New York's future could preview America's, for better or worse

Jane Jacobs, the great urbanist, described how cities, states, and even entire societies can fall into "vicious spirals" in which interlocking problems, left unaddressed, join other problems, resulting in "amalgamated declines."

The downward motion can seem inexorable. Yet vicious spirals aren't supernatural, Jacobs noted, but the "tangible consequences of tangible mistakes and misfortunes." That is, they are at least in part the result of bad ideas and policies. They can also be reversed if action is taken in time. New York State and City are caught in a downward spiral that the rest of the country should view as a warning.

The Wall Street meltdown has made apparent huge problems that were masked to some degree by the financial boom of recent years. State and local spending per capita in New York, with its vast empire of government services and "progressive" programs, is a staggering $12,505, the second highest in the nation (after anomalous Alaska). And it keeps on rising, and will again this year, in the teeth of a terrible economic downturn.

Funding the spending has required prosperity stifling taxation. A 2007 Independent Budget Office study found that New York City's tax bite was 90 percent larger than the American big-city average. The combined state and local tax burden in New York is the heaviest in the U.S., a major reason why upstate New York is now impoverished and bleeding population.

The main beneficiaries of all the spending and taxing are powerful public sector unions, which exercise ruthless control over most Albany and Gotham lawmakers. Democrat and Republican alike typically kowtow to union demands on pensions, health care, hours, and pay, and get reelected with union financial and political support as a result.

That the tax and spend regime could sustain itself at all, however, was due to Wall Street's success. At the peak of the recent boom, the securities industry generated 20 percent of the state's tax revenues, and a larger proportion still of the city's tax haul.

Without supersize financial sector profits and bonuses to tax - and nobody knows when or if Wall Street will come back - New York's profligacy now means vertigo-inducing budget deficits and massive new taxes.

Always a recipe for decline, this liberal New York model is completely unaffordable in a post-Wall Street boom era. New York needs a re-imagining of its future, and in a special issue of the Manhattan Institute's City Journal, the magazine I edit, entitled "New York's Tomorrow," a group of leading policy minds offer the ideas that would help New York not only begin to unwind its vicious spiral but flourish.

Among those ideas, the reader will find proposals to replace New York public employees' defined benefit pensions, which provide guaranteed incomes for government workers' retirements - a benefit increasingly rare in the private sector - with 401(ks), a move that would save taxpayers $40 billion over the next 30 years; to phase out New York City's public housing and sell off some of the buildings, whose worth was recently assessed at over $4 billion, which would raise money, free up property for more constructive uses, and complete the unfinished reform of welfare; to privatize bus services, which would save hundreds of millions yearly; to protect and extend the policing revolution that has revived New York City over the last decade and a half; and lots more.

Some of the proposals would be harder to enact than others, and all would require political leadership to achieve. But the alternative is ruin, as California, beset by similar troubles, is also discovering. New York needs a brighter tomorrow.

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