Politics on the Hudson

   A few economists who participated in the Legislature’s and Division of Budget’s economic forecasting conference today said they don’t think New York should raise taxes and fees or reduce spending to get the state into a better financial position.  Jonathan Haughton, a senior economist with Suffolk University’s Beacon Hill Institute in Boston, said a higher income tax on wealthy New Yorkers could cost the state about 22,000 private-sector jobs. He also criticized a proposed tax on non-diet sodas, known as the “obesity tax.”

   Sen. Liz Krueger, D-Manhattan, said the state isn’t in private business and has to respond to people who need help.

   Gov. David Paterson’s proposed budget implements or raises a host of fees, including the soda tax. A group of Senate Democrats have proposed a higher income tax on the rich to help get New York out of its $14 billion in debt, and Assembly Speaker Sheldon Silver, D-Manhattan, has indicated his support for the measure. The federal stimulus package money will help alleviate some of the state’s financial problems.

   As part of the budget-development process, the Senate, Assembly and governor’s office have to come to a consensus on economic and revenue forecasts. The forecasting conference took place earlier than usual this year in hopes of completing the 2009-10 budget before the deadline of March 31, when the current fiscal year ends, said Laura Anglin, Paterson’s budget director.

   All sides agree that the Wall Street collapse and reduction in bonuses have hurt state government.  The Assembly Majority budget report said the extent to which the Wall Street landscape will be permanently changed is unclear, which contributes to the ambiguity surrounding the state’s economic outlook.

   The Assembly Ways and Means Committee and Budget Division both predict that wages will fall 4.1 percent in New York this year. New York will lose 267,760 jobs during the current downturn, 5.1 percent of the total national job loss, the Assembly report said.

   The Senate Finance Committee predicts higher state and national unemployment numbers, slightly lower non-wage or bonus payments and lower Gross Domestic Product growth than the Division of Budget. As a consequence, it expects less revenue to be collected in almost all major tax categories. The Senate projects that all funds collections in 2009-10 will be $695 million lower than the Budget Division’s projections.

   Chris Varvares, president of Macroeconomic Advisers, predicted there would be a deep recession through mid-2009, followed by below-trend growth in the second half of the year and robust growth in 2010.

   James Orr of the Federal Reserve Bank of New York said economic conditions in upstate New York have not deteriorated as much as they have nationally, and upstate real estate markets have weakened much less than nationally and downstate.

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