No one is safe in the current economy

It must be terrifying to be a politician these days. A year ago, the Titanic was heading toward the iceberg and now the boat has hit the ice. People are out of work. State, city and local budgets are out of whack. New York can’t count on Wall Street bonus money to help fund the budget. No one knows whether their jobs are safe and spending is hitting the crisis level. People are losing their homes and the ones who aren’t are afraid they will.

In Albany, David Paterson now has to face the wrath of the voters who have nowhere else to put their frustrations. It is amazing but there are enough people who understand how tough Paterson’s job is to keep him in the “good” approval range. But the ratings elevator is going down, fast. He was lucky at the beginning because he wasn’t Eliot Spitzer and people were feeling good about the fact that someone who seemed on top of his game was in charge. They gave him a pass on his own human failings and his popularity was strong. Then came the Caroline Kennedy debacle and at the same time, the raw naked truth emerged that we were broke and state and local workers would be laid off. The government would stop paying for things it had paid for in the past, such as payments in lieu of tax revenue when state facilities are located on county property.

Paterson took the right approach in warning people that bad times were coming, but the people really didn’t listen. Even if they had, it wouldn’t have mattered. Hey, we elect people to make things right and the last thing we generally worry about is Albany. Most people don’t even know where it is or what it does. From Plattsburgh to New York City politicians are biting what is left of their nails. Mayor Bloomberg, who fought to be allowed to be reelected, is now confronted by fearful City Council members who are snarling like a group of feral dogs.

Now there simply isn’t enough money to feed the penguins in the zoos and to run the schools. The federal government can print money to run their programs, but the state and smaller localities will have a much harder time delivering their services. As a result, people are scared and when people are scared they get angry and when they get angry they sometimes turn on their politicians. They are virtually yelling, “Do something! I’ve got to feed my family and pay my mortgage!”

It all comes down to how to get the money. Now is when we change the way the system works. Desperate people will turn on each other and say things like “tax the rich.” That is what David Paterson and Michael Bloomberg, to pick two representatives of the political class, are facing. They didn’t want to get to this point, knowing that if taxation on the people at the top gets too onerous, it is likely that at least some of them will move.

Frankly, though, it’s the only way to save the system, at least in the short run. Of course, governors and mayors will be looking to the federal bailout money to keep them in business. President Obama, pursuing his Keynesian, pump-up-the-economy plan, will have to insist that the dollars put into the economy will be used to get out-of-work people back to work. But the big question will be whether the bailout money should be used to pay to maintain civil servants, for example, on the theory that if they lose their jobs, the unemployment problem will be made even worse. If you adopt that approach and the Congress and the president have to pay the bills of state and local government, I promise that you will need a lot more than $800 billion dollars over two years. You may need three times that. So far, conservative Republican U.S. senators are yelling, “Hell no,” to such a plan, forgetting that their Republican President, George Bush, got us into this mess and proposed and passed (with their help) the first bailout for their buddies on Wall Street.

So David Paterson will go to town meetings in upstate hamlets but as the old saying goes, “You can run but you can’t hide.” The question, of course, is who will pay. My bet is that no one will be safe. Everyone who still has a job will be taxed on everything imaginable and the rich will suffer an increase in what they are expected to pay. A recent study of the super rich said that they actually pay far less than we thought they did because of all the tax loopholes. From where I sit, that is inappropriate. They should be paying their fair share. Nothing will be safe — from a rise in the gas taxes to virtually every other way to get the money. In Europe they have something called a “value added tax.” Everything you buy has taxes added in. I’ll wager that sooner or later you’ll see that here. As for the politicians, they should be leading us and not running from the tough decisions. They wanted the job and now they have it. It has to be painful.

Originally Published in the Legislative Gazette, 2/6/09

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