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New York Post

 

Stimulus = Death?

February 13, 2009

By Nicole Gelinas

HOW 'FREE MONEY' MENACES NY

NEW York politicians are already exulting over the state's share of the $789 billion "economic stimulus." That puts us on track to disaster.

State and local pols need to remember: This money isn't free, and it's not infinite. We have one chance to do this right. If we don't, we'll pay for this "stimulus" again and again.

The bill nationalizes the practice that helped put New York on the skids in the '70s: borrowing money so that states and cities can pay operating expenses. Bad idea:

* First, once you've spent the money on day-to-day costs, the benefit is gone—but you're stuck with debt.

* Second, if you're borrowing for everyday spending, you're wasting a finite amount of debt that should be going toward improving things like flood-control systems, subways and bridges. So when you finally run out of money, this stuff will start to break down because of neglect and cost more to fix than it would have if you'd dealt with it earlier—a triple whammy that makes it harder to recover.

Yet the stimulus involves borrowing by the feds to give states and cities nearly $170 billion for everyday expenses like education and health-care costs.

Federal borrowing is still borrowing. This vast new debt will likely prompt lenders to demand higher interest rates. And it will inevitably push up mu nicipal-bond interest rates, making it more expensive for New York to borrow.

In effect, then, the federal government is consuming some of our power to borrow—and giving us some of the money back to pay operating expenses. We're right back to the '70s, through the back door.

What about the $37 billion that the stimulus will give the states for roads, bridges and transit? The risk here is that we'll use the cash for the wrong things.

Because the vast new federal borrowing could constrict our credit for years to come, it's crucial that Gov. Paterson, Mayor Bloomberg, Assembly Speaker Sheldon Silver and the rest act respon sibly in spending this small amount of infrastructure money.

And that cash has already shrunk: Because the bill's latest version has less for transit spending, New York will be lucky to get $1.8 billion for its subways and buses. (If you call it "luck" to send money to DC only to get some of it back.)

Our last "windfall" federal funding—the post-9/11 grant to build an $850 million subway station near Ground Zero—suggests the dangers.

We'd never have spent our own money on this Fulton Street project—there's a thousand better ways to spend nearly $1 billion on transit in the city. But the pols figured: The money's free—why not?

Because the MTA wound up starting a luxury project it can't afford to finish—that's why not.

Last year, it became clear that the Fulton Street project, as conceived, would cost us about half a billion more than the feds had granted—showing the real cost of "free money" spent recklessly. And the MTA's start of the project has torn down a previously healthy swath of Downtown.

Now, the feds have saved us again—seemingly. The MTA, upon Silver's self-described "complaint," will spend $500 million in stimulus funds to try to finish the project.

Sorry, this is not the best use of $500 million in transit funds—a quarter or more of our federal money. Throwing more cash into Fulton Street at the expense of other projects isn't a rational decision but a political one—the immensely powerful Silver wants a hole in his district filled in.

Sure, it would be nice to get the thing done—but the trains are still running underneath. And the cold reality is that the MTA needs far more billions than the feds are giving New York—to pay for projects that aren't fancy extras but will avert disasters.

What's worse—another vacant lot or subway lines that don't run reliably because we've stopped replacing obsolete equipment? The MTA says it needs $15 billion over the next 15 years just to maintain and replace signals.

Another potential waste of our finite stimulus money: Developer Bruce Ratner is reportedly lobbying for some of the cash to go to his Atlantic Yards basketball stadium and apart-ment project.

Sorry, surplus "luxury" apartments and a stadium aren't core infrastructure. This boondoggle shouldn't be taking a dime away from the region's real capital-starved assets—which the private sector needs to be running reasonably well so that it can recover.

President Obama once said that the stimulus bill would be a chance to invest in bold new infrastructure—but it isn't. So, until New York can find the political will to invest in its own future, it needs triage. The last thing we need to do is waste borrowed, finite money on any more white elephants.

Original Source: http://www.nypost.com/seven/02132009/postopinion/opedcolumnists/stimulus___death__154841.htm

 

 
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