Response To Comments On "Letter To A Manhattan Resident"

A post I wrote a couple of weeks ago titled "Letter To A Manhattan Resident" has drawn a large number of comments (more than 50 to date), most of them over at the City Journal website where the article was first posted.  Some of the comments raised points that I thought deserved a response, so here goes.

Several commenters somehow came away with the impression that I was describing a New York in "shambles" where the people are miserable.  For example, here is Ed Johnson:

I get out often, and not many of them [New Yorkers] look miserable to me. Come, enjoy the smell of Pretzels roasting over live charcoal by Rockefeller Center while you look at the windows at Saks, Macy's and Lord and Taylor.  This image you've been sold of a NYC in shambles full of violent homeless and Liberals is, well, you know. A stupid lie.

Well, you won't find anything about New York being a "shambles" or the people miserable in the article he's commenting on, or for that matter elsewhere on this website.  Actually, over on my "About" page my summary of living in New York over the past 40 or so years is "All in all, it has been a great place to live and raise a family."  My criticism is not that things aren't pretty good,  particularly after 20 years of Republican mayors who did great work in bringing the City back from the brink.  Rather, my criticism is that it could be so much better.  We fall far below our potential, mostly due to the drag of way over-expensive progressive policies that completely fail to accomplish their stated goals of ameliorating poverty, income inequality, homelessness and the like.

On a closely related subject, a number of commenters point out what appears to them to be a contradiction between the obvious wealth in Manhattan and my contention that high taxes and expensive redistributionist policies are a drag on the economy.  For example, a commenter calling himself "I love NY" writes:

You point out that we live in the richest county in the country and that we have the highest taxes. By the simplistic logic your favorite news channel often employs does this not prove that high taxes are not a problem for wealth creation?

Another commenter named Nancy Groutsis collects some data on per capita GDP by state, grouped Red and Blue:

Gallup’s top red states (Utah, Wyoming, Idaho, North Dakota, Nebraska, Kansas, Alabama, Montana, Alaska) had an average state GDP of $43,738 which is less than the $48,843 per capita GDP of its top blue states (Hawaii, Maryland, Rhode Island, New York, Massachusetts, Connecticut, Vermont, Illinois, Delaware) (Real Per Capita Gross Domestic Product by State, University of New Mexico, 2013).

The fallacy here is looking at a snapshot rather than at rates of growth and change.  High taxes and overly-expensive government do not bring about economic devastation overnight.  As I have written many times, for example here, the consequence of high taxes and overly-expensive government is a slow, gradual decline relative to other areas that have lower taxes and less expensive government.  New York (state) does have higher GDP per capita today than most of the most-Red states (however, not Alaska, North Dakota or Wyoming), but the recent trend is that most of the Red states are growing solidly and some rapidly, while in New York the economy of the City is growing a little and the economy upstate is somewhere between stagnation and absolute decline.

Go back to the 1920s, and New York was enormously dominant in the national economy.  Check out this IRS publication of income data from 1920:  New York State represented about 17% of the national total.  Today it's down to about 7%.  Slow, gradual, relative decline.  Per capita taxable income in New York was about two and a half times that of Texas in the 1920 data, and at least 50% higher than even "rich" states of the time like Pennsylvania; today, we're hanging on to about a 15% edge in per capita GDP over Texas.  How much longer will that last?  The decade of the 1920s was before New York's taxes and spending got way out of line, and for a time its growth and economic dominance continued.  In just the ten years from 1920 to 1930, New York City's population grew from 5.6 million to 6.9 million, reaching about 5.7% of the entire population of the U.S., with over 23% growth in one decade.  But in the 1950s and 60s New York adopted the model of government spending as the solution to all human problems, to be financed by ever-accelerating taxes.  By the early 1970s combined New York State and City income taxes for the top bracket had reached about 19% -- and the City lost about 800,000 people, about 10% of its population, in the decade of the 70s.  Today, we've gotten the combined top state + city tax rate back to about 12%, and all of our neighboring states have helped our competitive position by adopting their own income taxes.  That plus 20 years of decreased crime and competent management in City Hall, and New York City's population has grown from about 8.0 million to 8.4 million since 2000, 5% growth in 14 years.  But our taxes are still the highest in the country, if not by so much, and the relative decline continues.  Our population of 8.4 million people is now only about 2.3% of national population, and low tax jurisdictions like Texas and Florida are far outgrowing us.  It is only a question of time until they overtake us in per capita income as well.

But don't get me wrong -- it can be a lot of fun hanging around in a decadent, very slow-growing, but very civilized place.  Can anybody say "Europe"?