THE BLOG
03/18/2010 05:12 am ET | Updated May 25, 2011

Geese, Ganders and Governors

In capitalism, what's good for the goose (individuals) is not necessarily good for the gander (governments; society at large).

Proponents of unregulated capitalism (they prefer to call it free-market capitalism but we all now that nothing in this world is free) argue it is a self-regulating system that autocorrects (kind of like the autocorrect spelling program built into my word processing program). They believe it will reach equilibrium when left alone and given enough time.

Unfortunately, as the economist John Maynard Keynes pointed out during the global depression of the 1930s, while systems may survive in the long run, people have to live and eat in the here and now. Knowing that the economy will rebound and there will be jobs ten years from now may give me hope for the future, but it doesn't pay my bills.

Other problems with an unyielding commitment to unregulated capitalism are that if and when economic balance is restored, that does not mean the economy will be vibrant and all people will benefit. In the United States during the 1930s and in Japan in the 1990s, economic balance was restored at a relatively low level of economic performance and millions of people did not take part in the "recovery."

In the United States today, the people left behind in the current jobless recovery tend to be disproportionately black and Latino, although the white working class is also not doing very well. Older people who worked hard all of there lives, younger people who went to school to prepare for careers, people who bought homes and did everything "right," find themselves victims of problems they did not create.

The federal government under both Presidents Bush and Obama has tried to stimulate economic recovery through loans, loan guarantees, and the bailout of troubled corporations. The people responsible for the economic meltdown seem to be recovering quite nicely. The rest of us -- well, we have to wait.

Politicians like to say we all must tighten our belts during hard times, but very few politicians (or bankers) look like they are going hungry. New York City's Mayor Moneybags (Michael Bloomberg), who recently purchased reelection for about $100 million, had his total worth quadruple from approximately four to approximately sixteen billion dollars during his eight year term in office. If Bloomberg were forced to tighten his built, there would probably be enough for all of us to eat!

Last week, New York State Governor David Paterson gave the "tighten-your-belt" speech to a joint session of the State Legislature. Paterson demanded sharp cuts in the health care and education budgets because of the state's deepening financial crisis. He warned that New York was rapidly running out of cash to meet its obligations and could no longer be so generous with its young, old, sick, not-so-sick, and its workers and school children, or just about everybody who depended on state for some level of help. The wealthy, of course, would be free to gorge themselves at the Thanksgiving table, just as they always have, without worrying about onerous taxes that might make them tighten their belts just a little bit.

On the face of it budgetary restraint makes sense during hard times. Each of us is probably cutting back because of financial worries. We skip that extra cup of coffee at Starbucks, walk a few blocks to save money on gas, turn-off the lights at home, bring our lunch to work (if we have jobs), and wear last seasons clothes for a few more months. The idea that budgetary restraint is socially responsible is one of the reasons people demand tax cuts during hard times and vote for conservative Republicans. In the last round of elections, Democratic candidates lost campaigns for governor in New Jersey and Virginia, and campaigns for county executive in Westchester and Nassau (although this one is still up in the air) because their opponents succeeded in getting voters to identify them as "tax and spend" liberals.

That brings us back to geese (individuals) and ganders (governments) and Mr. Keynes because Governor Paterson's proposal proposed budget cuts (and similar proposals in the other 49 states and countless municipalities) are a recipe for an even worse economic disaster than we have had during the past year. It might make sense for individuals to cut back, but what happens when entire communities or states do so?

If Governor Paterson's proposal carries, a number of school districts across New York will be forced to lay-off dozens, perhaps hundreds of teachers. While this will certainly affect the education of the children who live in these communities, it will also affect local economies. Laid-off teachers will not be able to buy homes, keep up mortgage payments, hire contractors, purchase goods at stores, or pay taxes. Every lay-off means further economic contraction and every contraction means more lay-offs as the economic system collapses in on itself.

What on the face of it looks like economic responsibility for the State of New York is a downward spiral that can become precipitous. This is not a theory. We know this is what happens because it is exactly what happened in the United States between 1929 and 1933 as a stock market crash turned into a Great Depression.

In his message to the state legislature Governor Paterson stated, "We stand on the brink of a financial challenge of unprecedented magnitude in the history of this state. This is a historic moment. We're going to have to make historic decisions." I agree with him and these are my recommendations.

New York State needs to tax, borrow, and spend and then to borrow some more and spend even more. Let's have a first class school system. Hire more teachers. Build more schools (and roads, parks, and housing). Let's have a first class medical system. Provide free comprehensive medical care in New York. Medicaid and Medicare for everyone.

One of the projects I would like to see funded is an extensive light rail network. This would provide construction and maintenance jobs locally as well as factory work in some of the old rust belt cities of upstate New York and the mid-west. These would also be "green" investments as they would reduce vehicular traffic into New York City. Just based on my own experience I would love to see light rail lines along Hempstead Turnpike from the town of Hempstead out to the Nassau-Suffolk line; in South Queens connecting Valley Stream, the Green Acres Mall, and Kennedy Airport to the A-train line of the subway; in Brooklyn extending public transit out to Red Hook; and in the Bronx running from the Westchester Avenue elevated to Co-op City and the Westchester border.

Governor Paterson needs to pressure the federal government to expand the stimulus package to cover state and municipal projects and debts. Bailout the people, not just the banks. Let the banks wait until we have enough money to start saving again. We need trickle-up economics.

And while he is at it, Governor Paterson should announce he is giving his full attention to rebuilding the state economy so he won't be able to run for re-election in 2010. When he is successful, I am sure he will be able to fund a job in another government position.