Chairing the Committee on Correction: Responsibilities, Relationships, and Rewards

I did not just visit these prisons and jails. My job, as I saw it, required me to help inmates and reduce the number of future crime victims by winning more and better drug abuse treatment programs, correctional industry programs that more significantly reduced recidivism, AIDS education to reduce its spread within prison, special units for the developmentally disabled and mentally ill who would otherwise undergo extraordinary suffering in prison, and other services. It required me to help inmates, as well as correction officers, by increasing inadequate staffing levels to the point at which the officers could more effectively protect the inmates and themselves. It required me to help taxpayers by eliminating very expensive and unnecessary or counterproductive incarceration of non-violent low-level drug offenders and terminally ill inmates too sick to pose any danger to society.  It required me to investigate allegations of mistreatment and brutality of inmates, and to see to that such behavior was punished and not permitted to recur. I tried to do all these things, and succeeded at many.

As my late Assembly colleague Tony Genovesi once taught me, shortly after I took office and well before he did, each member of the Legislature represents his or her district, but also must assume responsibility as, in effect, a member of the Board of Directors of the State of New York.

In recognition of my work, I was part of a delegation of American prison experts invited to Hungary in 1991 to advise representatives of former Soviet bloc countries now emerging from communism on modern democratic prison administration. For three days we lectured, with our remarks translated into a variety of East European and Asian languages. Then, our hosts took us on a tour of a Hungarian prison. To my considerable embarrassment, their prison clearly exhibited administration generally superior to ours. Inmates engaged in well-run educational and occupational programs, violence by inmates or officers was virtually absent, and – most impressive to me – the food smelled and tasted delicious! Hungarians take great pride in their cuisine, even in prison. While I had occasionally encountered palatable food in my New York prison tours, it was never anything one could call “delicious.”

In one respect, though, the Hungarian prison did lack some logic. The authorities exhibited their security arrangements. In Europe, starting at least as early as the storming of the Bastille in 1789, prison officials greatly feared the forcible release of prisoners. Under the Nazis and under the Communists, prisons in Hungary and elsewhere housed many political prisoners, so it was not inconceivable that some political movement might launch a campaign to free them by force. With considerable pride, the prison officials showed us the ultimate guarantor of their security, a set of enormous sixteen-foot machine guns – all pointed out! None of us were cruel enough to alert them to the fact that no one was going to be breaking into the prison.

Our embarrassment did not extend to most of the non-Hungarian participants, however. Their inquiries to us included such subjects as whether we would approve the extended use of cold water, to a depth of a foot or so, as punishment in inmates’ cells. We wondered which punishments they refrained from asking us about.

Back in New York, by this time I had worked with Tom Coughlin for a number of years, and we had developed a good relationship, despite the occasional embarrassing newspaper coverage of my criticisms. On one occasion I asked him why he tolerated resistance to his generally sensible policies by some prison wardens and some correction officers. He said, “Dan, your people all serve you ‘at will.’ That means that if they don’t do what you want, you can fire them. I don’t have that luxury. I have employees with civil service protection and unions.” I understood.

When George Pataki became governor in 1995, he replaced Coughlin as commissioner with Phil Coombe, a fellow Republican and a competent administrator, although in my view not up to Coughlin’s extremely high standard. Tom eventually took a job with a Health Maintenance Organization – a variety of insurance company – in New Jersey. We stayed in touch. After a stretch of about a month when I could not reach him at his office, I called him at home in Watertown, New York. How come I can’t reach you at the office any more?, I asked.  “Oh,” he said. “I quit. I’m back in corrections, as a consultant, dealing with rapists and murderers again. They’re much more honest than those insurance company people.”

A few years later Tom died untimely young, of internal bleeding, as a result, many thought, of medical malpractice. I learned a lot from working with him, and liked him very much.

Chairing the Committee on Correction: Prisons and Jails

In 1988, with my blessing, New York opened its first “maxi-max” prison facility, Southport Correctional, in Chemung County, near Elmira. Not only were we running out of solitary confinement units to house violent and otherwise disruptive inmates, Commissioner Tom Coughlin and I felt that we could improve on the unofficial system of distributing “bad” inmates and officers to the worst facilities. We thought that this prison, comprised entirely of solitary confinement cells, would provide a more humane alternative to the old system, based – unofficially – on beatings. In retrospect, I am not sure we were right. Some prison experts feel that solitary confinement tortures inmates psychologically in ways that involve crueler punishment even than physical abuse.

In any event, back in 1990, the correction officers’ union, then Council 82 of AFSCME, wanted me to investigate complaints by the officers at Southport. George Winner, my Republican colleague in the Assembly who represented the area, accompanied me on the visit. Shortly after our arrival, the correction officers and union officials had us don white plastic garments that covered us from head to toe. These “shit suits” were to protect us against “throwers,” inmates who would hide their own feces until they could throw them at officers. As we moved through the tiers, or cellblocks, we heard many of the inmates screaming or raving incessantly. Clearly, a substantial percentage suffered mental illness, whether brought on by solitary confinement or perhaps responsible for their in-prison violence in the first place.

The officers pointed out, however, that during the legally required hour of exercise outside their cells, the inmates moved to an outdoor area with flimsy fencing. Staffing levels did not suffice to assure security either. The conditions presented a serious danger of riot.

Immediately upon my return, I sent a memo to Commissioner Coughlin seeking urging attention to these issues. A few weeks later, nothing having been changed, the inmates rioted and took hostages. The incident, and my memo, made the front page of the New York Times. Fortunately, Commissioner Coughlin resolved the situation within a few days without any fatalities.

Assembly Member Winner, later a State Senator, had won a reputation for especially cutting remarks to Democratic opponents in Assembly floor debates. He and I, however, always enjoyed a cordial relationship. So a few months later, when he rose to debate one of my bills, I slowly and ostentatiously removed from the drawer of my desk in the Chamber the white plastic suit I had been saving for just that occasion. Winner, overcome by hysterics, could not proceed.

So far, I have discussed only maximum security facilities. Green Correctional, about 20 miles south of Albany, houses younger offenders, eighteen to twenty-one years of age, in medium security. This makes it harder to run than some of the maximum security joints: raging hormones and immaturity do not help keep a prison calm. Unlike maximum security prisons, where cells stretch out along lengthy corridors, or “tiers,” medium-security prisons house inmates in dormitory rooms, sometimes with ten or twenty inmates to a room. They still use razor wire to cover their walls, so they protect the security of the outside world in ways not significantly different from maximum security prisons, but the security inside the walls is looser. Minimum security facilities often house inmates who may leave during the day on work-release programs. There, the system presumes that the outside world needs less protection.

Jails run on different rules altogether. That does not necessarily mean they are easier to run. Even Clinton Correctional, the State’s largest prison, could fit into a corner of Riker’s Island, New York City’s enormous jail, which at its peak housed about 20,000 inmates and detainees. Criminal defendants awaiting trial stay in jail, not prison; defendants convicted of misdemeanors, who serve sentences of a year or less, also go to jail. Defendants convicted of felonies must serve more than a year, and they serve that time in prison, except for any credit they may be owed for time served in jail awaiting trial or sentencing. Short-term detainees, on average, cause more trouble than long-term inmates. Often, they have not yet acclimated to detention, and so have not figured out that bad behavior will make their stay less pleasant. They may not expect to stay long, and therefore in any event have less motivation to try to assure themselves a more pleasant stay by cooperating. For these reasons, I think it is more difficult to run Riker’s Island than to run any State prison.

Obama’s Tax-Cut Compromise — Revisited

The 2010 lame-duck Congress enacted legislation ending “don’t ask – don’t tell” as well as the Zadroga bill for health-care benefits for 9/11 first responders.  The Senate approved the New Start arms-reduction treaty with Russia. All of this happened after, and because of Obama’s acceptance of Republican conditions on the tax-cut extender. Those conditions included full extension of the millionaires’/billionaires’ tax cuts and radical reductions in the estate tax. The first three legislative victories, along with the “good” parts of the tax-cut compromise itself, like the extension of unemployment benefits, caused some to reconsider their disapproval of Obama’s tax-cut concessions.

Those subsequent legislative victories deserved commendation on the merits and clearly helped Obama politically.  The collapse of Obama’s resistance on the tax issues, though, enabled the Republicans to continue their (no doubt unwitting) infusion of slow-acting poison into America’s future.

Far-sighted American political leadership instituted the estate tax to limit the establishment of a permanent upper class.  If enormous wealth can be inherited with only minor tax reductions, the wealthiest class of Americans will be dominated by the same families for generations. This will stall the convection currents that have historically kept the United States an icon of socio-economic mobility. Our ethos of socio-economic mobility inspired the kind of entrepreneurial dynamism that gave the country its innovative and free-wheeling character.

Thus, Obama’s acquiescence in the emasculation of the estate tax carried serious long-term costs for the future of the American character.

The President’s acceptance of the full tax-cut extension has even more obvious long-term costs. As Andrew Bacevich has explained, the United States has for some years followed an unsustainable path of budgetary excess. The housing bubble was more a symptom than a cause of the financial crisis. In 2008, then-Republican presidential candidate John McCain said the “fundamentals of our economy are strong.” http://thinkprogress.org/2008/08/20/mccain-econ-strong/ The housing bubble and the financial crisis actually reflect the damage wrought by decades of economic unsustainability: too much spending, too little tax revenue.

For the United States to recover from its deeper economic ills, Americans have to accept budgetary discipline. If the nation’s political leadership cannot even impose a reasonable tax levy on its richest citizens, how can it credibly ask the middle class to accept such elements of fiscal discipline as, for example, limitations on the mortgage interest tax deduction? Or any other kind of economic sacrifice?           

I don’t want to end the year on such a downbeat, though. I hope I’ve made it clear that the Obama compromise accomplished some useful things. Though they are, in my view, relatively short-term gains, perhaps they will lead to a “revolution of rising expectations.” I am referring to the theory that a practical basis for hope can lead the public to demand further significant advances. If so, I will be delighted to have been proven wrong. Happy new year.

Now I’ll Second-Guess Obama

I did not want to depress Democrats any further prior to Election Day, so although I did list my dissatisfactions with Obama, I urged continued support. I still do. But I hope Democrats press him to take a different tack – and not one more conciliatory toward Republicans.

Clearly, a majority of the public believes that both Democrats and Republicans defer excessively to plutocrats, exemplified primarily at this time by Wall Street bankers, but arguably joined by major executives of insurance, defense contracting, oil, and pharmaceutical companies. The Democratic party brand used to be, and still is in some quarters, identified with the working person, not the wealthy executive. When prominent Democrats protect the lower capital gains tax rate for billionaire hedge fund managers, join in the leadership of the repeal of Glass-Steagall’s protections against banking and insurance collusion, and help Republicans deregulate derivatives trading, this blurs the differences with Republicans in a very destructive way.

Say Obama, from the beginning, had insisted that the only federal money to be made available to banks would have to be placed in escrow, so to speak. Banks would have been able to use it for loans to assist struggling homeowners, and could have taken reasonable fees for so doing, but would otherwise have had no access to it. This would have increased purchasing power for otherwise desperate citizens, and enabled them to spend something on clothing, car payments, and the like, thereby increasing aggregate demand.

Far more than the policies actually adopted, this could have generated economic activity that would have increased business activity and decreased unemployment. I suggest, in addition, that the Fed should probably not have lowered the loan rate to banks to about zero, thereby guaranteeing their profits on any loans they make.

Certainly bank profits would not be as high as they are. Perhaps the stock market wouldn’t be doing quite as well either. But the unemployment rate would have been lower.

Politically, such policies would have nipped in the bud the ability of the Tea Party (with their hidden plutocrat backers) to paint the Democrats as at least equally in bed with Wall Street as the Republicans. Indeed, it could have created a sharp contrast with Republicans, who clearly wanted to put as much money as possible directly at the disposal of the bankers. How different Election Day’s results would have been!

Robert Reich, the former U.S. Secretary of Labor, who says something similar, knows what he’s talking about.  Paul Krugman argues that it’s still not too late to “engineer significant relief to homeowners,” and quite correctly also urges a much more aggressive stimulus plan, which would also increase aggregate demand by providing more jobs.  The latter could be in the context of America’s desperately needed infrastructure renewal, which Obama recently floated.

To reaffirm the belief that the Democrats are still the party of the people, as distinguished from the Republicans, this is the direction that Obama and the Democratic party should take now.  The Republicans cannot compete on this ground, because the plutocrats are their true constituency.  True, enlightened persons of great wealth, like Warren Buffett and Bill Gates, support economic and political policies that would benefit everyone, including themselves, by reviving the world economy. But short-sightedness and greed distinguish too much of corporate leadership, which is why we got into this mess and why their allies, the Republicans, will only make it worse if they have the chance. Democrats, if they and the country are to succeed, must move in a sharply different direction.

Gun violence: why do Americans put up with this?

A friend recently sent me an article from the Washington Post published on October 24, 2010, in effect providing some updates to our chapter on guns in Tales from the Sausage Factory.

It got me angry all over again. The Washington Post made requests for police log listings in the District of Columbia and Prince George’s County in Maryland over the past 18 years, to obtain records of 76,000 guns recovered from criminals in those jurisdictions. Of those, the Post was able to track about 8700 to retail gun dealers in Maryland. One gun shop in the area, Realco, in a town called Forestville, was responsible for 2500 of those guns, including 300 used in non-fatal crimes and 86 used in homicides. No other Maryland dealer came close. For every 1000 guns Realco sold, 131 ended up recovered from crimes. For every 1000 guns three other more typical Maryland dealers sold, 41, 28, and 8 ended up recovered from crimes. And Realco’s guns show up in crimes much sooner after sale than guns from other dealers, another indication that the store had a greater tendency to sell them to people who intended to use them in crimes, or to sell them to other people (“straw purchasers”) who intended to use them in crimes.

Virginia was not different from Maryland in this regard, the Post found.  A very small percentage of Virginia gun retailers – about one percent — leaked most of the crimes guns sold in that state.

All this confirms that what we found ten years ago nationwide, based on studies available then, remains true. Since handgun manufacturers must keep records, by serial number, of which distributors bought the guns they sold, and distributors must keep records, by serial number, of which retailers bought the guns they sold, manufacturers and distributors know which retailers specialize in selling guns that end up being used in crimes. Yet, they keep selling to those retailers. I tried, as a legislator, to make those manufacturers and distributors legally liable for such negligence; and I was part of the effort by the Attorney General’s office, under Eliot Spitzer, to do the same. But the National Rifle Association beat us, and went us one better: they got Congress to ban the release of the gun-trace data from ATF (the federal Bureau of Alcohol, Tobacco, Firearms & Explosives) that we and other used back then to demonstrate the culpability of the gun industry. 

Which American politicians would admit to shielding the gun industry from liability for what amounts to facilitating death and injury to innocent people so that it can make more money? I very much doubt that the average NRA member would support this policy. The NRA’s policies reflect its funding sources, not its membership. Yet this is where Congress has permitted the NRA to take us. If you happen to read this before Tuesday, you might check to see where your member of Congress stands on this issue.

Excerpt #2 from Tales from the Sausage Factory: Compromise, Tolerance, and Symbolism

The legislature — avenue for compromise:

The legislative process actually improves participants’ behavior in some respects. Since legislators must negotiate to win enactment of bills, they learn to consider viewpoints quite different than their own. Some of my ultra-Orthodox Jewish constituents vehemently objected to my refusal to support legislation that I thought was unconstitutional, banning pornography. Fred Schmidt, probably the most conservative Democratic member of our House, and among the most conservative of either party, sat next to me for twelve years. Responding to his own very conservative and mostly Roman Catholic constituents, Fred had a bill prohibiting the public display of racy magazines that I thought I could revise into constitutionally acceptable form. I could, I did, and the Schmidt-Feldman bill became law, of course with conservative Republican sponsorship in the Senate.

Legislative coalitions often open minds to the reality that people can differ dramatically on what kind of society we should have (within some limits – I don’t think any of us were totalitarians) and still respect the intelligence and integrity with which they hold their views.

The legislator as “social glue”

I came to understand another aspect of my role in the seemingly endless string of evenings and weekends dropping in on meetings: the East 22^nd Street Block Association (or any of dozens of other block associations); the Sheepshead Bay Kiwanis Club; the Plumb Beach Civic Association; the St. Edmund’s Home School Association; the Beth El Synagogue Men’s Club; the Midwood Development Corporation; the Meyer Levin Post of the Jewish War Veterans; the P.S. 195 Parent-Teacher Association, et cetera, et cetera, et cetera.

My presence brought the State to them. Even more, it conferred the imprimatur of the State, the dignity of the State, on them and legitimized their work. By visiting the various organizations, I served the function of a sort of social glue: I cemented all these groups into the polity, into the political fabric that makes up the State. This dignity, this acceptance, was for them a significant psychological reward for their past efforts and incentive for their future efforts on behalf of their communities.

Perception is reality

From time to time my constituents saw me on television. When they told me they saw me I’d ask, “What was I saying?” More often than not, they’d reply, “I don’t know. But I saw you!” This enhanced and strengthened my ability to confer dignity and inclusion into the greater world [by their association with me]. Since they could see that I held citizenship in TV-land, not only was I part of the State, I was important enough to join in the world of Jay Leno, Derek Jeter,  Roseanne, Mickey Mouse, the President, and Oprah Winfrey. Anyone who lives in that little box shares in the world of the people who really matter [in their view], so that my corporeal presence in their own actual living rooms or shabby meeting halls gave them a bridge to that “important” world.

Many, many people understood this function better than I did. After I rewrote Fred Schmidt’s bill into the Schmidt-Feldman law, the publisher of Screw magazine, Al Goldstein, debated me on a local New York City TV station. Wearing a t-shirt imprinted with pictures of tiny sperm, he scoffed at our legislation, which he maintained – incorrectly – would suppress the display of his tee shirt. He challenged my ethical and legislative priorities, along the lines of “instead of fighting violence and poverty, you’re trying to suppress freedom of speech!” After the show, as we were unclipping our microphones, he leaned over and assured me that we had written a sound and sensible piece of legislation, “but I couldn’t say so – that wouldn’t make good TV.” Though I hadn’t known it, I had participated in a fictional debate, but its political value to him and to me, and perhaps even its educational value to the audience, would have been no greater had he been sincere.

Can Americans Handle the Truth? (Part II)

Sometimes it appears that every New Yorker feels aggrieved at the “unfair” benefit someone else has. The homeowner decries the rent-stabilized tenant, who gets such a great deal on his beautiful apartment. The tenant notes the mortgage interest deduction on federal taxes that the homeowner takes for granted, but puts tens of thousands of dollars in his pocket. The elderly citizen may resent high property taxes that pay for someone else’s children to go to school.

FICA takes a big bite out of the young parent’s paycheck to provide Social Security payments that she doubts will be around for her when she gets old. “Keep your dirty government hands off my Medicare or Medicaid,” they said, in fear of “Obama-care,” incredibly forgetting that Medicare and Medicaid come from government hands. The pensions of government employees are the latest bête noir; how soon we forget the firefighters and police who risked or lost their lives or health at the burning buildings at Ground Zero.

Of course there are abuses by some; and recessions, as has recently been noted, follow peaks in inequality driven by the greedy few in this country whose share of the national product is hundreds or thousands of times that of those who work for them. But overall, we tend to lay the blame for our ills on large categories of our fellow citizens who are no more guilty than we are, while we zealously guard the benefits we ourselves enjoy, mostly without acknowledging even to ourselves that we are lucky to have them.

This reflects the same instinct that has us re-elect legislators who bring construction projects or other forms of largesse to our neighborhoods, while decrying the spendthrift ways of Albany or Washington.  The “hypocritical” politicians simply reflect their voters when they call for budget cuts while grabbing all the “pork” they can. The gridlock and dysfunction in Albany and Washington, to a great extent, reflect the incompatible tasks we assign our representatives there. We simply want it all. 

The founders of our nation wanted to “promote the general welfare.” Even before the Constitution, foundational documents like the Mayflower Compact reflected their authors’ pledge to pursue “the General good of the Colony.” Selfish ends were commonly subordinated to the common good, to be achieved through the public sphere.

But today we treat the public sphere as Garrett Hardin portrayed herdsmen in his article “The Tragedy of the Commons”: each herdsman calculates that an additional sheep will gain him its full price, while its effect on overgrazing the pasture (the “commons”) will be borne by all the herdsmen, so his cost will only be his proportionate fraction. Therefore, he should keep adding sheep. Of course, since each herdsman calculates the same way, the commons will soon be destroyed for everyone.

As we face this electoral season, consider that it is long past time for us to outgrow the childish notion that untrammeled selfishness and greed benefits our society, or indeed is even tolerable. We must start with our selves: let’s try to support candidates who will not necessarily appeal to our personal short-term interests, but to the common interests of our society.  Let them, and us, commit ourselves to “promote the general welfare.”

Can Americans Handle the Truth?

In our previous discussion, we recommended support for candidates who support at least some form of government intervention to counteract the effect of the narrow-minded tendencies of many companies to hoard cash instead of hiring.

In a way, that is the easy, obvious stuff. Andrew Bacevich, in his 2008 book The Limits of Power: The End of American Exceptionalism, points us to the harder issues. Those of us who grew up in the period between 1950 and 1965 usually take that period as the norm, when the United States gobbled up some enormous percentage of the world’s wealth. We continue to assume that we should have a very high standard of living and also have our nation serve as the world’s moral police, by which I mean, for example, that if the Taliban does terrible things, we should stop them. (Whether we are truly motivated by morality or by perceived national interest, while an important question, is really a different question, in that if the latter, the perception is mistaken: the costs will outweigh the benefits.)

In fact, the 1950 to 1965 period was aberrational. We now have very serious competition for the world’s goods and services. In 2000, we were responsible for about 31 percent of the world’s gross domestic product, in 2006, about 27 percent. In the earlier period, we peaked at about 37 percent, by a somewhat different measure that has us at about 22 percent now. 

Bacevich, a conservative military historian, find ample precedent for once-great powers that overextended themselves. The United States simply cannot afford to spend money on wars of choice, as opposed to wars of necessity. Our leadership always presents each war as a war of necessity, but we know better.

Still tougher is the issue of living standards. American voters want lower taxes, but also generous Medicaid, Medicare, and Social Security benefits, enriched and affordable education for their children, safe streets, and so forth. Part of the problem with our elected representatives is that they do in fact reflect the desires of the voters – and those desires are for the impossible.

Bacevich argues that ever since the complete political failure of Jimmy Carter’s call for an end to American self-indulgence, no successful candidate for the presidency has dared to tell the public the truth. Instead, each new administration, Republican or Democratic, has borrowed against the future to sustain the unsustainable.

If we have any sense of social responsibility left, we might start to reward politicians who tell us painful truths, and who don’t promise what can only happen if we keep weakening our country.

Bacevich might accuse me of inconsistency: did I not, in my previous posting, call for more government intervention to increase employment? But taxing some of that hoard of corporate cash that management refuses to spend on hiring would strengthen the United States, not weaken it. What weakens us is thinking we can have it all: a swaggering military presence around the world, low taxes, untrammeled profits for CEOs, and a strong economy.

Short Term Corporate Profits: Recipe For Trouble

In the past few weeks, national economic data has indicated that although corporate profits have increased considerably since the beginning of the fiscal crisis, companies have simply been hoarding cash. Corporations have not used their increased profitability to hire more employees – or, it seems, to increase compensation for those they have retained.

This reluctance is predictable, and frightening.

If a company can maintain or increase profits by shedding workers, it will do so, with the extremely rare exception of some socially conscious employers – maybe one in a million.  The fallacy of composition misleads honest knee-jerk opponents of government intervention: if such a policy is good for a company, it must be good for the economy, or at least for all companies.

Unemployment reduces demand, because workers are also consumers. Fewer people working means fewer goods and services being bought, so that even those companies who have done well by trimming their workforce may ultimately see losses.

The United States has gone through this cycle many times. The Obama administration stimulus efforts – which should be much bigger – attempt to ameliorate or undo its effects.

I commend and support the effort to reform the government in Albany, as our forthcoming book, Tales from the Sausage Factory, makes very clear. However, the economic health of our country must be at the forefront of our concerns. Therefore, exercise caution before supporting candidates for New York State office simply in order to replace the political party currently dominant in our State, the Democrats.

Democrats tend to support employment initiatives, while Republicans tend want to let business do whatever it wants, such as letting unemployment increase in the face of short-term corporate profits. There are exceptions on both sides, and the Democrats, in my view, have done far less than enough. Still, before supporting a Republican, I would want reassurance on his or her views on this issue. If you are considering volunteering for or contributing to candidates, Election Day, November 2, is not so far away; you may want to make those decisions now.

You may feel that unemployment and corporate profits are not so relevant to New York State races. But state office victories for Republicans who prize short-term corporate profits well above the need to employ the jobless win state office build strength for national Republicans of similar ilk. How New Yorkers vote for members of Congress will have more direct impact, but that should be obvious.

How to Revive New York’s Non-Financial Sectors

Let’s go a little deeper into this question of letting wealthy hedge fund managers pay much lower tax rates than the rest of us. Assuming Congress continues their federal tax break, New York would, indeed, risk their flight out of New York altogether should it impose a higher state tax. But that raises a much larger question. Does New York have to be so much at the mercy of the financial sector, or so dependent on it that it cannot afford to risk the occasional departure of some its wealthiest practitioners? The answer is no.

For a number of years, Cassandras have warned that New York was allowing itself to become much too dependent on the FIRE (finance, insurance, and real estate) sector.  [A 1999 report acknowledges, but underestimates the problem.]

What happened to New York’s great garment industry, printing industry, and many other kinds of light manufacturing? The common answer is that we lost them to competition from lower-wage areas of the country, and then the world.  But New York lost hundreds of thousands of manufacturing jobs in the 1970s as a result of the decline of its preeminence as a freight transportation center.

Yes, that’s hundreds of thousands – when today, a loss of 2000 jobs is considered a disaster, and politicians thirst for the opportunity to claim credit for bringing in a few hundreds jobs.

In the mid-19^th century, and probably through the 1950s, more freight came through the Port of New York than through the rest of the country’s ports put together.   Cargo crossed the Hudson by “carfloats” – barges that carried railway cars, from and to the railheads in New Jersey, hundreds of them every day.  Cargo came directly by rail across the Poughkeepsie Bridge. It came in, either for consumption by New Yorkers and other Americans east of the Hudson, or for shipment to Europe by freighters docked in Brooklyn or Manhattan, and it went out, from New York manufacturers by rail to markets in the west.

But New York’s political leadership took the Port for granted. New York City imposed a four percent railroad cargo transfer tax on the gross receipts (not the profits) of freight moved from one kind of carrier to another, from rail to ship, say; the Poughkeepsie Bridge burned down in 1974 and was not replaced; and we made a deal that allowed the Port Authority to give the container port to New Jersey and the World Trade Center to New York.  Results? New York manufacturers face a competitive disadvantages with manufacturers in any city that did not have to pay truckers to sit on the Gowanus Parkway or the Cross Bronx Expressway for hours in order to get their cargo to the railhead in New Jersey; and New York consumers have to pay a premium for products shipped to them over the same routes in the other direction.

For over thirty years Member of Congress Jerrold Nadler has urged the construction of a rail freight tunnel under the Hudson. Nothing could revive New York’s economy more effectively, making New York manufacturers competitive once again, easing pollution, and lowering prices for consumers east of the river.

New York has fallen prey to the notion that only the highest-end businesses should thrive here: the FIRE sector, and maybe medical services and high-tech. But New York has always thrived, and has only thrived, because ambitious poor people come here to improve their lives. They may become great entrepreneurs or doctors or artists some day, but first they need good entry-level jobs, which manufacturing used to provide and could again.

New York does not have to remain at the mercy of the FIRE sector. With a revived manufacturing sector, we would not need to say “how high?” when the hedge fund managers say “jump.”

You may be thinking that what is wrong with New York in this way is a synecdoche for what is wrong with the United States: we produce too little in the way of real things, with our mostly unproductive financial sector – the big casino – gobbling up way too much money, time, and talent. You’re right.