If you’ve been in the market for a home on Long Island, run a business here or are a student seeking a college loan, you’ll notice that interest rates have been inching up. That’s not good news for our area.
The 30-year fixed mortgage loan rate recently hit 4.9 percent, the highest since 2010. Existing home sales on Long Island have dipped as buyers find it harder to secure affordable monthly mortgage payments. This particularly affects first-time homebuyers already struggling to pay off college loans carrying interest rates that are also now over 5 percent. Add in car loans and credit card debt, and the interest burden for young Long Islanders is particularly heavy.
I often wonder how these young people will be able to afford to live and work here. And I wonder, too, whether our economy will continue to grow if the cost of living and borrowing here squeezes out the next generation. Given this precarious economic future, there are some things policy makers at all levels need to do to spur continued growth here.
First, at the national level, the Federal Reserve should put the brakes on pushing interest rates even higher. Inflation is growing at a low 2.3 percent right now, hardly enough to warrant financial concern. The economy is producing record numbers of jobs. Unemployment overall is at the lowest level in decades, with minority unemployment at a historic low. But if the economy slows due to interest rate spikes, another downturn, or even a deep recession, could result.
That doesn’t have to happen. President Trump is right to keep pressing the Fed to not kill the goose and the golden egg of this economic boom. Yes, the Fed is independent and doesn’t answer directly to the White House, but it needs to hear from elected officials that its decisions have real-world effects on the nation’s working people, and that an economic slowdown propelled by higher interest rates would have serious human costs. Fed policy shouldn’t be made in a political vacuum.
At the state level, there are some important actions that could also help keep New York growing. It’s no secret that the state’s high taxes and regulatory burdens help drive up costs and drive out businesses and people. Places like Florida and the Carolinas beckon with an attractive business climate and lower taxes.
But New Yorkers will stay here if they see some real progress in Albany on reining in the high cost of government. We spend several times what other comparable states spend on public health care and public schools, without big differences in outcomes. Our per-capita Medicaid cost is double that of California. Our per-student school cost — the highest in the nation — is a third higher than nearby Massachusetts. Yet the people in those states fare no worse, and sometimes fare better, than we do.
In the meantime, our spending on transportation infrastructure lags, crowded out by these high social spending costs. The Metropolitan Transportation Authority is billions of dollars behind in repairs to the Long Island Rail Road and the city subways. Onerous work rules and red tape drive up construction costs on these improvements to double or triple what they would be in other states. The result? Getting to work has become a job in itself.
New York needs to get its priorities in more reasonable order. That doesn’t mean shortchanging health care or schools, but it does mean better balancing that spending with competing needs. Other states are doing it. We can, too.
Which leads to the next level, where New York must begin to better contain costs. Long Islanders, especially, are paying unsustainably high local property taxes. That’s because our local governments and school bureaucracies mirror Albany’s high-spending ways. We have too many school districts, too-high law enforcement costs and too-heavy local government pension burdens. Getting these costs under control, along with reducing the state’s public spending, would help make New York more attractive to young people looking to head south or west or even to a state next door.
New York offers some unparalleled advantages that other states can’t readily match. We’re a business, financial and cultural capital that still leads the nation in many ways. But we can’t remain the Empire State unless we can find a way to have a renaissance, too. We need new and better ways of governing ourselves, better ways of providing cost-effective public services and better ways of balancing public spending with public good.
Al D’Amato, a former U.S. senator from New York, is the founder of Park Strategies LLC, a public policy and business development firm. Comments about this column? ADAmato@liherald.com.