Saturday, October 18, 2008
The Pataki-Spitzer-Paterson Gamble
"The financial-market implosion and the coming transformation of the securities industry pose a risk to the national economy. But they especially imperil NewYork State [NY], which for decades has built its budgets on the expectation of raising ever-greater revenues from a Wall Street that now no longer exists. [NY] was once a great industrial state. But for the past quarter century, with occasional bear-market interruptions, the state's dependence on Wall Street has grown as manufacturing has shrivilled. Last year, nearly 18% of private wages in [NY] came from the securities industry. ... The average Wall Street salary and bonus last year was $379,000--more than six times the average for all private-sector jobs in the state. As securities jobs dry up, the economy in the rest of [NY] is not nearly robust enough to make up for the income and other tax revenue that will be lost. ... So [NY] will soon have a large hole to fill in its budget. When that happens, the financial crisis will get the blame, but the fundamental problem has really been out-of-control state spending that was built on expectations of a continuous bull market on Wall Street. ...Above all, Mr. Paterson and state lawmakers need to recognize that this isn't just another cyclical downturn on Wall Street. If effect, the state government has been skimming the profits of a gigantic casino packed with drunken gamblers. Now the casino has shut down, and what replaces it will be more like a sedate church bingo hall", my emphasis, E.J. McMahon at the WSJ, 4 October 2008.
"[M]ore than six times". Think about that. My CPA buddy estimated his lady friend might make a fifth of her salary outside of Wall Street, see my 6 October 2008 post. Connie Yu, are you listening yet? There's a job for you at Chevron. You can even stay in California, if you like.