Saturday, April 6

Neither a Borrower Nor a Lender Be

Today's New York Times contains an editorial (note subject-verb disagreement in fourth paragraph) that appeals to Mayor Bloomberg to reconsider his plan to borrow $1.5 billion to help cover the city's whopping $4.8 billion dollar deficit. So far, so good. Borrowing money to cover a deficit is a bad enough idea at the best of times, but with no good reason to believe that next year's revenues magically will be high enough to pay off the loan as well as cover expenses, it is a terrible idea, as Edmund McMahon explains here.

But the Times's editorial then loses its way and degenerates into a predictable call for higher taxes as an alternative to borrowing. Acknowledging that critics warn that even a temporary tax inevitably becomes a permanent tax, the paper nevertheless calls on the Mayor to "recalibrate" property taxes (by which, it is safe to assume, they mean raise them, rather than lower them), introduce user fees for garbage collection (what, exactly, would our current taxes be going to then?), and lobby Albany for a commuter tax (as though the accompanying reduction in the private workforce is just what the city needs).

Much better ideas would be to put some the Mayor's much vaunted business acumen to work reducing rampant public sector waste. Just a few of the following reforms would achieve the same deficit reduction as the proposed borrowing would:

1. Reducing the city's cultural funding to something like its early '90s level, leaving New York with one of the highest rates of cultural subsidization in the country. Estimated savings: $50 million/year.

2. Reducing the public sector workforce (currently over 300,000) by 25,000, leaving it above its 1986 level. Estimated savings: $1.44 billion/year.

3. Adopting the health insurance reforms suggested by the Citizens Budget Commission. Estimated savings: $700 million/year.

These three measures, combined with the cuts that the Mayor is already contemplating, would eliminate the deficit and prevent the city from embroiling itself in either of the dubious options of borrowing to cover deficits or of increasing what is already one of the nation's highest tax burdens.

Thanks to Edmund McMahon and his article "Tax-and-Spend, Boom-and-Bust: Lessons for Mayor Bloomberg" for these useful suggestions.