By Bob Friedrich
Years from now, when the city is teetering on the financial abyss, just like Detroit, folks may ask, “How did this happen?”
The answer will be that it started on Mayor Bill de Blasio’s watch with his first smoke-and-mirrors budget that increases spending by double the rate of inflation. This reckless, $74 billion creates multibillion-dollar deficits that increase in each succeeding year. Those billion-dollar deficits, written into the budget, assume that New York will have a strong and robust economy.
Should the economy lose steam and sputter even for a year, the deficits will increase exponentially. When that happens, hold on to your wallets: The largest source of city revenue is property taxes, paid for by middle-class taxpayers who are already tapped out.
No wonder Moody’s issued a warning last week, and a few other brokerage firms are reducing their city bond purchases. They see the handwriting on the wall. De Blasio, a self-described ideological progressive, has the right to put his liberal imprimatur on the budget, but he should not have the right to do it by ignoring basic laws of accounting and economics.
Budgets have consequences. The consequences of long-term reckless spending can be seen in the once-great industrial city of Detroit. America’s first large city to default has seen services dramatically slashed and pensions cut by one-third. Its citizens are rightfully up in arms as they watch their city in the throes of ruinous decline.
This situation did not happen overnight but over a period of time as politicians promised constituents everything but the kitchen sink while paying little heed to the bottom line. Sounds familiar.
It took our city more than 30 years to dig its way out of the hole of financial disaster and near bankruptcy of the mid-1970s. Abe Beame, the mayor then, simply stopped all preventative maintenance and repair spending. It took the federal government’s loan guarantee backing of city bonds to begin the long climb back.
As part of the bailout, the feds demanded that all future budgets be prepared in accordance with Generally Accepted Accounting Principles, the gold standard of accounting. All mayors since, liberal and conservative, have done just that until de Blasio. Thankfully, city Comptroller Scott Stringer has tepidly put the brakes on such recklessness by requiring the budget recognize its expenses in the year that they actually occur.
But the budget’s massive, $8 billion payout to the United Federation of Teachers, including retroactive pay dating back to work performed in 2008 and 2009, remains mostly unpaid for and is sure to entice other unions to grab for their piece of the taxpayer pie.
UFT President Michael Mulgrew acknowledged in a private meeting with his union members that he “gummed up” negotiations with then-Mayor Michael Bloomberg — a strategy he successfully employed to buy time shopping for a new mayor who would more likely capitulate to his demands. He found that target in de Blasio, a grand giveaway with little to show for it in the way of productivity or future cost savings.
De Blasio’s budget claim of $1.4 billion in savings from future union health care costs is nebulous and wishful. To reach this illusory savings goal, de Blasio has buried deep in the budget a proposal to save money by shifting union members away from their current health insurance plans and into union-designated health clinics that current and former union members would go to for medical care.
Will these clinics be able to provide the same quality of care, choice of doctors and lack of wait times union members have come to expect?
This budget is as reckless as it gets, created by a mayor who never worked in the private sector, where a company’s success hinges on its ability to be fiscally prudent and stay afloat.
When this Titanic inevitably succumbs to the tidal wave of irresponsible spending, de Blasio will be gone and all that remains will be a shrunken middle class left drowning in a sea of debt.