Business

09.18.13

Can Bill de Blasio Fix New York’s Income Inequality?

New York’s likely next mayor wants to equalize the city, but can a systemic problem be solved locally? David Freedlander talks to economic experts about Bloomberg’s record and how de Blasio can deliver.

Bill de Blasio’s rise from the middle of the pack to Democratic nominee for mayor of New York City was fueled by a single message: New York has become a city of haves and have-nots and it will be the charge of Mike Bloomberg’s successor to remedy this problem.

Even as rivals accused the de Blasio campaign of dividing the city—an accusation likely to increase in volume as he gears up to take on Republican Joe Lhota in the general election—the public advocate stayed on point, decrying the “tale of two cities.” He pointed to stats showing that nearly half of New Yorkers were at or near the poverty line and based his campaign around a plan to tax those who make over $500,000 a year in order to fund universal pre-kindergarten and after-school programs for middle-schoolers.

Given a chance to push back on the notion that he was a radical more interested in redistribution than on running the city—as his opponents claimed—de Blasio refused to budge when pressed at candidate forums and in interviews.

“If the question is, should City Hall be entirely focused on addressing inequality, the answer is yes,” he told The Daily Beast in the waning days of the campaign.

“The Bloomberg administration managed to ignore the inequality crisis. He claimed he wanted a third term to address the economy, yet very few policies were put in place to address the economic suffering that people are going through. So, yeah, I will be very focused on fighting inequality. That to me is the job of a mayor.”

Mayors have moved into City Hall with a singular focus before. Bloomberg said he wanted to be known as the “education mayor,” and said the New York voters should throw him out if the school system did not improve. Rudy Giuliani was messianic about cleaning up crime and improving the city’s quality of life.

But in vowing to tackle inequality, de Blasio may have grander ambitions than either of his two predecessors. Few would argue that inequality isn’t a real and growing problem. But it is also a national problem. Can cities, states, and municipalities address it meaningfully on their own?

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Williamsburg, Brooklyn, New York, January 2008. (Lindsay Wengler/Getty)

Conversations with nearly a dozen economists, urbanists, and public-policy experts from across the political spectrum reveal sharp disagreement on the degree to which cities, states, and municipalities can meaningfully reduce inequality. Conservatives agree that inequality is reaching near-crisis proportions and will require an all-of-above approach if it is to be addressed. And liberals, some of whom supported de Blasio for mayor, conceded that the city’s toolbox to fix the problem is necessarily small.

“It is certainly limited what they can do,” said Dean Baker, the co-founder of the Center for Economic and Policy Research and the author of The End of Loser Liberalism: Making Markets Progressive. “You are stuck with a macro-economy you can’t do very much about. You don’t control the Federal Reserve. You can’t run large deficits, so you can’t really stimulate the economy. You don’t control trade policy. You can’t boost exports from the city. It is very hard to do things at the city level.”

Looking at New York City as a discrete economic unit can be misleading. The New York/New Jersey/Long Island metropolitan region is the fourth-least-equal U.S. metro region, according to one study. If the city annexed portions of Yonkers, to the north, or middle-class towns just over the Queens border on Long Island, it would alter the inequality ratio in New York.

As it is, current conditions mean that the city is bound to have large numbers of residents in both the uppermost and bottommost income brackets. The presence of the world’s financial center in lower Manhattan means that a large number of masters of the universe must at least live nearby, and as gains in the financial industry have outpaced other sectors of the economy, denizens of Wall Street have seen their share of the city’s income increase. On the other side of economic ladder, New York is home to miles and miles of subsidized housing units of various forms of affordability, from Co-Op City in the Bronx to the Seward Park Houses on the lower, easternmost tips of Manhattan, which permit residents who would seek cheaper housing in the ’burbs to stay in the city.

Baker noted that one thing a new mayor could do would be to increase the availability of affordable housing—de Blasio touted a proposal to build or maintain 200,000 units—but conceded that building a lot of new units would “obviously be very hard in New York” given a lack of available space. And, he added, a mayor would be foolish to attempt to “take a hatchet to the financial industry.”

If a mayor really wanted to reduce inequality, he would have to take measures that are not currently on the table, like vastly boosting the wages of the city’s workforce, creating a spillover effect in other industries, creating a citywide living wage and reducing or eliminating the debt load of New York residents, according to Jack Rasmus, a professor of economics at St. Mary’s College of California.

In New York, a bill guaranteeing a living wage was passed last year, but covers only those workers employed at buildings that received city subsidies and were built since the law was passed—about 400–500 people. De Blasio criticized one of his rivals, Council Speaker Christine Quinn, for watering down the bill and has pledged to push Albany for a higher citywide minimum wage, but it is unlikely that any bill that would meaningfully lift the floor on wages could pass the state Senate. Cities like San Francisco and Los Angeles have instituted their own wage laws, but the laws are too new for policymakers to determine if they have lessened inequality—although they are largely in agreement that such laws have not contributed to businesses’ fleeing those cities, as some business leaders feared.

The same goes for boosting the pay of the municipal workforce. All city unions have been working without a contract, in some cases for several years, and while de Blasio has promised a “fair” contract, he has also argued against retroactive pay hikes, and has pointed out that he can be tougher in negotiations with public-sector unions since he failed to garner their endorsement in the primary.

Dealing with the poor’s debt load, although a major downward drag on working-class assets, is a tougher lift, Rasmus acknowledges. In Richmond, California, city officials seized by eminent domain homes that were under water, but that would be difficult in New York, where real estate is a major economic driver and demand still outpaces supply. Any policy that tackled student debt would likely apply only to students who attended City University of New York, and although there have been various proposals to reduce tuition there, no mayoral candidates in this cycle seriously dealt with the issue of student debt.

Rasmus said he approved of de Blasio’s plan to tax those making over $500,000 a year to fund universal pre-K but said it likely did not go far enough to reduce income inequality.

“That is a positive thing, but it is not really going to change the income distribution in New York,” he said. Instead, he suggested a small financial transactions tax, perhaps $1 on every $100 of stocks traded.

“What are [financial firms] going to do?” he said when asked if this would mean a mass exodus out of the city. “Are they going to sell their buildings in Manhattan? I don’t think so.”

De Blasio insisted throughout his campaign that if his tax on those who make over $500,000 were instituted, that it would not lead to a mass exodus of the rich to Connecticut, Long Island, and similar lower-taxed environs. On this, economic opinion is mixed. Janis Barry, a professor of economics at Fordham University, said that economics have identified what are known as “power couples” who “tend to congregate not where they are most needed but where they get paid the highest. Part of the reason why they are staying in New York is not just the money but the amenities. They enjoy living in a cosmopolitan city, in a global city. Their personality is suited to New York, and they don’t want to leave.”

Others are less certain, however. They point out that rich New Yorkers pay more in taxes already than their counterparts around the country, and that the wealthy have fled the city before.

“New York has always been the most aggressive in income distribution, but it has not always been productive,” said Julia Vitullo-Martin, the director at the Center for Urban Innovation and a fellow at the conservative Manhattan Institute. She pointed out that throughout history, the delivery of city services has not necessarily waxed or waned depending on how flush city coffers were, but instead on how managerially efficient city leaders have been.

Vitullo-Martin pointed to a tweet from de Blasio’s campaign: "NYC: 389K millionaires, 2,929 multimillionaires, 70 billionaires—and 53,000 public school students without permanent homes.#TaleofTwoCities"

“I am sorry, but while the sins of rich people are many, depriving New York schoolchildren of homes is not among them,” she said. “The rhetoric is really worrying. I have lived through class warfare and I don’t want to live through it again, and I certainly don’t want to live through it in New York.”

Inequality in New York certainly grew under Bloomberg, but administration officials point out that it largely mirrored national trends and that New York created more jobs than the national average. When asked what the mayor has done to address the issue, administration defenders tend to talk about a development strategy that saw the proliferation of sports stadiums, supermarkets in low-income areas, and the proliferation of new housing and parks.

According to Tom Angotti, a professor of urban affairs and planning at Hunter College, this kind of strategy is insufficient. “New York City isn’t an island to itself, but what the city did encouraged greater inequality,” said. “Upscale development brought in more and more wealthy people who tipped the scale in the opposite direction.”

Instead, he suggested, the city should redirect subsidies that went to developers who did not need them in order to pay for more moderate income housing, and a new infrastructure policy that puts parks and libraries in low-income neighborhoods.

Generally though, despite de Blasio’s protestations, the Bloomberg administration received good marks for their anti-poverty strategy. Bruce Katz, director of the Metropolitan Policy Program and co-author of The Metropolitan Revolution, said that cities could do four things to reduce inequality: help the poor receive federal aid; create the workforce of tomorrow so that companies will move there; rezone neighborhoods to build more housing; and welcome more immigrants. He gave Bloomberg high marks on all accounts.

According to Katz, New Yorkers receiving food stamps more than doubled, and those receiving federal health insurance nearly did, a tribute, he said, to the administration’s aggressiveness in connecting the poor with the federal government. He praised the mayor’s plan to bring a new Cornell tech campus to New York, and said that city high schools and colleges should reorient in order to train students in jobs for tech firms. As for housing, he said, “New York has the toughest challenge of any city in the country because it is a global city and distorted by global capital. Every mayor has to find the right path to expand supply, and he has done that, and done it at a time when the federal government has not been helpful.”

And now that the federal government appears to be able to do exceptionally little to help urban areas, he said it will be a challenge for a new mayor to continue with this work.

“Campaigns are never the time for these conversations. I give Bill de Blasio enormous credit for the issues of poverty and inequality central to his campaign. And now is the time for the conversation about what really to do about it.”