The More Things Change, the More They Stay the Same?

by Gordon Cooper

From Broader View Weekly, January 21, 2010

Governor Paterson made some new proposals and some news with his State of the State speech. Aware of his falling popularity and the state’s dismal fiscal woes, he attempted to cast a new light on some old problems and give the impression that he has an optimistic view of his ability to restore both his image and the state’s economy to respectability.

I applaud anyone who retains an optimistic view during these challenging times. I am sure our readers share my disdain for the whining politician who claims that all the troubling issues were inherited from previous administrations; and/or the one who uses fraudulent number games to claim certain jobs were saved or created in bogus congressional districts. So, to the end that Mr. Paterson remains positive, honest and confident about our future, I commend him.

His speech opened with an honest assessment of our challenges, an encouraging look backward at our successes and offered a realistic, though difficult, plan for our recovery. He spoke of balanced budgets, increased health care coverage, improved schools and job growth while rebuilding a crumbling infrastructure and cleaning up the environment. It could be classified as a very good speech and you can and should read it for yourself by logging on to www.ny.gov .

However, I must also offer some concerns along with that commendation. Among his many proposals, Paterson has decided to stimulate job growth by eliminating the tired, sputtering diesel engine called the Empire Zones Program, and replacing it with a fresh, shiny hybrid engine called the Excelsior Jobs Program.

State Senator George Winner, among others, has been quick to run to the defense of the Empire Zones as a proven job creation enterprise. My initial response was to look at any press release from our senator and take it at face value and to cast a jaundiced eye toward any speech from our liberal-leaning governor. I decided to dig a little deeper and was surprised to find that I agree with some points of both parties, yet I also found areas that disturb me with each side.

First of all, I agree with Mr. Paterson that failed policies should be examined and removed when found to be clumsy and ineffective. As an engine of economic development, the Empire Zones may have started out as “a proven job producer” – according to Mr. Winner – yet the past few years has shown that the engine is leaking oil and the valves seem to be clanging. As with our own vehicles, there comes a time when we must admit that it is time to do a trade-in. That time has come.

After the aforementioned digging, I found an interesting report filed by the Citizens Budget Commission (CBC), a nonpartisan, nonprofit civic organization, in which they did an exhaustive and objective investigation of the Empire Zones program. This report opened my eyes to some serious issues faced by governmental entities that attempt to take on responsibilities that lie beyond the scope of their ability or mandate.

According to the CBC report, this program, which was initiated in 1986, was as fresh with promise and good intentions as Mr. Paterson’s Excelsior Zones is today. However, as with most government-run initiatives, it soon degraded to become a financial burden and a bureaucratic morass.

The following quote from a 2007 assessment, conducted by A T Kearney, consultants, speaks volumes:

…New York’s Empire Zones program provides the best example of good economic development intentions gone wrong. Its original mission has been morphed by political patronage, legislative revision and commercial manipulation, effectively repositioning it from a program primarily helping distressed communities to one routinely offering tax relief for ongoing businesses.

Mr. Winner claims that we should keep the program because businesses such as CVS, General Revenue, Sitel and others need this program to retain jobs in New York, because they ‘were targeted industries under the Empire Zone’. Mr. Paterson claims that the state needs to target ‘high technology, biotechnology, clean technology, finance (read Wall Street) and manufacturing’.

The problem with “targeting”, as anyone who has hunted or just enjoyed shooting-sports will affirm, when one is focusing on a target, the big picture is necessarily out of focus. The big picture is neglected when government tries to isolate one particular enterprise at the expense of the whole tax base. By offering tax credit incentives for one business, you are essentially passing the tax burden to other businesses and property owners.

It is my opinion that the Empire Zones Program has run its course. This vehicle has been worked over by the political mechanics for over 30 years and to keep her in working order, it would require another major overhaul that we cannot afford. In fact, after the last trip to the garage in 2000 the cost of the program rose from $30 million to over $582 million by 2008! However, I am not ready to slip into the driver’s seat of Paterson’s Excelsior mobile either.

I believe that the best method of creating a good atmosphere for jobs is to offer broad, sweeping tax cuts and targeted regulations, rather than the opposite.