E.J. McMahon of the Manhattan Institute explained why The Ravitch Plan Won't Save New York.
The Ravitch "Plan" is a scam. New York's lawmakers can either expose its fiscal folly or perish with this pathetic era in New York State era.
New York is $9 billion short of cash -- a structural/functional deficit that took 35-50 years to accumulate.
Factor in off-budget debt that has piled up through wasteful deficit-driven public corporations like the MTA.
These "borrow as we go" parts of State government are only accountable to appointed boards, reliant on tax dollars to cover any accumulated debt -- yet no referendum or legislative system is in place to slow down that fiscal bleeding.
But just in the "normal" course of a fiscal year, New York would fail as a business.
It's the institutional approach to budgeting, almost worse than annual entitlements, that leave the New York State Legislature acting as if they must continue spending money on services the people of New York obviously cannot afford. And the unions act as a lobby presuming it must be, that it would be wrong to make State government smaller, as if the tax dollars are guaranteed.
Ravitch is still pitching his plan as if it is the only solution.
The Albany Times Union covered his media tour. Ravitch is trying to sell "the borrowing" as up-front borrowing:
One of the problems you have is you’ve got all the banks wandering through the halls of the Capitol, selling all the same kind of cockamamie borrowing schemes that got us into trouble in the first place. So at least this borrowing is up front, contains covenants, is done with the best possible credit and it reflects my judgment which—I could be wrong—says, ‘They ain’t gonna cut $10 billion.’ ”
The State Constitution already contains a few covenants of its own -- and part of Ravitch's panic is that New York State Comptroller Tom DiNapoli is about to become a very powerful man.
Think ... Mr. DiNapoli could potentially turn the State Legislature and stop a LOT of spending, overnight, come April 1.
When did all this fiscal madness with the "credit card" style borrowing start?
Robert Caro in his biography of Robert Moses identified 1954 as the point of no return. Rockefeller-era critics point to the changes in the MTA in late 1960s/early 1970s and New York City's municipal crash in 1976/1977 remains a cautionary benchmark.
McMahon of the Manhattan Institute cautions that New York City's fiscal collapse and borrowing to save the city can't be applied to New York State.
"The city was functionally insolvent after more than a decade of chronic deficit spending concealed by capital borrowing to pay operating expenses. The state government, by contrast, has spent the last two decades veering from huge surpluses to occasional big deficits, patched when necessary with borrowing and temporary revenues. As a result, roughly $10 billion of $60 billion in currently outstanding state-supported debt can be attributed to past deficit borrowings. In short, New Yorkers have gone down this road before, and are paying the price."
Before Mario Cuomo arrived in Albany, New York State was already over the fiscal edge. Some older (and sometimes wises) political leaders will recall Governor Hugh Carey warning that the "days of wine and roses" were over in the mid-1970s. By the time Mario Cuomo was done as governor, it was worse. By the time George Pataki had departed the Executive Chamber, it was not better (and some say worse).
McMahon also noted that Ravitch (and Sheldon Silver) has so far ignored an important part of New York City's recovery -- taming the unions.
"New York City’s fiscal crisis in the 1970s established one key precedent Mr. Ravitch has so far ignored: the power of the state to freeze public-sector wages, notwithstanding contracts, in a fiscal emergency. Instead, Mr. Ravitch’s proposal would give legislative Democrats, led by Assembly Speaker Sheldon Silver, a rationale for permanently extending the large temporary personal income tax hike enacted by the state last year. This will suppress the economic growth the state desperately needs to grow its way out of its current problems."
Hence, Sheldon Silver's actual endgame with the Ravitch plan is a deceptive payback to the unions.
It is not too different than the TARP monies aimed for automobile companies that ostensibly would keep union benefits and salaries inflated.
Fred Dicker of The New York Post noted a near-delusional and contrarian attitude about the State budget by New York State Governor Paterson -- as if all was well.
Albany's burning, David. Is is that Governor Paterson no longer cares -- or is this fatalism designed to prompt enough fiscal chaos to expose the entire corrupt house of cards?
Or is it just stubborn hubris?
Paterson was in Westchester last night. He had a more direct and transparent approach there. It was a stark contrast to the illusions being played out on bigger media stages. Paterson admitted there was less money coming down to Westchester, less available to spend but is he okay with that situation because he expects the State Legislature to desperately approve the borrowing?
Westhester Gannett columnist Phil Reisman is so far still giving the embattled New York governor the benefit of the doubt.
"But things could be worse. The governor took pains to say that almost every state in the union is in worse shape. He listed the number of states that have furloughed public employees, closed schools or started early prison release programs to save money."
On this reasonable point, I must disagree with Reisman.
New York State is yet to acknowledge how bad its fiscal debacle will be ... with problems always put off to another day.
When New York finally adresses its debt, the interest on its off-budget debt, the off-budget debt and the projected debt, borrowing $6 billion to salve what is an estimated $60 billion debt will be viewed as reckless and a dishonest band-aid.
The bill to cover 55 years of openly deceptive accounting practices will likely turn to be the worst municipal fiscal crash -- per capita -- in the history of the United States.
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