When I taught at the Henry George School in New York, our Director, George Collins, used to give a stirring graduation speech to students. He told them they would find that the gift of insight they'd been given, in studying Georgist political economy, was also a kind of curse: they would never look upon their city with the same eyes. The land question and its ramifications, the malignant absurdities of today's economic systems and the sheer obviousness of the remedy, would shout at them in every day's news.
I was reminded of that when I recently visited New York. We stayed with cousins in Park Slope, Brooklyn, which is by all accounts one of the sanest and most pleasant neighborhoods in the city. Things were still running there: the coffee shops, the restaurants, Prospect Park, the Library, the Brooklyn Academy of Music. Well, now, in the Park, actually, the zoo was about to close because of budget cuts; the Mayor had suggested that devotees of the zoo should perhaps secure sources of private funding to keep it open.
Our cousins have two children, aged four and nine, and both parents work full-time. The mom, talking with me while dressing her daughter and preparing for her 90-minute commute to work, observed that "Cultural stuff for kids was really good here, a few years ago, but it's dried up with the bear market. Things are a bit tough in New York right now." And indeed they are: the city is in a dire budget crunch, possibly as bad as its default scares of the 70s or the early 90s. Fire stations are being closed again; library hours and after-school programs are being cut. New hikes in sales and income taxes are reluctantly being called for.
I finished up a bottle of juice and asked where to put the glass bottle for recycling. "Just put it in the garbage," I was told. "We don't recycle glass any more. Budget cuts -- the program wasn't making money, so it had to go." Now, that got me thinking. I mean, I'd be willing to bet that New York City is the largest per-square-foot generator of solid waste in the world. It is also the city with the highest land values in the United States. But it can't afford to recycle glass bottles.
I took the subway into Manhattan to attend the Henry George Institute Board meeting, discovering that -- glory be! -- the Manhattan Bridge is being painted. I rode across that bridge every day in the early 90s, watching (and reading about) the severe structural problems that had been brought about by poor maintenance, which on a steel bridge basically comes down to: not painting it. Crews worked on the bridge for at least a dozen years -- often shoring up the upper roadway with hundreds of wooden beams -- readying it for the paint job it's finally getting: I wonder how many tens of millions of tax dollars that cost. A timely paint job is very cost-effective, but politically it can always be put off another term.
Coming aboveground and strolling in the Murray Hill/Gramercy area, I saw that some of the long-standing unused parcels had been developed at last -- but more had not. I would not, at least, have to come up with a new perfect example for use in teaching: when I ascended from the Subway at the intersection of Park Avenue South and 28th Street, I found the same surface parking lot, still there, still ka-chinging up the asset value -- with the help of the city's public transportation services, and all the frenetic commerce going on in the multi-story, heavily-taxed buildings standing at the other three corners of that intersection.
At the meeting, our esteemed President, Sydney Mayers, a gentleman of brisk wit and advanced age, gave us a little history of his wife's needlework business. It had gone under at last. Her 400 square foot commercial space, which they'd initially rented for around $700 fifteen years ago, topped $4K last year, and that was just too much money to throw away every month.
I noted sadly that yet another of my favorite jazz clubs, Sweet Basil, was defunct. But, oddly enough, the old Martinique Hotel, a rather frightening, gated S.R.O institution when I was in town, has gotten a spruce-up and is now being operated by Holiday Inn.
I should say that I was long-gone as a New Yorker on September 11th, 2001; I watched the unfolding tragedy on TV from Maine. Although everyone is back up and running, I could perceive a hint of that lingering trauma in many eyes and voices. Two of my dearest diehard Manhattanite friends have actually taken steps toward considering nice suburban places, upstate. My nine year old nephew, widely acclaimed as one of the world's foremost authorities on Bad Guys in cinema and literature, his room a shrine to Darth Maul, no longer roots for them, in movies. Yet every urban disaster has a silver lining: the real estate section of NewYorkMetro.com puts it matter-of-factly in its outlook for lower Manhattan: "The incentives and modest recent price decreases mean excellent deals in the short run; the Trade Center redevelopment (opera house? Museum? Transit hub?) will only add value after that."
Economists note in this budget crunch, as in others the city has faced, a curious disconnect between the fiscal crisis and the overall economy. Tax receipts are way down and the budget outlook is indeed scary, even while the underlying economy actually lurches toward recovery. If it weren't for the large declines in the (admittedly, very important) financial and tourism sectors, the city's economy would not be performing badly at all. How unfortunate, then, that New York will see no other alternative than to choke off economic recovery by raising income and sales taxes while cutting back on public services. But what can they do? The tax base is declining.
Or is it? It turns out that land values in New York, while modestly down in some areas, have not taken anywhere near the beating that the Stock Market has, or the small business community, or public services. No, the real estate market in New York City remains, all in all, quite bullish. There are few bargains to be had. Residential rents, of course, having been held artificially low by rent stabilization, provide no relief even in a weak market.
So, no -- despite the dire warnings, New York City need not endure a fiscal crisis. Its tax base -- properly defined -- is robustly capable of providing for public needs, while actually bringing business into the city. They have just been taxing the wrong things, all along. Tourists, bulls and bears come and go, but New York City's land values -- like its citizens -- are quite resilient.
Lindy Davies, May 7, 2003
Progress & Poverty - Definitions - Capital - Law of Rent - Booms & Busts - The Remedy - Links