcoronavirus: The outlook for New York's economy is the grimmest on record, according to the first post-pandemic lockdown round of credible economic surveys and forecasts. Start with the Federal Reserve Bank of New York, whose regional economists today issued a notably pessimistic report based on their monthly Empire State Manufacturing Survey and a broader Business Leaders Survey that take sin the northern New Jersey and metropolitan New York. Read More

Session’s end clobbers NY economy

The closing days and hours of New York State’s 2019 legislative session were easily among the most economically consequential in Albany’s recent history—but not in a positive sense. Read More

Key Cuomo budget update late—again

How big are the fiscal challenges faced by New York State in second half of its 2019 fiscal year? Are tax receipts and spending living up with projections? What's the outlook for the next few years? We don't know—because, for an eighth consecutive year, Governor Andrew Cuomo has missed the statutory deadline for producing a Mid-Year Financial Plan Update. Read More

Subscribe

Sign up to receive updates about Empire Center research, news and events in your email.

CONTACT INFORMATION

Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100
Fax: 518-434-3130
E-Mail: info@empirecenter.org

About

The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.