Governor Paterson Means Business


The Republicans’ toughest rap in the election’s final days was that Democrats and their leaders want to plunge the nation into “class warfare.” Of course, this is laughable. Everyone knows that Democrats don’t have the guts to wage class warfare. There is no better evidence of this than in Albany, where the party of the people has a new African-American leader who gets all wobbly these days whenever someone suggests taxing the rich.

Last week, Governor David Paterson announced that, thanks to the Wall Street meltdown, the state faces some $47 billion in budget shortfalls over the next four years. No one’s ever heard these kinds of numbers before. But the accidental governor insists that he will cut his way out of this morass rather than impose any new taxes. Since much of the state’s spending is on education, health, and assistance to those less well-off, this means that Albany must start whacking away at those parts of the budget. The governor has summoned legislators to do so at a special session on November 18. He has refused to name his own targets, but he is adamant that that’s the way to go.

“Spending cuts are the only ones we can achieve right now,” he said last week, immediately after a trip to Washington to push for federal aid. “We can’t tax anybody.”

Not that Paterson is opposed to people voluntarily paying more taxes if they so choose. Take gambling, for instance. Proving that he is an agile fiscal player, the governor recently called for turning lovely Belmont Park into a massive gambling emporium, something called a “racino.” This came just a week after he approved 4,500 video gambling machines for Aqueduct Racetrack just down the road. It will generate millions in new revenues, the governor said.

Back when he was a lowly politician from Harlem and his party’s minority leader in the State Senate, Paterson saw this business of government-induced gambling quite differently. “Gambling is the tax on the addicted,” he said in 2003 when then Governor Pataki called for putting thousands of these same dollar-sucking machines into city OTB parlors to raise revenues. “And believe me, that is job-killing, and family-killing.”

Of course, that was before Paterson could see the big picture, and before he had to worry about getting elected in his own right to the job he now holds. To do so, he believes he must prove to business leaders that he is not that radical from Harlem he pretended to be for so many years. What better proof than to give thousands of working-class New Yorkers the opportunity to smooth out any $20 bills they may still have in their pockets and feed them into these brilliant new machines?

The governor has also scored points with the business class by rigorously insisting that “everything is on the table” when it comes to cuts. This includes slices to school budgets in the middle of the school year. Even Senate Republican leader Dean Skelos—desperate for teachers’ union support for his members’ re-election—ruled out this approach. Whatever you think about the union, most parents get a bit concerned when school districts start cutting staff while kids are sitting in the classroom. Paterson dismissed this complaint as mere “poetry.”

He got literary again in Washington, where he began his testimony last week by citing novelist Ayn Rand, patron saint of capitalist entrepreneurs. Paterson praised Rand and invoked her advice that “the greatest country in the world was founded on the basis of individuals, where people were encouraged to adventure, not to be complacent.” He said that “an infection of greed and mismanagement” had distorted that fine trait. But his chief message to business leaders was this: New York’s governor reads Ayn Rand!

The Fountainhead did not appear to be on his reading list when he was still that elected official from Harlem, one of the state’s poorest districts. The same year that he lanced Pataki’s gambling gimmicks as a tax on working people, Paterson called for a tax on the rich to help close what was then an $11.5 billion budget gap (slightly less than what Paterson projects for next year). He believed then that a 1 percent surcharge on incomes over $300,000 a year, and an added 1 percent bite on those above $500,000, were perfectly fair.

And he got his way. He helped the legislature impose—over Pataki’s veto—a temporary, post-9/11 surcharge bumping the 6.85 percent top income-tax rate up to 7.7 percent on incomes over $500,000.

These days, the governor winces when legislators suggest that such a hike is again in order. Some people believe he is only performing his designated role in Albany’s Kabuki dance of the budget, where all is shadows and gesture. If so, he’s doing an excellent job.

He started last spring when he dismissed calls by Assembly Speaker Shelly Silver to consider a tax hike on top earners. The newly installed governor spoke of the wealthy as victims. “Not to drive up taxes for a constituency that has been, I would say, just battered over the past number of years,” was his goal, he said then. “Compared to other states,” he added, “I don’t think that this is where we should be going.”

Paterson appears to have bought the notion that higher personal-income taxes cause the rich to flee. This may be the teachings of The Fountainhead, but there’s no real-world evidence for it. Were it so, New York’s wealthy would long ago have escaped to places like Georgia, where politicians make sure that millionaires pay the same tax rate as day laborers. As Frank Mauro, the tireless pro-union advocate of the Fiscal Policy Institute in Albany, points out, the rich have not even fled their estates next door in New Jersey, which has long taken an extra bite—almost 9 percent—out of the incomes of those making over $500,000.

What does cause people to move or stay away, says Mauro, is a decline in public services. “Our fear is that if you try and close a budget gap of the magnitude that the governor is projecting, you will be inevitably cutting services that are important to low- and middle-income families,” he says. “We know that expenditure cuts put more drag on the economy than high-end taxes.”

The shorthand terms of art these days to suggest that the rich can take a little nick here and there are “fiscal fairness” and “shared sacrifice.” This fall, some 100 nonprofit groups whose budgets are on the cutting table launched an aggressive new coalition aimed at body-blocking the cuts and pushing lawmakers to spread the pain around. Dubbed “One New York,” the coalition has been dispatching members to Albany and City Hall to get its point across. “An economic downturn is not the time to disinvest from job training, English classes, day care—all those services that we provide that help people get into, and stay in, the workforce,” says Nancy Wackstein, director of United Neighborhood Houses, who joined a large demonstration in front of City Hall this month.

Wackstein knows hard times when she sees them. She was City Hall adviser on homeless issues in the early ’90s, when the crisis was defined by some 800 new homeless families entering the city’s shelter system each month. Last week, the Coalition for the Homeless announced that that figure is in history’s rearview mirror: Some 1,500 families—an all-time high—sought shelter in September.