Private affluence, public squalor, high taxes
By Scott Sumner
Every time I visit New York I think about John Kenneth Galbraith’s famous remark about American private affluence and public squalor. There is impressive new residential construction. Townhouses in areas like Brooklyn are being fixed up. But the subway system is appalling, the worst I have ever seen. It’s as if a Hollywood movie director tried to create a nightmarish underground set for a film. New York’s airports are lousy and the roads seem to have more potholes than solid surface. Overall, just a disgraceful set of public facilities.
Were he alive today, Galbraith would probably say that the problem is insufficient tax revenues. But does the data really support that assumption? Here’s a table of tax revenue by state. What’s most surprising about the data is the very small variation in tax revenue.
The lowest taxed state (South Dakota) has a tax burden of 7.3%. The second highest taxed state (Hawaii) comes in at 11.3%. A range of just 4.0%. And then there is New York, in a class by itself—14.0%. (Note: this data source excludes taxes that are similar to user fees.)
Yes, even New York taxes (state and federal combined) are low by French standards. But that doesn’t explain why New York has much worse public facilities than average states like Massachusetts (9.6% taxes.) New York has been trying to build a new subway line for 80 years, while Beijing and Shanghai (far poorer cities) open opulent new lines about once a year.
You might argue that China is not a good comparison, as they have cheap labor. Yes, incomes are lower in China, but so are tax revenues. One difference is that Chinese subways are built with workers who earn low wages by Chinese standards, whereas New York subways are built by highly paid union workers.
I think a better comparison for New York would be a high income, world-class city like Singapore or Hong Kong or Dubai. Those places are able to build very good infrastructure quickly and at low cost. They might use Bangladeshi migrant workers at $1/hour instead of American “prevailing wage” workers at $50/hour. Indeed even cities like Paris and Berlin build new subway lines at 1/7th the cost of the New York project. A small part of this cost gap may be due to physical differences between the various cities, but by no means all of it. Nor is it all wages, work rules and nationalistic contracting also play a role. American firms are less experienced than foreign firms at building subways and unions require over-manning. Regulations also seem stricter in the US. The comment section of this article has some useful information.
This demonstrates one of the many internal contradictions of American progressivism. (And by the way, American conservatives have just as many internal contradictions.) You can have your strong public employee unions, “prevailing wages” and restrictive work rules, or you can have nice infrastructure. New Yorkers have (perhaps unknowingly) made their choice. Now they must live with the consequences. Few progressives (with the notable exception of Matt Yglesias) understand these internal contradictions.
BTW, the Hong Kong subway system has a 99.9% on time rating and is highly profitable. It is also a private company. Of course progressives prefer to talk about the Paris subway.
PS. After I wrote this I read a post on infrastructure by Matt Yglesias. His post is better. He points out that there are also lots of wasteful transportion boondoggles being built by conservative midwestern governors.