Doesn't Everybody "Need" A Bailout?

Do you “need” a government bailout right now? How do you tell? I know that I “need” a bailout. Here’s how I know: I’m a lot less well off than I was a couple of months ago. Meanwhile, the landlord still expects to be paid the same amount; the credit card company still expects to be paid, the cell phone company still expects to be paid, the internet provider still expects to be paid, the health insurance company still expects to be paid, the property tax bill is the same, the groceries cost the same, etc., etc. etc. Obviously I cannot be expected to support the same collection of expenses with reduced resources. The federal government needs to step up and bail me out!

Does my logic there appear to you to be sound — or, does it perhaps appear a bit deficient? In considering that question, you might want to review a piece from the New York Post on April 5 by Nicole Gelinas, headline “New York will need another federal bailout — and major belt-tightening.” The gist is that obviously New York City “needs” a bailout far bigger than the amount already provided via the brand new CARES Act:

Gotham is likely to see a more-than-$10 billion drop in its projected $66 billion in tax revenues for next year — or more than 15 percent. Yes, New York overspends, with city-funded spending up by nearly a third since Mayor Bill de Blasio took office, to $70.8 billion for the fiscal year that starts July 1. . . . But now is not the time for a lecture. . . . Congress’ recently passed rescue law, then, falls short, even with $180 billion allocated for states and cities.

Clearly New York City needs to pay for its basic expenses — police, fire protection, sanitation, education, and so forth. With tax revenues suddenly down by $10 billion they’re in a really big hole. Thus, they “need” a bailout.

Or do they? Another way of looking at it is that this is a fantastic once in a lifetime opportunity for New York City to get its expenses somewhat into line. Exhibit A: According to Chalkbeat on January 27, New York City is spending in the current year a completely ridiculous $28,808 per student annually on K-12 education. Edweek here has state-by-state numbers for the whole country, admittedly with 2018 as the most recent year. They put the national average of per student spending on K-12 education at $12,756. Florida, the most comparable state to New York in terms of population, percentage of minorities, and immigrants, spent only $9,764 per student in 2018. And Florida gets better results than New York on the NAEP! With close to 1 million students, New York City’s $28,808 per student spending represents close to $20 billion annually of additional spending over what they would spend if they controlled expenses the way Florida does. The budget hole created by the current crisis is only $10 billion. There’s plenty of room to cut the $10 billion in K-12 education alone, and still leave us spending almost double the amount per student that Florida spends.

And K-12 education spending is just the start. New York likes to project the image that its taxes are high because it has a bigger heart and is more generous to the less-well-off than other jurisdictions. But when you actually look into it, it turns out that the reason for the differential is that New York provides no better services than elsewhere, but spends wildly more to do so. Exhibit B is the Medicaid program where, according to the Empire Center on October 9, 2019, New York had the second highest percent of population enrolled in Medicaid among the states, and also spent 27% more per beneficiary than the national average.

Then there’s fire protection. Sure fire is an essential service. But in New York City, fires have declined enormously since the days of “Fort Apache The Bronx” back in the 60s and 70s. Today the New York City Fire Department is mostly in the ambulance business. Nevertheless all attempts by the last several mayors to close any fire houses have been met with tremendous neighborhood resistance, and the cuts have been minimal if any. Now is the time!

Another area of great overspending by New York City is health care and pensions for the workforce. In normal times, resistance from the unions makes reform in these areas impossible. Again, now is the time! And believe it or not, New York has recently thought itself so rich, with money to burn, that it has been embarking on billions of dollars of completely useless “climate mitigation” programs. If those get zeroed out, no one will even notice.

So suppose the federal government steps in with a new bailout of $10 billion, just to relieve New York City of the current hole in its budget and enable it to meet all its existing commitments. Result: all incentives to take this opportunity to deal with the vast overspending have just been eliminated. Taxpayers in low spending states like Florida and Texas get dragooned into support of New York’s aggressive unionized-workforce model, where all government services cost double or triple for worse results.

And as I understand it from Ms. Gelinas, the best argument for this result is “Now is not the time for a lecture.” Well, I’ve got a better idea than a lecture. How about just “NO!”

On the other hand, I have to keep in mind my own “need” for a bailout. But wait a minute, you say. You, the Manhattan Contrarian, live in a fantastic Manhattan spread, leading the cool Manhattan lifestyle. If you have overcommitted to expenses, you just need to cut back appropriately to match your resources. Maybe you should even sell and move somewhere else? I’ll bet you can anticipate my response: “Now is not the time for a lecture.” Give me my damn bailout!