A Memorandum from E.J. McMahon
Director, Empire Center for Public Policy
New York State has Wall Street to thank for much of the huge 2005-06 tax revenue surplus that is being counted on to help grease the wheels of state finances over the next two years.
But is this trend sustainable?
Thought-provoking answers to that question are provided in an article, Gotham Needs Wall Street; Does Wall Street Need Gotham?, by Nicole Gelinas, reprinted from the Winter 2006 issue of the Manhattan Institute’s City Journal. Ms. Gelinas, a Manhattan Institute senior fellow and chartered financial analyst, makes a compelling case that the prosperity generated by the recent Wall Street boom is real but also precarious. While the article focuses on implications for New York City officials, it also qualifies as required reading for anyone with an interest in state fiscal and budgetary policy.
Key points of the article include the following:
* Already losing its primacy in financial markets, the NYSE and its member firms are likely to shed employees as the exchange more fully automates.
* “[T]he technology that has helped erode the profit base of the old Wall Street has created another crop of high-flying finance jobs that are not as wedded to New York City as traditional high-end investment continues to be.”
* Because a New York base is no longer an absolute prerequisite for doing business in the securities industry, even those bankers and investors who love the city are more likely to consider moving if the cost of doing business there becomes prohibitive. Thus, events like the December mass transit strike could have greater long-term implications than they did 25 years ago.