Mayor Bill de Blasio, sipping lemon tea to nurse his cold, was the picture of fiscal austerity at his second-year budget presentation Monday.
“I think there are really substantial risks here,” he said — referring to the chances of a severe downturn.
Pointing to “a warning sign” he saw in the lemon-tea leaves, he intoned: We’re “in danger” and must “prepare” for a “shock.”
The mayor, of course, is absolutely right. But alas, we’re all stuck with the budget choices the mayor made last year, when he spent our money as if on a sweet-lemonade sugar high.
The mayor’s style Monday was a sharp change from last year. He was only half an hour late, rather than an hour.
And last year, de Blasio spent his budget address not really talking about the budget. He left the numbers part to his staffers, and instead waxed eloquently about how “honest” and “progressive” he was.
The mayor seems to have spent a little of the past year on the charts and graphs, and been disappointed in what they imply for how to support $79.3 billion in annual spending.
De Blasio looked mostly at the economy — and didn’t like what he saw. Pointing to a slide warning of “the potential of an economic downturn,” the mayor explained that we’re, well, due for recession.
The recovery from 2008 has now gone on for 68 months. We’re just five months short of the economic expansion that happened before that catastrophic downturn, and we’ve gone on way longer than the average recovery.
“Economic expansions do not go on forever,” he lectured, sounding a little Bloomberg-y. “I think it is actually necessary to be fiscally cautious.”
Good. And the mayor this year doesn’t add much in the way of new spending.
We’ll spend a little more on keeping people from losing their apartments and becoming homeless, expanding community health centers, teaching poor fathers parenting skills. We’ll buy some ambulances and some bullet-resistant vests.
But these things each cost millions or tens of millions, not hundreds of millions, as universal pre-K did. Overall, not much is changing — next year’s projected deficit is about a billion dollars, just as expected.
The problem, though, is that we’re stuck with the potentially catastrophic budget decision the mayor made last year — before he learned all this interesting stuff about the economy and how it can slow down.
Last May, the mayor signed unaffordable labor contracts with teachers and other city workers — adding $1 billion in new spending to the budget that starts this summer, $1 billion to next year’s budget, and $2 billion to annual spending the year after that.
And now, it turns out these bad labor deals will cost even more than we thought. Applied to cops and firefighters, raises and retro pay will cost $472 million extra next year, and another $408 million over the following three years.
What’s saving us from big deficits now?
The same thing that’s making the world’s rich even richer: the record-low global interest rates that have pushed stock markets, real estate markets, art markets and the like to record highs.
Over the next year, we’ll save $571 million thanks to lower debt costs and lower city payments into public workers’ pension funds. (When the stocks in the pension funds do well, the city doesn’t have to put as much of its own money in.)
Plus: The city is expecting $3.7 billion in added tax revenues over the next five years, mostly from top earners’ higher salaries and bonuses.
But if de Blasio is so worried about a recession, he shouldn’t be counting on these higher tax dollars. When the downturn comes, we won’t be “saved” by these good surprises, and we’ll start to face some bad surprises.
And those surprises would hit poorer New Yorkers the hardest. The mayor noted quite correctly that poor and middle-class New Yorkers haven’t fairly shared the gains of recent growth — with nearly three-quarters of salary and wage gains going to higher-income folks.
And the city’s top 1 percent makes well over 40 percent of the city’s income — up from about 23 percent two decades ago.
It’s very hard for the mayor to fix those things — which depend on economic forces beyond his control (like the decision to bail out banks).
The best he can do is protect the poor from predictably severe cuts in a reliably coming downturn — and he hasn’t yet done that.
Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.