NYS is F***ed. Also Sun Rises in East.

[OtakuLoki]

With the failure of Lehman Brothers, the buyout of Merril Lynch, and the drastic measures being taken to save AIG, it should be pretty obvious that Wall Street is in huge difficulties.

What is less obvious, even to people who should know better, is that NYS is approaching a huge financial crisis. IMNSHO for the better part of the past 20 years, and perhaps longer, NY has been so inimical an environment for business that few start-ups have been made here, and many businesses have left the state, or transferred operations or just world headquarters out of the state. In the past, however, like all true provincials, the government has taken the position that there's no need to control spending, nor to even consider controlling the tax burden - NYC is the financial capital of the world (Or at least the country) and no one would ever consider doing business elsewhere. So we can keep soaking those giant financial corporations to keep making ends meet - even if all other industry moves out of the state.

Even before this past weekend the writing was on the wall. This year's budget, that is the 2008-2009 budget passed this year, was already facing a projected $7 Billion shortfall. That's $7 Billion, folks. The governor called the Legislature back into session to try to address this by having them approve cuts. He got $470 million trimmed from the budget.

This was not enough, even then.

And now the situation has gotten worse. Some 20% of the state's operating monies come from taxes on Wall Street. With the way things have gone this week, it's obvious that further cuts are going to be needed. Or taxes will have to go up. And we're already bleeding jobs with the tax burden as it is. The only way to avoid having taxes going up further will be to address the budget issues ruthlessly.

That means that cuts have to be considered for all aspects of state government: Transportation, Education, and yes, even Pensions.

As an aside: For the love of all that is sane or reasonable, can we end state support for things like the new Yankees Stadium? After all the promises made locally that the taxpayer wouldn't be on the hook for either the new baseball stadium or the new soccer field, I have zero trust in any of these sports deals to actually be anything but an albatross around the neck of the tax payer.

The truly infuriating thing is that after the last round of cuts David Paterson, the only state figure who has been seeming to actively push for fiscal responsibility, was telling the so-called underrepresented special interest groups that in the future he'd remember that any proposed cuts will be affecting them, as well as those groups that afford major lobbying pushes.

Which seems to be a near-promise to treat their state monies as sacrosanct as anything the CSCE supports.

But raising taxes is the last option.

Here's a hint - if you can't consider cutting funds from all the sacred cows in the state budget - raising taxes is the only option.

And raising taxes will just speed the flight of money out of the state, and make things worse.

NY's ship of state just hit a financial iceberg. Unless drastic action is taken, now, it will go under.

I know which way I'm going to bet.

[silenus]

Not to worry. Sarah Palin's run Alaska with a surplus. Once she gets to Washington, she'll fix everything for everybody at all levels. :D







Sorry. It seemed better to make a joke than to say what I'm thinking, which is "You're right. Y'all are fucked." A number of economic birds are going to be coming home to roost across the country over the next few years, I'm afraid. You won't be alone by any means.

[OtakuLoki]

I don't pretend that the financial crisis isn't going to affect more than just NY. Like you said, it's going to have repercussions all across the nation, and the world. I just think that NY's provincialism and sense of superiority has set us up for a much more intimate encounter with the clue bat.

[NinetyWt]

I don't pretend that the financial crisis isn't going to affect more than just NY. Like you said, it's going to have repercussions all across the nation, and the world.

I've been keeping half an eye on the situation in Jefferson County, Alabama. They've been close to declaring bankruptcy for some time, and apparently the Wall Street crisis is exacerbating things:

BIRMINGHAM, Alabama (Reuters) - Wall Street's rolling crisis that caught two more leading municipal bond underwriters over the weekend may slow negotiations on restructuring $3.2 billion of troubled debt issued by Alabama's Jefferson County, local officials said on Monday.

The county, Alabama's most populous, has been in talks for more than half a year with creditors over its sewer bonds and related interest-rate swaps. It has authorized lawyers to prepare for a possible municipal bankruptcy filing.

With the help of Alabama Gov. Bob Riley, both sides are working against a September 30 deadline to reach agreement and avert what would be the biggest municipal bankruptcy filing since that of Orange County, California, in 1994.

[JohnBckWLD]

I couldn't agree more. It's gonna get a whole helluva lot worse before it gets better. When you combine the recent downturn, a completely dysfunctional, corrupt & out of touch state legislature, the power of the civil service unions and a lack of any immediate fixes; those storm clouds out on the horizon might be category 5.And raising taxes will just speed the flight of money out of the state, and make things worse.Though it's only one small example, I could 'prove' how much I agree with your OP. I just put my my house (http://www.weichert.com/search/realestate/PropertyListing.aspx?P=21376784&src=GBny&seg=GBseaford) (and its $12,750 property tax bill) on the market. My s/o is selling their barn house (http://wp.yahoo.prualbertrealty.com/details/start.aspx?propid=091W002808806&VIP=ClassOodle) as well. We're moving to Phoenix fairly confident of the fact the Empire State is in for much harsher times than the pain they've been feeling out west the past couple years. It sucks. Leaving 2 daughters, family, friends, a business, a decent job & many other ties behind - but even if things don't get as bad as expected, I can take comfort in the fact the cold winters will be an easily forgotten memory.

[Duke]

As my wife recently started working for a state university in New York State, this is a proximate concern for us as well.

But I'm mad at downstate as much as I'm mad at Albany. When NYC was rolling in dough, did we see a single penny of that in western New York? No, even during the boom times it was cut, cut, cut around here, while Albany raised taxes to the hilt. Even while our taxes went up, our services were being cut--even things like police and fire services. We enjoyed none of the benefits of the boom times, but we will catch hell because of the bust, while if the events of the past month are any indication, downstate will be bailed out over and over again.

And when (just as one example) Delphi faced shutdown and thousands of jobs were at risk, did the governor run to our rescue? Hell no. See, our economy around here isn't important enough.

[JohnBckWLD]

...But I'm mad at downstate as much as I'm mad at Albany. When NYC was rolling in dough, did we see a single penny of that in western New York? No, even during the boom times it was cut, cut, cut around here, while Albany raised taxes to the hilt...Spare us. NYC taxpayers kick-in $11 Billion (http://www.nysun.com/new-york/secession-plan-is-floated-for-new-york-city/70397/) more in taxes than it gets back from the state.

Failed cities like Buffalo (http://www.nysun.com/opinion/can-buffalo-ever-come-back/64879/), should either come up with their own local solutions - or be abandoned,

[Duke]

Spare us. NYC taxpayers kick-in $11 Billion (http://www.nysun.com/new-york/secession-plan-is-floated-for-new-york-city/70397/) more in taxes than it gets back from the state.

Failed cities like Buffalo (http://www.nysun.com/opinion/can-buffalo-ever-come-back/64879/), should either come up with their own local solutions - or be abandoned,
Bah. $11 billion will be chump change compared to the bailout NYC will get.

[OtakuLoki]

Failed cities like Buffalo (http://www.nysun.com/opinion/can-buffalo-ever-come-back/64879/), should either come up with their own local solutions - or be abandoned,

It's hard to come back, though, when all industry is so heavily taxed that no one with any sense would want to have a start-up in NY.

I'm not going to deny that Buffalo, Rochester, and Syracuse all have problems beyond the tax structure in the state. But that is a major hurdle for working to develop new solutions.

[mske]

Spare us. NYC taxpayers kick-in $11 Billion (http://www.nysun.com/new-york/secession-plan-is-floated-for-new-york-city/70397/) more in taxes than it gets back from the state.

Failed cities like Buffalo (http://www.nysun.com/opinion/can-buffalo-ever-come-back/64879/), should either come up with their own local solutions - or be abandoned,

Is there a state in the union that has state tax money distributed in the exact same proportion it was received?

I also note that the $11bn disparity figure is not cited in the article. I'd be curious of the methodology to determine.

As a new resident of the Buffalo area, moving here from Toronto, I am shocked by the state tax burden I carry here. The property tax on our home (assessed at 177K) is over $6,000. The property tax on the home we had in Burlington, ON (sold in 2006 for 300K) was $2,400. And - I had more services and quality of life ammenities in Burlington than here. Same garbage, recycling, police, fire, etc, *and* new community rec centre, libraries open every day of the week, new playground equipment. In fact, I can't think of one service I receive here for my tax dollars that I didn't have in Burlington (or Mississauga for that matter, where we lived before moving to Burlington).

[mske]

Missed the edit: I realize that the comparison between tax structures is far too complex than presented here. But what is true is that my total tax obligation (school, city, region, state, federal) is virtually unchanged as a percentage of my income despite moving from socialist, tax-loving, free healthcare, cradle-to-grave nanny state Canada to tax-cutting, personal freedom loving, you're on your own to support yourself, no government handout philosophy United States of America.

[silenus]

Today's LA Times notes that the California budget shortfall this year is $15.4 billion. The Governator is threatening to veto everything in sight if his austerity programs aren't approved. The budget was due back in July, so I expect there to soon be some political maneuvers to avoid or force defaulting on pensions and the like just before the election.

Such fun.

[OtakuLoki]

Missed the edit: I realize that the comparison between tax structures is far too complex than presented here. But what is true is that my total tax obligation (school, city, region, state, federal) is virtually unchanged as a percentage of my income despite moving from socialist, tax-loving, free healthcare, cradle-to-grave nanny state Canada to tax-cutting, personal freedom loving, you're on your own to support yourself, no government handout philosophy United States of America.

I don't mean to discount anything you've said. But the comparison about tax burdens is going to matter a lot more between states than between NY and Canada. (Well, NY and Ontario.) AFAIK NY isn't competing with Ontario for start up businesses, it's competing with, say, Delaware, or Arkansas. Or even Texas.



ETA: silenus, I feel for you. Those kinds of cuts, no matter how necessary, are not going to be without effect.

[mske]

I don't mean to discount anything you've said. But the comparison about tax burdens is going to matter a lot more between states than between NY and Canada. (Well, NY and Ontario.) AFAIK NY isn't competing with Ontario for start up businesses, it's competing with, say, Delaware, or Arkansas. Or even Texas.


Oh I agree with you. When your state tax burden is more on par with a Canadian province than a U.S. State, no one is going to look at you as a place to build. And for what? What am I getting here that I wasn't getting in Canada? I can certainly tell you what I am not getting.

[OtakuLoki]

I can certainly tell you what I am not getting.

Marginally less snow and cold? ;)

[mske]

Marginally less snow and cold? ;)

C'mon - I'm in Buffalo now. I've had a exponential *increase* in snow.

[Merkwurdigliebe]

Seriously, where the hell does all the money in NYS go? They tell us that NYC pays out more than it receives. You say that Buffalo is getting screwed, so where the hell does it end up?

But I'm still bitter. Why the fuck does the congestion charge bullshit have to go through Albany? What fucking business is it of theirs how we run our city down here? I thought it was a great idea to reduce traffic and raise transit funds. Now they'll be raising the fare again I'm sure.

Yeah we're screwed.

[Sunspace]

Failed cities like Buffalo (http://www.nysun.com/opinion/can-buffalo-ever-come-back/64879/), should either come up with their own local solutions...Buffalo has lost 55% of its population since 1950? Wow.

I remember my parents telling me how they used to go to Buffalo for a good time when they were young in the early fifties. At that time the Greater Toronto Area had around a million people, and the two cities did not appear all that different. I've seen pictures of Toronto from then, and it strongly resembled Buffalo--archiecture, railway yards, all sorts of things.

[Cluricaun]

Things aren't any better in Illinois either, we're $2 billion in the hole, which while not as much as other places, is still a whooooole great deal of money that isn't going to magically appear on the horizon, and Chicago seems to suck the most cash out of the system. They can barely afford public transportation or keeping the schools open. Sure, they most likely provide the most of the tax money the state gets, but they take the lions share back. They can't even get by with the 10% sales tax, the highest in the nation.

[smiling bandit]

Seriously, where the hell does all the money in NYS go? They tell us that NYC pays out more than it receives. You say that Buffalo is getting screwed, so where the hell does it end up?

But I'm still bitter. Why the fuck does the congestion charge bullshit have to go through Albany? What fucking business is it of theirs how we run our city down here? I thought it was a great idea to reduce traffic and raise transit funds. Now they'll be raising the fare again I'm sure.

Yeah we're screwed.

I'm not a New Yorker, and I admit if you pressed me I probably couldn't say what's the problem now. But I studied history - a lot of history - and new York has traditionall had just about the most expensive and elast useful government of the entire United States. As an organized entity, it is a running disaster, and has been since well before the Revolutionary War.

The problem si that from the beginning, politics in New York are all about bribery (in various legal and illegal forms) and argument. But no one really wants to fix anything or do anything. Government there seems to be almost an end in and of itself. Heck New York politicians have a better track record for encouraging "good things" outside New York than actualy accomplishing things inside. Sometimes, one or another politican really does try to fix things (William H. Seward, John Lindsey, Rudy Guiliani). Sometimes they succeed... sometimes not. There are a lot of entrenched interests in the State and City governments. You see the same problems in California, to some degree.

New York's overall economic success (in the city and elsewhere) has often enabled it to survive or at least get by even with ineffective, meddlesome government. It's no wonder that both upstate and downstate claim they are shorted: they are being shorted, since upstate has services cut with high taxes and downstate reaps the problems of awful service in a complex city.

However, as a final note state governments limit the power and authority of cities: states and territories are the fundamental unit of the nation. Cities are chartered under state law codes. Because of this, city law cannot violate state law, and state law takes precedence. This can affect certain taxes or fees, and the COngestion Charge may well have been un-state-consitutional.

[saoirse]

Oh come on. The money has gone to fast ferries, of course! You gotta have the fast ferries! OtakuLoki, you should probably be a reader of the Smugtown Beacon, if you aren't already. (http://www.smugtownbeacon.com/) I think you'd enjoy it.

[HongKongFooey]

I've been keeping half an eye on the situation in Jefferson County, Alabama.I'm sorry to hear about your eye, what happened to the other half?






I'm sorry, I couldn't resist :)

[olivesmarch4th]

I'm new to the area. I have noted living expenses are ridiculous out here on the East Coast, but people in general appear quite well-to-do. (I'm told I have a somewhat distorted view of economic security here as all I've really seen of NYC is the Wall St. District.) In general though, people seem to really think about money and financial planning--even young people. I'm hoping to learn a thing or two from these financially savvy folks.

Also, consider that I moved from Michigan, which is going through an incredibly economically painful experience even by general U.S. standards. I can't even describe how bad the Michigan economy is right now. Compared to Michigan the East Coast is a land of milk and honey. My rent went up but so did my wages, so it evens out.

I will be paying New York City income taxes but I live in New Jersey. I've been rather stunned by the news this week. I don't know much about the way stocks work, but I'm trying to learn and keep informed. My 403b is with AIG but I'm told that my money won't be much affected, and very luckily for me, I'm young. The impact that this destabilization is going to have on the entire economy as a whole can't be discounted though. I worry.

I think you have a very legitimate point. The wealth of New York State has always amazed me, but I imagine it owes a lot of that to the incredible economic power generated by big business in New York City. If all of that falls out from under the state, it will no doubt impact the local economy. However, I think that impact will affect the country as a whole with equal profundity--New York City doesn't just support NYS, it supports the entire nation.

Fortunately, I have the most secure job in the country right now-- debt counseling! :D

[NinetyWt]

I'm sorry to hear about your eye, what happened to the other half? Reminds me of this: (apolgies to Willie Nelson):

If I'd only had one arm to hold you ... better yet, if I had none at all...
If I'd only had one ear to listen... to the lies that you told to me..
If I'd only had one leg to stand on ...then how much how much truer picture you'd see...
For then I more closely resemble
the half a man that you've made of me

:p

[brazil84]

I'm more optimistic. There are plenty of people and businesses who would have chosen to be located in New York but for the fact that it's too damn expensive. If the financial industry contracts, it will make some room for these folks.

I do agree that the city and state are likely to face budget crises, but that's been happening for a hundred years. I predict they'll make it through; forget what's been learned; and move on to the next round of excess, just like in this past.

[XT]

Wait...are you saying that if you raise taxes on business they will have the affrontery to LEAVE?!?

Perish the thought....

-XT

[brazil84]

Fundamentally, New York City's real asset is its mystique. If you are a financial institution; a doctor; an law firm; an accountant; an advertising agency; etc., you have a lot of extra credibility if your phone number starts with 212.

The amount of extra taxes and rent you pay to have your office in Manhattan instead of Jersey City (a mile or two away) is staggering. But quite frequently it's worth it.

I don't see New York City's mystique going away any time soon. But when it does (and it will, because no city can be #1 forever), then NY could have some serious problems.

[Bookkeeper]

I don't mean to discount anything you've said. But the comparison about tax burdens is going to matter a lot more between states than between NY and Canada. (Well, NY and Ontario.) AFAIK NY isn't competing with Ontario for start up businesses, it's competing with, say, Delaware, or Arkansas. Or even Texas.
The reality is that, under NAFTA, to at least some extent, it is competing with Ontario. (And vice versa, which is a regular concern from our end.)

[Will Repair]

Sun Rises in EastNot everywhere; it can also rise in the north or south.

[Maeglin]

Fundamentally, New York City's real asset is its mystique. If you are a financial institution; a doctor; an law firm; an accountant; an advertising agency; etc., you have a lot of extra credibility if your phone number starts with 212.


Not so much. Speaking as a NYC finance professional, its real asset is its workforce. If you are a financial institution and you want a, large fluid labor market with some of the finest talent in the world, there are only a handful of cities that qualify. There are some decent finance people in other places, but seriously.

[JohnBckWLD]

There are some decent finance people in other places, but seriously.NYC + 9/11 + SOx -> London

[Maeglin]

NYC + 9/11 + SOx -> London

Not so much in my experience. It looks more like this:

Downtown NYC + 9/11 + SOX yielded Midtown NYC +9/11 + SOX

[smiling bandit]

New York is very good on finance, but it's more diversified with other commercial opportunities than London. There's more competition for talent, you might say.

[brazil84]

Not so much. Speaking as a NYC finance professional, its real asset is its workforce. If you are a financial institution and you want a, large fluid labor market with some of the finest talent in the world, there are only a handful of cities that qualify. There are some decent finance people in other places, but seriously.

I have 2 questions for you:

(1) Why are those talented people living in the NYC area?

(2) Why don't those financial institutions save on rent and taxes and re-locate all of their operations to Jersey City or Newark?

[Maeglin]

I have 2 questions for you:

(1) Why are those talented people living in the NYC area?

(2) Why don't those financial institutions save on rent and taxes and re-locate all of their operations to Jersey City or Newark?


1) It is a virtuous cycle. There is a market there. Once upon a time, if you wanted to make money, you had to be where the market was. So people and companies proliferated.

2) We do. A lot of the lower-value and operations work is done outside of NYC. It is less convenient for metro area people to commute to Jersey. If my company told me that my role was being relocated to Newark and the rest of the financial world weren't imploding, I'd be looking for a new job in a New York minute.

[OtakuLoki]

2) We do. A lot of the lower-value and operations work is done outside of NYC. It is less convenient for metro area people to commute to Jersey. If my company told me that my role was being relocated to Newark and the rest of the financial world weren't imploding, I'd be looking for a new job in a New York minute.


AIUI, though, keeping the corporate HQ in Manhattan has a number of costs that would be cut should a business simply perform an administrative change of location for its HQ. That so many companies stay based in Manhattan, even while moving operations or other departments into Newark, or Jersey City, says a lot about the mystique that brazil84 is talking about.

[Maeglin]

AIUI, though, keeping the corporate HQ in Manhattan has a number of costs that would be cut should a business simply perform an administrative change of location for its HQ. That so many companies stay based in Manhattan, even while moving operations or other departments into Newark, or Jersey City, says a lot about the mystique that brazil84 is talking about.

Comapies capable of posting multi-billion dollar profits (and losses, occasionally) can do the math. The savings in rent and taxes are clearly not worth the loss of talent and the loss of proximity to clients and markets.

Functions that are easily replaceable in the local labor pool are outsourced to other cities. Investment banks stay in Manhattan because that is where the investment bankers want to be.

[brazil84]

1) It is a virtuous cycle. There is a market there. Once upon a time, if you wanted to make money, you had to be where the market was. So people and companies proliferated.

Right. That's part of what I meant when I referred to the mystique of NYC. For the time being, it's the world's premier city. Which attracts succesful people and businesses. Which attract each other. Which maintains NYC's status as the world's premier city.

2) We do. A lot of the lower-value and operations work is done outside of NYC.

But not all. The "front office" is probably in NYC. Commuting issues explain some of it, but not all. Why did Citibank put most of it's back office operations in Long Island City and its front office operations in mid-town? You think it's just a coincidence?

[waterj2]

I don't see New York City's mystique going away any time soon. But when it does (and it will, because no city can be #1 forever), then NY could have some serious problems.(bolding mine)

Maybe not #1, but I don't see any intrinsic reason New York can't be one of the prime financial capitals of the world for some time to come. I mean, how long has London been in that category? 400 years and going strong, or so?

[brazil84]

(bolding mine)

Maybe not #1, but I don't see any intrinsic reason New York can't be one of the prime financial capitals of the world for some time to come. I mean, how long has London been in that category? 400 years and going strong, or so?

There's a difference between "some time to come" and "forever." There was a time when Carthage was an important city, no?

[smiling bandit]

There's a difference between "some time to come" and "forever." There was a time when Carthage was an important city, no?

Oh that's true, but also remember that some cities have been around for going on four thousand years. Sometimes less important, sometimes more, but always there, and always centers of civilization and trade.

[Maeglin]

There's a difference between "some time to come" and "forever." There was a time when Carthage was an important city, no?

Even after several brutal wars and the crushing of its independent history, Carthage was still an important city in the ancient world.

Rome is not as old as Carthage, has been sacked several times, and is still a very important city.

[DrDeth]

Sun Rises in East... and in other news, Cheney is a big fucking liar. :p:D

[OtakuLoki]

Sun Rises in East... and in other news, Cheney is a big fucking liar. :p:D

And radiation exposure prevents Alzheimer's Disease. :D

[brazil84]

Oh that's true, but also remember that some cities have been around for going on four thousand years. Sometimes less important, sometimes more, but always there, and always centers of civilization and trade.

Sure. And one can expect that NYC will decline some day. Will it be like Buffalo or Detroit? I don't know, but I would imagine that during Detroit's heyday, it was difficult to enivsion a decline.

Even after several brutal wars and the crushing of its independent history, Carthage was still an important city in the ancient world.

And eventually Carthage declined.

[wmfellows]

(bolding mine)

Maybe not #1, but I don't see any intrinsic reason New York can't be one of the prime financial capitals of the world for some time to come. I mean, how long has London been in that category? 400 years and going strong, or so?

While I might be partisan, it would seem that London remains more flexible and time zone wise the Asian centres provide more trading balance from a human perspective (I mean for actual living persons trading). An intrinsic reason to see the GMT +/- 5 hour cap mkts business shift to London or EU mkts is less imperial legal regime (current US tendency to trying to ad ho externalise political lawsuits) and better Asia the West mkt timing.

[Ludovic]

Nova Yorkium Delindo Est!

[elucidator]

Yeah, well, the Cato Institute has always had a grudge against Eastern liberal elites.

[Gukumatz]

Wait, what? People were unaware of the coming fiscal crisis?

Norwegian papers have run stories on it since June and it's been damned hard to find a sober financial analyst since July. (And I think my bank started hiring on-call psychiatrists and buying up large supplies of prozac back in August.)

[smiling bandit]

yeah, well, the cato institute has always had a grudge against eastern liberal elites.

:d