Kathy Hochul’s first speech as governor of New York stuck to the tradition for initial inaugurals: blessedly brief, general themes, details (implicitly) to follow.
Hochul’s specific priorities were lowest-common-denominator stuff: “combating” the spread of COVID-19 linked to the Delta variant, pushing billions in stalled federal rent relief out the door to tenants (and ultimately their landlords) and “beginning to change the culture in Albany.”
So far, so familiar: Hochul’s inaugural aspirations — even the bit about showing “no tolerance for individuals who cross the line” on sexual harassment — could have been lifted from any number of speeches given over the last decade by Andrew Cuomo, who (like all of his predecessors) also pledged to be an agent of change. Indeed, Hochul’s vow that “a new era of transparency will be one of the hallmarks of my administration” was a near-echo of Cuomo’s 2010 promise to run “the most transparent administration” in New York’s history.
We’ll see. To begin with, at least, she certainly has less to hide.
Hochul’s inaugural speech featured one allusion to the economy: a promise, near the end of a laundry list of bromides, to “help small businesses and create new jobs for New Yorkers hit so hard by the pandemic.” However, prospects for businesses of all sizes will be dampened if the new governor’s promised “proactive” measures to tamp down COVID-19 translate into added restrictions on indoor gatherings for the vaccinated.
As the epicenter of the COVID-19 outbreak, New York took a huge hit from the pandemic, with more than 1.8 million private payroll jobs vanishing virtually overnight once Cuomo imposed his “New York state on PAUSE” shutdowns in the spring of 2020. As of last month, statewide private-sector employment had struggled back to a level that was still 786,600 jobs below the count as of July 2019.
That jobs shortfall equated to 9 percent of the pre-pandemic base, more than triple the net national decline in the same period. More than half of those still-missing jobs were concentrated in New York City, the engine room of Albany’s state tax base.
The state’s unemployment rate in July was 7.6 percent, higher than all but two states and well above the nation’s jobless rate of 5.4 percent. At the end of the month, New York accounted for nearly one-fifth of all Americans still receiving federally funded extended Pandemic Emergency Unemployment Compensation — even as untold thousands of jobs go unfilled across the state.
In one respect, though, Hochul takes office with an enormous and unprecedented advantage: Thanks to a record infusion of roughly $13 billion in unrestricted stimulus aid, she’s inheriting a state budget that, when adopted in April, was projected to remain in balance through two fiscal years, right into the spring of 2023. After that, however, the bottom falls out, with big and growing deficits projected by mid-decade.
Caving to veto-proof supermajorities in the state’s increasingly left-leaning Legislature, Cuomo last spring agreed to an enormous increase in personal-income taxes on higher earners. New York City’s resident-income millionaire earners, who pay a disproportionately large share of total state and city taxes, now face the highest top rates in the country. Reversing one of his own signature achievements, Cuomo also agreed to New York’s first increase in state corporate-tax rates in 30 years. All those tax hikes are supposedly temporary — but history suggests they’ll be perpetuated unless spending is curbed.
In the short term — certain to be Hochul’s focus as she gears up for her own gubernatorial campaign next year — Albany’s revenue base is feeling a sugar high from Wall Street’s frothy rise in stock prices. If it persists, she’ll be sorely tempted to spend it, adding to the long-term problem.
The policy decisions by New York’s first woman governor inevitably will be shaped to a great degree by the coming Democratic primary challenge next June. If Hochul seeks to improve her prospects by indulging her fellow spendthrift, tax-happy Democrats, she’ll be digging an even deeper hole for the future.
E.J. McMahon is adjunct fellow at the Manhattan Institute and senior fellow at the Empire Center for Public Policy.
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