New York’s public-sector unions love to bash Wall Street, demanding punitive new taxes on investment banks as the solution to every fiscal problem. In fact, the financial sector “oligarchy” and the “new Tammany Hall” of the public-sector labor movement have long had a symbiotic relationship in the Empire State.

Nicole Gelinas lays it out in a must-read post over at Public Sector Inc. The core of her argument:

If the Wall Street / Washington embrace caused the bust and ensuing fiscal crisis, the same embrace also caused the tax-revenue boom that solidified public labor’s power for decades — prolonging the avoidance of conflicts and choices that we see today.

For a quarter-century between the early 80s and 2007, a booming Wall Street power-hosed record tax revenues into New York City and State, giving pols resources to lavish upon public-sector labor in return for votes.

Local unions benefited, too, from one result of finance’s power: the concentration of tax revenues at the top.

For more than two decades, New York’s private-sector middle-class and working-class taxpayers have loosely tolerated uniformed workers’ 20-year-till-retirement packages and the like, plus political self-dealing in Medicaid and other social services, because the political class stoked the myth that “the rich” could pay for it.

If middle-class taxpayers had to pay even higher taxes than they already do, state and local pols would have controlled public-sector spending long ago.
Wall Street has used its public-sector dependents as a handy shield, as well. In the past three years, New York’s Congressional delegation has opposed any real attempt to subject large financial firms to market forces, including the credible threat of failure. The pols know that doing so would cut Wall Street profits and force New York to make choices with scarcer tax dollars.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

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