A Plan for Economic Recovery during the Covid-19 Pandemic

New York is facing an economic apocalypse as the result of the COVD-19 pandemic. According to a report in Newsday, "The federal Bureau of Economic Analysis reported New York’s gross domestic product fell 36.3% in the second quarter compared with the first quarter of 2020. GDP is the sum of all goods and services produced in an area for an entire year."

This economic apocalypse should not be a surprise to anyone. The necessity of shutting down the state would naturally shut down economic activity. From the shut down in March to today, the overall state infection rate is hovering at 1%. This has allowed many businesses to re-open and for economic activity to restart. However, we have a long way to go before we are completely safe. Just as the fire marshal warns that while the fire is out, lingering embers can re-start the blaze, so too a lack of vigilance can restart New York's nightmare. This will result in yet another shutdown. Even now, there are communities that are refusing to comport themselves responsibly. See Newsday.

Beyond the human loss, of which all New Yorkers are deeply aware and touched by, the economic devastation will continue and perhaps worsen if we allow COVID to reestablish a foothold in New York.

Moving forward, we must come up with a comprehensive plan of recovery. We cannot wait for the Federal Government. We have a president, who now despite coming down with COVID, spent months downplaying the pandemic, and literally telling the States that they are on their own. Senator Mitch McConnell has been more interested in playing to the QAON supporters then acting like a patriot working for the best interests of the country. We cannot expect support from the dysfunctional federal government.

At present, we have been attacking the fallout from the pandemic with a piecemeal approach. Clearly, Governor Cuomo had to first focus on containment. Based on President Trump's abject failures, Governor Cuomo had the step up and be our national voice. He rose to the occasion. But, now we must move forward with a post-COVID plan.

Unfortunately, each advocacy group seems to think solely of their constituency and does not see how each piece of our economy relates to and relies on the other pieces. For example, the movement to extend the moratorium on evictions is laudable and I support it. However, the landlords who are not being paid, have their own expenses. They have to pay their mortgages, their taxes, their utilities, the wages to their employees as well as other fixed and extra-ordinary expenses. If we don't support the landlords, then the tenants may not have livable buildings in which to stay. The failure of small businesses also has a cascading effect. When these businesses go under, landlords lose rents, employees lose paychecks, and the vendors lose a client, and so on down the chain. Each loss occasions further losses down the chain of the economy.

We must come together to create a strong, comprehensive, and viable plan to support the various sectors of the economy. Pull-on a thread and the entire fabric will unravel.

What I predict is that there will be pressure to raise taxes, never a popular solution. The press has reported that the billionaires have increased their wealth by almost $845 billion. Last month in New Jersey people started to agitate for a "millionaire's tax." In New York, there is a movement to tax the New York Stock Exchange.

The easy political solution, for both parties, will be to implement a structured tax system on the wealthy. New York, if you recall passed a temporary Millionaires Tax as the result of 2008. It was extended once when elected I would support extending it again.

If various state and local governments act on this pressure to raise taxes, it could result in a very uneven tax structure across the nation, which I am worried could hinder the recovery.

The uneven nature of the various tax plans will also mean an uneven distribution of support to those in need. Further, smaller businesses may take further financial hits which will hinder the recovery of that sector of the economy.

We need both consumers to buy and businesses to sell. There has to be a real national plan to balance the ledgers. But, I am not confident that will happen.

At the federal level, I am afraid that a sense of unreality pervades. Governor Cuomo, as well as the governors of New Jersey and Connecticut, demonstrated during the pandemic that regional cooperation works and is effective. Perhaps, Governor Cuomo can again show us the way, by working both informally and formally with other Governors on an economic recovery plan. This must include a uniform approach to taxes.

What I am convinced of, is that without a sensible tax policy, the recovery will be stymied. I do admit to siding with Keynes over Friedman, but I am also mindful of the adage of killing the goose. As I said above a rational balance must be struck.

One solution would be a mix of a regional agreement of an ultra-millionaires' tax for a limited time and for the designated purpose of COVID relief to people, businesses, and local governments. We could also add a carrot of low-interest State COVID Relief Bonds. The understanding would be that purpose of the low-interest bonds would offset the need for a larger tax increase. By having the states work together, if such a thing is possible, we could establish such a program without the threat of "tax migration."