Rich Man, Poor People

The Billionaire Mayor and the Income Gap

Let this fact sink in: The United States has the most unequal income distribution of any advanced economy in the world, with the current gap between rich and poor now greater than at any time since 1929. In New York State, the disparity is by far wider than in the rest of the country, with the top fifth of families making 14 times what the bottom fifth do. In New York City, the problem is starker still. Despite the sense that the rising financial tide of the '90s raised all boats, only the richest 5 percent of New Yorkers increased their share of income between 1987 and 1997. * "New York is somewhat of a poster child for the inequality problem," says Jared Bernstein, an economist with the liberal Economic Policy Institute. "You have more poverty and far more extensive wealth." A magnet for poor immigrants who hope it will provide them with a better way of life, home to communities that have long been mired in poverty, the city has an underclass that is increasingly alien from the city's ultra-rich. Almost 1.6 million of the city's 8 million citizens fall under the poverty line. Meanwhile, says Bernstein, "there are tremendous earning opportunities for people like Michael Bloomberg." * Indeed, the unprecedented disparities in our current economy might be summed up by the strange fact that the city's entire projected budget deficit—now estimated at $4.5 billion—is roughly equal to the estimated net worth of the new mayor. With some $4.5 billion in corporate and real estate holdings, Bloomberg is both the city's most powerful political leader and its fifth rich-

est citizen. (With $7.5 billion, publishing magnate Rupert Murdoch ranks No. 1.)

While vast wealth is concentrated in the hands of individuals, the city is announcing a host of new cuts this week. It's tempting to think of Bloomberg—who once spent $2 million on a "seven deadly sins" party for his company, complete with a "gluttony bar" and entertainers who repeated the phrase "Money, ain't it gorgeous?"—wiping out the city's financial problems with a wave of a custom-made magic wand. In addition to a townhouse on East 79th Street, Bloomberg owns private homes in London's Cadogan Square; Vail, Colorado; Bermuda; Armonk; and a farm in North Salem where his daughter keeps her horses.

Imagine: Just by cashing in his Bermuda estate, worth an estimated $10 million, he could more than make up for the $2 million that was going to help uninsured patients at city hospitals pay for their medications before the last budget slashing. And there'd still be plenty of spare change to restore the $7 million cut from anti-smoking programs aimed at youth. Or, let's say he'd eliminated the direct mail part of his almost $70 million campaign. That $16 million would have been enough to avert cuts to the city's public libraries and keep them functioning at the level they were last year.

Of course, the mayor can't actually be expected to use his personal wealth to bail the city out. The prospect is unrealistic both because most of his fortune is tied up in his financial information company, Bloomberg LP, and because such a donation would inevitably be considered a bizarre conflict of interest. Instead, he has tried the next best thing, recently calling on his friends in the private sector for cash, offering to rename public facilities in exchange for donations.

But no matter how many Staples libraries and Warner Bros. community centers we get, the bulk of the looming deficit will translate into budget cuts. And inevitably, the city's plans to scale back services in the wake of the terrorist attacks and the Internet bust will disproportionately affect the poor—and deepen the already monumental chasm between the city's haves and have-nots.

Consider the proposed reduction in pay planned for Sylvia Rosado, one of 3500 single parents (95 percent are mothers) who have been working in the parks department since reaching their five-year welfare-benefits limit. If the city follows through on a cost-cutting plan hatched in the final hours of the Giuliani administration, a first round of these workers, who were originally hired for renewable 50-week-per-year jobs with benefits, stand to have their pay lowered from $9.38 to $7.95 an hour at the end of this month. By entering into a federally funded contract with a private temp company that will pay workers the lesser wage and provide no benefits, the city is saving millions.

But to Rosado, a 27-year-old mother of three who works picking up trash in Harlem's Jackie Robinson Park, the cost of the cut would be almost incalculable. At the higher rate, her pretax salary adds up to $18,760 a year. With that, the parks worker now pays rent on her two-bedroom apartment in the Robert F. Wagner Houses on East 122nd Street; clothes and feeds herself, her unemployed boyfriend, and her three children; and covers carfare and take-out food for her family on the all-too-frequent occasions that Timberlee, her youngest, lands in the hospital for asthma treatments.

When the cut goes through some two weeks from now, she'll be out $2860 a year—more than she's ever had in her bank account. The shortfall will mean forgoing all the extras—"goodbye, couch," she says, referring to the sofa set she's paying for on layaway—as well as a deep cut into the basics, like her food budget.

Less than three miles downtown, in a neighborhood of embassies and appointment-only art galleries, Michael Bloomberg lives in a five-story, 9200-square-foot limestone townhouse just east of Central Park. Bags of garbage and a rusty bedframe sit in Rosado's hallway, which has been the site of two trash fires in the past six months, but even the service entrances gleam on the mayor's prime block.

The numbers are in keeping with the aesthetics. Average family income in Rosado's housing projects is $22,216; in the three square blocks encompassing Bloomberg's exclusive slice of East 79th Street, the figure is more than 21 times higher—$474,483, according to 1997 estimates (the most recent available). And that doesn't include assets, of which Rosado—and roughly 40 percent of New Yorkers—have none. The stat gatherers say the single largest group of earners in Bloomberg's block make more than $150,000 a year; in the Wagner Houses, the largest number of households make less than $5000 per year.

And Rosado isn't even poor—or not officially anyway. She hovers just above the $17,524 threshold for a single mother of three. In the six months she's had a full-time job, she has somehow managed to purchase the sofa set ($85.90 per month for a year); a cell phone so she can keep track of Timberlee from work ($40 per month); and curtains for her window overlooking the FDR Drive ($19.99). She's been flush enough to make chicken—instead of eggs—along with rice and beans (still, dinner for five usually totals less than $5). And she even has some savings. Rosado has socked away $109 since beginning her job—"for a rainy day," she says.

It's chilling to think of a day much rainier than the one she's already experiencing. The pay cut would be bad enough. Loss of her job, which the temp company plans to phase out within the next year, will almost surely send her back into the depths of poverty she's been trying desperately to escape.

Yet, that downward trajectory is exactly what is in store for Rosado and the millions of other poor and near-poor people throughout the city, according to economists and budget analysts. Though the economic downturn is affecting all New Yorkers, it is compounded by the termination of welfare benefits to millions.

"This is our first post-welfare recession. It's a new situation for us," says Mark Levitan, senior income-security policy analyst at the Community Service Society. "We don't have the same kind of safety net we did before. We're going to see a lot of people hit very dire straits pretty early on because there aren't the public supports."

Even before this fall, inequality indicators were already setting records. In New York State, the richest 20 percent accounted for all the income gains of the 1990s. While the widening of the gap was temporarily stalled by the dotcom bust, which hit the rich hardest, the current crisis promises to continue deepening the great divide. "Income disparity will almost surely go up as the recession deepens," says Bernstein.

The problems of extreme poverty are obvious. "I was thinking about money all the time," Rosado says of the time not long ago when she was trying to manage her household on a $187 welfare check that came once every two weeks. "Every little thing was a struggle." And according to James K. Galbraith, director of the University of Texas Inequality Project, which studies income gaps around the world, the cost of economic inequality is far greater than even the toll on individual poor people. "More-equal societies have less unemployment, fewer poor people, less crime, and better public services," says Gabraith.

It's not just liberal economists who see the disparity as unseemly. Even George Bush's spokesman, Ari Fleischer, recently listed "reducing the income gap" among the president's top priorities. Unfortuately, that gap is increasingly self-perpetuating, according to experts. A precipitous drop in electoral participation among those at the bottom of the economic ladder means the poor have little say in the policies that shape their fate. Meanwhile, as the World Economic Forum and Enron have recently reminded us, a wealthy elite enjoys tremendous political power.

"We're seeing a takeover of the political system by the very wealthy," says Galbraith. Politicians like Bloomberg and New Jersey senator Jon Corzine, a former Goldman Sachs executive, are just the latest symbols of money talking—and holding office.

It remains to be seen if and how having a vast fortune will shape the mayor's response to the budget crunch. Several unions have suggested placing a surcharge on the city's ultra-wealthy—something that's been levied in the past, but now stands virtually no chance of being approved. Mark Rosenthal, president of DC 37's local 983, to which Rosado belongs, is hoping a commuter tax might save his workers' jobs. "If they need to tax people to keep people working, then I'm for the tax. It's morally wrong to take these jobs."

The mayor has said city lawyers are reviewing the parks workers' new contract. Meanwhile, he's focusing on private philanthropy to help close the gap. Though he has been a generous donor himself, giving gifts of up to $100 million at a time, doubters say it's unlikely his fellow billionaires will rush to follow suit.

"It's going to be a lot harder for the mayor to convince the wealthy to contribute to the city of New York," says Edward Wolff, professor of economics at New York University and author of Top Heavy: The Increasing Inequality of Wealth in American and What Can Be Done About It. "The very wealthy typically don't like the public sector, so to ask them to not only pay taxes but also contribute is more difficult than the Met Opera asking for $10,000."

As Wolff sees it, even the slightest progress toward closing the gap between wealthy and poor in New York will require a paradigm shift for the mayor. "Once you run a business, your goal is to minimize costs—and wages are viewed as costs," he says. "I think it's going to be very hard to break out of that mentality."


Research assistance: Joshua LeSieur

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