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Downstate policies killing upstate economy

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The Empire State’s economic performance since the end of the Great Recession hasn’t been especially outstanding, roughly equaling the US averages for growth in private employment and gross domestic product. But a closer look reveals a tale of two New Yorks.

The 12-county metropolitan region that includes the Big Apple, with a population of 13.3 million, has gained jobs and grown personal income much faster than the nation. But the other New York — home to 6.2 million in the 50 counties north and west of Dutchess and Orange counties in the mid-Hudson Valley — has trailed far behind most of the country. In fact, much of upstate has yet to recover from the downturn.

Since the recession ended, upstate has gained private-economy jobs at a third the national rate and less than a quarter the downstate rate. Only three states (Connecticut, West Virginia and Wyoming) had slower private-job-creation rates than upstate. Twenty New York counties, all ­upstate, still lagged their prerecession private-employment levels in spring 2019. Upstate’s once-mighty manufacturing sector has been ­especially weak over the past decade, losing jobs even as manufacturing employment rose nationally for the first time in half a century.

After peaking at nearly 9 percent in January 2011, the statewide jobless rate has dropped by more than half, reaching near-historical lows in some areas. But unlike in New York City, unemployment upstate has declined because fewer people are looking for work — not because more are working.

From 2009 to ’18, only five states registered lower personal-income growth than upstate New York. Some of the state’s weakest income-growth rates were in Southern Tier counties that would have had the most to gain from shale-gas production, via “fracking,” before Gov. Cuomo banned it in 2014. Downstate, meantime, personal income jumped faster than the national average.

Upstate trends are consistent with a national pattern of rural and small-city decline. Yet in New York state, the cycle of decline dates back earlier — at least to the 1980s.

Why is upstate New York notably weaker than comparable areas in the Midwest? Higher taxes are part of it. Upstate employers also must deal with some of the ­nation’s highest workers’-compensation ­insurance rates, a uniquely expensive liability standard on construction projects, a state “environmental-quality” law that makes it easier to slow down ­development, mandated union preferences for all public works and most recently a virtual ban on ­the expansion of natural-gas pipelines.

The ideological shifts in Albany are casting more clouds. In 2018, Democrats took control of the state Senate for only the third time since World War II with their largest majority in more than a century. Members from New York City and its suburbs now dominate both chambers; more lawmakers than ever are committed progressives.

During his more moderate, first-term incarnation, Cuomo initiated some pro-growth policies beneficial to upstate. But more recently, he has veered aggressively leftward, signing virtually every major piece of progressive legislation that made it to his desk in 2019. These included the Climate Leadership and Community Protection Act, which will embolden the governor’s war on fossil-fuel infrastructure, along with his aggressive push for solar panels and offshore wind-turbine projects.

One result of this deep-green agenda will be higher electricity costs upstate, where utility rates had remained roughly in line with or even below national norms. Cuomo also signed a law extending New York City–style rent regulations to upstate communities that already have ample affordable housing.

In yet another blow, the Legislature passed a Cuomo-supported farm-labor rights and unionization bill, even as the New York Farm Bureau and other industry groups denounced it as costly and unbalanced in its treatment of family farms.

Upstate’s decline isn’t good news for New York City, though. Thanks to the state’s redistributive ­income-tax and aid formulas, the poorer and less self-sufficient the region gets, the more it will ­depend on subsidies from higher-income households and businesses downstate. Instead of exploiting their political dominance, downstate Democrats would better serve their own interests by sparing upstate from their version of “progress.”

E.J. McMahon is research director at the Empire Center for Public Policy and an adjunct fellow at the Manhattan Institute. Adapted from City Journal. Twitter: @EJMEJ

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