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Michael Miller


By Michael Miller
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2010 marks the 30th anniversary of an event that eventually squeezed the American Middle Class and left a hundred million dreams scattered along the roadside. Long Island was at the center of it all, but I’m not aware of any planned public ceremonies or anniversary journals. After the Supreme Court ruled that banks could “export” interest rates charged on credit cards across state lines, the Citibank people told state officials that unless ceilings on credit card interest rates were significantly raised, they would move their credit card operations from the Route 110 corridor in Huntington to South Dakota.

Long story short, in order to save 2,000 Long Island jobs, the state legislature and Governor Hugh Carey changed New York’s laws to allow 25 percent interest rates and other fees. Turns out, Citibank immediately phased out the Long Island operation anyway because of the sweet Sioux Falls offer and we lost the jobs and got the interest rates.… New York still has strict usury laws for actual people. If I loan you a thousand bucks to help you get by, I can’t charge more than 16 percent interest.… In 1991, President Bush advocated the lowering of credit card interest rates as a way of increasing consumer confidence and stimulating economic activity. Senator Alphonse D’Amato, former Hempstead supervisor, introduced a bill to cap card rates at 14 percent. It passed the Senate, 74-19. A massive offensive by industry lobbyists killed the legislation in the House of Representatives, fully empowering an Army of Darkness which occupies our Capitol to this day.… A local group in Kingston, on the west side of the Hudson River, is urging the small city to declare Chapter 9 bankruptcy. The state government should step in before this kind of misguided thinking gets out of hand. Although Kingston is under the same revenue stresses as hundreds of other municipalities in the region, it is not yet broke. Rather, Chapter 9 is being urged in order to void contracts with public employees, particularly with police and firefighters, so that the city can essentially dictate terms with lower pay and reduced rights and benefits.… Municipal bankruptcy is a rare event in the United States. Since 1937, less than one-tenth of 1 percent of over 50,000 municipalities that borrowed by issuing bonds have defaulted, keeping interest rates paid by taxpayers low. Despite the nationwide budget crisis, only Vallejo, CA, the economically-blighted city of Prichard, AL, and tiny Westfall Township, PA, have declared in the past few years. Vallejo (population 116,000) suspended payments on bonds for four years, costing investors $13.4 million. Anticipating trouble, Fitch Ratings has issued a stern warning that it may downgrade a town’s bond rating just for considering bankruptcy. Twenty-six states prohibit any municipal bankruptcy outright. If people start throwing around the idea loosely, New York should take this option off the table, before the bond market dries up and costs shoot up for school districts, villages, towns, cities and counties. The stigma alone should make bankruptcy an absolute last resort.… Standard & Poors issued a new credit report on New York. S&P gives the state a AA/Stable rating for general obligation debt and top-drawer AAA/Stable for bonds backed by personal income taxes.… S&P sees it the same way as Member of Assembly Barbara Lifton, who represents upstate Tompkins and Cortland Counties. She has toured her district with a presentation showing that over the past quarter century, state expenditures have remained steady at around 7 percent of New York’s gross domestic product. What has changed is the flattening of tax brackets so that very wealthy New Yorkers and large corporations pay a smaller percentage of income in state and local taxes than low-income taxpayers. Lifton argues that a fairer tax schedule could eliminate the entire $9 billion budget deficit. It takes guts to suggest that the people most likely to write checks to a campaign fund should pay more.… I’m not suggesting that we go back to the old 15.9 percent top rate, but this idea that nothing on Earth would be worse than an increase in taxes based on the ability to pay may soon put at risk the good things that a previous generation of New Yorkers built with those higher rates.

Michael Miller is a freelance writer, designer and strategic consultant who has worked in state and local government. Email: