LICBDC Hears Of City, State Economic Situation
At the March breakfast meeting of the Long Island City Business Development Corporation, held at the MetLife building on Queens Plaza North, Kathryn Wylde, chief executive officer of Partnership for New York City, gave attendees a brisk runthrough of the current economic situation: how it got the way it is and where it is headed. While saying, “We’re finished with the two-year global recession” and “U.S. companies have money to invest and are ready to do it,” she had unhappy news to impart too, saying that in the city the recovery is jobless and that the well-publicized financial problems of New York City and state, are quite true. For Queens and the rest of the city, she saw hope for the future, if not immediately, in exports.
The city is better off than most of the rest of the country, though its government employment is an economic drain, she said. In the past several years it has received more than a trillion dollars from all sources, the economic stimulus package included. (She was strongly supportive of the stimulus package and suggested that skeptics should be ignored. For those shocked by the $180 billion bailout granted to American International Group, or AIG, she said that it was “only a small part” of the whole package.)
The city has its problems, of course: 237,000 jobs have been lost since the summer of 2008, a 6 percent decline in employment, and slow or no growth in that respect can be expected for years to come, she said. Small business is crucial in New York, but current consumer reluctance and the credit crunch have caused a small business decline for which there is no ready solution. In addition, there is, of course, the lag in commercial real estate rentals, causing the rent rate in Manhattan to fall 45 to 50 percent—though that, in her estimation could be called a mixed problem. She quoted John Sexton, president of New York University, who described the city’s economy as “less than the sum of its parts”. More bad news could be delineated, such as the fact that the city cannot afford a larger police force than it had in 1994. Additionally, she said that the mammoth financial firms brought on the economic crash and deserve the further financial regulation they might eventually get as a consequence.
Wylde appeared to imply that if the general economy moves up from recession, New York City should find a way to move up with it. She cited a recent poll saying New York was the most dynamic of 21 cities the poll covered, though it was pressed for supremacy by some of the other cities, such as Singapore and Toronto. Its international status is sound—London recently ceded its title of financial leader to it—and the export sector is where New York, and Queens within it, could be superior, though that will take time. She praised the agreement made between LaGuardia Community College and Goldman Sachs as an investment boon, marking another tie-in of business and higher education. She also said the city is enjoying a “rebound in the housing market”. During the question period, one inquirer asked if she believed the city’s old manufacturing base could be revived. She said niche and advanced manufacturing could find a home here, but the heavier kind that has been lost is not coming back. Even China, current workshop of the world, might be farming a lot out to Africa before long, she said.
She was not so sanguine about the rest of the state, finding that its worst problem is its economy. Albany does not have cash ready to pay state tax refunds, she said, and, according to Lieutenant Governor Richard Ravitch, could be broke by June 1. The shortfall is not because there’s no willingness to raise revenue by taxing persons at the upper income levels, she observed, since those making $250,000 or more have a tax rate ranging from 55 to 61 percent, a level where their elastic willingness to tolerate it suffers terminal strain and, in Ravitch’s words, “they begin to go away”. She said the state must resort to spending cuts and smarter investment. She called its investment record a poor one, exemplified by the once-vaunted “Empire Zones”, which were meant to stimulate business revival but which, in her words, largely resulted in shopping malls in Central and Western New York for a population too economically depressed to support them. She suggested the state might look to better innovations such as those that have been made in New Jersey and Connecticut. Because the Empire Zone concept has survived for a quarter-century, some conclude it is thus indispensable, but she said it should be abandoned as ineffective.
One-fifth of the jobs upstate are government jobs, she said (only one-tenth downstate); perhaps the recent increase in private sector jobs throughout the state that she noted could be augmented by something like “backshoring”, which would pull back some of the jobs that have been outsourced to foreign countries—“offshoring”—and offer them in the state’s regions with high unemployment. Believing that heavy spending cuts must be made by the state legislature, she fancied that Tea Party types might spur legislators on to perform that difficult task.