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Manhattan Institute

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Trump's Right, Cuomo Wrong About the Woes of Upstate

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Trump's Right, Cuomo Wrong About the Woes of Upstate

New York Post August 3, 2017
Urban PolicyNYC
EconomicsEmployment

President Trump last week suggested that economically struggling upstate New York residents should be willing to move to areas with better job prospects. This wasn’t exactly an original or outrageous idea — yet it still managed to ruffle feathers among defensive New York officials.

Trump’s remark was linked to the announcement that Foxconn had picked Wisconsin over six other states — including New York — as the site for a $10 billion flat-screen manufacturing plant. The president said the unemployed in states like New York should follow the manufacturing-jobs boost to Wisconsin and other states.

In most of upstate New York, private-sector employment is still below the 2000 level.

“You’re going to need people to work in these massive plants,” Trump said. “I’m going to start explaining to people: When you have an area that just isn’t working like upper New York state, where people are getting very badly hurt, and then you’ll have another area 500 miles away where you can’t get people, I’m going to explain, you can leave.”

Indeed they can. And they have been.

From mid-2010 to mid-2016, nearly 194,000 people moved out of the 50 counties north of the New York City metro region — a net out-migration rate exceeded only by four states. Births and foreign immigrants made up some of the difference, but the total upstate population still dropped by nearly 60,000 people.

Trump, in effect, was simply prodding upstaters to act in their own best economic interests. This nonetheless prompted blowback from, among others, Gov. Cuomo.

Claiming to “deal in facts — not fake news,” a Cuomo spokesman said: “The facts are unemployment has been cut nearly in half and private-sector jobs are at an all-time high in New York.”

The governor’s favorite “facts” are misleading, however.

The unemployment rate has dropped upstate because there are fewer people seeking and available for work, not because more have found jobs.

And those “record” job levels cited by Cuomo’s office are confined mainly to New York City and its suburbs. In most of upstate New York, private-sector employment is still below the 2000 level.

Cuomo has attempted to reverse the trend by spending billions on “economic development,” including new high-tech factories. So far he has little to show for it. Upstate as a whole has continued losing manufacturing jobs since 2010, even as Wisconsin and other Midwestern rust-belt states were adding them for the first time in decades.

To lure Foxconn, Wisconsin reportedly offered up to $3 billion in state tax breaks, or $230,700 per projected worker. That’s a rich package even by Albany standards — one New York couldn’t duplicate at least in part because (thanks to Cuomo) it no longer imposes any state corporate tax on manufacturers. And while upstate New York’s property taxes on homes are sky-high, property taxes on industrial plants in upstate cities are roughly equal to those in Milwaukee. Electricity rates for industrial customers in much of upstate also are competitive with those in the Midwest.

So, taxes aside, what advantages does Wisconsin offer over New York?

For one thing, it’s a right-to-work state, making it harder for unions to organize and force employees to join them. New York, by contrast, is the most heavily unionized state in the nation, and Albany is dominated by organized labor’s political agenda. Not by coincidence, New York employers are saddled with the nation’s third-highest workers’ compensation insurance rates — 54 percent above average, and 38 percent higher than Wisconsin.

While Wisconsin Gov. Scott Walker has been an aggressive deregulator, New York’s regulatory climate in general is notoriously hostile to businesses. The 1970s-era State Environmental Quality Review Act, which has no equivalent in most states, hands a potent weapon to anti-development activists.

Cuomo, while reducing corporate taxes, has pushed environmental and labor policies that can significantly boost business costs. For example, the governor hasn’t just prohibited shale-gas production via hydro-fracking; he also has blocked expansion of existing natural-gas pipelines in depressed regions such as the Southern Tier, whose few remaining manufacturers would benefit from the alternative energy source.

For all of the challenges faced by upstaters, Wisconsin’s giveaway to Foxconn is not something New York should emulate. Rather, Cuomo and legislative leaders need to dedicate themselves to the much harder, less glamorous work of creating a truly pro-growth climate — which will mean defying some of Albany’s most powerful special interest groups.

This piece originally appeared in the New York Post

______________________

E.J. McMahon is research director of the Empire Center for Public Policy and an adjunct fellow at the Manhattan Institute

Photo by Mike De Sisti / AP
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