The Five Borough Report


Five Borough Report   June 2003


Beyond Fiscal Crisis


George Locker


Following the bursting bubble of the new economy, the stagnant and now deflating real economy has ravaged city and state finances nationwide. Plummeting revenues combined with expanded debt obligations have left governments with enormous and catastrophic budget shortfalls.

In place of a large surplus and the promise of unlimited growth, we now have austerity, cutbacks, layoffs, price increases, etc., all of which are imposed in the name of fiscal necessity. But this is yesterday’s news.

Today, it is clear that spending cuts that seem impossible either to prevent or to accept represent only the beginning of a deep and lingering budget nightmare. More than 30 states, including New York, California, Pennsylvania, Arizona, Washington, Wyoming and Alaska are expected to experience long-term budget shortfalls for years into the future.

Progressives and the labor movement are unprepared to oppose this bleak scenario. What is really a crisis of economic planning, allocation and development has been mislabeled and misperceived to be a fiscal crisis. America does not lack the financial capacity to address its domestic priorities, but our affairs, debates and organizing efforts are conducted as if we do.

Considerable resources will be needed to rebuild our infrastructure and to restart our productive economy. These could be made available through demilitarization (see accompanying article, Building Weapons of Mass Construction) and by taxation of speculation.

Finding the Resources

In order to raise much-needed state and city revenues from non-Federal sources, taxation of speculative activity must be embraced to be as legitimate as raising the cost to shop, smoke, cross the bridge, or take the subway. Examples abound.

Implementing a cooperative tri-state tax on all equity transactions, currency swaps, derivative deals, securitizations, and other financial products initiated, undertaken or routed through the metropolitan area, would be an obvious, practical and substantial source of funding for social programs in New York, New Jersey and Connecticut. Collection and sharing of these taxes could be governed via interstate pacts and any state could choose to participate.

For all of the wealth generated by New York City’s biggest industry, real estate, it does not pay nearly its fair share for the upkeep of the City. There is no reason why a large real estate transaction that represents a change of title only (which is most often the case), could not be taxed at a significantly higher rate than a purchase or re-financing that results in the actual construction or rehabilitation of a building.

These and many other potential taxes on speculative activities are both viable and enforceable. For too long, ingrained ideology, misplaced support and an unspoken compact have allowed serious consideration of speculation taxes to be placed strictly off limits. Now, we need to discuss, debate, and analyze the issue with integrity, insight, passion and persistence.

With forced austerity and a permanent war footing, the room available for a meaningful and effective progressive political response has narrowed. Without new, equitable and significant sources of non-Federal revenue, further contraction and impoverishment of local government is inevitable.

Unlimited military procurement and unchecked speculation re-enforce the need and possibility of the other. They destabilize and weaken. Both are incompatible with economic development, shared prosperity, and social justice.

To achieve a New New Deal for New York and America, our task is to bring these destructive activities under control.

June 2003

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