Failed states: Escaping New York 

Just more than 1 million taxpayers and their dependents moved from New York to other states between 2000 and 2007. Many went to Florida (30 percent), but others went to New Jersey, Pennsylvania and North Carolina.
Ask any New Yorker: The decision to surrender the New York address for a New Jersey one is an obvious sign of duress.

Nearly 10 years ago, New York was dealt a harsh blow by terrorists who saw the Financial District, correctly, as the capital of wealth upon which the West stood. The recession that followed the Sept. 11 attacks hit New York especially hard, causing a loss in revenue as stocks traded less, local businesses atrophied and residents, fearful for their safety, headed for the border.

According to a report on mass migration of New Yorkers to other states from the Empire Center for New York State Policy, the lost income from residents’ flight to Connecticut reached $245 million in 2001 — hardly a surprise given the shock of the attacks. But as recently as 2007, more than 10 times as much money is now lost to the same hoity-toity Constitution State, standing at $2.7 billion.
In other words, New York residents have been fleeing terrorism far less frantically than they have New York taxes.

If there’s a single lesson from the past decade, it’s that governments — local, state and federal — are no longer expected to guard against unforeseeable catastrophe, but instead to respond to fads and serve the ambition of politicians. New York has been reduced to a financial straw house, waiting for a gust of wind.

If the big bad wolf wasn’t the unpredictable terrorists, it was the entirely predictable financial crisis. While families tighten their belts, the state government continues its spending bacchanal. State spending has risen by nearly 70 percent during the past decade.

In terms of economic outlook, the Empire State has no clothes. It’s ranked 50th behind every other state by the American Legislative Exchange Council because of, among other things, its high top marginal personal income tax rate (10.5 percent) and its absurdly high top marginal corporate income tax rate (17.53 percent).

At these rates, businesses serve the government, not the other way around. (The Tax Foundation puts the state second to last in the nation for business tax climate.)
Albany apparatchiks pursue such a rape-and-pillage tax strategy because how else could they fuel their spending monster? The ratio of public employees to taxpayers is one for every 16 residents. In 2009, the state boasted the highest total percentage of public sector union members at 25.2 percent. Not even union-friendly Michigan, at 18 percent, is so overrun.

New York’s Medicaid program is the most costly in the nation. At $44 billion annually, it is bigger than the total budgets of 42 states. New York spent 25 percent more than California — itself no shining beacon of budgetary sanity — and only covered half as many people.
According to Manhattan Institute fellows E.J. McMahon and Josh Barro in their recent report, “Blueprint for a Better Budget,” if left unchecked, state-funded Medicaid spending will grow by 37 percent during the next three years, according to projections in the 2009-10 state budget. If you think things are bad now, wait till next year.
How could things get out of control? Ask Service Employees International Union Local 1199, which attacked Republican Gov. George Pataki in 1999 for proposing reforms, and repeated the process when Democratic Gov. Elliot Spitzer did the same in 2006.
Not only did both politicians back off, but in 2002, the union swayed Pataki and the state Legislature to raise cigarette taxes to finance health programs to benefit the union.
McMahon and Barro’s report offers solutions worth pursuing, including imposing greater transparency measures, moving to a two-year fiscal cycle to promote long-term planning and limiting, for heaven’s sake, the circumstances under which debt can be issued without voter approval. Oh, and taxes should be lowered, too.
Such a brick house would protect against even the strongest blow from union wolves, intent on driving the state to bankruptcy. But doing so would require a voter revolt, one that would be difficult to achieve if all the voters have left.

A successful turnaround would provide a shining model for all other troubled states. After all, if it can make it there, it can make it anywhere.
J.P. Freire is associate editorial page editor of The Washington Examiner.

About The Author

J.P. Freire

J.P. Freire is the associate editor of commentary. Previously he was the managing editor of the American Spectator. Freire was named journalist of the year for 2009 by the Conservative Political Action Conference (CPAC). You can follow him on Twitter here. Besides the Spectator, Freire's work has appeared in... more
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