June 14 (Bloomberg) — The most irritating thing about Eliot Spitzer is his complacency, his overriding conviction that no matter what he does to New York, the city and state will endure.
Neither corporations, nor Wall Streeters, nor lawyers have succeeded in convincing the New York attorney general of the contrary. Few are like Theodore Sihpol, the former Bank of America Corp. broker who dared to fight back — and won — when Spitzer prosecuted him on criminal charges. Instead, the companies and the lawyers settle. They, too, are complacent.
There's a surplus of complacency as well now that Spitzer is running for New York governor. The attitude is that if financial markets do all right then New York will be all right, no matter who wins in November.
Besides, challenging Spitzer is a fool's game. After all, the Spitzer war chest was, by the last public count, almost $20 million, some 20 times that of his Republican opponent, John Faso. And Faso isn't a big name. Before this campaign he was best known for losing a race for state comptroller.
But you could see things differently. Faso doesn't cut corners the way Sihpol did; he seems a model of probity. But Faso is like Sihpol in that he is daring to fight where others don't. So I phoned him to get a better fix on his plans.
The first thing Faso did was ring the alarm about New York state. "We're not just losing jobs and opportunities to other countries," he said. "We are losing to other states." The rate of that loss, he notes, is dramatic: New York citizens depart for other states more frequently than those of any U.S. state.
Sure, immigrants tend to compensate. Still, this outflow suggests that Wall Street at its frothiest doesn't take care of New York, and that laws have to change so that New York can take care of itself.
Faso wants to axe state spending, and he has a certain credibility in taking this stand. When George Pataki, the current governor, was elected in 1994, he named Faso to plan the state's finances. Fasoßled a budget transition thatßclosed a $5 billion budget deficit left behind by Democrat Mario Cuomo. There were cuts across the board, including the closure of the State Energy Office and a $100 million teacher bonus program. The plan represented the first year-over-year spending reduction in half a century.
Here Faso provides a contrast to Spitzer, who has promised to put more than 1 million New Yorkers on the Medicaid rolls, surely leading to more spending.
Next, Faso focused on New York's high property taxes. He wants to reduce the mandates that force school districts to spend so much, and he wants to cap taxes for all, whatever their income. The current system, he says, "is designed like an auto that has an accelerator and no brake." This contrasts with Spitzer's plan, which expands property tax reductions for lower earners without explaining how to limit spending.
Faso has additional plans, mostly aimed at reducing New York's tax burden, now the second-highest in the country. He wants to raise thresholds in the state's progressive income tax schedule so that more families find themselves in lower brackets. Today a married couple need earn only $40,000 to pay the top rate of 6.85 percent.
Faso also wants to end a special New York tax perversity, the recapture provision. Under the provision, the progressive schedule converts to a single high rate for all income once an earner makes more than $150,000 a year. This feature, Faso notes, makes the New York tax code "inhospitable." He proposes eliminating a corporate franchise tax, at least on manufacturers, as well as getting rid of the state's estate tax.
Regulation is last on Faso's list. He wants to regulate less and make regulation more predictable. Where Spitzer talks about creating individual jobs, Faso wants to create an environment of opportunity where jobs create themselves. Faso says that he will travel to Washington "to advocate for New York" and try to reduce the costs of Sarbanes-Oxley, or, at the very least, the surprises that come with the law.
This is the opposite of the Spitzer approach, which maximizes uncertainty in the name of a moral cause. Spitzer "doesn't play by the same rules as other people do," says Brooke Masters, author of a forthcoming biography of the attorney general, "Spoiling for a Fight."
If as attorney general Spitzer has rewritten the rules, as governor he may rewrite others. The governor controls both New York's insurance and banking departments, and a former prosecutor could work plenty of mischief from these places.
In short, the contest really is between Mr. Complacency and Mr. Anti-Complacency.
In the campaign we'll likely hear that the difference has to do with personal background. Spitzer's parents are wealthy. He went to Princeton and Harvard. Faso's father repaired televisions and rented tools. He went to Archbishop Molloy High School in Queens, the State University of New York at Brockport, and Georgetown Law School — at night. My own view, though, is that the difference is more one of temperament than social background.
In any case, New York voters and campaign donors are, in their way, like the companies that Spitzer has targeted. They can "settle" by calling this contest before it's begun. Or they can take the battle, and Faso, seriously.
(Amity Shlaes is a Bloomberg News columnist. The views expressed here are her own.)
© Copyright 2006 Bloomberg
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