Monday, November 03, 2008

The Political Evolution of a Governor

Just as Harry Truman rose above expectations-going on to become, arguably, one of our greatest presidents-so it appears that Governor David Paterson may follow along the same path. As the NY Times reported on Saturday, the governor-faced with an unprecedented economic crisis-appears to be evolving; from the liberal critic of former Governor George Pataki, into the kind of pragmatist that state needs in these troubled circumstances: "To recall Mr. Paterson so loudly crusading against a leaner state budget seems incongruous with the kind of fiscal conservatism he now says the state needs. A liberal Democrat, who as a state legislator voted for increasing income and sales taxes and for generously financing expensive social programs, Mr. Paterson’s talk these days is all about keeping taxes where they are and shrinking the budget."

This evolution has given Paterson some high marks from New Yorkers. As Bill Hammond observed last week: "Facing its worst financial crisis since the Depression, New York State needs more courageous leaders like Gov. Paterson who are willing to confront reality head-on." The Times chimes in here:His tough-talking stance has its political advantages, of course. And that point has not been overlooked by Mr. Paterson’s advisers, who have made the economy the centerpiece of his administration. Voters who ordinarily would be wary of his liberal stance on most social issues could be swayed by his swift and stern handling of the budget, they believe."

The governor's road, however, will not be easy by any stretch. An Obama administration in Washington looks like it will be setting a much more liberal, tax hiking tone; and the Working Families Party and the municipal labor folks will soon be chomping away, and they will soon let loose on Paterson if they begin to see their perks being threatened: "In July, he even vetoed a bill he had voted for numerous times as a senator. The bill, which critics said was a giveaway to the state’s unions, would have made it more difficult for local governments and state agencies to fire unionized employees. It had also been vetoed by Eliot Spitzer, Mario Cuomo and Mr. Pataki, who was a state legislator before he was elected governor."

The coming confrontation appears to be inevitable: "But budget experts warned that the strategy could backfire if the cutting resulted in New Yorkers’ noticing a decrease in services, or if he came out looking too combative..."Right now, the governor is popular because he’s saying we have to be responsible,” said Edmund J. McMahon, director of the Empire Center for New York State Policy, a conservative research group. “But when you do the right thing, the public never appreciates it. When you actually cut stuff and interest groups spend millions of dollars portraying you as someone who wants to leave Grandma on a gurney out on the street, that drives down your poll ratings.”

All of which makes the leadership battle for the senate that much more important. The last thing Paterson needs is another liberal voice hocking him-as the assembly is certain to do, given its composition. The tax hikers are getting ready to go after him: "Ready for a Halloween scare? New York State predicts a deficit of $47 billion over the next four years. Many states have been smacked by the economic downturn’s one-two punch of declining revenues and rising need for public services, but in New York, home to the devastated financial services industry, is really in the soup. Governor Paterson’s answer? “bold and aggressive action to reduce state spending.” As he told Congress on Wednesday, "any taxation right now would only exacerbate the problem." With all due respect, the Governor needs to put down his Ayn Rand novels and consider what real economists are saying about state budget choices during periods of economic decline."

That's from the Drum Major Institute-and it's aptly named because they never stop beating the drums for more taxes; the Drummers seem to forget that wealth is generated in the private sector-and is often mobile when taxes and regulations become too onerous. This is particularly true as the financial services sector reorganizes, and different geographic venues compete for ability to host the new forms of finance.

This point is driven home by Nicole Gelinas in last week's NY Post. Gelinas praises Comptroller Thompson, and warns Mayor Bloomberg that the city needs to reduce the cost of doing business-as does the state: "Small companies and owner-operated firms could be the future of New York as we possibly move away from huge investment banks playing with vast amounts of other people's money. All in all, Thompson's comment about "excess spending" was a breakthrough - and something rarely, if ever, heard from elected officials in New York City.
Mayor Bloomberg, for one, once called New York a "luxury product." Problem is, luxuries are the first thing people cut back on: In September, spending at US luxury retailers plummeted by double digits from last year's level. And people uninterested in buying a luxury purse probably won't want to keep paying "luxury taxes."

So as we go forward, there will be an ideological battle to determine the policy direction of both the city and the state. The mayor, as the Post highlighted last Saturday, is drumming up the wrong tree: "Mike said yesterday that he'll "remind Gov. Paterson that New York state does that to New York City" - and should kick back some cash. Good luck to both of them - but if we had to guess, we'd say they'll both come up dry. Paterson obviously knows this. With multi billion-dollar deficits to deal with, he isn't giving an inch to the spenders. Bloomberg would do well to follow suit - never mind his third-term politicking."

Will Mike take the Post's advice? Better yet, will Mike take anyone's advice? So we're left with the irony of an old liberal stalwart seeing the fiscal realities clearer than the multi-billionaire. Good luck to David in his mission, and here's hoping that he'll have good allies to help him.