Can't They Understand That Their Policies Are Counterproductive?

The Wall Street Journal recently has added a "Greater New York" section that you outlanders don't seem to get.  In this morning's version we find a report that yesterday our illustrious Mayor Bill de Blasio spoke at a breakfast forum in Washington sponsored by Politico.  (The on-line Journal article is behind a paywall, but Politico has video here.)  Of course, de Blasio took the occasion to advocate that if the Democrats want to recover and win in 2016, they need to get behind his "progressive" agenda, most particularly the fight against income inequality.  And also, of course, that the person to lead this effort is Hillary Clinton.

The Democrat should be willing to challenge the status quo. . . .  The Democrat should be willing to challenge wealthy and powerful interests and should marry that with a grass-roots organizing strategy that epitomizes the message. . . . 

Now, do you think that Mr. de Blasio's interviewer from Politico, Mike Allen, would have thought to ask how he could possibly have any credibility on the income inequality issue when the highest measured income inequality in the country is right here under his nose in Manhattan?  Needless to say, the issue did not come up, at least not in the portions quoted in the Journal article and not in the video that Politico has posted.  That's what it means to have subservient house journalists -- you can be interviewed by them, secure in the knowledge that they will not ask any difficult or embarrassing question, no matter how glaringly obvious.  Meanwhile, as I have pointed out here multiple times, a study of all Congressional districts shows that NY-10 has the highest "Gini coefficient" of all Congressional districts; and NY-12 is number 3.  Mayor de Blasio's office, at City Hall, is in the NY-10 district.

So really, isn't it obvious to everyone with a pulse that New York's collection of policies makes income inequality worse rather than better, at least as measured by the most widely used metrics?

Over the past weekend, the New York Times published an article in its Real Estate section that unintentionally illustrated how this comes about.  The article is titled "Divided by a Windfall," and describes the tensions that have arisen in a large Manhattan "affordable housing" complex from a proposal to remove the complex from the affordable housing program and allow the apartments to be sold on the free market.

Of course, "affordable housing" is de Blasio's favorite program above all others to address income inequality.  Yet from all anyone can observe about the man, he seems to be completely unaware that affordable housing programs clearly and obviously increase measured poverty and income inequality.  That's because the value of the rent saved by a low-income family through having a discounted rent is not counted as income.  Here in Manhattan, many families get rent discounts of $50,000 per year, and some get discounts of over $100,000 per year, none of which counts in their measured income.  Meanwhile, very sensibly, these people minimize their measured incomes by various means in order to qualify for these huge rent subsidies.

The project under examination by the Times is called Southbridge Towers.  It's not one of the low-income NYCHA projects that I proposed giving away in my article last week, but rather falls under one of the many other wacky New York housing subsidy schemes, this one called the Mitchell-Lama co-op.  According to the Times article, there are about 70,000 units of this type in New York (most outside of Manhattan).  The basic deal was this:  The state finances construction with tax exempt bonds.  You apply in a lottery for an apartment, and if you win, you get your apartment for a steeply discounted price.  (The Times gives the average price paid at Southbridge as $17,500.)  Theoretically, you "own" the apartment; but when you sell, you must sell back to the co-op corporation itself, and the price must be exactly what you had paid, here an average of $17,500.

Of course, with a desirable downtown Manhattan location (in fact quite near de Blasio's office at City Hall), these apartments are now worth an average of over $500,000; some may even be worth $1 million.  Can the residents cash in?  Actually, it's specifically permitted after a fixed period of years, as long as they re-pay the state-subsidized mortgage and refinance it privately.  So a proposal to do just that was presented to the shareholders at Southbridge, and passed in September.

A win-win you say?  You don't understand official New York thinking. 

“It’s a sad day for affordable housing in New York,” said John Fratta, 61, the only member of the 15-member Southbridge Towers co-op board to oppose the decision. “It’s really a tragedy.” . . . Mayor Bill de Blasio’s housing plan even suggests reaching out to former Mitchell-Lama developments to see if residents would consider returning to the fold.

Nobody in the article is actually able to articulate why exactly it is a "tragedy."  This complex has 1,651 units, which means that at over $500,000 per unit, it's worth close to $1 billion.  That's a billion dollars of value that has been locked away and prevented from entering the economy or anyone's income by brain-dead restrictions on resale.  Now suddenly a billion dollars of income will be created out of thin air.  Or, as the co-op board president who spearheaded the privitization put it:

“People of modest means now have an asset worth hundreds of thousands of dollars,” said Wallace Dimson, 68, the president of the Southbridge Towers co-op board.

And it's not just that they can sell the apartment.  There are lots of other ways to monetize some or all of the value once market sale is allowed.  For example, you can borrow against the value.

Well, it's not hard to see why de Blasio hates this privitization thing.  The process makes it glaringly obvious how ridiculous the affordable housing program was in the first place.

Letter To A Manhattan Resident

Last week the Manhattan Institute's City Journal published one of my articles, titled "Letter to a Manhattan Resident."  I'm putting the first part of it here, with a link over to the City Journal if you want to read the whole thing.

I am a resident of Greenwich Village in Manhattan. Recently, I received a letter from an oddly named group calling itself “The Rest of the Country.” Since the letter is not addressed specifically to me, I thought the senders wouldn’t mind if I shared it more widely.

Dear Manhattan Resident:

We could not help but notice that we voted very differently out here than you and your Manhattan neighbors did in the recent midterm elections. We sent large Republican majorities to the U.S. House and Senate, and also elected large majorities of Republicans to state governorships and legislatures. But in Manhattan, Democrats prevailed by huge margins in every one of 25 races for U.S. House, statewide offices, and the state legislature. In the races for New York governor, comptroller, and attorney general, the Republican candidates each got only about 13 percent of the vote in Manhattan. In 22 races for federal and state legislative offices, the Republican candidates got less than 10 percent of Manhattan’s votes in six of them, and less than 20 percent of the votes in another seven. And in five of the 22 races, including two of the four for U.S. House, no Republican candidate ran at all. The most successful Republican contender in Manhattan got 32 percent of the vote in an Upper East Side assembly district. His Democratic opponent won with twice as many votes.

Out here we regularly read newspapers and watch television news reports emanating from Manhattan. We understand that you think we are stupid, if not immoral, in our failure to support the “progressive” public policy agenda of your Democratic politicians. But given the huge disparity between our patterns of voting and yours, we thought we should explain how we see things.

By per capita income, Manhattan is the richest county in the country. In New York, and in Manhattan specifically, you have put in place more government programs to address poverty and income inequality than has any other state or locality. You have higher taxes than any other jurisdiction. You have a vast array of housing programs, from extensive low-income public housing, to rent regulation, to multiple “affordable housing” initiatives. Your welfare programs are the nation’s most generous. You have the most generous Medicaid program, too. And you spend almost double the national average per student on K-12 education.

Yet, even with all those programs and all that spending, according to Census Bureau statistics, Manhattan’s poverty rate is above the national average. And in a recent study of income inequality broken down by congressional district, a Manhattan district, NY-10, was shown to have the highest income inequality of all 435 districts in the whole country; and another Manhattan district, NY-12, came in third.

Continue reading . . .

Competition For Stupidest Policy Initiative Of The Week

Every week some seriously stupid policy proposals get floated by our great leaders.  But this past week somehow had a few that were even stupider than usual. 

First up, there's the one that you would think cannot be topped.  I'm referring of course to President Obama's climate change agreement with President Xi Jinping of China.   Really, when Obama left town Xi must have laughed so hard that he split a gut.  Under the agreement, the U.S. pledges to reduce its CO2 emissions by 26-28% below 2005 base by 2025, while China pledges only to achieve "peaking" of CO2 emissions by 2030.  Here is the key text of the joint announcement:

Today, the Presidents of the United States and China announced their respective post-2020 actions on climate change, recognizing that these actions are part of the longer range effort to transition to low-carbon economies, mindful of the global temperature goal of 2℃. The United States intends to achieve an economy-wide target of reducing its emissions by 26%-28% below its 2005 level in 2025 and to make best efforts to reduce its emissions by 28%. China intends to achieve the peaking of CO2 emissions around 2030 and to make best efforts to peak early and intends to increase the share of non-fossil fuels in primary energy consumption to around 20% by 2030. Both sides intend to continue to work to increase ambition over time.

You might say for starters that this is entirely a charade, only applying to a period when these leaders will be long gone, and their successors will likely pay no attention whatsoever.  Maybe true.  But assume it is real.  In terms of actual emissions, what are the two sides saying they will do?

On the U.S. side, this agreement would mean undergoing a giant transformation over the next ten years of our means of generating electricity.  According to Wikipedia from EIA data for 2012, we have 557 coal power plants generating 1,514,043 GWH of electricity per year, which is 37.4% of our total electricity output.  Barring a sudden revival of nuclear power, the feasible way to achieve Obama's goal by 2025 is to shut most of that coal capacity down and replace it with natural gas.  The EPA already has regulations in the works to force most of U.S. coal electricity-generating capacity out of business.  The cost of changing several hundred power plants from coal to natural gas?  Perhaps a few hundred billion, to be buried in your skyrocketing electric bill.  Meanwhile, better hope that the natural gas "fracking" boom continues to keep natural gas prices low.

And for China?  They don't even suggest starting any capacity-restricting efforts before 2030.  So during the years that we are shutting down hundreds of coal power plants at enormous cost, they are building hundreds more of them. How many?  The total capacity they will build in that period is going to be a multiple of what we ever had.  Here is a chart from Climate Central showing to-date and projected coal electricity-generating capacity in China and the U.S.:

We have about 500 coal power plants now.  They have about 1000, and while we're shutting down our 500, they'll just build another 1000 and get to 2000!  Oh, are they supposed to achieve "peaking" by 2030?  OK then, they'll just build the last couple of hundred plants a few years earlier than otherwise planned! Or, perhaps more likely, they'll just get to 2030, look over at a U.S. that has hobbled its economy for no reason by closing down its entire coal power capacity, and say, "Sorry, we changed our minds."

Needless to say, this agreement came to great cheer-leading from the usual suspects, like the New York Times ("landmark agreement . . . signature achievement"), Krugman ("really important . . . a big deal") and NPR ("inject[s] fresh momentum into the global fight against climate change . . . unexpected breakthrough").  The Wall Street Journal even gave an op-ed to Fred Krupp of EDF (who calls the agreement "a game changer").  Can any of these people count?  The amazing thing to me is their level of arrogance and smug superiority even as they show off their total stupidity.

Well, is it really possible even to compete with that one for the title of Stupid Policy of the Week?  Believe it or not, I have a candidate.  New York City's Public Advocate, Letitia James, has proposed expanding the City's defined benefit pension plans to include all workers in the private sector.  According to the Wall Street Journal on Thursday November 13:

Public Advocate Letitia James wants to create a centrally pooled retirement fund in the next 15 years that would be open to any private-sector New York City worker who doesn’t have access to a pension. . . .  “Quite simply, too many New Yorkers are not prepared for retirement,” Ms. James said at a breakfast meeting of the Association for a Better New York.

It seems that Ms. James has not noticed that defined benefit pension plans are gradually destroying the public sector employers that sponsor them.  So it must be time to multiply our commitments by, say, a factor of ten!  Ms. James, after all, is the close ally of Mayor Bill de Blasio -- the guy who managed to give his first budget speech earlier this year without ever mentioning the pension issue.

Yes, these are the people who think they should be running our lives.  

In Manhattan, It's Time To Give Away The Public Housing

I have previously nominated so-called "affordable housing" in Manhattan as the "worst possible public policy."  But the question arises, what to do about it?  The answer is remarkably simple, because everything about this policy makes everyone involved with it worse off.  Thus any and all ways of getting rid of public housing will make everyone involved better off.  My preferred solution is to give away the public housing buildings to the residents.  What I can't understand is why nobody else out there is pushing this idea.

Consider the disaster that is public housing in Manhattan today.  (I'm only focusing on Manhattan because that is the focus of this blog; similar facts can be compiled for all of New York City.)  We have in Manhattan 53,570 units of low income housing run by the New York City Housing Authority, lived in by around 120,000 people, presumably nearly all of them low-income.  While some of them are likely not in "poverty," the ones who are constitute a sizable chunk of the 285,000 or so people who the Census Bureau asserts are living in "poverty" in Manhattan.  Yet all of these people receive deeply discounted apartments, the value of which is not counted in their "poverty" status.  When the Manhattan NYCHA projects were built, most of them were located in slums or otherwise in out-of-the-way areas with low housing values.  Not so today -- there is no such thing as a bad neighborhood in Manhattan any more.   In the Chelsea neighborhood, the projects have come to be surrounded by new condos, trendy art galleries, and the High Line park.  Other projects are located right next to some of the most expensive parts of the Upper East and Upper West Sides.  On the Lower East Side, some projects line the East River, with coveted waterfront views.  The discount on lifetime rent received by the residents easily has a present value of $1 million per family, and over $2 million in many cases.  But the families have no access to cash to spend and are deemed in most cases to be in "poverty."  The buildings pay no property taxes, have a huge backlog of billions of dollars in needed repairs, and are a serious drain on all other taxpayers of the City.

In public ownership, these projects have zero value.  Nobody owns them, and nobody can sell them.  What would their value be if privately owned?   The median value of privately-owned apartments in Manhattan is right around $1 million.  OK, presumably public housing units would be worth less than that, but don't forget that location is a much more important determinant of value than physical condition.  If the average value of these apartments is $500,000 (which I think is low), then we have about $25 billion of value trapped in these projects.  If the average value is $1 million, then it's well over $50 billion.  There is a huge amount of value trapped here and waiting to be unlocked.

Giving the apartments to the residents opens infinite possibilities:

• They can now rent out rooms for cash income previously unavailable to them.
• Or they can rent out the whole apartment, rent a cheaper place somewhere else, and pocket the difference to live on.
• Or, for many apartments, they can divide them in half, sell or rent one half, and use the income to live in the remainder.
• Or they can sell the whole apartment, become a millionaire, and go live somewhere cheaper.
• Or they can borrow against the apartment, and use the proceeds for all kinds of personal betterment, from going back to school to starting a small business.
• Owners of these buildings as condos could build additional buildings on unused adjacent land and pocket the proceeds.  When the City recently proposed to build additional buildings on NYCHA vacant land, many tenants protested vigorously.  Watch them do a 180 and start new developments themselves when suddenly they get to pocket the money and get rich from selling the new apartments.

The residents go immediately from poverty to relative wealth, with real net worth (in many cases millionaires) and lots of possibilities for generating serious income and spendable cash for the first time in their lives.  Meanwhile, the buildings will promptly have the ability to charge maintenance fees sufficient to keep the property in good repair.  The buildings stop being a drain on the taxpayers, and indeed, could even start to generate some property taxes (I would recommend that this be phased in slowly).

Needless to say, this proposal is anathema to the Manhattan progressive.  Yet I have never heard any coherent reason to oppose my plan.  The usual response goes something like: "We should live in a community that is open to people of all income levels."  Sounds good at first blush, until you realize that what they're really saying is that we should keep the poor poor so that my lefty college classmates won't ridicule me for living in the wealthy enclave of Manhattan.  Well, what happened to the idea of making it possible for the poor to get out of poverty?  The residents of Manhattan public housing are living, breathing human beings who deserve the opportunity to escape from poverty and achieve success in the world; they are not animals to be kept imprisoned in a zoo for the viewing pleasure of their superiors. 

Here we have an unused $25 to $50 billion or so, sitting on the table and completely available for promptly removing tens of thousands of people from poverty with the wherewithal to live on their own free from government dependency.  And the reason not to do that is -- what? 

In Government, Failure Is The Route To Success

For today, I'll stop harping on the fraud by which the "poverty" rate is kept intentionally high in order to sell the gullible public on yet more "anti-poverty" spending, and turn to another example of the same phenomenon.

If you had been around Manhattan for the last week in the run-up to the election, you would have seen that most of the campaign literature being distributed for local races stressed the same theme, which was the supposed need for more "resources" for our beleaguered public schools.  All of this literature came from Democratic candidates, substantially funded by the teachers union and other public employee unions.  In the case of my own household, although we had Republican candidates running for State Senate and State Assembly in our district (in most elections we don't), we did not receive a single piece of campaign literature from the Republican candidates -- they were that badly funded.

As just one example, consider the campaign of Rebecca Seawright, the Democratic candidate in the one semi-competitive race in Manhattan, previously covered by me in the article entitled "Can A Republican Win A Political Office In Manhattan?"  (Ms. Seawright ended up winning the race 65/32 over her Republican opponent.)  Here is an excerpt from her website giving her position on education funding:

As the mother of two public school kids and PTA mom, Rebecca has personally experienced the fallout from overcrowding in our city’s schools. . . .    Long-term, we need to invest in renovating existing schools as well as constructing new ones.  But as we set aside the space and money to build, we need to find a way to address the needs of our neighborhood’s children now, even if that means being a little creative.

In literally no campaign discussion that I can find was it mentioned that in New York we spend nearly double the national average per pupil on K-12 education.   I'll bet that not one voter in one hundred knows that fact. 

Meanwhile, for all that money, large numbers of the public schools are failing.  In an editorial this morning, the New York Post has some of the numbers:

At 371 schools, 90 percent of the kids — 90 percent! — aren’t making the grade. Altogether, that’s 143,000 students whose futures are at stake.

Prior Mayor Mike Bloomberg, to his credit, had a plan to deal with the failing schools by imposing some accountability:  he closed large numbers of them, while opening new ones with new management teams, and also encouraging a substantial expansion of charter schools outside the stifling union control. 

Now we have de Blasio.  His idea?  The failing schools just need some more money!  On Monday (November 3) de Blasio announced a new program -- called his "School Renewal Program" -- for additional spending on the worst public schools.  From Monday's New York Times: 

The new program will designate 94 of the city’s most troubled schools, including the Coalition School, as Renewal Schools based on a list of criteria including low four-year graduation rates for high schools and poor test scores for middle and elementary schools. Students at those schools will receive an extra hour of instructional time each day, teachers will have extra professional training, and the schools will be encouraged to offer summer school. The schools will also be given additional resources, with $150 million spread over two years, about $39 million for this school year and $111 million in the next.

Yes, it is the very worst failures among all the schools that are getting rewarded by the new gusher of money.  Seems like the idea is, if you just give the same incompetent people more money to do the exact same thing that they have been doing so far, they will magically overcome their failure.

The Post heaps completely appropriate scorn on the plan, calling it the "Teacher Protection Program."

Under this program, the city’s 94 worst schools will be shielded from any serious accountability for three years (and probably longer) while their students remain trapped without any real hope of escape.  After that, the program hints vaguely at possible changes. But the smart money holds that by then Team de Blasio will have brand new excuses to keep the failing schools going — and the kids inside trapped.

Well, if I were a principal of one of the second-hundred worst schools, I know the lesson I would learn from this:  If I can only fail the kids a little worse next year, I can get myself a few extra million too! 

Meanwhile, the voters keep getting tricked year after year into supporting the idea that if only the schools had a little more money they'd be fixed.  If only say 20% of us could learn that our schools already get double the national average, we could at least try to end this insanity.

Manhattan Election Roundup

Yesterday, there was a big Republican "wave" election.  You undoubtedly know that the Republicans took control of the U.S. Senate, made gains in the House, and took many governorships, even in very "blue" states like Massachusetts, Illinois and Maryland.  Here in New York, you may also know that the Republicans took control of the New York State Senate, which is something of an accomplishment in this very blue state.  

But I'll bet the question at the top of all of your minds is, how did the Republicans do in Manhattan?  I know I teased your curiosity about this subject with an article two weeks ago titled "Can A Republican Win A Political Office In Manhattan?"  If you read that article, you know that going into the election every single elected official at any level whose district covers any part of Manhattan was a Democrat.  Well, rest easy:  that has not changed.  But what's even more remarkable is how, even in this year where Republicans were cleaning up literally everywhere else, their existence is barely noticed here in Manhattan.  So I've put together a little compilation of the election results to show you just how lopsided this is.  The data come from the New York State Board of Elections.  When districts overlap into parts of Brooklyn and Queens, I've included just the data for the Manhattan part of the district.

U.S. Congress

District 7 (Lower East Side): Dem 78%; Rep 9.5%; Con 2%; Blank 10.4% (Blank beat the Republican!)

District 10 (my district): Dem 85%; Con 8%; Blank 7% (No Republican candidate!)

District 12 (East Side): Dem 76%; Rep 21%; Blank 3% (Good showing!)

District 13 (Uptown/Harlem): Dem 75%; Green 11%; Blank 14% (No Rep or Con candidate!)

State Senate

District 26 (Downtown): Dem 79%; Rep 14%; Blank 7% (Republican beats blank!)

District 27 (my district): Dem 80%; Rep 13%; Blank 6% (We had a Republican candidate!)

District 28 (East Side): Dem 72%; Rep 26%; Blank 3% (Good showing!)

District 29 (Spanish Harlem): Dem 78%; Rep 15%; Blank 8% (In Bronx portion, Rep got 4%)

District 30 (Harlem): Dem 88%; Rep 4%; Blank 8% (Once again, blank beats Rep!)

District 31 (Uptown): Dem 76%; Blank 23% (No Republican challenger!)

State Assembly:

District 65 (Lower East): Dem 76%; Rep 16%; Blank 7% (Not bad against the Speaker!)

District 66 (my district!): Dem 75%; Rep 12%; Progressive 7% (Rep beat Progressive!)

District 74 (Midtown East): Dem 79%; Rep 14%; Blank 7%

District 73 (Upper East): Dem 65%; Rep 29%; Blank 4%

District 75 (Midtown West): Dem 82%; Rep 13%; Blank 5%

District 67 (Upper West): Dem 85%; Blank 14% (No Republican candidate!)

District 69 (Upper West): Dem 79%; Blank 20% (No Republican candidate!)

District 68 (East Harlem): Dem 83%; Rep 8%; Blank 9% (Blank beats Republican again!)

District 70 (Central Harlem): Dem 88%; Rep 3%; Blank 8% (Blank beats Rep again!)

District 71 (Far Uptown): Dem 80%; Rep 6%; Blank 14% (Blank beats Rep yet again!)

District 72 (Even Farther Uptown): Dem 76%; Rep 7%; Blank 17% (See a pattern?)

District 76 (Way Upper East): Dem 65%; Rep 32%; Blank 3%

You can see that I saved the best for last.  The 76th Assembly District is the one I wrote up in that article two weeks ago asking if it was possible for a Republican to win any office in Manhattan.  That district covers some of the area where a Republican last held office on this island, over a decade ago.  The candidate, David Garland, was excellent, and the Democratic opponent was completely inexperienced and uninformed on the issues.  Well, Garland did break 30%, the only Republican in Manhattan to do that this year.

To summarize the rest of this embarrassing list, of 22 total races, the Republicans ran no candidate in five; in six others "blank" (meaning, the voter did not vote in this race) beat the Republican candidate.  Those 11 races are fully half the total.  Only one Republican in any race (Garland) broke 30%, and only three others broke 20%.  All of those were on the East Side.  On the West Side and Downtown, Republicans generally ran in the teens; in Harlem and far Uptown, under 10%.

Here's the message of Manhattan to Republicans: You may hold the majority of both houses of Congress, the large majority of the governorships and state legislatures, but here in Manhattan we find you so creepy that even if we can't stand our Democratic candidate we would rather leave our ballot blank than vote for you.   After all, we're a lot smarter and cooler than you are.  So smart and cool, in fact, that we don't even notice that we have the highest taxes and the biggest collection of progressive programs of any place in the country and all that we have to show for it is poverty way above the national average and the highest income inequality anywhere!