Friday, October 14, 2005

Mayor Discovers Small Business

In an announcement on Wednesday Mayor Bloomberg announced a broad plan to make NYC a more business "friendly" place for small business as well as "a more attractive hub for big business." While this does seem like welcome news you'll have to pardon us if we're remaining just a mite bit skeptical of the mayor's good intentions.

The reason for our skepticism derives from an examination of the mayor's record, specifically in regard to small business, over the course of his four year term. We have made this point on innumerable occasions: the mayor has largely ignored those factors that are essential to the growth of a healthy small business sector. In particular, entrepreneurism needs a tax and regulatory environment that allows it to grow through the inevitable growing pains associated with start-up enterprises. This is especially true of neighborhood store owners.

The mayor has been particularly tin-eared in these two crucial areas. His commercial real estate tax increase raised the rent of each and every one of the 186,000 mom and pop stores in the city, in some cases by as much as 25%. On top of this, the current administration unleashed a regulatory assault on the neighborhood stores and proceeded to brag about all the revenue that was brought in.

The lack of sensitivity to small stores has been compounded by the administration's obsession with mega-development. In particular, the case of the Bronx Terminal Market is symbolic of the Bloomberg team's approach in this area. In this case the development, a suburban-style mall, was not only sole-sourced but the recipient of the development rights is a close friend and business associate of the Deputy Mayor. Furthermore, the city's EDC, using questionable legal tactics, abrogated the leases of the Market's mostly minority wholesalers and proceeded to sanction their eviction with no plan for relocation.

In essence, the eviction was very similar to an eminent domain-style ejection, with the property rights of merchants – who are long-term lessees – being arrogantly ignored for that proverbial higher and better use. As bad as the BTM issue is, however, it may only be a dress rehearsal for the city's plan for Willets Point. In the mayor's Wednesday speech he reiterated his proposal to redevelop the Point where over 150 will have to be ejected for the plan to proceed. As Bloomberg has famously remarked, "The land is too valuable for the businesses that are on it."

Sun's Editorial On Point

Despite the mayor's claims that 50,000 more people are working in the city today than were a year ago, the fact remains that New York is lagging behind the rest of the country in job creation, as this lag is particularly pronounced in the small business sector. The NY Sun, citing the work of Ray Keating's Small Business and Entrepreneurial Council, makes the point that NY trails most of the rest of the country on those indices that measure an area's ability to promote entrepreneurism. As the paper indicates, "New York's infamous tax burden is once again a major culprit."

So while the mayor's plan to create an internet center and a 311 system in order to enable small businesses to get licenses and permits more easily is commendable, we still believe that he simply doesn't understand the core underlying issues in regard to nurturing this sector. His government-based approach for targeting neighborhoods plagued with "chronic unemployment" is a case in point.

From a small business perspective it is precisely government's expansion into this area that poses the greatest threat. Inevitably in these low-income areas the concern about unemployment gets transposed into mega-development schemes that end up hurting the existing small business base. Given the last four years we could benefit from a little benign neglect: less regulation, less taxes and less government in general.

Reinventing Government

Which brings us to another of the mayor's weaknesses: his complete lack of a creative vision when it comes to making government more efficient and, by extension, less costly. Inevitably the bloated bureaucracies that breed inefficiency and stifle entrepreneurial initiative within government lead to a tax and regulatory burden that reduces entrepreneurial competitiveness.

What has the mayor done in four years to address the efficiency of government? Indeed, has he ever said anything to even indicate that he sees this as a problem in need of addressing? The sad reality is that when it comes to innovation in government our extremely entrepreneurial mayor approaches the problem in the tradition of the very same old-style liberalism that has caused the city so much grief over the past thirty years.

Which gets us to the issue of the mayor's lack of policy expertise and political vision. Clearly he is not someone who comes to politics imbued with any particular reformist world view. Even after four years it still isn't clear what drove him, aside from boredom, to seek political office. It is, however, precisely this lack of vision that, when combined with his pragmatic technocratic governing style, so endears him to the city's traditional media and business elites.

These are clearly the same folks who are comfortable within the confines of NYC's traditional political culture and who probably had some misgivings about Rudy Giuliani’s crash and burn approach to the politically correct style of governance. Mike Bloomberg, then, exudes a certain impression that makes the political and cultural elite comfortable indeed. It is the kind of elite pleasing style that could be described as David Dinkins with competence.

Unfortunately it is, with certain concessions to technological advances at the margins, a status quo approach to government. There is no indication that Mike Bloomberg will ever read the City Journal and feel impelled forward to changing the way the city is governed. Without any real vision, the next four years of a Bloomberg administration are unlikely to address any of the city's systemic problems.

This expected failure is not only bad for small business but is a bad situation that will leave whoever takes office in 2009 with some daunting challenges. The real tragedy here is that Bloomberg, precisely because he is not beholden to the traditional hidebound structures and elites, could move boldly to tackle some of the intrinsic problems that have plagued NYC politics for the better part of the last half century. Intellectually and temperamentally, however, the mayor sadly appears ill-suited for the daunting task.

NY Post Postscript

In today's NY Post, with an editorial entitled, "Mayor Mike's Nice Try", the paper hits on some of the themes outlined above. In particular, it cites the mayor's failure to connect lower taxes and less regulation with business growth. As the Post says, "the city is arguably less business-friendly than it was four years ago."