New York can’t afford an other debt-fueled decade. For the last 10 years, New York state and city did what regular Americans did: borrowed without results. Mayor Bloomberg, Gov. Paterson and the Legislature should understand this trend and halt it before we end up spending so much on debt that we can’t fix our crumbling infrastructure.
How much debt has New York amassed since the millennium? A decade ago, New York state owed $45.1 billion, including the public-authority debt it guarantees. (Figures, from the city and state comptrollers, are in today’s dollars.) Today, the total is $61.9 billion, a 37 percent jump.
When the New Year’s ball fell in 1999, New York City had borrowed $49.6 billion. Today, it’s $64.9 billion, a 31 percent rise.
The king of the debtors is the Metropolitan Transportation Authority. Through 2000, the MTA had borrowed $19 billion. Today, it owes $28.7 billion — up by half. As usual, the MTA reflects Albany and City Hall cravenness, concentrated.
Relative to the rest of the country, we started out at high levels and stayed there. New York City’s per-capita debt is the highest of any American city — 52 percent higher than runner-up Philadelphia. Only New Jersey eclipses New York state — not even California measures up.
It would be one thing if the debt had paid for what it should have: gleaming infrastructure to support productivity and growth.
Do you see much of that?
This week, New York state had to blow up an 80-year-old bridge to Vermont before it fell down. Its destruction and an 18-month replacement project were unplanned. Albany, responsible for maintenance, had scheduled an inspection for next year. But a state worker fortuitously discovered catastrophic cracks.
The nearly 60-year-old Tappan Zee Bridge is awaiting a $16 billion replacement, too. Let’s hope we don’t have to take down the existing bridge before we get around to building the new one.
Budget documents detail Albany’s failures. Ten years ago, Albany had wasted 12.5 percent of its outstanding debt for budget relief — borrowing, that is, for routine, recurring Medicaid, education and other costs. Today, Albany has nearly doubled long-term borrowing for short-term spending, to 22.4 percent, rivaling the 24.9 percent borrowed for transportation.
In Gotham, things aren’t much better. Coming off a record boom and record debt-issuance, the MTA, the city and the state have managed to build part of a modest subway extension to Manhattan’s far West Side — but cut out one of two planned stations to save a few dollars. And we’ve finally built some of the Second Avenue Subway, too.
But it still takes longer than it did 40 years ago for New Yorkers to commute to Midtown from Brooklyn because the MTA has abandoned some express tracks. Subway ceilings are falling down, and the MTA has no idea where it will find money to keep them up. Transit’s share of the city’s capital budget, 6.1 percent, is half of what it was in the early ’90s.
As for other city infrastructure, transportation gets 9.6 percent of the city’s capital budget — still not enough. And the city rightly continues to invest in its third water tunnel — but water rate-payers fund that project directly, on top of taxes.
New York has done its borrowing without feeling much pain — so far. Even as outstanding debt has skyrocketed, the city and state have enjoyed record-low interest rates, thanks to bubble-and-bailout monetary policy from Washington, which is still going strong.
Problem is, we’ve grown addicted — and the addiction will cost more as interest rates rise.
If New York continues to borrow and spend as it has, it’ll be squeezed on both ends. Debt costs will rise, and a less productive economy won’t be able to pay.
Washington should be nudging cities and states off indebtnedness. Instead, President Obama and Congress are doing the opposite. The 2009 stimulus offered subsidies to states so that they could borrow taxable debt, in addition to their usual (and cheaper) tax-exempt debt. This program was partly to help states tap foreign markets, whose investors don’t benefit from American tax exemption.
Just what we need — more government dependence on foreign lenders.
In its 2010 round of municipal aid, the Obama administration should get states and cities to save more for capital investments by making cuts elsewhere and wringing out union concessions for more efficent capital spending.
That’s unlikely. So Bloomberg and Paterson should fight Washington’s bad policies as best they can.
New York will probably see a mini-windfall next year from higher-than-expected Wall Street bonuses — money that labor unions and education and health-care interests will covet.
Bloomberg and Paterson should say that when it comes to such spending, the money doesn’t exist — and put the funds toward smart capital spending.
That way, when bond markets crack down on government borrowing, as they did last year on private borrowing, New York will be better prepared.
Nicole Gelinas, contributing ed itor to the Manhattan Institute’s City Journal, is author of “After The Fall: Saving Capitalism From Wall Street — and Washington.”