Tuesday night the city of New York voted to put progressive firebrand Bill De Blasio in charge of one of America’s largest cities. More importantly, a city that has some of the nation’s largest financial institutions based in its metropolitan boundaries.
Blasio’s elevation to the mayor’s office based on an identity politics driven campaign and borderline socialist policies have understandably worried many in the business community. The Investor’s Business Daily, a center-right business friendly newspaper known for endorsing candidates of both sides of the aisle basically called Blasio a socialist and claimed he would take the city back to the 70’s.
Putting Blasio’s win in a historic context is important. Yes, he won by 49%, the biggest margin in city history, but the City Journal notes some important tidbits about this victory. Just over a million people voted Tuesday, if that holds up it means turnout was around 30% lower than 2009. In hard numbers consider Blasio has so far won 752,605 votes, a bit shy of Bloomberg’s 753,089 votes all the way back in 2005. of those who did vote, a slim majority, 51%, said they approved of Bloomberg.
None of this is to make Blasio’s win even less impressive. But it does make it likely he will consider it a mandate and move aggressively to implement an agenda as antithetical to growth as one can get. Ironically, his platform was fairly similar to Bloomberg’s first and second term campaigns on the social front.
During the campaign De Blasio called for affordable housing, infrastructure spending, ending the city’s stop and frisk policy and levying even more taxes on those who make $500K or more. The saving grace on taxes is that this has to be approved by the state legislature and the GOP controlled Senate will block such a move. Even the Democratic controlled House might want to avoid being associated with a tax hike. Certainly Cuomo, running for reelection next year in a possible run-up to a 2016 Presidential bid, will.
Demographically, New York city would be the Eastern version of Detroit, without the influx of immigrants that continue to make up an increasing percentage of the city’s population (which helps explain why voter turnout keeps dropping). During Bloomberg’s tenure taxes still went up and high earners fled the city. Consider this very enlightening statistic brought to us by the National Review, “As Mike Bloomberg was lambasted for pointing out, you can’t ignore the super-rich, either, given that fewer than 100,000 New Yorkers pay half the city’s taxes, and 500 of them pay 15 percent of the city’s taxes.”
This statistic cannot be blamed on a one-time phenomenon such as the recession. In fact, the US government has been pouring hundreds of billions of dollars into the stock market to make those 500 New Yorkers, mostly wealthy hedge fund managers, even wealthier. Unlike income taxes, income from hedge funds (investments) get far more tax protections.
So maybe Blasio will not get far with his tax increase idea. But as has been seen with the Bloomberg era he can still nickel and dime people to death. Keep in mind De Blasio did not run on streamlining or government, he ran on creating more of it. Building more affordable housing requires more money and more government to monitor compliance, write contracts, etc. Blasio also has to find some way to fund a $74.6 billion city government with an ongoing $2 billion shortfall.
New York is not the first city to encounter this issue, or perhaps issue is the wrong word and cycle is better. Higher earners and more conservative folks, at least fiscally, fleeing Detroit for the suburbs led to a downward spiral for that city which as resulted in the state of Michigan taking it over. Tax revenue fell, infrastructure failed, crime grew and voters of the city only supported candidates who promised more spending and government. Today, Detroit is the largest city in the country geographically but has barely 600,000 citizens who call it home. Meanwhile, plush suburbs surround its rotting core (and yes, few would disagree with that assessment).
New Yorker’s, or at least those who voted, choice to go down the same path is frightening and worrisome. New York used to be a mecca for growth and opportunity and while it remains a major entry point for those seeking the American dream, New York’s fall seems to echo the fall of the chance to achieve the American dream.
There is hope however outside Detroit and New York City. Multiple cities across the country, most notably San Jose and San Diego have led efforts to curb pension benefits and reform city government, saving them from insolvency and the spectacular failure which is Detroit. Large states such as NY, CA and IL would be smart to follow their model.
These efforts are of little avail to New York City. The election of Blasio simply continues a downward trend for one of this country’s greatest cities.