The “tale of two New Yorks” looks very different if you look at the bigger picture — at the whole state, and over decades. Then it’s clear that our problem is growth.
The story starts the same: It’s been the best of recessions for the concentrated rich in Manhattan — income for the top 1 percent has been going up. But for the other 99 percent of New Yorkers it’s a different story, especially upstate.
In the period 1991 to 2011, upstate counties with big cities lagged the nation’s growth in per-capita income considerably. While the nation’s income rose 109 percent (and all of New York’s income rose by 116 percent largely because of Manhattan), Broome County grew only 88 percent, Monroe 92 percent, Niagara 96 percent and Onondaga 104 percent.
Yet there’s a darker story under these facts, for the whole of New York, including downstate. Despite good times on Wall Street, over the last five years New York state lagged the nation’s recovery by a cumulative deficit of 5.3 percent in GDP expansion.
Longer-term, it’s even uglier. In 1961, New York was the richest and most populous state; it claimed almost 12 percent of the nation’s personal income. In 2013, the state’s people took home only 7.6 percent of the nation’s earnings. What accounts for this erosion?
The answer isn’t straightforward — causes and results tend to mix. For example, it is difficult to maintain a robust economy when the state is losing people. In the same 50-year period, the Empire State saw its population fall from 9 percent of the nation’s to 6 percent. Making matters worse, New York is “graying” faster than nearly any other state.
But the bottom line is still that, compared to the nation, the Empire State now has fewer people making comparatively less money.
Yet these are far from the only shifts. In these 50 years, the very nature of New York’s economy changed significantly. Industries that once thrived, upstate and on Long Island, are shadows of their former selves.
Again, the causes are multiple. For example, New York lost its claim on innovative engineering in good part because its universities fell behind in the game of basic research. California universities now get roughly four times as many government research dollars on a per-capita basis as New York’s do and nearly seven times as much industrial-research support. Back in 1961, New York’s institutions were at rough parity with California’s.
But there are larger reasons why robust growth eludes New York — in particular, its well-earned reputation as being hostile both to business and economic success.
New York’s comparatively high taxes (on corporate and personal incomes, on estates and property) coupled with the most aggressive regulatory climate in the nation, surely signal that growth should be happening elsewhere.
Then, too, every New York employer knows another reason why no one would relocate a plant here — “the scaffold law” is code for an unbridled tort bar. (One of Texas Gov. Rick Perry’s key arguments in recruiting business from New York and other states is that Texas has reined in class-action suits.)
To have any hope of moving forward on a competitive basis with other states, New York must reduce its tax burden by lowering taxes and eliminating its estate tax. To do this, it has to get control of its civil service. Pay and extraordinary benefits — where a jail guard in Syracuse can retire on $160,000 — have to be recalibrated to fit a state that no longer needs nor can afford an oversized and self-protecting bureaucracy.
Most of all, it must focus on big problems with a view that only by making objective gains on several fronts will New York’s economy really come back.
The state’s politicians initiate programs apparently without wondering if they can genuinely help the economy. Declaring a few acres around state campuses to be “tax-free zones” begs further cynicism, since everyone knows that even if these do lure a few tax-protected firms, their effect would be too small to make any difference in the overall situation.
No, New York has to get serious. It might look to the fiscal discipline of other states (Texas, Florida, Indiana, Tennessee) that have cut spending in order to cut taxes for everyone.
Not only are these states serious about improving the welfare of all their citizens, their accumulating record of growth and job creation is real and speaks more loudly every day. Their message: “Leave New York, come here.”
Carl Schramm is University Professor at Syracuse. Adapted from his remarks to the New York Business Council’s annual meeting.