Thursday, June 7, 2007

Would a President Giuliani Cut Taxes?

Norma Segal and I have been debating the merits of Rudy Giuliani. I have some concerns about Rudy. Specifically, he tended to obsess on minor conflicts. For instance, there was a battle with the taxi drivers that I recall caused him to redirect all of the police one day to a taxi demonstration. This was a conflict that Giuliani precipitated, similar to his threatened law suit over a New York Magazine ad. Giuliani's anti-crime initiative of ticketing minor offenses was intrusive. I recall getting parking tickets for parking five feet instead of six feet from a hydrant on 87th Street, or something like that.

Steve Malanga of City Journal argues that:

"Giuliani changed the primary mission of the police department to preventing crime from happening rather than merely responding to it...William Bratton, reorganized the NYPD, emphasizing a street-crimes unit that moved around the city..."

But I have had a long conversation with several NYPD officers and executives who said that Giuliani did not support the police in substance and left the police department with low morale and in weak organizational shape.

I am skeptical that reductions in crime rates during the 1990s were due to anything other than demographic shifts. In particular, the aging of the baby boomers reduced the percentage of the population most likely to engage in violent crimes. Also, Mario Cuomo had invested in expensive prisons during the 1980s, and these likely kept felons off the streets. I think it is a stretch to attribute reduced crime rates in New York City to Mayor Giuliani.

Malanga agrees with Norma about Giuliani's tax policies. He argues that Giuliani is a "conservative" because he cut city spending by 1.6 percent his first year in office. He also contends that Giuliani:

"reduced or eliminated 23 taxes, including the sales tax on some clothing purchases, the tax on commercial rents everywhere outside of Manhattan’s major business districts, and various taxes on small businesses and self-employed New Yorkers."

In a city that suffers from taxphilia to the degree that New York does a 1.6 percent cut in spending is a major improvement. In the scheme of things it is small change given that New York's spending is out of line and that much of it goes into wasteful government operations and mismanagement.

On August 4, 2001 Marcia van Wagner of the Citizen's Budget Commission wrote the following letter to the New York Times.

"...The common perception that Mr. Giuliani has reined in spending results from misleading city budget reporting practices that omit increased spending on debt service and do not adjust for the transfer of one year's surplus to the next.

"Accurately reported, New York City spending grew 6 percent a year from fiscal year 1997 to 2001, while inflation averaged 2.3 percent. In a comparable period (1985 to 1989) under Mr. Koch, spending grew 6.7 percent a year while inflation averaged 4.5 percent.

"New Yorkers should not believe that the recent growth in the number of police officers and teachers was accomplished with budget restraint."

According to the New York City Independent Budget Office , the city's spending increased from $32.1 billion to $36.0 billion, or 12 percent from June 1996 to June 2000. During the same period the Consumer Price Index increased by nine percent, from 157.8 to 173.7. Thus, Mayor Giuliani did not cut spending during his last four years in office, although he did not increase it very much. There may be budget shenanagans that cause these numbers to be understated, as Ms. van Wagner argues. In any case, these numbers do not qualify Mayor Giuliani as a tax cutter or as a supporter of limited government. It is true that holding the line in tax-and-spend New York is an achievement.

Can a small government Republican emerge from tax-and-spend New York?

Regarding spending, Mayor Giuliani probably is better than President Bush. But he is not a standard bearer for reductions in the scope of government or free markets. If he aims to be, he needs to make a stronger case that he is.