Friday, December 10, 2010

Bloomberg's NYC Economic Euphoria: Greg David Critiques

We, as always, have been far from reticent in deconstructing Mike Bloomberg's magical economic mystery tour-something that, in our view, is much like the crowing rooster who takes credit for the dawn. Now Greg David in Crain's chimes in with a similar-although more reserved-critique: "In weighing in on how to revive the national economy, Mayor Michael Bloomberg yesterday said New York City's strong performance gave him the credibility to offer solutions for rest of the country. It may also form the basis of a campaign against President Barack Obama and whoever the Republicans nominate in the 2012 presidential race. It's time for a reality check."

Ah, reality-along with stubborn facts that are less malleable than the mayor's rich rhetoric:

"Every semester, I begin my class on the New York City economy with a quiz that includes this question: How much influence does city government have on the local economy? The choices are:

a) A lot
b) Some
c) None at all

The correct answer is some. After all, what happens in New York is primarily determined by Wall Street, and to a lesser extent by the performance of the tourism industry and the national economy, in just about that order."

And, as we have pointed out, the feds role in  the bailout of the banks infused NYC with a huge cash influx: "The hated TARP bill saved some firms, like Citigroup, and allowed others to avoid a bloodbath of layoffs. Total job losses tallied at about 35,000, or about half the worst predictions. The Fed's zero-interest-rates policy meant record profits--$61 billion, or three times the previous record. The mayor's role: none at all."

Then there's tourism, where Bloomberg's role was tangential at best: "The mayor's revamp of NYC & Co., his commitment of city money for marketing and NYC & Co.'s creative strategies helped, of course. The primary reasons tourists continued to flock to the city were that the dollar remained weak, making the city inexpensive for foreign tourists, and hotel owners slashed room rates so the New York was affordable for everyone else. The mayor's role: some."

But then David goes on to discuss a more intangible and subjective area-one he calls business confidence: "Executives at big companies believe they should keep their companies here, and that is a direct result of many Bloomberg policies. Some small-business owners disagree, saying the city's policies harass them with too many regulations and inordinate fines and taxes. The mayor's role: huge."

Notice how he throws us a small business bone-but David is right that the big business tycoons love the mayor, viewing him correctly as a kindred spirit. It is also true that big firms employ hundreds of thousands of New Yorkers and we shouldn't downplay their impact. Quantifying this role-as well as the mayor's-is, however, more problematic. Which makes David's grading system suspect-or, perhaps, incomplete without a more rigorous quantitative analysis by business category.

It would be useful to know how much of the city's job retention and growth is related to both Wall Street and tourism before hurting ourselves with too robust a slap on the mayor's back-and if someone could assay the correlation between TARP and the city's job numbers, it would provide a useful antidote to the mayor's styling. After all, as Dan Morris told the WSJ yesterday: "Dan Morris, a spokesman for a coalition advocating for a living wage bill, said the mayor focused on "courting the national political and business elite" while "squandering an opportunity to offer a real economic vision for struggling New Yorkers."

In doing the analysis, though David does perform a useful service in throwing some cold water on all of the heated talk from the mayor and his usual amen chorus. It can't be forgotten that the city's unemployment rate is still over 9%, and NY is rated second to last in over all business climate for entrepreneurs. But that's the city on the bottom of the hill-a neighborhood that Mike Bloomberg sees only from the back seat of his limo.