It's anybody's guess as to whether the subject of the economy's performance will even come up at tonight's debate. My guess is that it will come up minimally if at all -- because the moderator will not view the subject as casting a sufficiently favorable light upon the preferred candidate. But if it does come up, we already know that the preferred candidate is ready with her "economic development" plans, all of which involve lots more government spending to "rebuild infrastructure" and "create jobs."
To put this in context, I thought you readers might be interested in what passes for "economic development" by the state and local governments in New York. After all, Hillary's agenda is nothing more than a nationalized version of the New York groupthink, so observing New York will give you perfect insight into what you are in for in a Hillary presidency. The summary of the experience with New York's "economic development" efforts is (1) very large spending for minuscule (or negative) results, and (2) pervasive corruption. Indeed, New York's experience underscores the ever-present question of whether it is even possible to engage in economic-development-through-government-handout without ending up with pervasive corruption. You be the judge!
In New York City, the signature economic development program is "affordable housing." I have covered this many times before (see this tag for more details than you can bear), but the summary is the highest possible government giveaway for the smallest number of beneficiaries. For example, many thousands of residents of New York City public housing projects live in waterfront developments where apartments would have values of easily $2 million each, and up to $5 million, if they were only allowed to become part of a free market -- yet the residents are still deemed to be poor!
In this affordable housing game, the government mostly got out of pure socialist-model government development and ownership a couple of decades ago. Instead, in more recent years, the affordable housing has been "incentivized" by two principal methods: (1) free handouts of the land, and (2) the so-called 421-a tax abatement program. In the free-handout-of-land category, we have for example the now-under-construction Essex Crossing (formerly called Seward Park) on Delancey Street at the foot of the Williamsburg Bridge, and the new La Central project in the South Bronx. In this model, government starts out owning the land; and instead of just selling it to the highest bidder, they request "proposals" from developers, and award the development rights based on some political criteria. Is there any chance that this process can be free from corruption? I wouldn't think so, although I haven't seen any recent indictments.
And then there is the 421-a tax exemption. The basic idea is that a developer can get reduced property taxes by committing to build housing that meets criteria for "affordability." This program actually expired at the end of 2015, and since then there has been an ongoing negotiation about its renewal, participants including the governor, legislative leaders, representatives of developers, and representatives of labor unions. Why labor unions, you ask? Because in New York, labor unions, by reason of political contributions, hold sufficient sway over politicians to demand that government housing subsidies only go to developments that somehow favor union labor. The latest on these "negotiation" came to light last month. As reported in The Real Deal on August 23:
According to a one-page proposal sent to developers and seen by the New York Times, developers would not be required to hire union contractors or pay prevailing wages in return for the tax break. But they would have to pay workers a minimum of $65 in wages and benefits for 300-unit-plus projects south of 96th Street in Manhattan and $50 in Brooklyn and Queens – $15 of which would be paid by New York State. Developers would also be required to set aside 25 or 30 percent of the units for below-market rents, the Times reported. It wasn’t immediately clear how the state would finance the wage subsidy.
You read that right -- our genius governor thinks it's a good idea for the state government to subsidize the wages of construction workers, who are making $50 to $65 per hour, to the tune of $15 per hour of taxpayer funds. Rumor has it that he also believes in perpetual motion machines. Anyway, as of this writing, 421-a remains expired. But the betting is that it will be revived, with a generous helping of taxpayer money to people already well in the top half of the income distribution.
The Buffalo Billion
Upstate cities like Buffalo, Rochester, Syracuse, Utica and Binghamton have been hemorrhaging jobs and population for decades; and of course the "solution" proposed by our state government is not lower taxes or fewer regulations, but rather massive subsidies for favored businesses. The governor's current baby is the "Buffalo Billion," a taxpayer "investment" of a billion dollars or so supposedly to revive that moribund town. It turns out that $750 million of the billion got claimed by just one project, a massive factory on the site of a former steel plant, for the use of Elon Musk's Solar City venture to build solar panels. I last wrote about this giveaway back in July, when it emerged that Musk was going to temporarily "save" the near-bankruptcy Solar City by merging it into the somewhat-less-near-bankruptcy Tesla. I would say that there is next to zero chance of the taxpayers ever recovering any of the $750 million.
But wait -- it gets worse! Last week came down a complaint from Preet Bharara's Southern District of New York prosecutor's office alleging pervasive bribery and kickbacks in connection with the Buffalo factory. Here is a copy of the Criminal Complaint. The basic allegations are that would-be contractors on the project paid large sums (in the range of hundreds of thousands of dollars) to people in the governor's office and/or state-connected economic development corporations to direct the construction business their way. Really, was there any chance that this was not going on?
Hurricane Sandy Relief
Hurricane Sandy -- wasn't that in 2012, now almost four years ago? Yes, but this is New York, and therefore the state is still passing out taxpayer money to "rebuild." And to whom? Why, to waterfront homeowners whose homes were damaged or destroyed by the storm. Nicole Gelinas has a piece in today's New York Post. Example, please:
It’s bad luck, sure, to buy a house on the coast and then learn it’s vulnerable to flooding. That’s what happened to one Broad Channel resident, who told the Wall Street Journal he paid $365,000 in 2008 for his home, which the city is paying $600,000 to elevate.
As Gelinas rightly points out, two-thirds of New York City residents do not own their homes at all, much less waterfront homes.
When the state gets the idea that it can create economic development through government handouts, this is what you get. Can it really be any other way?