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New York's New Deal -- an open letter to Governor David A. Patterson

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An open letter to Governor David A. Patterson

November 23, 2008

The Honorable Governor David A. Patterson

State Capitol

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Albany, NY 12224

Dear Governor Patterson:

New York and you, Governor Patterson, are trying to find solutions for the State's deepening fiscal problems. Some of the proposals that I have read include billions of dollars in cuts to Medicaid and midyear reductions in school aid.  The MTA also anticipates a double-digit percent fare increase, personnel reductions, and services cuts.  These may be sound fiscal policy during normal times, but these are not normal times. Ordinarily, this type of fiscal prudence would be a welcome philosophy.  However, during a deep recession, such as the one our nation is experiencing, it's a time when you should postpone your sound instinct to impose fiscal prudence and balanced-budgets but instead impose Keynesian economic practices.  You can take solace that great leaders have grappled with this same dilemma for centuries.

The first known Keynesian policy is recorded in the bible (Genesis 41:1-57).  You may remember this bible story of Pharaoh telling Joseph of his dream about seven fat cows that were devoured by seven lean cows.  Joseph interpreted Pharaoh's dream to mean that for seven years there will be an economic boom in Egypt which will be followed by seven years of recession.  Joseph advised Pharaoh to store grain during the fat times so as to diminish famine during the lean time to follow.

This is one of my favorite bible stories because, although calculus and statistics may help predict the economy (absent divine dreams,) economic policy is often simply common sense.  During abundant times one should run surpluses to lessen misery during the lean times.  Unfortunately, our modern leaders rarely heed this idea and waste surpluses in the good times to have little surplus to weather a poor economy and thus try to balance budgets during recessions.

Cutting government spending during a recession is, in economic terms, little different than raising taxes during a recession (or storing away grain in a time of famine.)  Likewise, subway fare increases are identical to tax increases.  The effects of each during lean times spirals our land deeper into recession.  As state government cuts aid, local government responds by cutting construction projects, reduce workers and teachers, and cancel maintenance plans, which results in further lessened economic activity and a shrinking tax base which causes state revenue to fall further.

As difficult as it may seem, the pragmatic response to New York's economic crisis is actually for the State to deficit spend--borrowing money to spend on necessary infrastructure and aid to local governments and public transit--as long as the State is in recession.

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A recent column by Nobel Prize winning economist Paul Krugman  Dr. Krugman argues that F.D.R. was too timid in his early attempts to stimulate the economy.  underscores the mistakes Franklin D. Roosevelt made in his first years as President to address the Great Depression.

'...the definitive study of fiscal policy in the '30s, by the M.I.T. economist E. Cary Brown... conclu[des]: fiscal stimulus was unsuccessful "not because it does not work, but because it was not tried."


expansionary policy at the federal level was undercut by spending cuts and tax increases at the state and local level.'

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Joel is a reformed conservative who abandoned conservatism when it became clear that the philosophy does not work -- at least for most Americans. Joel is now a progressive activist who lives in New York with his wife and children.

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New York's New Deal -- an open letter to Governor David A. Patterson

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