NEW YORK | Dismay Today over Pay to Play

Both Federal SEC officials and NY state prosecutor Preet Bharara have charged two brokers and the former director of fixed income at the NYS Common Retirement Fund with a pay-to-play arrangement.

The Fund is under the aegis of the NYS Comptroller, Thomas P. DiNapoli, who had no comment for the time being.

Allegedly the brokers got $2 billion worth of funds to manage in return for "at least" $180,000 worth of sex, drugs and rock-and-roll (including tickets to a Paul McCartney concert) demanded by the fixed-income director.

Bharara said:

This case finds itself at the intersection of public corruption and securities fraud. Unfortunately, this appears to be a busy intersection.

The charges were filed in federal court in Manhattan. Here is the story in Crain's.

HEALTH CARE | Federal and State Policy in 2017

Gottfried at a Health Care Rally in Albany.

I just received an email from my NY State Assemblyman, Richard N. Gottfried, who chairs the Assembly Health Committee. 

He says (with some minor edits by me to save space and clarify references):

The election of Donald Trump and Republican control of Congress are a serious threat to programs and policies that protect our health.  Washington could make radical changes to Medicare, Medicaid, the Affordable Care Act, reproductive care, and other programs that could drastically undermine our right to health care, cost New York State billions of dollars a year in federal funds, and destabilize health care providers. ...

For years, congressional attacks on funding and programs have been defeated by the threat or use of presidential vetoes. Now we will have a president who may be leading the charge.

Under the Affordable Care Act (ACA), we [in NY State] get 90% federal matching money, instead of the usual 50%, for the "expanded" Medicaid population. ACA repeal would take away the additional funding and cost New York over $2 billion a year. ACA repeal would also eliminate federal funding for the new Essential Plan, blowing an additional $800 million hole in the state budget and potentially leaving 100,000 New Yorkers without health coverage.

President-elect Trump has vowed to eliminate funding for Planned Parenthood, and Vice President-elect Mike Pence is an anti-choice extremist who carried legislation doing just that. This is a major platform for the Republican Party and it's likely that Congress would eliminate federal support for family planning services. If President-elect Trump has his way, a new Supreme Court majority would not only overturn Roe v. Wade, but could go further and outlaw some or all abortion - overriding New York's law that protects legal abortion. ...

When Trump and Republicans in Congress say "repeal and replace Obamacare," the agenda is eliminating financial help for low and middle income people who can't afford high premiums and deductibles, shifting more of the cost of health care from insurance companies to consumers, and eliminating consumer protections. They talk about letting insurance companies sell in any state, but insurance companies already can do that. What they really mean is making out-of-state insurance companies exempt from state consumer protection and financial solvency laws. ...

Much of our state public health policy is driven by federal funding, laws, regulations and oversight. We must protect the federal policies and programs New York depends on, and respond with appropriate changes to state law when needed.

Our health insurance-based system is a major contributor to economic inequality and lack of opportunity. The insurance company wants the same premium and imposes the same "cost sharing" whether you're a multi-millionaire CEO or the receptionist struggling to make ends meet. For a median-income household, the cost of insurance can be over a quarter of your income (whether paid by the worker directly or indirectly by your employer lowering your wages). And that's not counting possibly thousands of dollars in out-of-pocket costs.

The New York Health Act is my bill to provide complete universal health coverage (called "single payer" or "improved Medicare for all"), eliminate financial barriers to care, and let people go to the doctor and hospital of their choice. Instead of regressive premiums, deductibles, co-pays and out-of-network charges, it would be funded fairly through broad-based taxes based on ability to pay.

The Assembly passed the bill in 2015 and 2016 - helping to move it from being "a great idea that could never happen" to something really achievable. In 2017, we will continue to work to build public support so it can ultimately pass the [NY State] Senate.

CityEconomist Just Passed 90,000 Page Views

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NY STATE | Recent Prosperity Originates Downstate

L to R: John Tepper Marlin, Reps. Carolyn Maloney (D-NY12)
 and Tim Bishop (D-NY1). Photo by Alice Tepper Marlin.

Rep. Tim Bishop spoke at an event over the weekend welcoming back Rep. Carolyn Maloney from China.

Bishop told the group in Bridgehampton, NY that he would be facing a challenger backed again by Tea Party bankrollers.

The reason is that NY-1 had one of the weakest majorities for Obama in the last election.

However, if the plan is to dredge up the last campaign's attacks on Bishop for not doing enough for the Suffolk County economy, as both opposition candidates promised, recent new data do not support the idea that Suffolk County has been slipping.

On the contrary, Nassau and Suffolk had New York State's lowest metro area unemployment rate in May and again in June. On a county basis, both Nassau and Suffolk had among the lowest ten unemployment rates of 62 NY State countries, averaging 4.9 percent. By comparison, the Bronx unemployment rate was 10.8 percent and Brooklyn's was 8.3 percent. The NYC unemployment rate fell slightly between June and July. The unemployment rate has increased slightly in the United States in July compared with June, seasonally adjusted, and in NY State outside of NY City. NY State’s unemployment rate was unchanged between June and July, at 6.6 percent, the lowest level since November 2008.

NY State jobs were again in July above 9 million, reports the Bureau of Labor Statistics this morning (Table D). This is the third consecutive month of jobs above 9 million, and the 20th consecutive month of jobs growth. The state added 17,300 private-sector jobs. Total private-sector jobs in NY State are at an all-time high of more than 7.6 million.  Jobs in NY State have grown in 38 of the past 43 months

Private-sector jobs have continued to grow in July 2014 compared with the same month in 2013:

United States                          +2.2%
New York State                      +1.9%
Downstate NY (10-co. area)    +2.4%
New York City                         +3.0%
Suburban Counties                 +1.2%
Nassau-Suffolk                       +1.6%
Upstate NY (52-co. area)        +0.9%

In the 10-county Downstate region, private-sector jobs grew by 2.4% over the past year. Downstate’s private-sector job growth was most rapid in New York City (+3.0 percent) and in Nassau-Suffolk (+1.6 percent).

In the 52-county Upstate region, private-sector jobs grew 0.9 percent over the past year. Private-sector job growth occurred in both the region’s metro areas (+1.0 percent) and in counties outside of metro areas (+0.3 percent). One metro area in the state lost private sector jobs between July 2013 and July 2014, i.e., Syracuse (-1.2 percent).

Rep. Bishop has been a major advocate for education in the Congress, and (private) educational and health services are the fastest-growing sector in NY State.

NY State Major Industry Sectors that Gained Jobs
 Growth between July 2013 and July 2014 (details here):
Educational & Health Services*       +53,400
Professional & Business Services     +30,600
Trade, Transportation & Utilities        +28,200
Leisure & Hospitality                         +22,200
Construction                                     +8,400
Other Services                                  +5,800
Financial Activities                                +500
Information                                           +400
Natural Resources & Mining                 +300
*Educational and health services are in the private sector.

A Tea Party opponent will have trouble making the argument that Rep. Bishop has been allowing government employment to get out of control in NY State, since government jobs in NY State fell during the year ending July 2014.

Major Sectors that Lost Jobs (Decline between July 2013 and July 2014)
Manufacturing                                     -9,200
Government**                                     -6,200
**Government jobs include public education and public health services.

NYC and NY State Fiscal Problems

A Reuters story on Tuesday by Joan Gralla reports that New York City fears return to 1970s. The fear then was that the City couldn't get out from under its heavy load of short-term debt. In fact the City recovered as soon as the economy came back.

The more serious problem today is NY State's fiscal stress. Back in the 1970s NY State was not in such trouble, and it was able to bail the City out in conjunction with support from Sen. Richard Lugar (R-IN) to provide federal guarantees to the pension funds to buy the City's bonds (his help in getting these guarantees has never been properly acknowledged by the City).

Gov. David Paterson is now raising many taxes and cutting aid to local governments. The problems this creates for NYC are tacked on top of the City's own loss of tax revenue and rising requirements from the NYC employee pension funds for money to make up for their losses when an 8 percent annual return has been built into their actuarial assumptions. In addition, the volume of new tax abatements to spur development has contractually reduced the City's ability to raise taxes on some new developments. Gralla says:

While many U.S. cities worry that their economies are deteriorating to the level of the 1930s Great Depression, New York City fears reliving a more recent decade that features strongly in city lore.

But the better comparison is with 1989-1992. Gov. Paterson’s array of tax increases is reminiscent of the 22 forms of NYC tax increases during these recession years. The large number of increases, and the nuisance nature of some of them, were the subject of many news stories at the time.

A major advantage that NYC has over the state today is that property tax revenues are more stable than other taxes during an economic decline because NYC's assessed values are averaged over five years. NYC's property tax revenues continue to rise for a couple of years into a recession even though market values of property are falling. Property owners may sell and move away, but the property continues to be paid by the new owner.

All the taxes can be avoided by moving completely out of NYC. Charles Tiebout introduced the concept of “foot voting” or “voting with feet”. IU would argue that it's more serious when businesses leave town than when individuals arbitrage among residential options based on differences in property taxes.

The two explanations I have heard most widely regarding the exodus of businesses in 1989-1992 are (1) high crime rates and (2) higher taxes on incomes and businesses. It would have been better, in retrospect, to have increased NYC property tax rates more during those years to avoid increasing other taxes and to beef up spending on the police earlier than the City did. NY State doesn't have a property tax to rely on, although I am advised by a former employee of the Assembly Ways and Means Committee that NY State used to have a statewide property tax and there would be no constitutional problem with reintroducing it.