Archive for September 2010

NY’s Next Guv Should Heed the Deeds of Hugh Carey – By George J. Marlin

September 26, 2010

The following appears in the September 24-30 issue of the Long Island Business News:

In a terrific new book, “The Man Who Saved New York: Hugh Carey and the Great Fiscal Crisis of 1975,” authors Seymour Lachman and Robert Polner describe the herculean job the Empire State’s 51st governor did to save New York City from bankruptcy. The authors correctly conclude that “although often underappreciated by the public, it was Carey’s force of will, wit, intellect, judgment and experience that allowed the state to survive this unparalleled ordeal and ultimately to emerge on a stronger footing.”

When in the first month of his administration, then Gov. Hugh Carey told the public that the “days of wine and roses are over,” no one, not even the new governor himself, knew quite how true his remark really was. Then, as now, New Yorkers were the most heavily taxed citizens in the nation, and their state had the highest public debt. Viewing the financial mess Carey inherited, former Gov. Nelson Rockefeller said, “Poor Hugh. I spent all the money. And it’s no fun being governor of New York if you haven’t got the money.”  And it wasn’t fun. On Feb. 25, 1975, the New York State Urban Development Corp. defaulted on $104.5 million in short-term notes when the state Legislature refused to appropriate the money. Ignoring the state’s “moral obligation” to pay principal and interest due to UDC debt holders was devastating.

Suddenly the state, its agencies, as well as local municipalities throughout the state, had trouble borrowing. New York City officials told the public that the “recent default by the state UDC has created an unwarranted climate of suspicion in the marketplace.”

After four weeks of this, Carey persuaded the Legislature to come up with the money they “morally” owed. He hoped to add some sense of stability to the debt market.

But UDC was only one of the crises Carey had to face; 1975 was also the year New York City’s fiscal house of cards collapsed. After years of mismanagement, budgetary gimmicks, phantom revenue, huge permanent short-term debt and the capitalizing of operating expenses, the financial markets closed their doors to the city.

Carey, grasping the magnitude of the situation, forced the city to begin internal reforms and created the Municipal Assistance Corp., which was empowered to restructure the city’s debt and to monitor its fiscal condition. In September 1975 he announced, “far-reaching steps were taken or agreed to by the city, in close consultation with the state and the recently formed Municipal Assistance Corp. for the City of New York to improve its condition.” They included:

• A ceiling on the size of the city’s budget;

• a moratorium on additional taxes;

• the dismissal of thousands of municipal workers and a freeze on new hiring;

• a suspension of wage increases of city employees.

These measures were not enough to restore investor confidence, and in November 1975 the City defaulted by decree of the state Legislature. Moratorium legislation was enacted on $2.6 billion of notes. Holders of the paper were offered MAC bonds in place of principal payments. Later, Carey convinced President Gerald Ford to sign legislation permitting short-term federal loans up to $2.3 billion a year.

Most remarkable was Carey’s successful negotiations with public employee unions. A.G. Andrew Cuomo summed it up best in a Daily News Labor Day op-ed: “The state recovered through shared sacrifice and a balanced approach that did justice to the interests of both business and labor. … Famously tough labor leaders, like District Council 37 head Victor Gotbaum and Albert Shanker, president of the U.F.T., came to the rescue. The former agreed to shelve pay raises for municipal workers; the latter helped stave off bankruptcy by buying city bonds with pension funds.”

Through a combination of Irish charm and steely Brooklyn smarts, Carey devised plans that saved New York. Our new governor, who will face a broke and corrupt state government, would do well to study with care the lessons of the Carey administration.

Charles de Gaulle: Christian Warrior and Statesman – By George J. Marlin

September 22, 2010

This article I wrote appears on The Catholic Thing web site on September 22, 2010.

JFK’s Houston Speech at 50 – By George J. Marlin

September 14, 2010

This article I wrote appeared on The Catholic Thing web site on September 10, 2010.

NY should take a page out of NJ’s playbook – By George J. Marlin

September 9, 2010

The following appears in the September 10-16 issue of the Long Island Business News:

If the day comes when Albany’s power brokers get serious about dealing with New York’s huge structural budget deficit, they should look to New Jersey’s Gov. Christopher Christie for guidance.

Christie, born in Newark’s ironbound district to an Irish father and a Sicilian mother, is one tough guy. As New Jersey’s U.S. attorney (2002-2008) he fearlessly took on the political establishment and successfully prosecuted more than 100 corrupt politicians including Democratic Newark Mayor Sharpe James and Republican Essex County Executive James Treffinger.

As a candidate for governor, he had the grit to beat back the well-financed machines of multimillionaire incumbent Jon Corzine and the public employees unions. And since he was sworn in, he has ruthlessly tackled the purveyors of fiscal mismanagement.

Christie inherited a state on the verge of bankruptcy. New Jersey spending has increased over the last 20 years by 322 percent – an average of 16 percent a year. Taxes and fees have been raised 115 times in the past eight years. Reckless spending explains why New Jersey has the nation’s highest property taxes and the second-biggest state budget shortfall: 29.9 percent. (In contrast, New York’s $9 billion deficit is about 7 percent.) Also, the state pension fund, which has been raided over the years, is unfunded to the tune of $46 billion.

New Jersey was hit hard by the recession because, like New York, it is heavily dependent on the financial sector. So far, the Garden State has lost about 120,000 jobs and has experienced a 16 percent decline in tax revenue.

New Jersey ranks 46th out of the 50 states in the Tax Foundation’s economic freedom index and its business climate is rated worst in the nation. This explains why $70 billion in wealth moved to friendlier tax and regulatory regions between 2004 and 2008.

Reacting to these dreary conditions, Christie took the offensive, declaring in February a state of fiscal emergency and impounding $2.2 billion in approved spending to close the budget deficit for the fiscal year ending June 30, 2010.

To close this year’s budget gap of $10.7 billion, Christie called for “a smaller government that lives within its means.” He stumped the state making his case and withstood $6 million in attack ads funded by the teachers union. At Christie’s urging, voters went to the polls in droves and rejected 58 percent of local school district budgets.

Fearing a taxpayer revolt, the Democratic-controlled state Legislature blinked and Christie got 95 percent of his budget loaf. To plug the deficit, deep cuts were approved including $820 million in school aid and $500 million in aid to cities. The school tax rebate, that’s been funded with long-term debt, was converted into a tax credit. Scores of dubious programs were eliminated and numerous services were privatized. Pension reform included 401(k)s for future state employees; public employees must now contribute 1.5 percent of their salaries toward their health care costs.

While the final budget wasn’t perfect – it included $2.1 billion in deferred pension contributions – to eliminate so huge a gap without resorting to tax increases is an incredible feat.

And while Christie was on a roll, 48 hours after the budget was passed he called the Legislature into a July 4 session to deal with his proposed constitutional amendment to cap property increases to 2.5 percent annually. On July 13, he signed into law a compromise statute that limits increases to 2 percent.

Christie has proven that political will and hard work can produce incredible results even in a state as blue as New Jersey.

The day after Election Day, New York’s governor-elect should send a strong message to Albany’s special interests by calling Christie, who is establishing a national reputation, and arranging a sit-down to discuss his roadmap to success.