The Atlantic Yards is a financial disaster poised to happen and not just because of FCRC’s frivolous fiscal practices, which have been well documented since the project was announced in 2003. The project has, and will have, no fiscal over-sight. FCRC has been able to embed themselves in Albany to such an extent that even those who are charged with guarding the public treasure are already looking the other way even before the project begins. That is how and why Ratner has leap-frogged his way through the entire public review process and emerged free to do whatever he pleases. It is already clear that the Atlantic Yards will produce a host of secondary problems and costs, like sewerage, that will come directly out of the public treasury and extend far beyond the limits of the project itself. The question is, can we pay for this enormous, uncontrolled and ill-conceived undertaking to build the equivalent of a mid-sized American city in the middle of downtown Brooklyn? There are three points that need to be addressed in looking at the financial future of paying the tab for the Atlantic Yards.
The first and most important one is that the dollar hit 1.39 against the Euro this week. They US balance of trade is so far gone into the imports column that with each penny of this increase, it will come painfully out of the hide of American businesses and consumers. That will in turn decrease the purchasing power of every American to buy the goods that we have outsourced in order to reduce labor costs. You will have to pay more for the essential goods and services you must buy. The Atlantic Yards will form a substantial surcharge for every New Yorker on top of the decline of their real wealth and the rise of the cost of living. Thus far there is no indication whatever that the Atlantic Yards will be anything but an additional and onerous burden on taxpayers. It is no longer a question of whether we want to pay for Atlantic Yards. It is now seriously doubtful that we even can and sustain a semblance of our standard of living. That is already clear from the crisis in the real estate industry.
The second point is that while the default rate on sub prime and interest only mortgages may be relatively low, it signals a fundamental softness in the economy. The price of anything is dictated finally not by scarcity but by a fundamental desire to buy it and the resources to meet the price point set for it. The NY Times has indicated that one benefit to the housing recession is that Americans will see their houses as homes rather than investment to build equity. That is a quaint way of saying that the bull market is over for the middle class if in fact they ever really had a crack at it. Real income has been stagnant in this country since the 1970s when the GOP went to war with the labor movement and apparently has won. The disparity between wealth and wage earners has climbed exponentially ever since.
The third factor is that government and personal debt at all levels of the economy are at an all time high. That debt has the precipitous effect of underscoring the softness in the real estate market. One of the reasons for the mortgage defaults is that ordinary people are up to their ears in other payments they have to make. Something had to give so they didn’t pay the mortgage. There cannot be a housing boom if the market is glutted with foreclosures, and it takes very little of that to cause new home construction to stall. It has done so in many parts of the country.
If personal debt is crucial, the national debt is at an all time high of nine trillion dollars and six trillion of that has been added since the election of 2000. Say what you like, but that debt has to be serviced and a huge portion of our taxes is going to doing just that. Since our tax system greatly favors the wealthy, the burden for that cost falls most heavily on the middle class. Therefore, a large portion of your tax bill goes to paying interest to creditor nations, the largest of which is the Chinese who are our chief competitors now given their vast source of cheap labor. We are in that sense borrowing our own money from the wages we shipped abroad.
The decline in the dollar and real worth, plus the growth in debt, mean you will have less to pay your bills, and you will get less and less return on your tax dollars. The Atlantic Yards is the sort of cost most small countries would not dream of assuming. Serious people should now see that it is not one New Yorkers can realistically afford either. What is more, no one should be deluded that the present administrations in Foley Square, Albany, or Washington are able to see these factors at work, much less have the perspicacity to fix them. They remain concerned with redistributing wealth upward.
This week Paul Krugman pointed out in The Times that the Administration in Washington is running out the clock on Iraq. That applies at all levels of government on a host of issues. The strategy is to hang tough and never admit anything regardless of the facts. We see that mentality at work as the model in many aspects of the economy such as the Atlantic Yards. The leadership we have at all levels knows full well that even the costs of beginning this venture are set to balloon out of control. That is made grossly worse by the fact that FCRC is mired in political cronyism in Albany and with our Senators and Representatives. Why anyone thinks Senator Clinton is fit to be president under the conditions she has helped to create nationally and locally is beyond me. In the matter of the Atlantic Yards, she and Senator Schumer have shown as much economic insight as President Bush, which is to say none.
The situation is not, however, in any sense hopeless. Here in NYC we have a stable real estate economy that may take a beating in the months to come, but it is still NYC and its essential value will weather the storm. What is missing is the will to resist the steamroller approach that has driven big money over the public interest for thirty years. Just as we must find and elect candidates who will look for a serious end to the war, we must find and elect those who truly understand that the business of government is not business. We do not want public agencies to be the enemies of business, but corporate interests are often in competition with those of the public. Government performs the essential function of regulating the market to protect the citizenry from its excesses and omissions.
We need people in office who understand that while prosperity is good, other concerns like stability and fairness are equally, if not more, important. That means real incomes have to rise for all Americans while at the same time health, education, infrastructure and the like must not be treated as for-profit, short term enterprises. They are too fundamentally important to society for that. Nothing is more likely to destabilize the economy of New York City and State as the Atlantic Yards Project. We are already in an economy that national policy has seriously destabilized. We will be paying for that for some time to come. We simply cannot afford the Atlantic Yards and every New Yorker should make it their business to bring that message home in whatever way they can as quickly and firmly as possible.