Free Speech For Me, But Not For Thee

If you haven't been following it, you should make yourself aware of the current effort going on in the Senate to amend the First Amendment to give governments (federal and state) the complete right to suppress the political speech of outsiders and challengers seeking to oust incumbents and change the status quo.   The proponents wouldn't put it in quite those terms, but I think that is a fair description.  Here is a summary dated June 2 of what is going on from Hans von Spakovsky and Elizabeth Slattery on the Heritage Foundation website.

An effort is underway in the Senate to amend the Constitution to restrict free speech by allowing Congress to limit fundraising and spending on political speech. A constitutional amendment proposed by Senator Tom Udall (D–NM) would grant Congress the power to regulate the raising and spending of money in elections. Supporters of this amendment claim that restricting the amount of money that may be spent on political speech and activity is not the same as limiting speech, even though “virtually every means of communicating ideas in today’s mass society requires the expenditure of money.”

Text of the proposed amendment, introduced by Senator Udall in May, would give governments the ability to limit the spending of their challengers right down to zero if they so desire.  They would have unfettered authority to set limits on:

(1) the amount of contributions to candidates for nomination for election to, or for election to, Federal [and State] office; and

(2) the amount of funds that may be spent by, in support of, or in opposition to such candidates.

Leaders of the Senate effort include majority leader Harry Reid and my own senator, the odious Chuck Schumer.  Von Spakovsky quotes Reid justifying the proposal on the basis that “the flood of special interest money…is one of the greatest threats our system of government has ever faced.”  Or here's the quote from Schumer: “It’s time for Congress to act—to reassert its role and protect the right of all Americans…without the risk of [laws] being eviscerated by a conservative Supreme Court.”

You might say that this effort is not going anywhere -- it will never get a two-thirds vote in the Senate, nor will it even come to a vote in the House. 

But meanwhile over at the U.S. Supreme Court a bare majority of five justices has the power to make the First Amendment into what Reid and Schumer want it to be just by deciding the next case.  And four of those votes -- the four so-called "liberal" justices -- are already on the court.  To judge from the dissents in recent cases, the four so-called "liberal" justices fully support the proposition that all expenditures supporting speech challenging the status quo are subject to limitation or even elimination at the behest of incumbents because such expenditures threaten corruption.   At the same time the same "liberal" justices see no issue of corruption in the government requiring the citizenry to turn their money over to those who then support the continuation and expansion of the power of the incumbents.

Am I being harsh in describing the mindset of our "liberal" justices?  You decide.  The Udall/Reid/Schumer amendment is specifically a response to the Supreme Court's 5-4 opinion, four "liberals" dissenting, in the Citizens United case in 2010.  The bare majority in that case upheld the right to unlimited independent expenditures by corporations and unions in the context of political elections.  Then we have today's 5-4 decision, four "liberals" again dissenting, in Harris v. Quinn, holding that Illinois could not force home health care workers to pay dues to the SEIU that would then be used to support the political campaigns of Democrats.  Ask yourself:  Which of these two cases involves a more direct and clear threat of rank corruption?

The endless and turgid 90 page dissent in Citizens United was written by now-retired Justice Stevens.  You get to the meat of it somewhere around page 68, where he raises what he believes to be a serious concern that independent expenditures by corporate entities are likely to be corrupting to candidates:

The insight that even technically independent expenditures can be corrupting in much the same way as direct contributions is bolstered by our decision last year in Caperton. . . . In Caperton, then, we accepted the premise that, at least in some circumstances, independent expenditures on candidate elections will raise an intolerable specter of quid pro quo corruption.

Far be it from me to say there is no potential for corruption in literally any aspect of the political process.  But I also think that fair-minded people would recognize that the big money independent spenders, whether the likes of the Kochs on the right or Soros and Steyer on the left, are in this for core reasons of ideology, and not to buy favors for their personal businesses.  Compare that to the SEIU, which is very much in the political game to get the government to compel people to become members against their will and pay dues they don't want to pay.  In the Harris case the government of Illinois directed that some of its money paid to health care workers be paid on to the SEIU, which then kept most of the money for itself and funneled a percentage of the money back into the campaigns of the Democrats who controlled the legislature.  Now read the dissent, this time written by new Justice Kagan, and see if you can find even a mention of the potential for corruption in that. 

These opinions are so long and complicated that no normally sane member of the body politic can actually understand them, even if you have the time to try.  But may I suggest that there is no making sense of them if you take at face value the assertion that the real concern is corruption of the candidates.  If that were the real concern, it would be front and center in the Harris case, and instead it is nowhere to be found.  But there is a unifying principle of the "liberal" approach, unstated but obvious, and that is this:  If we like the speech, then it should not be limited, even if the government is compelling someone to make it against his will; and if we don't like it, then the government must have the power to limit it, which of course it will then exercise.  And which speech do we like and dislike?  Simple:  We like speech that advocates maintenance of the status quo and the ongoing growth and expansion of government; and we don't like speech that opposes any aspect of the government or its ongoing expansion.

While Justice Stevens and other so-called liberals regularly railed against the potential corruption engendered by independent political expenditures, they seem to have no concern whatsoever about the government's ongoing enterprise to promote its own expansion with the use of taxpayer funds.  Would they really allow it to become illegal for anyone to push back? 

Watch Out For Rule By The "Smart"

A famous quote from William F. Buckley, Jr. is "I'd rather entrust the government of the United States to the first 400 people listed in the Boston telephone directory than to the faculty of Harvard University."  Boy did he have that one right.  The faculty of Harvard are genuinely "smart" in a simple sense of the term -- ability to solve a discrete problem, or a puzzle; ability to get a high score on an IQ test or an SAT test; ability to write a paper to get an A at Harvard.  How about judgment on big public policy questions?  Watch out!  What "smart" people also have is tremendous hubris that they have figured out everything important about the world, and that their solutions should then be imposed on everyone else through government power.

And thus we have something calling itself the Risky Business Coalition coming out this week with a big ad in the Wall Street Journal and a big report urging everyone -- not least the U.S. government through coercive means -- to take immediate and drastic action against fossil fuels to prevent "climate change."  Who are the people behind this?  The three co-chairs are seriously accomplished business people, self-made billionaires all, who undoubtedly meet any test of "smart" you could come up with:  former Mayor Mike Bloomberg; former Treasury Secretary and head of Goldman Sachs Hank Paulson; and Farallon Capital founder Tom Steyer.  As soon as you start looking at the details of this thing you realize how limited this category of "smart" is.  Bloomberg really was a pretty good mayor (given the alternatives), but he repeatedly showed himself completely subject to falling for every overhyped scientific fad without ever considering the underlying data.  (The anti-salt campaign anyone?  Trans-fats?)  Paulson was Treasury Secretary when the financial crisis hit and promptly got buffaloed into falling for every bailout request that anyone could think to make.  And Steyer?  Don't get me started.  And all three of these guys are serious private jet mega-users, who don't seem to have any comprehension that their behavior is exactly the opposite of what they want the government to force on everyone else.   Here is a Wall Street Journal compilation of several hundred trips made by Bloomberg's fleet of four private jets in just the four years from 2007 to 2010.  Did I mention that he is also a fan of private helicopters?

To someone like me who actually follows the data on this subject, the timing of this big initiative certainly seems odd.  Do these people, despite their undoubted brilliance and their many accomplishments, even know that temperatures have failed to rise for some 17 years now despite the ongoing increase of CO2 in the atmosphere?  Do they know that the models on which they and the government have relied to predict warming have been proved spectacularly wrong by the evidence of the real world? 

Or perhaps we should turn to the actual Harvard faculty to see where they are on this issue.  Those of you who did not have the honor of attending that august institution may not be aware that it is currently being consumed with the debate over whether the Harvard endowment should divest from all investments in fossil fuel companies.  Here's a roundup from the current issue of Harvard Magazine, with lots of links.  It would be hard to think of an institution with a bigger carbon footprint than Harvard, let alone the collective carbon footprint of its jet-setting faculty.  Back in April some 154 faculty members calling themselves "Harvard Faculty For Divestment" sent an open letter to the Harvard community calling for the divestment.  These signers are all undoubtedly really "smart," although if you look at the list you will find it remarkable how few scientists are on it, let alone scientists whose specialties have anything to do with climate.  The large majority are from the humanities.  But they just know that having the government force everyone but themselves to stop using fossil fuels is really, really important:

Our sense of urgency in signing this Letter cannot be overstated.  Humanity’s reliance on burning fossil fuels is leading to a marked warming of the Earth’s surface, a melting of ice the world over, a rise in sea levels, acidification of the oceans, and an extreme, wildly fluctuating, and unstable global climate.  These physical and chemical changes, some of which are expected to last hundreds, if not thousands, of years are already threatening the survival of countless species on all continents.  And because of their effects on food production, water availability, air pollution, and the emergence and spread of human infectious diseases, they pose unparalleled risks to human health and life.

Of course, not one of them indicates that he or she will cut his own carbon usage but one bit.  Nor will any one of them will support the use of some form of non-carbon-based energy that might actually work on a large scale, namely nuclear. 

At the Atlantic, Todd Gitlin, a professor at Columbia, wrote an article back in April supportive of the position of the Harvard activist faculty.  Here is the response of the first commenter:

Shorter version of this article:  Harvard activists tell worldwide poor to shiver in the dark, peasants.

Economic Prospects For New York

Most every night I see one or more taxpayer-financed ads run by the state of New York boasting that "New York is open for business."   The ads tout Governor Cuomo's program of tax free zones for business expansion, and claim that New York "is ranked No. 2 in the nation in private sector job creation."  Could this really be true?  The New York Post has an editorial this morning expressing extreme skepticism.

I've spent quite a bit of time looking today, and I can't find anything like the statistics that my tax dollars are paying to put on the television every day to fool the voters.  At the Manhattan Institute's Empire Center E.J. McMahon claims that New York private sector job growth badly lagged the national average in 2013, and he links to statistics released on June 19 by the New York State Department of Labor to back him up -- which they certainly appear to do.   Total employment for New York State up by 1.4%; for the United States up by 2.1%.  New York City slightly beat the nation with growth of 2.3%, but all the suburban counties lagged (Nassau/Suffolk +1.5%; Putnam/Rockland/Westchester +0.6%) and upstate things ranged from pitiful growth to actual declines (Binghamton -0.7%; Elmira -1.2%; Glens Falls -0.7%; Ithaca -2.0%; Syracuse - 1.0%).

Meanwhile the U.S. Conference of Mayors is out with a study of growth prospects of all U.S. major metropolitan areas from 2013 to 2020.   Here is the press release.  This was picked up today by the Wall Street Journal among others.  The study is based on analysis by economic consulting firm IHS Global Insight.   They rank the 363 metro areas from projected fastest growing to slowest.  The ten fastest are mostly in low-tax Texas, Utah and Florida.  Of the ten slowest, five are in New York:  Binghamton, Utica/Rome, Kingston, Elmira and Buffalo/Niagara Falls.  Here is a chart:

They project New York City to grow at just about the average of all American metro areas, which is pitiful given the ever-increasing predominance of the largest cities around the world as the places where everyone wants to live.

Meanwhile, on Friday Mayor de Blasio and Speaker Mark-Viverito of the City Council held a press conference to announce a budget deal for the coming (July 1 - June 30) fiscal year.  Here is the New York Times Report.  I cant find any written documentation of this as yet.  The summary is that last year they spent about $70 billion; in his May plan, de Blasio proposed to spend about $73 billion; and now that the City Council has weighed in, it's going to be about $75 billion -- a 7+% rate of spending increase when the rate of inflation is thought to be under 2%.  The basic role of the City Council in this process is to add spending for various feel-good initiatives that may or may not do anything useful:  $6.25 million to provide free lunches for every middle school student! (Poor students already got free lunches; so this is for the rich ones?)  $6.2 million to hire 200 new administrative aids for the police department!  etc.  Here is the New York Times take:

Mayor Bill de Blasio and the City Council Speaker, Melissa Mark-Viverito, have announced an agreement on a $75 billion budget that Mr. de Blasio said signaled a more compassionate era for New York City, with investments in public housing, expanded prekindergarten programs and summer jobs for youths, but with no tax increases or major cuts.

With no documentation, they continue to hide the big numbers.  Where are the retroactive raises for the teachers?  Even after the efforts of Comptroller Scott Stringer to bring some honesty to this process, it appears that only about $700 million of some $4 billion of retroactive teacher raises will be accounted for in the current year.  The rest will be deferred and hidden in future years.  And then there is the issue that the pension projections are laughable.  Not a word on that that I can find.  Hiding major fiscal time bombs in a way that would be fraud if you did it is what de Blasio and the Times refer to as "compassionate."

So we have a ball and chain of huge future obligations to drag down our economic performance for decades to come.  But as of now, it's still well hidden by politicians who continue to play for today's headlines.

 

 

 

 

The Magical Equal Protection Clause

In 1868, in the aftermath of the Civil War, the United States adopted the 14th Amendment to the Constitution.  Section 1 of that Amendment contains what is known as the Equal Protection Clause:  ". . . [N]or shall any state . . . deny to any person within its jurisdiction the equal protection of the laws."  That's the whole thing.  What could be simpler?

And now last week we have a judge in California in a case called Vergara invalidating the entire California system for  job security and tenure for teachers based on this Equal Protection Clause.  According to this report from Edvard Pettersson of Bloomberg, "Judge Rolf Treu in his tentative ruling found that low-income and minority students are disproportionately stuck with “grossly” ineffective teachers, leading him to conclude the challenged laws violate the students’ fundamental right to equality of education." 

Needless to say, the teachers unions and so-called "public education advocates" are up in arms.  Here is a round-up of their reaction from Sarah Lazare at Common Dreams.  From Dean Vogel, president of the California Teachers Association:

 This lawsuit has nothing to do with what’s best for kids, but was manufactured by a Silicon Valley millionaire and a corporate PR firm to undermine the teaching profession and push their agenda on our schools.

And this from Chicago:

 [C]ommunications director for the Chicago Teachers Union Stephanie Gadlin called the ruling "ludicrous" and "hypocritical."

The generally sensible Megan McArdle of Bloomberg View nominates the court's decision for a "Dunce Cap":  

[T]his does not seem like a very good ruling to me. Political partisans on both sides tend to treat "unconstitutional" as a synonym for "things I think oughtn't to be allowed." This is not correct, and moreover, it is profoundly destructive. The courts don't owe reverent deference to the legislature, but I do think that we should restrict the meaning of the word "unconstitutional" to, well, things the constitution doesn't allow, rather than expanding it to things the constitution shouldn't allow. Every time we use the latter definition, we travel further down the road toward rule by unelected boards of elderly lawyers.

Excellent point, Megan.  But isn't equating "unconstitutional" with "things I think oughtn't to be allowed" what the Equal Protection Clause has been about for a long time?  For decades the Equal Protection Clause has been the all-purpose mechanism for the Left to implement the items of its agenda that could not get through a legislature.  Well, you may achieve some result you like today, but now you have conceded great power to what Megan calls "unelected boards of elderly lawyers," and some day they are going to make some very major decisions that you don't like.  And then, what are you going to do about it?

The problem with the Equal Protection Clause has always been that of course every law treats some people differently from others; indeed, generally that's the whole idea.  For example, criminal laws impose crushing burdens on criminals, and few burdens at all on the law-abiding.  Could that really be unconstitutional?  If not, what is the principled distinction between that and all the other instances where equal protection challenges have been upheld?

McArdle prefaces her argument with the admission that "I Am Not a Lawyer," seemingly conceding that lawyers must have some insights into the proper boundaries of the equal protection elixir.  Well, I am a lawyer, and if there are any such boundaries I've never figured them out.  You can know as much about this as pretty much any lawyer by reading the next couple of paragraphs.

After the enactment of the 14th Amendment, the southern states proceeded to implement the system of overt racial segregation known as "Jim Crow."  In 1896 a case called Plessy v. Ferguson reached the Supreme Court, challenging a Louisiana statute that mandated segregated accommodations for blacks and whites on railroads.  The Supreme Court upheld the statute and, more generally, the concept of so-called "separate but equal facilities."  And there the matter stood until the famous 1954 Supreme Court decision in Brown v. Board of Education, which reversed Plessy and held that segregated public schools were inherently unequal and therefore violated the Equal Protection Clause.  Brown brought about a revolution in public education, with federal judges basically taking over and running hundreds of local school districts.  Essentially nobody today would disagree with Brown as it applies to de jure racial segregation.  But the problem with Brown is that it set no boundaries for the invocation of the Equal Protection Clause.

And thus we have six succeeding decades in which the courts have found one new area after another for applying the Equal Protection Clause to invalidate large swaths of state laws and even state constitutions.  As just a small partial list, consider:

•  Baker v. Carr (1962), where the Supreme Court decided that districting of state legislatures implicated the Equal Protection Clause, and (together with subsequent cases) required all states to draw districts in accordance with the principle of "one man, one vote."  (If applied to the federal government, this principle would invalidate the Senate.)  Since 1962 the federal courts have micro-managed many state legislative districting decisions.
• Serrano v. Priest (1971), where the California Supreme Court invalidated the state school finance system, which had been largely derived from local property taxes, again based on the Equal Protection Clause.  The Serrano decision was then followed by the courts of numerous other states, who forced on state legislatures new financing systems that had not previously gained democratic support.
• Plyler v. Doe (1982), where the Supreme Court struck down as a violation of equal protection a Texas statute that denied funding to local school districts for the education of children who were not "legally admitted" into the United States.
• The fight for same-sex marriage has proceeded largely under the banner of the Equal Protection Clause (although on this one, the Due Process Clause has also gotten into the act; for example, the Supreme Court found the basis to strike down DOMA in the 5th Amendment's Due Process Clause, since the Equal Protection Clause of the 14th Amendment only applies to the states).  Numerous courts, federal and state, have used the Equal Protection Clause to strike down one or another statute or referendum that attempted to restrict marriage to a man and a woman.  (Note that New York has about the most honorable record of any state on enactment of same sex marriage:  the Court of Appeals in 2006 declined to order it as a matter of the constitution, and thereupon the state legislature enacted a legalizing statute in 2011).

At this point the Equal Protection genie has been out of the bottle for a long time.  Judge Treu's decision may seem a stretch at first blush, but is it really much more of a stretch than Serrano, which is indeed the main authority on which it relies?  Seems to me that those who have never to date spoken out about overreaching equal protection jurisprudence but now argue that the Vergara decision is wrong have a burden to articulate some kind of a principled boundary on where the Equal Protection Clause ends.  And that boundary had better not be too obviously reverse-engineered to preserve just the decisions you like.

Infinite Credit Card Update, Cantor/Brat Edition

To the progressive -- and unfortunately to many Republicans as well -- it seems that the federal government has limitless borrowing capacity, thus making it possible for the government to cover all the downside risk of life.  And if it is possible for the government to cover all the downside risk of life, then isn't it a moral imperative that it must do so?  The next thing you know we have the government as infinite insurer for everything that is even a little hard to insure right through all the things we used to think were completely uninsurable.  "Uninsurable" -- what's that?  With an infinite credit card, nothing's uninsurable.

This only really got started in the 1960s, but within a few short decades we have government as the infinite insurer of everyone's health; of nearly all home mortgages; of nearly all student loans; of nearly all natural disasters, including hurricanes and other flooding events; of all pensions; of terrorist attacks; and I could go on.

What could go wrong?  The federal government is so huge and has so much taxing power that it could never really go the way of little Detroit, right?  Can anybody name an entire country where government overcommitments actually destroyed the economy and left the people impoverished?  (Well, yes.  In descending order of disastrousness, Venezuela, Argentina, Greece, Portugal, Spain, etc., etc., etc.   And don't forget the entire continent of Africa.)

In the U.S. the gradual government takeover as infinite last resort insurer of everything has proceeded with remarkably little push-back.  Fannie and Freddie have long enjoyed bipartisan support even as they gradually used the government credit card to take over the whole home lending market, run up multiple trillions in debt, and then blow up and cost the taxpayers hundreds of billions.  The big promoter of government flood insurance, as much as anyone else, was then Republican New York Senator Alphonse D'Amato, for whom it was a great payback to the wealthy Long Island beachfront homeowners who financed his campaigns. 

Or let's consider TRIA (Terrorism Risk Insurance Act of 2002).  Prior to 9/11 the government was not in the business of insuring against the risk of terrorism.  After 9/11, insurance companies that had just taken a big hit proposed either excluding the coverage altogether or making terrorism insurance a separate item at huge additional premium.  Maurice "Hank" Greenberg, then CEO of the largest property/casualty insurer AIG, led an industry effort to get the federal government to step up to provide what they called a "temporary backstop" for the terrorism insurance market.  With the "temporary backstop," they claimed, the market could stabilize and the private insurers would gradually come back in.   (Aside:  Greenberg is generally a friend of free markets, and in some recent years has been the Chairman of the market-oriented think tank called the Manhattan Institute.  But it is remarkable how quickly a businessman can turn to crony capitalist when the opportunity presents itself to get access to the government credit card to enhance his own bottom line.  TRIA was one of the great crony capitalist coups of all time -- the insurance companies get the premium and the federal government takes the downside risk.)

So in 2002 the government enacted TRIA.  And surprise, with the government occupying the field, no private market whatsoever has re-emerged.  TRIA is now up for renewal, and Business Insurance in its current edition has the sordid story.  (Sorry I can't find a link -- but I read this obscure trade publication so you don't have to.)  Of course, the American Insurance Association is strongly backing the renewal.  The renewal has just cleared the Senate Banking, Housing and Urban Affairs Committee, and is on its way to the full Senate and then the House:

A key U.S. Senate panel's unanimous approval of a bill to extend the federal terrorism insurance backstop by seven years should speed the reauthorization process in the full Senate, supporters of the legislation contend.  However, passage in the House of Representatives is uncertain and getting it done in a year of Congressional mid-term elections could make it more difficult. 

If it was unanimous (22-0) in the Senate Banking Committee, why any problem in the House?  It's because over there there are actually a few Congresspersons who are catching on to the problem of this infinite credit card thing.  Not the least of these is one Jeb Hensarling of Texas, who is Chairman of the House Financial Services Committee.  Here are some excerpts from remarks that Hensarling gave at a hearing last September on the subject of renewing TRIA:

At the time [2002] it was a thought that originally the TRIA act would give the insurance industry time to re-capitalize and develop new models that they could price for terrorism risks and increase industry capacity. Three years later in 2005 Congress decided to make TRIA a little less temporary and extended it for two years. In 2007, Congress was back again to stretch the boundaries of modern linguistics by extending TRIA temporarily for seven additional years and expanding it to cover any acts of terrorism, foreign or domestic. So we all must recognize that in just five years TRIA has leapt in scope and quadrupled in length, neither of which I think could be mistaken for facilitating a transition to a viable market for private terrorism risk insurance. . . .

[H]ow can we be convinced that the federal government is any better as our National Flood Insurance Program is under water, pun intended? PBGC, $34 billion deficit, and as we look at the national debt clock, which I know is inconvenient to some, it principally turns because insurance programs -- be they social insurance programs such as Social Security and Medicare or others -- the government has not done a particularly good job. That ladies and gentlemen, represents a man-made disaster.

Hensarling is also known, by the way, as the proponent of the most comprehensive (although far from perfect) proposal to wind down Fannie and Freddie and get rid of them permanently.

And now we come to the subject of Cantor and Brat.  Brat has actually spoken strongly on the subject of getting rid of Fannie and Freddie.  Cantor?  He just didn't see this issue of the government taking on infinite insurance obligations as something worth fighting over with the other side.  For example, this from the Wall Street Journal of June 10:

Already this year, Mr. Cantor had drawn conservative resistance by striking a deal with Democrats on flood insurance that bypassed Mr. Hensarling's committee.

So perhaps there is hope that TRIA will actually be killed in the House.  And the rest of the federal infinite insurance program?  That will require getting together some critical mass of people who pay attention to the issue and understand its significance.  Maybe we will soon have at least one more. 

A Couple Of People Are Actually Catching On To The Affordable Housing Scam

In several prior posts I have noted that it is virtually unanimous here in Manhattan that more so-called "affordable housing" on our island is a good idea.  See, for example, here and here.  You literally need to have no understanding of numbers whatsoever to possibly think this makes sense.  But hey, this is Manhattan!

But just in the last several days, I would like to welcome a few people to the ranks of the tiny minority who are at least raising questions:  Greg David at Crain's New York Business, in an article yesterday titled "Not-so affordable housing"; Josh Barro at the New York Times Upshot blog on Saturday (also appeared in the print edition in the Business Section on Sunday) titled "Affordable Housing That's Very Costly"; and a Crain's article from yesterday titled "City calls $500K-per-unit Harlem housing 'affordable'".

Barro highlights a new development called the Abington House at 500 West 30th Street, near the trendy High Line park in West Chelsea.  This is a large building with about 400 apartments, of which 20%, or 78, have been designated as "affordable."  Using 2 bedroom apartments as his benchmark, Barro notes that the market-rate units range in price from $5850 to $8695 per month.  That's over $100,000 per year at the top end!  But the "affordable" 2-bedroom units (of which there are 17) have rents of only $687 to $873 per month -- about a 90% discount.  These apartments go to people chosen by a lottery who supposedly have annual incomes in the range of $25,612 to $42,950.

From the point of view of the City budget, this is a freebie -- nothing on the balance sheet, nothing on the income statement.  We "helped" 78 families and it didn't cost the taxpayers a dime!  But Barro correctly notes that this is an illusion.  The subsidy to each lucky family averages about $90,000 per year.  And these families aren't even poor!  Also, remember that nobody who gets one of these apartments ever moves out.  OK, that's a little bit of an exaggeration, but not much.  The New York City Housing Authority actually publishes figures for annual turnover in its steeply subsidized units, and it's around 3%.  That's equivalent to saying that virtually no one ever leaves except in a coffin.  If you figure that each lucky family is going to claim the $90,000 annual subsidy for an average of about 30 years, you can see that this is really a gift of close to $2 million per family on a present value basis.  Wow!

Tuesday's Crain's article by Joe Anuta highlights a new all-"affordable" development in Harlem at 404 West 155th Street.  There are 124 units, with an average cost (Anuta cites data from the City's Department of Housing Preservation and Development) of over $500,000 per unit.  Compared to the Abington, that's dirt cheap!  Anuta gives the rent for a three-bedroom as $1588 per month. 

Here's a picture of the development -- Could it be more hideous? 

This makes the old time "projects" that New York is famous for look positively pleasant.  If you didn't know what it was, you would probably guess it's a prison.  And yet that $500,000 cost per unit is about two and a half times the approximately $200,000 median price of a single family home in this country.   And again, the recipients of this largesse are not going to be poor, because the actual poor could not afford even these deeply subsidized rents.  Instead, the income range for this project is up to $42,950 for a family of four, up to $79,700 for a family of six.

Greg David, the editor of Crain's, correctly points out that the only way to look at this is from the view of opportunity cost.

First, if the city asked for a cash payment from the developer, it could assist far more people in less expensive neighborhoods.  Second, the unsubsidized rents are higher than they would be if no subsidy were required. Admittedly, to understand this you must accept that rents are soaring in the city precisely because about 1 million units are rent regulated. I doubt the mayor would agree, but it is Econ 101.

David doesn't work through the numbers, so let's do it for him.  You have forced a developer (as a condition of permission to build) to give each lucky family a gift of present value of approximately $2 million of subsidized housing in Manhattan.  But only 78 families get the gift.  If you got the $2 million per family in cash from the developer, you could easily provide the same housing in a less-desirable neighborhood in an outer borough for three or four times as many families.  Or how about thinking outside the box?  You could provide comparable housing for easily 20 times as many families in Detroit.

And then there's thinking really outside the box.  How about the developer gets to keep the extra $160 million or so as profit?  If he behaves like all other developers, he'll immediately want to use that profit to build several more new buildings; and if those succeed comparably, he'll go back and build still more.  And before you know it the increase in supply will drive the price of the new apartments down to the cost of production, and even put pressure on the construction industry and land sellers to reduce costs.  This is the process that works so well in places like Houston and Las Vegas, but hasn't been allowed to operate in New York since before World War II.  This is so long ago that it's beyond human memory.  And lord knows that we can't look to unsophisticated provinces like Houston for any guidance! 

Unfortunately, there are lots of opportunities for graft in the "affordable housing" racket.  Developers get tax breaks to induce them to build, let alone in many instances sites are not put up for auction but rather given to "designated" developers who make promises that politicians like.  And the "affordable housing" developers are a great source of political contributions.  So the only way to return to sanity is for the public to catch on.  Well, now we at least have a toe in the door.