Back to the Future with Zohran Mamdani

Despite living in Canada, I am going to write some more about NYC Mayor-elect Zohran Mamdani. It is hard not to, as most of the things he says make my Econy-sense tingle.

Here are some of the things he has said he is going to do as Mayor, in case you didn’t know or forgot.

But first, the context. NYC’s municipal government has an annual budget of about $120Billion, employs over 300,000 people, and the city is home to more than 8million people. Mayoring all that is no small job.

1. Mamdani pledged to “freeze the rent” on nearly one million rent-stabilized apartments throughout the city.
2. As a New York state legislator, he argued for ‘defunding the police’. He has (sort of) toned that rhetoric down in recent months as he campaigned.
3. He said he will establish city-run grocery stores in NYC.
4. He will make the NYC bus system ‘free and faster’.
5. He will raise taxes on the rich.

The entire list is longer, but I will just say a few things about these, as they are in the wheelhouse of a retired economist like me.

1.

Rent freezes are not new, indeed, the fact is that NYC already has a ‘rent-stabilized’ category of rental units, which basically means that any rent increases are limited, either by a statute or by requiring that the increases be approved by some kind of review board. So, what does it mean to freeze the rents on such units? Presumably, it means they will be allowed zero rent increases for some period of time.

Details matter here. It should first be noted that Zohran cannot do this on his own, there is in place a Rental Review Board that would have to approve this freeze. ZM can appoint new members to this, but only after existing members’ terms lapse, so he would have to work on this board, one way or the other.

Assuming he can do that, the next issue is – which and how many of the rental units in NYC are included in this category? If more than a million is a small portion of the total, then some renters will get a nice little gift of zero increases, and the owners of these units will react in some way. If zero increases means they lose money as their costs increase (Zohran has not promised to freeze those costs, natch) then they will sell the units – perhaps at some loss – or find creative ways to get their units ‘uncategorized’ as rent-stabilized. Where there’s a bureaucracy there’s a way.

If, on the other hand, most rental units in NYC are in this category, and – most importantly, newly built units are – then the supply of units will dry up in general, and you will see lots of people who cannot find accommodations at all.

2.

(Wet Dream Police….apologies to Cheap Trick.)

The concern here, as expressed by people who currently work throughout the NYC justice system, is that even if he does not de-fund the police (that might actually be unpopular) he has the power as Mayor to appoint City judges. If he appoints judges who are determined to lower incarceration rates and give non-punitive sentences to those convicted of ‘minor’ offences, and to avoid imposing cash bail on those apprehended for not-so-minor offences, then it will not matter much what the police do. The people they apprehend will quickly end up back on the street, and so they will have no incentive to apprehend them in the first place. That way you get the same outcomes as with police defunding without actually, you know, defunding them. Judgement on this one will have to wait to see what he actually does, but he has the ability to do a lot.

3.

I could just say ‘what makes anyone think any government at any level can run grocery stores competently’, but I will in fact say more than that.

We have a case history of this. It was tried in Kansas City, where the city paid millions to renovate a building and then put a grocery store in it that was run by a non-profit called Community Builders of Kansas City. So, I could repeat the remark in quotes above with ‘government’ replaced by ‘non-profit organization’, but I won’t. The store was about to close as of the end of July, I can’t find any more recent info on its fate, but one could of course say that is just one example, it does not prove such a thing cannot succeed.

That is true, it proves no such thing.

Here are some quotes about the KC experiment of interest, however.

Noting that some have blamed high crime levels in the area of the KC store for its demise, the mayor of KC, Quinton Lucas, had this to say….

“While I hear and understand the crime issues and concerns,” Lucas said, “there’s a grocery store right down the street — largely in the same kind of area, some of the same criminal numbers and statistics — that still is doing pretty darn well.”

So, a grocery store being run to make a profit (horrible word, just horrible) down the street is doing fine. Oops .

And there’s this – One shopper said “There’s no meat. There’s no vegetables. There’s no nothing.”

Second oops. And….

“A rancid odor fills the market, with shoppers turned off by bare shelves and coolers, along with empty meat and deli departments,” reports local station KSHB.

Oh, dear.

I am betting that when Zohran puts the NYC version into place, they really will be run by the city, staffed by (union-waged) city employees. After all, he said in his victory speech that he was going to show everyone that ‘There is no problem government cannot solve.’

Can you say ‘money pit’, boys and girls?

4.

It turns out I have local information on an experiment almost exactly like this.

Some years back, the London Transit Commission (LTC) struck a deal with the university’s Student Council (USC). The USC would take some of the money they get from taxing students (sorry….from collecting fees from students) and give it as a lump sum to the LTC every year. In return, the LTC would let any university student ride LTC busses for free, anytime. They call it the student bus pass.

Prior to this deal, university students had the option to buy a regular LTC bus pass at a discount. Not surprisingly, some students did, and others did not, depending on where they lived and what other transportation options they had available. Now, with this deal all students can ride the bus for free, and all students pay for this – whether they want to or not.

The result of this was quite predictable. Students who might have walked six or so blocks to class or to get downtown to party of an evening because they had not bought a pass, and would have to pay the undiscounted fare, now could jump on the bus for free, so they did. If it’s raining, just jump on the bus. Busses in the university area got way more crowded. The LTC responded by running more busses (not free) and by buying ‘articulated’ busses that are basically two busses connected by an accordion-like middle section so they can sort of still get around corners (also not free).

Now, Zohran is planning to make NYC busses free for everyone. Thus, the same effect of increased riders will occur as occurred in London, but not just in some areas for some riders, but everywhere for all riders. So, busses will be free perhaps, but there is no way they will be fast, unless…..the NYC transit system increases the frequency and number of busses. The LTC got actual new revenue from the USC in their agreement, so they could buy new big busses and run them more frequently. NYC will have – yes, kids, that’s right – zero revenue.

So, to get to ‘free and fast’ some taxpayers somewhere are going to have to cough up the dough not just to replace the lost fare revenue (cuz drivers must still get paid, and busses maintained), but to pay for more and more frequent busses.

One commentator has mentioned another likely impact not seen in our local experiment. The homeless of NYC will have a new place to stay to get out of the cold. The homeless in London did not get university bus passes.

I can’t wait to see it all unfold.

5.

 

I think this is Mr. Mamdani’s favourite. Tax The Man. You know a card-carrying member of The Democratic Socialists of America is going to go big on this idea.

It happens that NYC has its own income tax, which of course is paid only by those who live in NYC, and whose revenues flow wholly to the NYC government. So, we all can easily see what the Big Question is here. If ZM does raise the NYC income tax rate on high-income New Yorkers, what will those folks do in response? Conservative commentators are all predicting they will leave NYC in droves, but it is surely not that simple. Living in Yonkers, White Plains or Jersey City is just not the same as living in NYC. Even I can grok that. So we may be about to find out just how much rich folks really like living in NYC.

Again, I can’t wait to see it all unfold. You go, Zohran.