The New York Post reports that New York City is “careening closer to all-out financial bankruptcy.”
Despite these ominous trends, New York City Mayor Bill de Blasio plans on spending billions more. In the middle of a slowing economy and increased migration out of state thanks to the state’s burdensome tax system, a recession could potentially hurl the city into a “fiscal disaster.”
American Institute for Economic Research economist Peter C. Earle claimed that “New York City could go bankrupt, absolutely.”
The economist added, “In that case, the city would get temporary protection from its creditors, but it would be very difficult for the city to take on new debt.”
New York City is clearly afflicted by the disease of fiscal irresponsibility. Long term debt is estimated to be about $81,100 per household. Mayor Bill de Blasio plans on spending an additional $3 billion pushing the city’s budget to $89.2 billion.
Although Mayor de Blasio claims to have $750 million in savings for the preliminary fiscal 2020 budget, that amount may not be enough of a cushion during a potential recession. New York Governor Andrew Cuomo’s preliminary budget has $600 million in cuts for the city in 2020.
New York city’s fiscal house continue to lie on a shaky foundation, with spending increasing by 32 percent since Mayor de Blasio came into office. On the taxation front, NYC’s top 1% of earners shoulder 50% of the tax burden. The Big Apple is in a tough fiscal situation no matter how we slice it.
Economist Milton Ezrati commented on NYC’s troubling fiscal situation:
“The city is running a deficit and could be in a real difficult spot if we had a recession, or a further flight of individuals because of tax reform.”
We don’t know when a recession could potentially hit America, but in the case that it occurs, the chances of NYC going into bankruptcy are quite high. Such a situation might propel NYC to turn to the federal government for a bailout like New York City Mayor Abraham Beame did in the 1970s.
NYC and the state of New York, for that matter, can avoid this kind of fiscal upheaval. However, it will take bold political leadership to carry out meaningful reforms.
The same inefficient tax code and regulatory system and profligate spending that we see at the federal level have largely been replicated in New York. For New York to remain competitive and prevent its premier city from going bankrupt, it must consider a multi-pronged approach of slashing taxes, spending, and regulatory red-tape.
For once, the Empire State should embrace reducing the size of government. It could be the difference between a nasty bankruptcy and economic stability.