Tax the Rich? Okay. But ‘Pre-Distribution’ Is a Better Long-Term Bet.
Urban Matters: First, congratulations on the publication of The Menace of Prosperity, your history of economic development policy in New York City from the end of the Civil War through the 1970s fiscal crisis.
A big theme of it is that the costs of policies that promote growth, especially when they subsidize high-earning individuals and corporations, often exceed the benefits. What’s an example of that in present-day New York?
Daniel Wortel-London: The high cost of housing. It’s partly because the city has been so successful. But as more demographics of people can’t afford to live here, you lose the diversity that keeps innovation going, the resilient mix of ideas and firms that - as Jane Jacobs reminded us - helps cities truly prosper. Our economy becomes more fragile, because it becomes more dependent on a specific group of people and a specific kind of industry.
UM: In your introduction, you quote former Mayor Michael Bloomberg as saying, in so many words, ‘We need more billionaires, their taxes take care of everyone else.’ Why do you think that’s wrong?
Wortel-London: Partly, that’s like ‘making a desert and calling it peace.’ It’s creating a gated community and calling it a city. If what we’re after is a city that works for everyone, we should have everyone here. Also, the costs of attracting and retaining the 1% forecloses other options – of not relying on taxing the 1% in a trickle-down model, but instead growing the city from the middle out or the bottom up, which is another way of delivering prosperity.
UM: Earlier this month, The Economist had a special report on New York City’s economy. A headline was, ‘As new jobs and finance dry up, New York's fiscal model is wilting.’ Anyone who’s read your book would say, ‘Sounds familiar.’ You describe almost 120 years of New York financial and real estate booms that, when they collapse, cause city government fiscal busts. Are we just doomed to repeat this cycle?
Wortel-London: If most of the economy is motivated by profit in the immediate term, there’s going to be booms and busts, as people overproduce or overinvest. But if you’re producing along different logics, based on people’s needs and serving more local markets rather than paying back outside shareholders, while there’s never going to be perfect stability, there can be more smoothness in this cycle.
UM: Near the conclusion of your book, there's this statement. ‘We cannot afford to finance progressive policies through taxes on a regressive economy.’ You call this profoundly self-defeating. But how, alternatively, ought a progressive agenda be funded?
Wortel-London: To the largest extent, progress in the city should be driven through the operation of the economy, not through taxing the economy. That requires an economy that, through its own operations, generates good jobs, affordable housing, and goods and services that people need the first time around, rather than by taxing and spending after the fact. That puts less burden on the public sector. It’s ‘pre-distribution,’ as it’s sometimes known.
UM: So fast-forward to January. The new deputy mayor for economic development calls you and says, ‘Daniel, that's a great book. Now, what should the Mamdani administration be doing?’
Wortel-London: I think the first thing would be establishing a public bank. The City has more than $100 billion in private banks, and that money is often going outside the city towards investment that might not help the city ultimately.
Zohran Mamdani, when he was a State Assemblyperson, endorsed creating a public bank where City funds would be redirected into a democratic institution, and reinvested in the city. That could be at the core of shifting our economic base.
I'd also say, ‘Open up and politicize the city's economic development strategies.’ A lot of these decisions are made outside the public eye. They’re not made by the City Council and some of the costs don’t appear in the City budget. Corporate welfare isn’t in the budget, but social welfare is. ‘Politicizing’ those costs and making us aware of alternatives would be another good initiative Zohran could take.
UM: Whatever the downside of relying on redistributive taxes, there’s also tax fairness. CNYCA’s research recently found that close to half the income gains in New York post-pandemic went to millionaires. Isn’t there an argument for capturing some of that for the public benefit?
Wortel-London: I think we absolutely should, but we should also be aware of the possible costs of that. New York has justified often economically damaging policies on the basis of, ‘We need to attract the wealthiest here.’ I say that we need to tax the wealthy while at the same time shaping our economy so that we don’t rely on taxes as much to deliver necessary services.
Depending on high finance, insurance, and real estate, particularly since the early 80s, has set up what The Economist article talks about, a kind of dangerous position where, thanks to A.I. and other factors, that sector doesn’t look as reliable as it used to.
Even though the city is economically more diverse than it was in the early 90s, its development strategy is still very much about attracting the wealthiest firms and actors and less about cultivating investments and industries that emerge from and serve its existing population.
A theme of my book is how, over time, our economic imagination has narrowed. Look at the 70s fiscal crisis. What’s striking is how little the city’s economic strategy changed after the crisis. Part of it is because the welfare state, which had become more prominent, was a scapegoat. So, the social welfare state was sacrificed, but not the corporate welfare state.
Zohran is, I think, more critical of the costs the private sector can inflict on the public budget. And even though he’s mostly talking about taxing the rich, he’s more open, perhaps, to pivoting the economy. And the city already has many tools to do that.
UM: Ok, before we wrap up, here’s one more argument for putting City funds in a public bank. Earlier this year, the Trump administration clawed back some federal funds the City had on deposit in Citibank. Not only did Citibank not notify the City; they then hit them with a big resulting overdraft fee. [Editor’s note: When the City Comptroller called the bank on that move, it refunded the fee.]
Wortel-London: Hilarious. Wow, Citibank, what a great name - what loyalty. That should go in the interview.
Daniel Wortel-London is a visiting assistant professor of history at Bard College. His book, The Menace of Prosperity: New York City and the Struggle for Economic Development, 1865-1981, was recently published by the University of Chicago Press.
Photo by: June Marie and YT3142