What do Mayor de Blasio and the Republican Party have in common? They both need to figure out how to address poverty and underemployment without targeting the rich. Oddly, this means that “progressive” cities may become more of policy laboratory for the national G.O.P. than for the national Democratic Party.
The similarity between the policy problem facing de Blasio and the Republicans reflects no similarity in world-view or temperament. Mayor de Blasio’s campaigning made it clear that he has no love for the wealthiest one percent. He will happily tax them aggressively—if he can—and he has already proposed raising the tax rate on the wealthiest New Yorkers.
But Mayor de Blasio is not a free agent with the powers of a national autocrat. His proposed tax rate will need to get through the state legislature, and an increasingly centrist Governor who supports tax relief, perhaps because of Presidential ambitions.
Mayor de Blasio’s redistributive instincts will also be limited by the mobility of firms and the wealthy. If he does end up getting some form of extra taxation on New York’s highest earners, then any Wall Street firm that moves to Stamford will have the opportunity to claim that de Blasio’s anti-business bias drove them from the city. Some of those claims may be true, but even when they are not, the Mayor will face a steady drum-beat of negative press about how his redistributive policies are damaging New York’s economic future.
This dynamic seems far clearer in Boston, which has also elected a Mayor with a progressive pedigree. But while Mayor Walsh, a former union official, surely believes in more redistribution, he faces even stronger legislative limits—the Massachusetts’ State Constitution forbids progressive taxation—and a more obvious threat of economic exodus. Mayor Walsh knows that Boston is a small, cold city on the edge of the U.S. and that he cannot afford to make war on the business community. As a result, Walsh has been far more focused on promoting economic opportunity without new taxes on the rich.
New York may believe in its own invulnerability, but that belief is a chimera. Whether or not Mayor de Blasio knows it now, I believe that tough realities will eventually prod him towards progressive, anti-poverty policies that do not rely on large increases in revenue. That goal should also be the prime objective of the national Republican Party.
When it comes to reducing inequality, the national Democratic Party has an obvious agenda—fund programs that help the poor by taxing the rich. This cannot be the way forward for the Republicans—they must be the party that idolizes Ronald Reagan not Lyndon Johnson.
But to be successful in 2016, the Republicans will need to have a more inclusive agenda that offers more to less wealthy Americans. Lower tax rates, especially if they are accompanied with less spending, will not sell as the solution to the woes of bottom half of the country’s income distribution. Similar to Mayor de Blasio, the G.O.P. must find ways to help the less fortunate without massive spending.
Simplified one-stop permitting for would-be entrepreneurs seems to be an obvious first step. NYC business express is a wonderful tool that teaches possible business owners what they must do to get licensed in New York. But while the portal promotes transparency, it also makes the number of needed licenses painfully obvious. In most cases, these licenses require interfacing with many different regulatory agencies.
The entrepreneurship process would be far easier if new businesses only had to deal with a single licensing entity that handled all of the issues around permitting. The agency would have a commitment to quick approvals and would regularly post data on the speed of permitting.
If Mayor de Blasio wanted to give this proposal a particularly progressive tilt, he could start by making one-stop permitting available in New York’s less advantaged areas. This structure would be a variant on Empowerment Zones, but instead of providing cash for disadvantaged neighborhoods, the city would provide only the good, swift government that every neighborhood deserves. Simultaneously, the mayor could call for a retrospective cost-benefit analysis of the city’s myriad business regulations and commit himself to fight for more economic freedom.
A second approach could focus on education. The Mayor has supported early-childhood education, and some experiments with pre-k interventions have found amazing results. But he should also ensure that higher grades do more to promote economic success after graduation. Schools should be graded not only on test scores, but also on employability and entrepreneurship in later life. The Mayor needs to champion a new educational model that that focuses on the skills that deliver the most economic value later in life. For example, the work of my colleague Joshua Goodman finds that African-American earnings rose after they were exposed to more science and math in the years that followed the Nation at Risk report.
New York’s high housing costs represent another problem that can be addressed without significant subsidy. Prices reflect the confluence of supply and demand. The high cost of housing in New York shows what happens when robust demand collides against supply that is artificially restricted because of excessive regulations. The Mayor should judge his administration by the number of units that are permitted and built and he should aim to reach the high levels last seen during the 1950s and 1960s. The easier that it is to build, the cheaper that it will be to rent.
Low barriers to entrepreneurship, skill-oriented education and unfettered housing supply should also be included in a national Republican anti-inequality agenda, but at the national level, Republicans can take one further step that is impossible at the local level. They can expand the Earned Income Tax Credit so that it effectively guarantees a reasonable minimum wage to every worker.
The minimum wage itself penalizes those businesses that are doing exactly what want every American employer to do—providing jobs for less skilled Americans. A sensible policy would reward rather than tax companies that hire marginal workers, and a bigger Earned Income Tax Credit could do just that.
Public policy, similar to politics, can make strange bedfellows, and it is harder to think of two more awkward companions that Bill de Blasio and Paul Ryan. Yet oddly, they are facing the same problem—improving the welfare of poorer Americans without penalizing the rich—and if the country is lucky, they may end up learning from one another.
Edward Glaeser is the Fred and Eleanor Glimp Professor of Economics at Harvard and a contributor to e21.
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