How Joe Lhota Can Earn My Vote

I’ve noted that I don’t vote for Democrats at the local level, because they represent the producers of public services at the expense of increasingly less well off taxpayers and consumers of public services.  And I don’t vote for Republicans at the federal level, on generational equity grounds and because they represent the unearned privileges of the wealthy in exchange for campaign contributions.  In my post on Bill DeBlasio, I challenged him to earn my vote by separating himself from the public employee unions and contractors, to at least present the illusion that someone will be representing everyone else.  In this post on Joe Lhota, I challenge him to separate himself from policies that shift costs to the future and disadvantage younger generations to make things easier for Generation Greed – and politicians today.  Admit that the future will be tougher for younger generations, and they will have to settle for less as a result.  And to break the seeming rule of Omerta with regard to what has gone on in the past by talking about it, saying it was wrong, and promising to try to reverse it or at least not make it worse.

In general Republican politicians have robbed the future from younger generations with debts and tax breaks for seniors, and Democratic politicians have done so with pension deals and senior services what will leave younger generations destitute when they reach old age themselves.  But in bi-partisan New York State, both Democrats and Republicans work together to destroy the future of the city and state, and those who will live in it, both ways.  Including the Giuliani Administration and those who have run the MTA.  Let’s take a walk down memory lane with two examples of the policies Lhota would need to bring up, criticize, vow not to repeat, and admit that things will be worse – not better – to pay for going forward.

Since Lhota is a Republican, lets start with debt, which he seems to be in favor of as long as no one has to pay it back until his generation has passed away.  In an interview with Bond Buyer, Lhota claimed that the MTA only borrows money for capital expenditures with long run-benefits, and that the MTA and the City of New York should be borrowing for 100 year rather than 30 so they don’t have to pay as much today.  He earlier indicated that the MTA can borrow all the money needed to keep the system operating, by replacing equipment and components are they wear out, over the next 20 years. The MTA has estimated this will cost $100 billion, and at normal interest rates paying for this would cost $5 billion per year in interest, in today’s money.

Now take a look at the cash basis budget of New York City Transit in 2013 in this document on page V-211.  The expenditures are $7.8 billion, in today’s money.  The revenues of New York City transit are $5.4 billion.  So if the city and state are as irresponsible over the next 20 years as they have been over the past 20 years, the additional debt would be equal to nearly all the money spent by New York City Transit, leaving almost nothing for transportation.  That’s what it would take for Joe Lhota’s generation to continue to enjoy the free ride they have taken for the past 20 years, which is what Joe Lhota (and Bill DeBlasio and the state legislature) wants.  Already today, as a result of the past 20 years, 17 percent of all MTA revenues go to pay for past debts, and 10 percent go to pay for pensions.  But it will get much worse if things continue.

Were all these real capital expenditures, as Joe Lhota claims, with ongoing benefits that will offset higher taxes and fares for future New Yorkers?  On the West Side, the Flushing Line extension is completely new infrastructure.  It will allow tens of thousands of more people to live and work in New York City, in new buildings, and their additional tax payments can be used to pay off the debts needed to build the extension.  Yes, that is a capital expenditure that can be paid for by debts. 

But nearly all of the “capital” spending by the MTA and the city is merely the ongoing normal replacement required to keep the infrastructure we already have.  Existing residents and businesses will have to pay for it, either now or later, and if ongoing normal replacement stops the system collapses.  Since that is an ongoing cost that is not associated with growth that can pay for it, I say that is not a capital expenditure.  They cannot go on borrowing for 30 years, or 50 years (by refinancing bonds as they have) or 100 years, to pay for each year’s maintenance.  Eventually maintenance will stop, perhaps as soon as 2015.

But the deception by Generation Greed is far greater than that.  Of the $5.4 billion in operating revenues for New York City Transit, $1 billion is accounted for by “Capital and Other Reimbursments.”  That is money borrowed for the capital plan and then paid into the operating budget.  That figure has been consistently above $600 million per year just at New York City Transit, with more for other parts of the MTA.

Basically, in response to the deep financial crisis of the early 1990s the city and state took away general revenue support for the MTA Capital plan and cut operating support as well.  To shift the resulting sacrifices to the future the MTA was told to call costs that used to be “operating costs” “capital costs” instead, including operating transit service in the vicinity of a capital project.  By any means necessary (it was my useless job to challenge some of these charges on behalf of the capital program for a while, so I got to see the ruses that were always allowed). 

The city and state funding was never restored, despite two economic booms, and the MTA kept borrowing.  Over 20 years, perhaps $12 billion (in today’s money) has been borrowed for operating costs using this financial fraud, one endorsed by Joe Lhota (and all the Mayors and Governors and state legislators since the early 1990s, along with the MTA Board).  How can the operating costs needed to run trains and buses be considered capital costs?  Where are the ongoing benefits?

Now let’s consider pensions.  In 2000 Rudy Giuliani wanted some extra money to throw some goodies around while running for Senate, so he cut a deal with the unions.  City workers would no longer have to contribute to their own pensions after they had worked 10 years – forever.  And in exchange, the city would slash its own contributions to the pension funds for two years. Joe Lhota was Giuliani’s budget director.   This was described as costing nothing, like the rest of the pension increases pushed through by others, but the Times didn’t believe it.  Two years later that lie was exposed to be a mere product of the stock market bubble, as was the lie that the huge increase in executive pay was justified by “shareholder value.”  Of course neither the executives nor those public employees cashing in and moving to Florida have given anything back.

Instead, younger generations have been sacrificed with higher taxes and ongoing spending constraints.  And public employees hired after 2012 will have to pay far more of their paychecks for pensions worth far less.   Or perhaps not.  Under a previous pension cut for future police officers, new hires were required to work 25 years to get a pension instead of 20, while contributing 3 percent of their pay instead of nothing.  But that has already been cut back to 22 years worked before doing nothing for anyone else for the rest of your live.  And as a result of court decision, all those contributions have to be paid back too. “Under an agreement reached in 2000 that allowed the Giuliani administration to raid pension funds, the city agreed to cover much of the pension contributions of cops and firefighters in order to increase their take-home pay, what came to be known as ITHP,” noted the New York Post

So apparently because the Giuliani administration raided the pension fund for two years, New Yorkers have to be much worse off relative to public employees FOREVER.  It is just a matter of time before all the other city employee unions sue, and all that money has to be paid back too.  By not talking about it, and paying more into the pension funds now, the city is shifting those costs to future tax increases and service cuts too.  This will continue until the city leaves people to die in the street, as in the 1970s.  Because that’s the way people with power want it.

How well off will younger generations of New Yorkers, who have to sacrifice to pay for what older generations took, be?  Perhaps they will be richer, and can afford to have the government make them worse off, because they have “time to adjust?”  Well the American Community Survey came out yesterday, and adjusted for inflation New York’s median household income fell by 5.5% from 2008 to 2012, and its mean household income fell by 7.7%. 

And that isn’t just what happened in New York City, and it isn’t just what happened in the Great Recession.  As the Census Bureau reported a couple of days before, U.S. median household income has been falling since the year 2000.  Before that cash income was rising, but most workers retirement benefits were being cut, even as public employee retirement benefits were being retroactively enriched.  And before that most workers’ wages were being cut, in a series of two-tier deals that exempted those in older generations from the sacrifices, but this was offset by more household members working.  So while median household income has been falling for more than a decade, and even the rich have been somewhat less rich since 2008, the trend of most people becoming relatively worse off actually dates back more than 30 years.    Covered up by rising public and private debts, costs deferred, future revenues advanced.  By any means necessary.

Basically, a rising share of Americans have become worse off than those in previous generations, even as the previous generations shifted costs to poorer younger generations to live the way they felt entitled to live.  The real pain will be felt when younger generations reach the vulnerability of old age themselves.  But much sooner they will face higher taxes, a diminished standard of living, and gutted public services as soon as the ongoing lies that everything in the past “cost nothing” become untenable.  Which is why the political class wants hack Comptrollers in the city and state, and the stock market wants the Fed to keep printing money. 

Locally, even the New York Times has written that the city faces a budget crisis – despite record stock prices and employment and soaring real estate prices, and that city residents face a future of who will be worse off in what way when.  Although it doesn’t wish to link that future with who took what back when, particularly with their boy Mike Bloomberg having been in charge for the past 12 years – and most of their readers among those entitled people in Generation Greed who like to hear the consequences of their actions justified. “It would be good for voters at least to hear answers to tough questions. How are you going to solve the budget puzzle, starting with filling the $2 billion hole that Mr. Bloomberg left behind, and the $8 billion the unions are demanding? What services will you cut? What taxes will you raise?”  Two billion dollars my ass.  Clearly the upcoming MTA financial disaster and ongoing pension underfunding are not being included.

Joe Lhota is at 22 percent in the pols.  He has nothing to lose by telling the truth. That Americans in general and New Yorkers in particularly face a future of diminished expectations, in their personal standard of living and their public services and benefits.  Younger generations will have to work together to cope.  And it is morally wrong for his generation and the beneficiaries – whether the one percent or those older public employees cashing in and moving out – to try to exempt themselves from sacrifices, let alone demanding more.

Unfortunately, Joe Lhota does not seem up to the job.  Take his position on bicycles.  He objects to city efforts to allow people to get around by riding them without being killed, as a matter of identity politics.  His generation is a driving generation, and therefore driving is what matters, because “we are the people who matter.”  That’s what people want to hear.  Cut those welfare cheats, waste fraud and abuse, and funding for painting bike lanes, and no one (who matters) will lose out on anything (in the short run).

Republicans, however, used to stand for thrift and self-reliance.  And there is no greater symbol of thrift and self-reliance that travel by bicycle, getting around using your own power with very little assistance from anyone.  Accommodating that type of travel costs the government almost nothing, and it is what people will be left with after Lhota’s generation re-wrecks the transit system.  It keeps you healthy, and keeping healthy is what younger people will need to do when health care is taken away from them even as they are taxed to pay for unlimited health care for the richer people in Lhota’s generation. 

Instead of admitting that younger generations will have less, Lhota seems hell bent on leaving them with nothing.  Not only is he planning to admit once elected that people under 55 can’t expect the government to do things for them, at the highest state and local tax burden in the country.  He isn’t even willing to give them a break when they try to do things for themselves.

He needs to change course, and fast, to have a chance to get my vote.