Tag Archives: New Yorkers

New Levels of Paternalism Promoted in New York

Image via Flickr user freedryk

Earlier this week, New York City Mayor Michael Bloomberg introduced a proposal to ban the sale of sodas larger than 20 ounces by any retailers regulated by the city’s health department. This proposal has many New Yorkers upset, and even the New York Times says this would be a step too far toward paternalism.

While many agree that banning a product goes beyond the bounds of what we can tolerate from the nanny state, writers including Matt Yglesias support additional soda taxes instead. Yglesias suggests that a soda excise tax is a good idea primarily because it will raise revenue and that one good use of this revenue would be increased welfare payments.

The problem with suggesting excise taxes as revenue raisers to support welfare programs is that low-income people are those who are disproportionately hurt by these taxes. Yglesias suggests that the tax will fall in large part on tourists, but I’m not convinced that tourists drink a large percentage of sodas sold throughout the city. Further, a study of soda consumption in New York shows that people in a household at 200% of the poverty or below drink more soda than the average New Yorker. If this statistic were adjusted for the percent of income spend on soda, the results would be even more striking. This tax will also fall the hardest on those who have the strongest preferences for soda over other drinks, the same people who are the least likely to change their behavior as a result of the tax.

Paternalists may suggest that low income soda drinkers are behaving irrationally and that a higher soda tax will help them make better choices. However, it’s impossible for regulators or supporters of paternalistic policies to understand consumers’ preferences better than consumers themselves. While increased health outcomes may be an objective for policymakers, this is not to say that it is or should be everyone’s objective. Almost none of us acts in accordance with seeking the lowest risk choices in diet or any other area of life, and trying to enforce healthy choices with tax policy is going to make some people worse off with the highest burden falling on those at the low end of the income distribution.

However, a policy choice is available to policy makers not in New York but at the federal level that would decrease the deficit, make soda a little more expensive, and likely lead consumers to make healthier choices at the grocery store. Corn subsidies totaled an estimated $3.5 billion in 2010, making food made with corn products relatively cheaper than food that is less heavily subsidized. Rather than targeting a specific product, large sodas, Bloomberg should put his efforts toward advocating a more fair national food policy in which food prices more accurately reflect their true costs.

NYC Taxi Reform Doesn’t Go Far Enough

Next week, New York Governor Cuomo is likely to sign a bill that will marginally increase competition in the NYC cab market. The new rule will allow passengers to hail some livery cars in outer boroughs and add 2,000 additional medallions for yellow cabs with wheelchair access.

Via Flickr user Ian Caldwell

The auction of these medallions  is projected to raise $1 billion. This figure might seem outlandish, but last month two medallions sold at auction for over $1 million. That’s right, it costs $1 million for the right to drive a cab in NYC, not accounting for any of the costs associated with owning and operating the vehicle.

The price tag of these medallions that are sold to the highest bidder demonstrates that in a free market, many more drivers would enter the cab industry. Artificially constraining the supply hurts both consumers and those who are not able to drive a cab because they are unable to purchase a medallion.

Unsurprisingly, the Metropolitan Taxicab Board of Trade remains strongly opposed to this bill. The increase in the supply of medallions will lower the value of the medallions that cab drivers and larger medallion companies already own. Their lobbying efforts reflect their desire to profit through the political system.

While this increase in the number of medallions available for yellow cabs and allowing some livery cars to be hailed represents a small improvement for New Yorkers, the reform does not go nearly far enough. For real reform, Mayor Bloomberg should look to Indianapolis.

Before Stephen Goldsmith was elected as the city’s mayor in 1991, the number of cabs permitted in Indianapolis was limited to 392. Goldsmith created a Regulatory Study Council whose first project was to reform taxi regulations. The RSC recommended eliminating regulatory barriers to entry and allowing cab drivers and companies to determine their own prices. In a case study of regulatory reform in Indianapolis, Adrian Moore writes:

The main resistance came from existing taxi companies, and initially much of the city and county council sided with them in the name of the “public interest.” However, the support for reform by seniors, the inner city poor, minorities, the Urban League, and the disabled soon brought many of them over to the RSC’s side. The RSC expected little support from Democrats on the council, but the strong support for deregulation from that party’s traditional constituents turned the tide.

Some price controls remain in the Indianapolis taxi market, but the city has seen an increase in supply, a decrease in fares, and an improvement in service. Indianapolis and New York City are of course very different, but the laws of supply, demand, and rent-seeking are the same everywhere. By phasing out the medallion system, New York City would benefit consumers and allow many more people to make a living driving cabs. Medallion owners who have invested in some cases over $1 million in the current system would need to be compensated in some way, but not by continuing to profit at the public’s expense.

NYC Union Protest Budget Cuts By Not Plowing

The New York Post reports that New York City’s sanitation workers were told by supervisors to not plow the streets and leave the boroughs covered in snow drifts  in order to send a message to Mayor Bloomberg over his cuts to the department’s budget. The action resulted in emergency vehicles being stalled in the snow with tragic results for one young woman in labor. Feeling guilty, the workers came forward and told officials of the plot which included overtime pay for work undone. New Yorkers aren’t happy with how the City has handled the blizzard. Streets remained unplowed for 72 hours.

The question is what should the Mayor do? The City does supplement its own plow crew with outside contractors and private plowers but the call went out too late to bring in enough workers. Many private contractors may have already been called in by the airports. The debacle has caused the city to re-consider its snow strategy. The Sanitation Department union doesn’t like the idea of the City relying more on “privates” claiming, “You can never count on the privates, because they don’t have to show up,” he said. “What obligation do they have?

Hoping it will Go Away? Employee Benefits Breaking Budgets

During their first gubernatorial debate, Maryland Governor Martin O’Malley and former government Robert Ehrlich didn’t tackle the question of Maryland’s $33 billion pension and health benefits shortfall. As The Washington Post reports, it is a sum equivalent to the state’s entire budget. In fact, the tab is much higher when applying the risk-free discount rate.

Regardless of what discount rate is employed, states will have to contribute much more to their pension systems. The Center for Retirement Research at Boston College projects scenarios for several states. They find California, Illinois, and New Jersey will have to increase contributions to 8 percent of their current budgets (when using an 8 percent discount rate) and to 12.5 percent (when using a 5 percent discount rate). On average, states contributed about 3.8 percent of their budgets to their pension systems in 2008.

This represents a significant shift in spending priorities for many states.

Local governments are sure to be under even greater fiscal strain. At The New York Times, Mary Williams Walsh reports that taken together the cities, counties, and authorities of New York have promised more than $200 billion in health benefits. And they have set almost nothing aside.

A new report from The Empire Center for New York State Policy notes that while the state doesn’t have to come up with sum immediately budgetary reality will become increasingly painful for New Yorkers.

So far attempts to rein in costs by billing retirees for part of their premiums have met with lawsuits. And governments are only recently coming to terms with the size of these promises. Calculating the cost of Other Post- Employment Benefits (OPEB) is a new requirement for governments. As the NYT reports Schenectady, “found the cost too overwhelming to calculate, warning that it ‘will be astronomical, with the potential of bankrupting municipalities.'”

New York Stimulus Spending Transparency

Like many states, New York set up a nifty website to solicit public input about how to spend its share of federal stimulus dollars. In casting a wide net, the state received some off-the-wall proposals, including $500,000 for a marijuana farm in Rochester in a state that has yet to legalize medical marijuana.  And, not surprisingly, the sum cost of all the ideas submitted (about $100 billion) greatly exceeds the amount available for distribution (about $4 billion).

That the state surveyed citizens for suggestions about how to spend their share of the stimulus money is commendable.  But that’s only part of the equation.  It’s equally important that the state make public the process by which officials vet, prioritize, and green-light the more than 18,000 project submissions received. Without clear and transparent guidelines, it’s impossible for citizens to know how state agencies will weigh the stimulative value of a $500,000 pot farm against a $1.2 million composting facility or a $10 million aquatics center.

More than likely, the vast majority of New Yorkers who took the time to submit a request will soon receive a form rejection letter — “thanks, but no thanks” — without any explanation as to why their project was deemed unworthy of funding vis-à-vis the “winners.”