Twenty billion dollars will be insufficient for helping New York City to recover. Resources must therefore be targeted toward rebuilding the human and physical infrastructure of the city, which is essential for attracting the private capital needed for business growth.

Public investment must take priority for three reasons.  First, private investment won’t return to the city without the restoration of the world-class public services and the skills, technology, and personal services that existed before September 11. In fact, New York’s recovery depends on creating a better infrastructure than it had. Public investment is the financial “leverage” to attract private capital.

Second, there isn’t enough money to effectively subsidize private business that return to the city when future infrastructure is uncertain. Businesses will leave when subsidies run out.

Third, engaging in complex business subsidy programs, even in the best of circumstances, inevitably leads to instances of at least the appearance of special interest dealing and corruption. After the loss of so much life and so much human suffering, the risks of a public backlash against subsidization of the rich are high.

Public investment should aim to create good jobs and upward mobility for the low- and middle-income workers that form the backbone of the city’s economy.  Therefore, funds should be devoted to public services that promote a secure and skilled work force. This will put people back to work quickly, thereby maintaining purchasing power through the next two years.
To assure the effective concentration of public investment, project sponsors should be limited to public agencies and private nonprofits. For efficiency, all projects should fit into an ongoing strategic plan coordinated among the central public planning agencies. There should be full disclosure of how federal monies are spent.To assure fairness and maintain local purchasing power, all federal funds used for wages should pay the higher of prevailing wages or a living wage of $8.50 per hour. All jobs should provide health insurance.

Preferences for hiring on redevelopment projects should be given to workers displaced (either directly or indirectly) by the events of September 11 and workers in existing apprenticeship programs. To foster labor-management cooperation, employers should enter into agreements to remain neutral in organizing campaigns for the duration of redevelopment, and into agreements that allow unions and redevelopment agencies to decide on a set of work rules in exchange for dispute resolution and a no-strike agreement.

To assure that redevelopment proceeds in a environmentally responsible way, relevant projects must include state-of-the-art pollution controls, emission-reduction programs, recycling, and full disclosure of unfunded environmental liabilities.

Jeff Faux is president of the Economic Policy Institute. Heather Boushey is an economist with EPI.

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