What do the elections of New York mayor Bill DeBlasio and New Jersey governor Chris Christie have in common? The wealth gap. As the latest jobs numbers show, we may be in a recovery, but it’s not one that the average person can feel. Unemployment remains high—higher now thanks to political dysfunction that led to the shutdown—and inequality is growing. While DeBlasio is a true blue liberal and Christie a Republican, both appeal to voters who are sick of plutocrats, slow growth and politicians who don’t care about the 47 percent. The question is whether either really has the policy answers for the 2 percent economy.
In New York, it’s hard to imagine a more radical contrast to billionaire Mayor Michael Bloomberg than DeBlasio, whose main economic proposal is a tax on the city’s wealthiest (those making over $500,000). While the business community is already nervous, I don’t think a percentage point increase in taxes on the rich will scare the creative classes away; the key point is that the revenue must be spent on things that boost growth. As Bill Clinton proved, you can grow your way out of a deficit. New York’s new mayor will be facing a 2 billion dollar budget gap that will be best bridged not with cuts or tax increases alone, but with faster growth. On that score, he should continue Mayor Bloomberg’s work to diversify the city’s economy. Finance may be NYC’s home town industry, but with a quarter of the wage share and only 9 percent of the employment, it doesn’t do much for the inequality problem, or for job creating small businesses.
Both DeBlasio and Christie will also have to deal with the issue of stagnant wages (salary negotiations with unions loom), and a growing pension crisis. While Christie has talked tough on this front in the past, he’s kicked the can down the road in New Jersey. Unfunded pensions and retiree health liabilities there are truly the elephant in the room in the Garden State. And in an era in which both growth and asset returns are predicted to be slower, there are some very hard choices to be made. For more on the politics of the 2 percent economy and the recent elections, listen to Joe Nocera, Charlie Herman and myself on this week’s wnyc Money Talking.