Going local in the fight against inequality

Kathleen Lantto |

95th Annual New York City Veterans Day Parade

Photo from Flickr / Matthew Stroup

From The American Prospect

By James Parrott

It has been five years since the Occupy movement focused attention on the gap in income between the top 1 percent and other Americans. During Barack Obama’s first term, Democrats made federal taxes more progressive and expanded health insurance for low- and middle-income people. But since those changes were adopted, conservative forces in Washington have stifled further progress toward greater income equality.

Many liberals have therefore focused on local measures, despite some clear limitations to going local. Legally, cities and counties are creatures of their respective states and often face strict statutory limits on what they can do, including laws preempting local initiatives (see Abby Rapoport, “Blue Cities, Red States,” The American Prospect, Summer 2016).

Cities and counties also face competition from other localities that offer tax abatements and other incentives for business, which make it difficult to raise enough revenue to carry out progressive policies in fighting inequality.

The constraints on local governments, however, are often exaggerated. Localities can do a great deal to improve incomes and living standards in low-income communities. And contrary to the conservative insistence that progressive taxation will drive away the wealthiest taxpayers, recent research on “millionaire taxes” by Charles Varner and Cristobal Young of Stanford shows that the rich are generally so tied in to local economic and social networks that they have not moved out of the states that have imposed higher taxes on them.

Today, some cities enjoying strong economies have more leeway for progressive policies than they did in leaner times. With an economic output greater than that of 46 states, New York City has been in a singular position. It has also had a political leadership committed to reducing inequality since the election of Bill de Blasio as mayor in 2013. But considering all the obstacles to local progressive policies and the difficulties of doing anything about inequality, is de Blasio having a meaningful impact?

 

NEW YORK CITY IS the most economically polarized of the 25 largest U.S. cities. As the nation’s largest financial center, it is home to bankers and hedge fund and private-equity managers, who enjoy sky-high levels of compensation. From 2009 to 2013, as the economy recovered from the Great Recession, the wealthiest 1 percent took nearly half of all New York City income growth, according to an analysis of income tax data by the Fiscal Policy Institute. The top 1 percent’s share of total income rose to 40 percent in 2014, nearly twice the share of the 1 percent nationally. While New York City workers have seen some wage gains in the past two years, median family income in 2014 was still nearly 6 percent below pre-recession levels.

Poverty was also higher in 2014 than in 2008. Especially telling is the estimate by University of Washington researchers that 42 percent of all New York City households lack sufficient income to meet minimum basic family needs such as shelter, food, child care, and health care. Among black and Asian households, nearly half don’t make enough to meet that standard, and the incomes of three out of every five Latino households fall short of sufficiency.

If the dividends of economic growth had been more equally shared, the difference would have been enormous. Median family income in 2014 would have been $97,000, two-thirds higher than it actually was, if median incomes had grown since 1990 as fast as the city’s economy (as measured by the increase in per capita gross product).

Running for mayor in 2013, de Blasio highlighted New York’s “tale of two cities,” the city of the rich and the city of the struggling. Since taking office, he has acted in concert with a progressive city council led by Speaker Melissa Mark-Viverito to lift low wages, expand benefits for low-wage workers, institute universal pre-kindergarten, increase affordable housing, and bolster funding for programs serving the poor. In several areas, such as taxes, state law circumscribes local autonomy, and Governor Andrew Cuomo and the Republican-controlled state senate have blocked de Blasio’s initiatives. Most notably, they prevented the city from instituting an income tax surcharge on the 1 percent to pay for universal pre-K.

Even with those constraints, New York City hasn’t had such a progressive government in a long time. In his first year in office, de Blasio mandated five paid sick days for all workers at businesses with five or more employees. He increased the living-wage level required for workers at companies receiving city subsidies and expanded coverage to the employees of business tenants in subsidized developments. He also pushed aggressively for an increase in the state minimum wage, or the authority from the state to set a higher wage floor in New York City.

At first, Governor Cuomo chided de Blasio for proposing a higher wage level for the city. But as the Fight for 15 campaign built momentum, Cuomo changed course, using his executive authority to establish a wage board that recommended a $15 floor for all fast-food workers in the state, with a faster phase-in for New York City. By early 2016, the governor proposed and aggressively pushed for the enactment of a minimum-wage increase for all workers that would reach $15 by 2019 in New York City and later in the rest of the state. Since de Blasio has been mayor, Cuomo has alternated between thwarting de Blasio’s proposals and seeking to outdo them. In one area, the mayor still occupies the high ground. Unlike Cuomo, de Blasio has included funding in his latest budget for nonprofit agencies under city contract to enable them to keep up with rising minimum wages.

While public-sector workers have met hostility from elected officials elsewhere in the country, de Blasio has resolved almost all of the city’s contracts with its own workforce. Michael Bloomberg had left office after 12 years as mayor without having settled contracts affecting all 340,000 city employees. In contrast, de Blasio reaffirmed the principle of collective bargaining for public employees and was able to fully cover the cost of labor contracts containing modest wage increases and significant health insurance savings

To date, de Blasio’s crowning achievement as mayor has been the expansion of universal pre-K to serve all 4-year-olds, mainly from low-income families. More than 68,000 children have been enrolled, more students than in the entire public school systems in Boston or San Francisco.

In addition to substantially increasing funding of a range of human services such as homelessness prevention and immigrant, youth, and senior programs, de Blasio and his social services commissioner, Steve Banks, reversed two decades of punitive welfare policies. Banks had been a Legal Aid attorney who frequently sued the city to compel better treatment for vulnerable populations.

The city’s economy and its private-sector jobs have continued to grow faster than the nation’s under de Blasio, business confidence and investment evidently undiminished by a progressive in City Hall. Construction activity and private employment are at record levels and thriving tech, professional services, cultural, and tourism industries have helped make the current economic expansion the first in New York since the 1960s that has not been driven mainly by Wall Street. Strong revenue growth has certainly aided de Blasio in enacting much of his agenda, but he has also built up budget reserves to cushion any eventual slowdown.

De Blasio’s most ambitious policy is his plan to preserve and create 200,000 units of affordable housing. Rents have risen much faster than wages in New York since 2000. Two-thirds of city households are renters and one-third of all renters pay more than half of their income in rent, including nearly half of all low-income renters.

In its first two years, the de Blasio administration financed the preservation and construction of more than 40,000 affordable apartments and put nearly $7.5 billion in the city’s ten-year capital plan for affordable housing. Many of the new units already built or under construction have benefited from a long-standing lucrative tax break known as “421-a,” which also subsidized a lot of high-priced condo units and padded the profits of developers. The tax break expired earlier this year and it’s not clear whether or in what form it might continue.

De Blasio is relying heavily on a new regime of mandatory inclusionary housing passed by the city council. Developers building housing in areas rezoned for denser development will be required to set aside a portion of units for low- or moderate-income families. (One option would be to require 30 percent of units be affordable for families with incomes at 80 percent of area median income, or about $62,000 for a three-person family. Set-aside requirements are lower for lower-income families.) The plan relies on rezoning low-income neighborhoods such as East New York and East Harlem and has triggered concerns about displacement and gentrification.

Rezoning areas for greater density enables developers to make a lot more money; mandatory inclusion of affordable housing enables the city to require that some of that additional value go to low-income families. Housing advocates argue that the city can increase affordability requirements even further. Some would like to see the city buy up land in advance of rezoning so that it can directly capture more of the city-induced wealth creation, or use a community land trust to permanently insulate housing from market pressures. De Blasio’s efforts to limit displacement of existing tenants and encourage greater community participation in planning may help ensure that the program genuinely advances its equity goals.

De Blasio has also provided funds for long overdue repairs at the city’s public housing projects, and his appointments to the Rent Guidelines Board permitted rent increases of just 1 percent in three years for more than 1.1 million rent-stabilized housing units—the smallest three-year increase in the city’s history of rent stabilization.

DE BLASIO'S POLICIES stand out when compared with those of his immediate predecessors and Governor Cuomo. While they helped make New York one of the safest large cities in the country and contributed to the city’s economic growth, Rudy Giuliani and Michael Bloomberg were not concerned about social and economic inequalities. Giuliani initiated and Bloomberg continued punitive welfare policies that denied or revoked benefits for many poor families and prevented recipients from pursuing a college education. De Blasio has ended those practices, overhauled employment policies to foster skill development, and used temporary assistance to keep people in their homes and prevent evictions and greater homelessness.

While unrelenting in his drive to shrink welfare rolls, Giuliani’s generosity in handing out sizable tax breaks to Wall Street firms and other large corporations cost the city an average of $125 million each year he was in office. He also agreed to give the New York Stock Exchange nearly $1 billion to build a new trading floor, though the deal fell through after the September 11 attacks. (The stock exchange never tried to revive the deal, since computerization soon dramatically shrank the need for trading space.) Bloomberg raised regressive property and sales tax rates in the city while instituting multibillion-dollar property tax breaks for the Hudson Yards district, even though Senator Charles Schumer, among others, argued that such tax breaks were unnecessary because the city was already subsidizing the district through a subway line extension. In contrast, de Blasio firmly rebuffed JPMorgan Chase when the mega-bank sought $1 billion in subsidies to build a new headquarters in Hudson Yards. That would have been on top of $600 million in reduced taxes from the discount scheme Bloomberg had put in place.

The contrast between de Blasio and his predecessors is especially evident on issues affecting low-wage workers. Bloomberg steadfastly opposed the expansion of living-wage requirements, and he severely undermined union labor standards for thousands of low-paid child-care workers and school-bus drivers. Through his housing development and rezoning agenda, Bloomberg enriched developers without putting much priority on affordable housing.

While Cuomo’s support for the $15 minimum wage and paid family leave is to his credit, his budget and tax policies appear to have been inspired by anti-tax conservatives. The governor’s cap on local property tax increases (the lesser of 2 percent or inflation) and his cap of 2 percent on state spending growth have limited the potential for progressive policies. Revenues have been growing—at about the same 4 percent to 5 percent annual rate for both the city and state—but de Blasio and Cuomo have responded differently. De Blasio has increased municipal spending by 5.1 percent annually, while Cuomo has adhered to his self-imposed 2 percent spending cap and used the projected revenue growth exceeding 2 percent to cut taxes.  The beneficiaries of those reduced taxes include Wall Street giants and buyers of yachts and private jets. Cuomo also plans to let New York’s “millionaire tax” expire at the end of 2017 to provide a $3.7 billion windfall to the richest 1 percent.

New York City’s experience under de Blasio affirms that progressive mayors can reduce inequality, especially by helping low-income people. The city could do more with a supportive state government, not to mention changes in national policy affecting unions, financial market regulation, and other issues. But New York City under de Blasio ought to be a model for progressive leaders in other cities.

Read the full article from The American Prospect.