In short, residents across New York City and State are encouraged at one level and perplexed on another by the new jobs numbers announced this morning. The new US Department of Labor data showed the US economy shedding 20,000 jobs - bringing the number of US jobs lost since December 2007 to 8.4 million - in January but the overall unemployment number dropping to 9.7% from 10%. However the national numbers are reconciled, New York City still suffers from a 10.6% unemployment rate. And, with continued Washington talk about a new bank tax, concern abounds in New York City and State that the largest revenue generator of taxes for the city and state - tax receipts from the financial services industry - will be crippled even more.
Our simple message to Washington about Wall Street - regulate banks and financial institutions but don't tax them so much during this recession that unemployment increases and pressure on New York City and State budgets intensifies.
We need smarter and tougher financial regulations that, among other things, require greater capital reserves at the banks, restore common sense to mortgage lending, compel greater transparency for derivatives and don't allow Wall Street financial institutions to choose their regulator. But don't tax the banks right now because it will impair the flow of credit at a time the nation needs it. Further, it could have the unintended impact of chilling risk-taking in business when what we really want to do is curb recklessness, which was the primary force behind the catastrophic challenges we are living through.
Second, cut main street's taxes now. Washington can start by exempting all US business and their employees from the payroll tax for 6 months, and for all firms and/or businesses 5 years old or less, exempt them for 12 months. The payroll tax's highly regressive nature hurts small business owners and middle income Americans disproportionately. Cutting the tax would allow small businesses to invest more, hire more and spend more in their respective communities. The payroll tax cut might be the fastest way to get money into economically hard hit cities and communities across New York, especially upstate. I would agree that a long term growth plan is needed for upstate New Cork economies as well, but the payroll tax cut would provide some much needed and immediate relief.
In addition, Congress should cut the corporate tax rate from 35% to 25% to help with job creation, make permanent research and development tax credits to spur more innovation - the key to long-term job creation - and then extend the current tax rates for capital gains and dividend through 2012 to give investors more certainty during this period of turbulence.
We will pay for this with the growth it produces through increased employment and business investment. For those who doubt this strategy, I remind you of the powerful lessons of Bill Clinton's presidency. He inherited a record debt from George H.W. Bush, but went onto grow the economy by creating more than 22 million new jobs, reform welfare, make college more affordable and usher in record college matriculation rates, raise taxes for the highest income earners while eventually lowering them for the middle class. After 8 years in office, Clinton then handed his successor, George W. Bush, a balanced budget and a surplus. Anyone who questions America's - and New York's - resiliency and our capacity to renew and reinvent ourselves should get out of the way and let others lead.
The keys to President Clinton's strategy to balance the budget was job creation and shrinking government where it was too big - that was one of Vice President Al Gore's chief responsibilities, and he did it very well.
President Obama and the Democrats can and will do it again.
Our message from New York - be bold and please start soon.