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August 4, 2002
Public SectorOther

Carolyn Maloney's congressional district includes perhaps the greatest concentration of businesses in the country—some 40,000 firms operating throughout Midtown and bustling commercial neighborhoods in Queens.

But in the last session of Congress, the Upper East Sider so consistently voted against the interests of business that a Washington lobbying group—the Small Business Survival Committee—gave her its lowest rating possible: zero.

Maloney did propose one piece of business legislation in the 107th Congress: a bill to give tax credits to companies that set up "lactating stations" so that mothers can breast-feed their children on the job. Not surprisingly, a breast-feeding tax credit is low on the priorities list of New York's major business groups.

Far from being an anomaly, Maloney is typical of Gotham's congressional delegation, which increasingly votes against New York's economic well-being. It stridently opposes business-friendly initiatives, battles free-trade legislation that would boost Gotham's global services sector and votes down tax cuts that might bring relief to a city whose residents pay disproportionately more in federal taxes.

Instead, New York's delegates campaign almost exclusively for ever more social outlays for a city already so awash in social-services subsidies that major new federal spending here is unlikely any time soon.

Indeed, the city's congressional delegation is veering so far out of the mainstream that many of its members have grown almost irrelevant in Washington on issues of economic and fiscal importance to the city. Even during the Clinton presidency, when they should have been powerbrokers, most largely opposed their own party leader on key economic legislation like the North American Free Trade Agreement and hence played almost no role in shaping significant tax and trade policy.

Says one former Giuliani-administration deputy mayor: "The New York delegation rarely got beyond the idea that what we always need from Washington is more spending. They fit the stereotype in Washington of the money-grubbing New Yorker."

Until the mid ‘70s, the city often enough elected Democratic congressmen like Hugh Carey, who preached fiscal discipline and became a tax cutter as governor, or Ed Koch, who leaped from the House to Gracie Mansion by taking on the public-employee unions and emphasizing the need to restrain the city's budget.

But then the local party organizations gave way to the rising power of city employees and social-service groups, who put forth a new breed of candidate focused on boosting government spending and raising taxes to pay for it. Now the Gotham delegation is dominated by former public employees, social advocates and lifetime political operatives, whose priorities rarely coincide with the city's economic interests.

For instance, Maloney's most recent agenda, beyond her "corporate lactation" bill, included support for parental leave for federal employees and a bill to protect the civil rights of victims of "gender motivated violence."

Vying with Maloney as one of the delegation's furthest-left members is West Sider Jerrold Nadler, who represents most of the wealthy Manhattan residential neighborhoods and thriving business areas outside her district—including the World Trade Center site. Like Maloney, Nadler has racked up one of the most rabidly anti-business, anti-tax-cutting voting records in Congress.

Even delegation members who speak for solidly middle-class outer-borough neighborhoods that vote Republican when given the chance, as in the last three mayoral elections, now support more government spending and higher taxes.

Anthony Weiner, for instance, represents a district that includes Queens neighborhoods like Forest Hills and Rego Park, along with Brooklyn's Sheepshead Bay—areas that have a higher-than-average family income and a poverty level only about half the city average. But Weiner also gets among the lowest ratings in Congress from business and anti-tax groups.

Of course, New York also includes some of the country's poorest congressional districts. Here, Gotham elects a slate of black and Hispanic officials who unfailingly tout expensive social programs as prescriptions for the city's economic ills, but who scoff at free-market initiatives that have actually unleashed economic power in their neighborhoods.

Hewing to such an agenda, the city's minority caucus has had almost no role in spurring the economic gains of the mid- and late '90s. It has championed government spending on ineffective programs that have done little to help boost low-income neighborhoods—most notably the federal empowerment-zone program that Harlem's Charles Rangel helped to create during the Clinton years.

In its early stages, the program aimed to pour money into social services programs designed to eliminate the supposed "root causes" of poverty, but it did little to encourage the private investment in Harlem. Fortunately, the Pataki administration moved the program to free-market initiatives, yielding a burst of Harlem investment and building unparalleled in the last 50 years.

In Washington, Gotham's congressmen inevitably vote for higher taxes, whose effect falls disproportionately on New Yorkers. Residents of New York state accounted for 6.6 percent of all federal income-tax filings in 1999 but paid 8.5 percent of the federal income tax, according to the Manhattan Institute's E. J. McMahon. The city, with its big cluster of high earners, is subject to similar inequities.

Of Gotham's 14 representatives in Congress, only Republican Vito Fosella, who represents Staten Island and parts of Brooklyn, opposes the taxing views of his colleagues: "In their view, if you are a police officer married to a schoolteacher in New York City, you are considered rich."

Nadler, for instance, led a Democratic group that tried to replace the Bush 2001 tax cut with a $300 tax credit for every taxpayer and dependent. This would have shortchanged New York residents—especially in Nadler's own district, where yearly household income averages 65 percent above the national average.

By contrast, the federal tax cut eventually passed will amount to about $89 billion in savings for state residents over the next 10 years, according to E. J. McMahon's analysis, with more than three-quarters of those savings realized by taxpayers who live in New York City and its surrounding suburbs. Still, every Democratic member of Congress who represents New York City voted against the tax-cut package.

Such unconcern toward taxpayers takes a sharper edge where Gotham's biggest industries are concerned. Exhibit A is the delegation's steady opposition to lowering the federal tax on capital gains, despite evidence that cuts improve the city's economy by boosting its No. 1 industry.

A 1978 capital-gains tax cut, for instance, brought a flurry of stock and bond trading that saw profits for New York securities firms double in just two years, while securities employment in the city shot up by 22 percent, after having been flat for most of the 1970s.

Mayor Giuliani strongly endorsed another capital-gains tax cut to revive the city's flagging economy after 9/11. But he got no support from the city delegation, even from those whose districts teem with securities-industry workers. "I don't think a capital-gains tax has the kind of macro effect on the economy Giuliani expects," Rep. Weiner told City Journal. The proposed cut never materialized.

The one issue as critical to New York's economic well-being as low taxes is free trade: Gotham has become perhaps the ultimate world-business capital, benefiting as much as any city around the world from globalization. But the city's Democrats consistently put their loyalty to big-money union contributors first.

Every Democrat representing New York City, except Nita Lowey and Floyd Flake, voted against the North American Free Trade Agreement in 1993, even though President Clinton backed it. With Clinton gone, the delegation is growing even more stridently anti-free trade. All its Democrats voted against a recent bill to expand the president's ability to make trade agreements—a bill strongly favored by a host of N.Y. industries and the editorial pages of the city's dailies.

The city's congressional delegation instead pushes for spending hikes. But the gap between what New York receives from Washington and what it sends in taxes is only growing larger. The state had a balance-of-payments deficit with Washington of $890 per person in 1999, the last year for which data are available. But the gap is almost entirely in just two areas—defense and Social Security payments to city residents—which hardly suggests that Washington is stiffing New York, especially since the city's delegation is traditionally a foe of defense spending.

The city's representatives say Washington should close the gap by spending more in New York on social programs like Medicaid and welfare. But New York already ranks No. 1 in the nation in per-capita federal spending on assistance programs. Medicaid outlays nationally average $425 per capita—but a gigantic $1,285 per capita in New York City. Chicago only gets $514 per capita; Los Angeles, just $464.

So, New York can't expect big infusions of new spending anytime soon. By contrast, tax cuts could powerfully redress the gap. Over 10 years, the recently passed federal tax cut could return as much as $40 billion to city residents, far more than the delegation could possibly extract from Washington in social spending.

There are no big pots of gold out there for the delegation to capture anytime soon. Unless the city's congressmen somehow change their tune—or unless the city's residents change their representatives—New York's House members are likely to be little more than marginal players in Washington for years to come.

From the Summer issue of the Manhattan Institute's City Journal, where Steven Malanga is a contributing editor.