Monday, May 09, 2005

Bloomberg's Mismanagement and its Cost to Small Business

Bob McManus has a column in the Post today that talks about the long-term dangers of Bloomberg's economic policy, specifically his failure to control City costs:

Carey couldn't anticipate Mayor Mike, of course. Early on, Bloomberg resumed the practice of borrowing to finance everyday municipal expenses the tactic that precipitated the fiscal crisis in the first place.

The following year, he refinanced the 1976 bail-out bonds, after 30 years, they were about to mature , effectively obligating the whole state to 30 more years of interest payments to make good on the profligacy of Mayors Wagner, Lindsay and Beame.

But Mike got $2.4 billion in fresh money for the municipal spending machine, which was all that mattered to him.

Now he has a new budget out, larded with election-year goodies but utterly devoid of any sense of the city's continuing - indeed, structural - fiscal peril.

The problem with Bloomberg's failure to control costs is that it inevitably results in increased taxes and fines at the expense of small business. As the 20% property tax increase, the 150% cigarette tax increase, the high sales tax, and the increased number of fines demonstrate, Bloomberg is helping to fund his proposals on the back of hard-working entrepreneurs. In the long term this creates two major problems. The first is that because higher business costs are passed on to consumers, these shoppers will increasingly opt to go to out-of-town locations with cheaper taxes and hence cheaper prices. The second issue is that these small business owners, in part due to the city's high taxes and draconian regulatory policies, are declaring bankruptcies at unprecedented rates. Therefore, while padding city coffers in the short term, Bloomberg is destroying his tax base and creating a fiscally unsound future.