OF next year's expected $700 billion federal infrastruc ture-stimulus package, New York state could get $4 billion for mass transit, with most of that money going to city projects, Sen. Chuck Schumer said over the weekend.
It's vital for the feds to invest in infrastructure, provided it's done wisely. But Schumer's announcement shows why it's such a bad idea for wealthy cities like New York to depend on federal policies for rational infrastructure planning, even in a tough downturn.
It will be interesting to see how much of that $4 billion, if it materializes, really will filter down to city capital projects, once it travels through state pols' hands. But New York shouldn't even be in the position of depending (or pretending to depend) on federal largesse.
Consider: If New York City had worked with the state since 2003 simply to keep its medical costshealth benefits for public-sector workers and for people on Medicaidin line with inflation, the city would have an extra $5 billion every two years now to spend on whatever it wants, including subway infrastructure.
Plus, the city and the MTA could have taken advantage of an especially brutal economic trough now by getting more projects done for less money. How?
As the local, national and global economies have plummeted, demand for construction materials and construction-intensive commodities like oil and labor has fallen. The recession has cut oil prices by more than 70 percent; big-ticket construction inputs like steel have seen similar declines. And there's less competition for construction workers with private-sector projects.
Instead, we've consigned ourselves to waiting around for federal generosity. And perversely, the mass scale of the promised federal stimulus could push up the costs of labor, materials and commodities, meaning New York may get less work done per dollar than it would have otherwise. Plus, federal stimulus money likely will come with its own labor strings attachedreducing the slim but real chance that New York now has to reform its labor costs at big agencies like the MTA.
The brutal economic cycle will push costs up in another way, too. The $4 billion (or $3 billion or $2 billion or however much filters down to good projects) sounds like a lot for the MTA. But the MTA has to spend at least $30 billion over the next half-decade or so just to keep its existing assets in decent shape and add very modestly to them. So $4 billion barely makes a dent in its projected $30 billion capital plan.
The state likely will have to borrow to pay for some of the rest. But an aggressive federal stimulus is likely to make municipal borrowing even harder. That's because as the federal government borrows heavily to pay for all the stimulation, it pushes up municipalities' own debt costs.
States and cities have to compete with the feds for investor cash, and a high level of federal borrowing signals to investors to demand a higher return as compensation for the future risk of inflation. The more the federal government borrows, the more it has a motive to push up inflation, because it can pay back all of that debt in cheaper dollars.
Plus, we'll still be paying for our own federal stimulus money, and more. New York still sends more money to Washington than it gets back each year, because of the nation's progressive tax system, which could get even more progressive under President Obama. In other words, New Yorkers, even with their straitened finances, will be paying disproportionately not only for our subway stations but also for sewer lines in Akron.
But the real fault lies at home. We can't control what the feds dobut we could've controlled our own priorities. It may seem pointless to criticize Mayor Bloomberg for past failures to control spending that he can't undo now. But we should understand the numbers and learn the lesson.
New York will pay a high price for its budgeting of the past decade. The price includes less-than-optimal infrastructure in a city that now needs to become more productive, now that its cash cow, Wall Street, is gone. It also includes a presumed dependence on the federal government's inefficient allocation of the city's own resources to keep our aging infrastructure from deteriorating dangerously.
We must ensure that we don't keep making the same mistakeworsening the structural budget problems that starved the city of world-class infrastructure during the record boom. We'll make things worse instead of better, for example, if we sit around depending on federal bailout money to avoid making hard choices about the city and state budgets.
We should keep in mind that our own all-consuming medical and pension costs, along with mindlessly ever-higher education spending, have deprived us of the infrastructure that we need and the quality mass transit that New Yorkers deserve.
The federal government can't fix thatbut New York can.
Original Source: http://www.nypost.com/seven/12302008/postopinion/opedcolumnists/bootstrap_transit_146433.htm