Wednesday, December 10, 2008

How to spend New York's federal tax money

Let's put it into trains, trolleys, and sewers

by Bruce Fisher

I miss Daniel Patrick Moynihan, our late senator. For 23 years, he put forth the annual publication that always came to the same disturbing conclusion: that New York State taxpayers paid many billions of dollars more into the federal treasury than we ever got back.

While he was living, even the mendacious creeps who today say they hate taxes but forever clamor for public projects used to have to follow Moynihan’s methodology. In 2001, for example, an outfit called the Public Policy Institute of New York State, Inc.—which says it offers “private-sector insights on New York State government and politics”—reported that New Yorkers paid $166.5 billion in federal taxes but that New York State got only $126.9 billion in federal spending—leaving us with a net loss of $39.5 billion.

So who got our money? Sarah Palin’s Alaska. North Carolina and South Carolina, too. Arizona, Arkansas, Idaho, Kentucky, Louisiana, Maryland, Mississippi, Tennessee, and of course West Virginia, home of champion pork-barreling Senator Robert Byrd. New York’s contribution to fiscal federalism was to fund it.

That is, of course, as it should be. Our Constitutional system superseded the go-it-alone Articles of Confederation. It is not surprising that places with more military bases than New York, or post-Katrina New Orleans, or post-hurricane Florida, should benefit from the common national pool of federal tax dollars.

But even standard-issue neoclassical economists like Harvard’s Edward Glaeser understand that when there’s fiscal distress in a once-rich place, the once-rich place should get federal help. New York State is now such a place.

When Governor Paterson goes to Washington to ask for some help closing New York’s budget gap, he needs to take these facts with him. Sadly, however, he’s going to have to use old reports—because nobody at Harvard’s John F. Kennedy School of Government produces these annual reports any more. The Public Policy Institute hasn’t produced a Moynihan-like report on the fiscal imbalance (which means the out-migration of New York’s taxpayers’ tax dollars) since 2001; the message that New York is being short-changed is not convenient for a group that prefers to say that New York State government spends too much.

It will take some time to crunch today’s numbers (and I’ll assign some graduate students to work on this), but somehow, I strongly doubt that our $39.5 billion deficit of 2001 has done anything but grow in the past eight years.

So let’s make like Bob Wilmers’s bank, or a Wall Street brokerage house, or a Detroit automobile company, and let’s go to Washington and get some stimulus money. The distinction, of course, is that New Yorkers already paid it in.

This chart from Moody’s estimates return on investment for different kinds of federal stimulus spending.

What a smaller New York should ask for

The worst thing to do with free money, of course, is to waste it. But we have to ask for the right things, and reject any politicians or moguls who ask for the wrong stuff. The Peace Bridge plaza is the wrong stuff. Subsidies for retail stores, for hotels, and for waterfront condominiums, that’s the wrong stuff. More suburban roads—obviously the wrong stuff.

We should pay attention to people like former Milwaukee Mayor John Norquist and his Congress for a New Urbanism, and brand-new Nobel Prize-winner Paul Krugman, and New York State environmental commissioner Pete Grannis, and make sure that when we get some of our New York State taxpayer money, we buy the right stuff.

We should buy streetcars, sewers, and high-speed trains.

Streetcars: We need a regional electric-powered streetcar or surface light-rail plan for the year 2020. In an urbanized region so compact as ours, and with fewer of us projected to live here in 2020 (today’s Erie County population of 920,000 will shrink to 820,000), we should still travel around in an economically and environmentally sensible way.

Using New York State taxpayers’ funds, tax-eaters in Phoenix, Arizona live in one of the many North American cities that is embracing light rail (not subways, which are too expensive for all but the biggest and most dense urban areas).

When we get some of our money back, we should make a similar investment—and within a few years, we should be able to ride a streetcar to the airport, to Transit Road, all the way from the Niagara River down Sheridan to Transit, all the way down Transit to Orchard Park, from Orchard Park to Hamburg and the Lakeshore, back downtown to the connector that can take you to the Tonawandas and Niagara Falls. Connecting the University Station of the existing metro to the Main Campus of UB has always been the right thing to do, but let us understand the rest of the picture, too.

The total cost of Portland, Oregon’s light-rail surface system is $26 million per mile. The projected cost of Charlotte, North Carolina’s system will be $44 million per mile. The potential for comparatively cheap solution for the Buffalo area is real because so many miles of existing rights-of-way already exist. A touted alternative—so-called dedicated buses, or “bus rapid transit”—does not work. Little Kenosha, Wisconsin (population 90,000) did its light-rail system for $3.5 million per mile. Our price tag: Call it $1 billion, but it could be far less.

Trains as fast as France’s or Japan’s: There is no technological obstacle to building a high-speed rail network that can connect New York City to Toronto with stops in downtown Syracuse, downtown Rochester, downtown Buffalo, downtown St. Catharines, downtown Hamilton, and then in Toronto, with the express option from every stop. California just passed a budget item issue for almost $10 billion to get their own inter-city high-speed rail system going, so that you could get on a fast train (still slower than a Japanese “bullet” train or a French “tres grand vite” train) and go from LA to San Francisco in under three hours. Why not a three-hour trip from New York to Toronto? Price tag: call it $10 billion, including Loonies.

Sewers for clean lakes: We urgently need a 10-year watershed-by-watershed approach to wastewater management so that all the water of both Lake Erie and Lake Ontario is as clean as it needs to be in order for the Great Lakes to be clean again. The Brookings Institution published a book on the economic benefits of a cleanup, including the payback schedule. Price tag: $26 billion for the whole Great Lakes, about the same for all of New York State’s problems, or $583 million for Buffalo.

Add it up. If New York State got the entire enchilada, including all the money to fix all the sewer systems in this state, it still wouldn’t add up to one year’s worth of the $39.5 billion more that New Yorkers paid into the federal exchequer in 2001 than New Yorkers got back.

The realities: shrinkage, opportunities

New York State taxpayers are dwindling in number. As the Census just reported again, the Buffalo-Niagara metro region’s population dropped again. The number of people who live in the three cities, 25 towns, and 16 villages within the boundaries of Erie County is a smaller number than it was in 2000. (The fact that population still sprawls into Lancaster and Clarence does not mean “growth,” people: We have 10,000 fewer people in Western New York than we did 10 years ago.) Economists at the Wharton School at Penn project that by 2020, most urban regions that are like Buffalo—including Syracuse, Rochester, Erie, Cleveland, Detroit, and Milwaukee—will also shrink by an average of 10 percent.

So the last thing we need to do, when we succeed in fetching some of our money, is to waste it on make-work road projects. We have more roads than we need already—we don’t need a plan that will give us a sugar high for a construction season rather than an infrastructure boost that just might make our community greener, more connected, more livable, and more able to handle folks 10 and 20 years from now.

It comes down to one’s worldview. I believe that the “bones” of Upstate New York and the other Great Lakes communities are quite good. We have urban centers worth saving, mature transportation networks that need refreshing, sewer systems that need replacing, and, overall, a quality of life that can attract new residents. Appropriate public investment could turn upstate cities into communities that are better able to sustain themselves; right now, our skewed system of incentives for sprawl and for urban abandonment—common to all Great Lakes cities—make us poorer than we should be.

What worries me about the Obama folks is that they are a little too ready to listen to local politicians about what will work as economic stimulus—when what we need is long-term investment for a long-term turnaround. That’s why transit-oriented development that the Congress for a New Urbanism advocates, and Great Lakes wastewater cleanup that the Brookings Institution studied, should be the way to go.

It’s all about where we want to be in 2020. A casino won’t get us there. A bulldozed neighborhood next to the Peace Bridge will, at best, further pollute our air even as truck traffic stagnates or declines. And since when were retail tenants that sell Chinese-made merchandise ever going to turn around a downtown in a shrinking region?

Our path to the future is to get connected within our region, to get better-connected to Toronto, and to be clean, green, and smart. All our paths—and trolleys and trains too—should connect us to what makes us smarter. So let’s go get some of our own money and get going.

Bruce Fisher is visiting professor of economics and finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.

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