Cuomo and New York's Business

Welcome to Politics Bites, where every afternoon at It's a Free Country, we bring you the unmissable quotes from the morning's political conversations on WNYC. Today on The Brian Lehrer Show, Kathryn Wylde, president and CEO of the Partnership for New York City and Steven Spinola, president of the Real Estate Board of New York—both members of the business-centric Committee to Save New York—offered their perspectives on how Governor Cuomo's fiscal policies will impact New York State.

If Kathryn Wylde and Steven Spinola are any indication, New York's business community is optimistic about spending a few years with Governor Andrew Cuomo.

Welcome are the promises to freeze taxes for everyone and to let a tax surcharge on the wealthy New Yorkers sunset at the end of 2011. Spinola and Wylde also voiced support for public employee wage freezes and other cost-cutting measures, insisting that getting government spending under control is the best thing Andrew Cuomo can do for the state's economy. Spinola said that we've gone about budgeting all wrong in previous years.

He's spoken about the need for the business community and citizens to speak up about their fears about where the state's fiscal problems are going, where taxes are going, and where our debt is going. The governor is articulating exactly what we've been aruging for the past year or two. In the crisis we've had, instead of raising the budget by $9 billion in a year, we should've cut the budget. Last year we raised it again. We should not have done that. Cuomo is now articulating the reality that we cannot afford to spend beyond our means.

The government—and the state's residents—are in for some sacrifices. But Wylde said she agreed with Cuomo that this crisis is not to be wasted. New York's problems are far greater than any one constituency, and Albany has been routinely flooded with special interest groups advocating for too-specific policies that don't necessarily work. This could be a chance for the new governor to shift focus to the holistic picture of the state, using big problems to bring disparate groups into the conversation.

Business spends plenty of money focused on narrow industry interests. Same with organized labor and other special interest groups, they tend to focus narrowly. The challenge Cuomo will lay out today in his message is, "Okay, enough with your narrow interests. The whole place is falling apart. There is no more resource. The state can't support any of you unless we fix what's going on, unless we figure out how to grow our economy in a constructive way, get control of the taxes and that we grow our tax base by building our economy, not simply by raising taxes."

Whether or not it's the right thing to do, Cuomo will have to explain to many New Yorkers earning between $200,000 and $500,000 will see their taxes go down at the end of the year, while everyone else's rates stay the same and government services tighten their belts. Brian Lehrer played devil's advocate, asking Wylde and Spinola if it's fair for the individuals and corporations that contributed to the financial collapse in 2008 to get a tax cut when everyone is struggling. Wylde said that was an oversimplification of the causes and effects of the crisis, and responded that the recession's effect on New York was comparatively small. The real problem for New York is the pattern of overspending that the state had gotten used to in the last 15 years.

If you look at the trajectory of state spending growth and debt, as opposed to state revenues, this is a long-term structurual problem that's been happening over the last decade and a half. This is not a result of the financial crisis and immediate recession. [The financial collapse] is a blip on the screen compared to the overall problem the state faces in its costs, where our Medicaid costs are double the country average, education costs are double the country average, and that has to do with growing our expenses far more than growing our economy...The public sector has, at the state and local level, displaced the private sector as a source of jobs and economic activity.

Spinola agreed that scapegoating big business and the rich with higher taxes places all the blame on very few people. For more substantial causes of our economic woes, he said, look no further than the public sector.

It wasn't the real estate industry or the banking industry that negotiated pensions we can't afford. It wasn't the real estate industry or the banking industry that negotiated wages that continue to get increase in the last couple years despite the fact that the private sector wasn't giving increases. 

Brian brought up his thoroughly unscientific poll for today, which finds that a vast majority of respondents think the tax surcharge for higher-earners should not be allowed to expire at the end of the year. Public opinion, he pointed out, may not be on Wylde and Spinola's side. Spinola countered that if the question were phrased differently, expressing the full range of ramifications for raising taxes, we might see very different results.

If you ask your listeners would they support taxes on the rich if it also might mean that those people will make a decision to move out, and the number won't generate as much money, or that investments won't be made in the state of New York and jobs may be lost or won't be created, you might get a little different response. The thought process has to go a lot deeper than "Should we tax rich people?"

As with most of Governor Cuomo's actions thus far, the symbolism of his tax decisions will be important. Wylde said that letting the tax surcharge sunset was a promise made by the government years ago, and that the state risks more by reneging than it does by lowering taxes. It's all about perception and confidence. If people can't keep faith in their government's promises, New York's problems will only get worse.

If the state breaks its word to the taxpayers, then i think you're going to see an acceleration of the people who are leaving New York. Property and income tax burdens are starting to be a decision-maker, not just for individuals, families and young people, but also for businesses. We have to change the message New York state is sending if we're going to be competitive.