State of the Economy Four Years After Onset of the Financial Crisis
By NYC.gov - SEP. 12, 2012
The following are Mayor Bloomberg’s remarks as delivered today at a forum hosted by The Economic Club of Washington, DC.
“David, thank you for that introduction. Let me just start out by saying what I know is on everyone’s mind: the attack on the American consulate in Libya. It’s just another tragic reminder that the freedoms that we cherish continue to come under attack by those who do not share our commitment to liberty, and I thought the President this morning, I don’t know if you heard him, but he struck exactly the right tone in his remarks. And clearly our thoughts and prayers are with the families of the three victims.
“Let me talk a little bit about the economy in this country. Yesterday in New York City and Washington and in Shanksville and all over the country we marked the 11th anniversary of the attacks of 9/11. Back then, many people thought that our city, New York, would take decades to recover.
“But today, I’m happy to say, there are twice as many people living in Lower Manhattan than there were 11 years ago – and there are more jobs, as well. Four years ago, all the progress that we’d made coming back from the attacks – and the recession that followed – once again seemed at risk.
“On Friday, September 12, 2008, the growing financial crisis reached a tipping point. Bear Stearns had already failed. Fannie Mae and Freddy Mac had just been bailed out. And now Lehman Brothers was teetering on the brink of bankruptcy. The future of the global economy, I think it’s fair to say, now hung in the balance.
“By the end of the weekend, it was clear that Lehman Brothers would not survive. And that was about the only thing that was clear. Even after the government stepped in to save AIG, panic spread throughout the markets – and for the first time in our lives, the entire financial system was in imminent danger of collapsing.
“Hank Paulson, Bob Steel, Tim Geithner, Ben Bernanke – all of them and their teams – deserve enormous credit for the way they handled the crisis. But so does someone else, and that someone else is President George W. Bush. After Paulson outlined the TARP plan to President Bush, he then began discussing how difficult it would be to get Congress to go along.
“Reportedly, the President cut him off and said: ‘Hank, let me worry about the politics. You just do what is right.’ And that was exactly the right message – and it may well have saved this country, and the entire world, from a catastrophic economic meltdown.
“‘You do what’s right. Let me worry about the politics.’ If you’re looking for a definition of government leadership, that’s about as good as I think you’ll ever find. But in Washington, that idea is usually turned on its head – by members of both parties. Too often, things are done – or not done – because of politics.
“Today, every policy position involves a political calculation: What will this mean in terms of poll numbers, campaign contributions, television ads, endorsements? And if you want to know why the recovery from the Great Recession has been as sluggish as it has, the hold that these questions have on Washington I think is a good place to start.
“Four years ago, a financial crisis undermined our economy. Today a political crisis – caused by Washington's paralysis – is standing in the way of a full recovery.
“Both parties, and both ends of Pennsylvania Avenue, have let us down. They have focused on generating headlines in the media, rather than generating headcount in the workplace. They have given us an economy that is shrinking our workforce rather than growing our future. And they have tried to divide America into small single-issue constituencies – pitting one against the other – rather than getting us to work together for all citizens.
“As a result of this leadership vacuum, cities around the country have had to tackle our economic problems largely on our own. Local elected officials are responsible for doing, not debating. For innovating, not arguing. For pragmatism, not partisanship. We have to deliver results at the local level – and that’s one reason why, since the 2008 financial collapse, most of the U.S. job growth has happened in cities.
“Let me use New York as an example – but I’m sure there are other cities that have done even better than we have. Four years ago, New York City was the epicenter of the financial collapse. But since then – despite being burdened with huge job losses on Wall Street – we have been the epicenter of the national economic recovery.
“As David pointed out, since the beginning of the national recession, the U.S. has gained back just over 40 percent of the jobs we lost. So our country is still down 60 percent.
“In New York City, we have gained back more than 200 percent of the jobs we lost. So for every job we lost, we have added two more. To put that in perspective, if the rest of the country had weathered the recession as strongly as New York City, there would be 12 million more jobs today. And that would be awfully good news for the roughly 12.5 million Americans who are unemployed right now.
“That’s not to say all is rosy in New York. All cities – no matter how responsibly they have faced the real world problems – still have lots to do. Unemployment is still much too high – though in New York City that’s partly because people are coming to New York knowing there are jobs to be found. In fact, there are more jobs in New York City – and more people working in New York City – than at any other point in our history.
“Nationally, the picture unfortunately is much darker. And that’s why the big question in this year’s campaign, that’s what it has become: are we better off today than we were four years ago? For political reasons, Democrats obviously say yes, Republicans obviously say no.
“But I think we’re asking the wrong question. It’s not whether we are better off, it’s whether we’re as well off as we should be, and whether either party has a plan to give us the levels of growth we need.
“Sadly, the answer to both those questions seems to be no. Because the truth of the matter is, the work that cities are doing to spur job growth has been held back by Washington’s two-party failure to address the biggest challenges our economy faces. One of those challenges is short-term: the uncertainty that is paralyzing businesses and hindering investment in both plant and people, and let me just briefly touch on that before discussing the longer-term challenge.
“When businesses view government’s finances as unstable, when they see unsustainable levels of borrowing and an unpredictable regulatory environment, businesspeople get worried. Nearly every CEO and business leader that I know tells me that the question marks hovering over Washington are negatively affecting major investment decisions. And even though many companies have healthy bottom lines – in fact they are sitting on record amounts of cash, and interest rates are at record lows – they are not investing or hiring.
“And I think that will continue until Washington takes two steps: First, they must adopt a credible plan to deal with our deficit, along the lines of Simpson-Bowles. And if Democrats are serious about getting it done, and they hold all the cards, they can just say to Republicans: ‘All the Bush tax cuts are on income groups that you care about, and they are expiring on December 31st. You need us to help stop it. Now, do you want to talk about spending cuts and adopt comprehensive tax reform with a lower corporate tax rate? Well, just talk to us.’ And if Republicans are serious about growth, they’ll take the offer.
“The second step the private sector is waiting for Washington to take is to implement the new health care and financial regulations that everybody’s waiting for. Right now, thousands of pages of new, conflicting, and incomprehensible regulations are being written by government lawyers who have little appreciation for the way markets work or the way businesses and banks operate.
“No one knows what the real impact will be on the private sector – and that uncertainty is artificially depressing lending, investment, and hiring levels. Removing that uncertainty – and the uncertainty over fiscal health – would be a huge shot in the arm for our economy.
“That’s the short-term challenge we face – and that’s the easy part. Addressing it will help us solve the cyclical economic crisis we face. But we are facing, I think, a structural economic crisis that is much more dangerous to our future. Dealing with that long-term challenge is the hard part – and it’s a challenge that is largely being ignored in Washington.
“The facts are the fundamentals of the American economy have been shifting for decades and we haven’t been keeping up. The housing bubble covered up some of the problems for the better part of a decade by expanding the construction industry to a level that was not sustainable and by allowing people to borrow against the value of their homes, which fed consumer spending to a level that was also not sustainable.
“When it all came crashing down, the federal government stepped in to protect the banks and the auto industry, but those were only stop-gap measures. Long-term, the question we need to ask is not: how do we protect particular industries? It is: How do you strengthen an American middle class that is under siege and to help it grow? That’s the tough challenge that we face today.
“America’s creation of the most open and prosperous middle class the world has ever known is one of the great triumphs of the 20th century. It was the growth of our middle class, in fact, as much as military policy and diplomatic strategy, that led to the downfall of the Soviet Union. And don’t think that the Chinese government didn’t notice.
“Right now, the American middle class is being pressured from all sides. Globalization has moved many middle-class jobs overseas, where the industries of tomorrow are being created. Automation has rendered many middle-class jobs obsolete. Cost increases – especially for health care, college tuition and tort law – have eaten away at real income. Higher education is improving outside the United States at a rate almost guaranteed to reduce our competitiveness. And relative productivity has decreased so much that it now often takes two middle class breadwinners to make ends meet, rather than one.
“The shifting fundamentals of the American economy – and the squeezing of the American middle class – is an enormous problem that the Great Recession has laid bare.
“It’s not a problem any one city can solve. But it is a problem that many cities, unlike Washington, we are trying to solve. Yet Washington is tying one hand behind our backs.
“I’ve always said that one of the biggest differences between government and business is that in business you move resources to the most successful product line in order to drive growth. But in Washington, too often it’s exactly the reverse: You take resources away from the most successful areas and spread it around based on who has power and who screams the loudest.
“So instead of investing in cities to spur more growth for the entire country, Washington has taken tax revenues from cities and spent them where their personal politics are improved rather than where investments would reap rewards.
“We cannot solve the country’s structural economic problems and rebuild our cities without stoking the economic engines of growth – and that’s where most people live. That’s where the vast amount of job creation – and tax revenue – will come from. Nevertheless, cities are finding innovative ways to tackle these problems on their own. And the cities, I’m happy to say, are making some progress, including New York. And the cities are, to some extent, leading the nation in job growth.
“So let me touch on just four key ways that we’re working to align our economy with the structural shifts that have taken place and how Washington can help us accelerate our progress. Use New York as an example. Everything we do isn’t directly transferable to other cities, but it has been working, and a lot of it is copy-able. First, in New York we’ve taken a comprehensive approach to improving our business environment.
“Usually the pundits think of this as lowering taxes – something we’ve done for thousands of small businesses in New York City. But taxes are just one element of the environment – and usually not the most important. The first question most entrepreneurs ask is: can I afford the taxes. It’s not that. It’s: who are my customers and where do I need to be to serve them, and how do I get up and running quickly? It is not: Can I afford the taxes.
“There is nothing harder that I know of than starting a business. Been there and done that. Long days and long nights – full of stress about whether you’re going to be able to pay the rent and keep the doors open. If you’re serious about creating jobs, we should be doing much more to help entrepreneurs because most of the job growth we experience in the United States comes from the formation of new companies.
“In New York City, we’re helping entrepreneurs get their ideas off the ground by joining with the private and nonprofit sectors to create incubators that have the capacity to launch more than 1,000 new businesses over the next three years.
“We’ve also helped entrepreneurs open their doors more quickly – by creating what we call a New Business Acceleration Team, which expedites the approval process for restaurants and retail establishments. And we’ve created Small Business Solution Centers, we call them, to help connect entrepreneurs to the capital and expertise they need to open and grow.
“We’ve also created a new role at City Hall – a Chief Business Operations Officer – with the sole mission of making government more responsive and efficient in dealing with business customers.
“You know, businesses can locate anywhere and it’s up to government to roll out the welcome mat by creating a pro-growth environment. If the next president and the next Congress spent half as much time discussing how to help entrepreneurs as they’ve spent debating whether upper-income tax rates should be 35 or 39.6 percent, we’ll be a heck of a lot in better shape.
“You show me a business person who cares about his federal tax rate more than his customers, I will show you Darwin at work.
“The second idea we’ve focused on in New York City is creating the infrastructure that we need to build a 21st century economy. For instance, we’re building the first new city-funded subway extension in five decades. Our state government refused to do it, so we went ahead and did it with our city dollars.
“That’s already attracting billions of dollars in new investment in our city for the Far West Side of midtown Manhattan, which will be our next great business and residential district. With city, and a small amount of welcome state and federal funds, we’ve built new sewer and water lines throughout Lower Manhattan. We’ve invested in new cruise terminals, new container terminals, and new freight rail service, new ferry service. And with the help of private funds from some of our most generous citizens, we’ve added 730 acres of new parkland, which will not only attract new residents, but also major new commercial developments.
“Elected officials in Washington talk about infrastructure when discussing the economy. That’s the key thing, ‘I’m going to solve all the problems with infrastructure.’ It is something that our economy certainly needs for our future. But they talk about it as an employment program rather than as an economic development strategy.
“Funding infrastructure is not a direct jobs program that will solve today’s unemployment problems. Federal stimulus funding helped some construction workers get back on the job – that is true – but it did not and it could not create jobs for the 96 percent of Americans who don’t and can’t work in construction.
“You have to wonder who in Washington thinks your middle class office worker can run a crane, pour cement, or lift 100 pounds of conduit. Have they ever been to a construction site? We need more federal investment in infrastructure, not to create construction jobs but to create the foundations for businesses to build and grow here. And over the last seven years, American infrastructure has slipped from #1 in the world to #14 in terms of economic competitiveness.
“We have the worst air traffic congestion in the world. Of the world’s top 10 seaports, we have none. China has six. There are 15,000 miles of true high-speed rail in the world – and none of it is in America. Cities that need infrastructure investment to drive job growth don’t get it for political reasons, even though our taxes support the rest of the country.
“And I think exhibit A is Amtrak’s profitable Northeast corridor, which Washington uses to subsidize money-losing lines in rural areas, rather than invest in high-speed rail and better service in the Northeast.
“Members of both parties spend money to protect public sector jobs in antiquated industries – maintaining traditional postal service in the internet age is a good example of that. And they buy private sector-produced goods – including military hardware the Armed Services say they don’t need – in order to protect jobs in their districts and their own job.
“Making matters even worse, Washington imposes infrastructure costs on cities that stop us from building what we actually need. For instance, in New York, the Environmental Protection Agency tried to force us to build a $2 billion concrete cover over a reservoir. Why? Because birds flying over it might defecate in the reservoir, even though every scientific study said it wasn’t necessary and no one in the community wanted it. And only after the media highlighted the absurdity of this mandate did the EPA decide that it wasn’t actually necessary.
“And right now the EPA is forcing us – and other cities – to spend billions of dollars on water quality projects that have no scientific or public health basis.
“Washington is the last place we should be making policy for what local infrastructure to build. The problem is Washington views infrastructure as a regulatory requirement – or a political opportunity – instead an economic imperative.
“And the longer that continues, the further behind our competitors we will fall.
“The third area we focused on in New York City is opening up new markets to investment. For instance, we’ve modernized our zoning regulations to open up huge swaths of the city – much of it outside of Manhattan – to commercial and residential development, which has generated billions of dollars in new investment.
“That’s one reason why Brooklyn has become the world’s coolest place. I think it’s definitely too cool for this crowd. Ask anybody that goes to New York, ‘Where’d you stay?’ It’s a hotel in Brooklyn or Queens, not in Manhattan. ‘Where’d you eat?’ It’s a restaurant you’d never heard of in a place you didn’t know had restaurants. Across the city, zoning changes will result in hundreds of thousands of new jobs, many of them paying middle and upper income salaries.
“We’ve also reclaimed areas of our waterfront that had been rusting away for decades – and opened it up to new investment. We’ve opened our doors to the world by opening and expanding tourism offices in 18 countries. As a result, tourism from those countries has increased 60 percent.
“Ten years ago, our city had 37 million visitors a year. Last year, we had 51 million – and that has meant thousands of new jobs. Now, not every job created by tourism is a middle-class job, but we need jobs for people on every rung of the economic ladder.
“And the fact of the matter is: most of them are middle-class jobs. Tourists support artists and actors, musicians and merchants, managers of hotels, restaurants, and museums – all middle-class jobs, and all of them have been growing in New York City.
“Now, we’ve heard a lot about how the Administration is focused on increasing exports. But tourism is a huge export industry – and the federal government’s visa policy couldn’t be designed any better to discourage visitors from coming here and bringing their money to support our jobs.
“Washington could be doing more to open our export market by knocking down barriers to trade. Bashing China – the next great market for our domestic manufacturing industries – just gets us nowhere. The Chinese are not just our competitors; they are also our customers and we need better access to that growing middle class there.
“The three major trade agreements that have been signed over the past four years with Colombia, Panama and South Korea are helpful, but at the same time, the Administration has done the country no favor by pursuing protectionist policies, like the new tariffs on Chinese solar panels and wind turbines.
“We’ve all seen how well tariffs worked out for the U.S. auto industry. And I don’t think it’s going to work out any better for our green energy industry. We are still a nation of producers – but most of the products we now make require great skills, where we hold a competitive advantage.
“The more we can open up these markets to our goods, the more jobs we can create here at home. But the more barriers we face to those markets, the more other countries will cut in on that business and take all the jobs that go with it.
“Of course, manufacturing high-skilled goods requires high-skilled labor – and that’s the fourth major area of focus.
“Rebuilding the American middle class cannot be done without retooling our skill set. When I was in high school, many low-skill jobs came with a ticket to the middle class. Not anymore. Today, with most blue-collar jobs, no longer do you just ‘work with your hands.’ Nearly every job requires more analytic thinking, more technological skill, and more computer literacy.
“And that’s why public education reform is so crucial and urgent. Now I do give Presidents Bush and Obama, both of them, a lot of credit for enacting No Child Left Behind and Race to the Top. Both have helped inject accountability and innovation into our schools. But the changing economy demands that we do more to give students the skills they will need to succeed in colleges and careers.
“And that’s why we must stop the disastrous policy of running our public school systems across the country for the people they employ, rather than the students they should serve. And we also must raise the standards in our schools and focus on math and science and the analytical abilities the marketplace is demanding.
“New York City has begun linking students directly to college and careers through a new partnership with IBM, which turns high school into a six-year experience. Those who graduate not only get an Associate’s Degree, they get an interview at IBM.
“Last week, we opened a new high school focused on software engineering – because coding is beginning to rival English as the international language of business. And while higher education and basic science research is being defunded at the federal and state level at an alarming rate, at least in New York City we’re doing everything we can to advance them.
“Last year, after speaking with business leaders about what resources they need to grow, we launched a competition inviting world-class universities to build new applied science and engineering campuses in our city, and the response really was stunning.
“Cornell and The Technion Institute of Israel will be investing $2 billion to build a new campus on Roosevelt Island, and two new facilities will also be built by partnerships involving Columbia, NYU, Carnegie Mellon, the University of Toronto, the University of Warwick, the City University of New York, and the Indian Institute of Technology, as well as IBM and Cisco.
“Together, these projects, which Bob Steel did put together, will more than double the number of engineering students and faculty in our city – and we believe they will be a game-changer for our economy. They will create tens of thousands of new jobs – and position New York City as the world’s leader in technological innovation, even ahead of Silicon Valley.
“If you want to see a difference researchers and engineers can mean to an economy, just look at North Carolina. A recent article compared the economies of North and South Carolina. There is no reason why they should be dramatically different – but the fact of the matter is they are. North Carolina has 14 Fortune 500 Companies. South Carolina has one.
“And a big reason is that while South Carolina clung to its textile and manufacturing industry, North Carolina focused on building its university system, creating the Research Triangle, and attracting the banking industry. The cities around that Research Triangle – along with Charlotte, which is home to a major state university – have led North Carolina’s economic renaissance. That’s the course we’re charting in New York City – and it’s a course the federal government should be helping more cities follow.
“The applied sciences competition I think is just one way that we’ve worked to attract the talent that will drive job growth in the new economy. And as I’ve always said, talent attracts capital far more effectively than capital attracts talent.
“So we’ve also invested in the conditions that attract the best and the brightest and hardest-working people from all around the world: safe streets; cutting-edge cultural attractions; beautiful parks; top-quality public schools.
“But while the rest of the world is rolling out the red carpet to attract immigrants, our federal government is giving them their walking papers. I call our immigration policies national suicide. By turning our backs on our history, we are destroying our future.
“The fact that we give students a first-class university education and then tell them they have to leave and live in countries that compete against us may be the single dumbest economic policy we have on the books.
“It’s no coincidence that cities with the highest rates of immigration – including New York City – have the highest rates of economic growth. But Washington has just refused to recognize that its immigration quotas are much lower than our economy demands. And until that changes, our economic growth will continue to be artificially depressed.
“Now I’m confident about the future of our country, even though I might not sound that way. I believe our best days are still ahead, partially because I believe in cities. I also think that most Americans do as well. But business leaders do not make investment decisions based on patriotism and love of country – and it does seem neither does Washington. To get our economy moving, we need Washington to finally begin addressing our most pressing economic challenges.
“In the short-term, that means eliminating the uncertainty that is paralyzing businesses by adopting a credible deficit reduction plan that balances new revenue with spending cuts. And in the long-term, it means helping cities and states do more to create pro-business economic environments that spur entrepreneurship. It means allowing businesses to tap into new markets by clearing away trade barriers.
“It means helping us build the modern infrastructure that will catalyze private investment. And it means attracting and developing high-skilled workers by fixing our broken immigration system and aligning our school system with today’s economic realities.
“As President Clinton said last week: ‘The old economy is not coming back and we’ve got to build a new one – and educate people to do those jobs.’
“It will be up to the next president – whoever it is – and the next Congress – whoever leads them – to take up that challenge and take actions that will ensure our country remains a beacon of progress and prosperity for generations to come. Thank you very much.”