Neil deMause: The Website

In part two of my debunking of overinflated economic impact studies, I examine the claims that New York City will see an influx of tourist spending as a result of the “Waterfalls” public art exhibit:

I was riding the B train across the Manhattan Bridge recently when an especially civic-minded conductor thought to point out Olafur Eliasson’s “Waterfalls” art installations visible out either window. One passenger near me got up to take a peek, then sat back down, shaking her head: “It looks like the Brooklyn Bridge sprung a leak.”

That seems the popular verdict on the $15 million project (mostly funded by private donations, though the joint city-state-run Lower Manhattan Development Corporation kicked in $2 million): This is a waterfall?… [read more]

I’ve been digging into claims of economic windfalls from sporting events for quite a while, so why quit now? Today, I investigate New York City’s claims that the All-Star Game will generate $148 million for the local economy, this time with the help of an eminent tourism expert:

Don’t be so sure, says John Crompton, author of a 2006 paper detailing what he calls “mischievous procedures” in economic impact studies that reflect their genesis as more PR documents than scientific treatises. “The All-Star Game, there’s no question people will come to town for that,” he says. Nonetheless, he questions how many of the “new” visitors will merely displace existing tourists who’ll avoid New York because the hotels are full during All-Star week: “If there was no All-Star Game, would those hotels still be at 80% [capacity]? If the answer is yes, then you haven’t added to the economic impact, you have merely displaced some other folks who would have come if there was no game.”

After a week off, I’m back in Metro today with a look at New York City’s best-kept secret for tax day:

With tax day coming up tomorrow, Judith Rubinstein is a bundle of energy, spreading the word about the tax rebate no one knows about. Called the city school tax credit, it’s an offshoot of the state’s STAR property-tax rebate. (It also has nothing to do with schools — welcome to Albany logic.) “When you do your taxes, there’s a box that asks, ‘Did you live in New York City for the last 12 months?’” explains Rubinstein, director of Connecting To Advantages. That’s the only requirement. “It’s the one stupid refund that you can get even if you don’t do the full tax form.”… [read more]

Also, as a special bonus for the text-messaging generation, I now offer the same article in haiku form:

Tax credit for all
Nobody knows about it
Bloomberg hates poor folk

In which I examine the business tax breaks in the final version of the economic stimulus bill signed by President Bush, and whether they’ll actually, you know, help stimulate the economy:

The economic stimulus bill signed into law by President Bush today included one tax break for small businesses added by the Senate, but lost another as Congressional leaders bowed to White House pressure to move quickly without adding too many amendments.

The key addition affecting small businesses is an expansion of “bonus depreciation,” which allows investments in tangible property, computer software, or improvements to leased property to be more speedily depreciated, adding to a business’ tax savings. Businesses of all sizes will be allowed to depreciate in this tax year 50% of the cost of an asset put into use in 2008.

The Senate Finance Committee estimates that this amendment will funnel $43.9 billion in federal tax savings to businesses over the next two years… [read more]

I’m belatedly making my way through David Cay Johnston’s new book “Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill),” which is well worth reading (and not just because I get a mention in it). I’m only a few chapters in, but my favorite factoid so far:

In 2005, the 300,000 men, women, and children who comprised the top tenth of 1 percent had nearly as much income as all 150 million Americans who make up the economic lower half of our population. Add the income the rich are not required to report and those 300,000 made more than the 150 million.

This growing concentration of income at the top is nothing like the distribution of income America experienced in the first three decades following World War II. Nor is it like that found in Canada, Europe, Japan, Australia, and New Zealand. Instead it resembles the distribution of income found in three other major countries: Brazil, Mexico, and Russia.

Now there’s an epitaph for your democracy.

For more discussion of Free Lunch, see fieldofschemes.com, where I’ve posted about another section of the book - the bit with me in it, though it’s interesting for other reasons as well. You can also buy it at finer bookstores, like I did.

Another op-ed in today’s Metro NY that’s somewhat akin to what I wrote for them - it’s not my headline, I know that the economic term “leakage” is a phenomenon and not a quantity of money, and the only time I’d use the word “Gotham” to refer to New York City is if I were covering Batman’s policy positions. (Tough on crime, light on inheritance taxes, I’m guessing.) My editing kvetches aside, though, the topic at hand is an important one: How spending money on the poor gets short shrift as a way of helping the economy.

If you’ve been following the debate in Washington over how to best kick-start the economy, you may have noticed an interesting twist. Along with the usual minutiae about which businesses should get to depreciate what, Congress has been consumed by a debate over whether to increase food stamps and unemployment insurance - not just to help the needy in lean times, but to help the country as a whole.

The issue first arose when the Congressional Budget Office declared that boosting benefits for the poor and unemployed was the quickest way to inject cash into the economy. Then Moody’s economist Mark Zandi - hardly a bleeding heart - said the best “bang for the buck” would be boosting food stamps, generating $1.73 in economic activity for every dollar spent. As a comparison, tax breaks for companies buying new equipment would produce only 33 cents… [read more]

If you’ve been dying to know what Congress’ economic stimulus package means for your Section 179 deductions, your prayers have been answered:

The Senate version of an economic stimulus bill, which could come to a vote this week, contains several tax provisions intended to benefit small businesses, including some not present in the House bill passed last week.

First and foremost, the Senate bill, proposed by Senate Finance Committee chair Max Baucus (D-Mont.), would extend a helping hand to businesses facing large operating losses in either the 2006 or 2007 tax year, allowing them to write off those losses against gains as far as five years back, rather than the current two-year limit… [read more]

Apparently not everybody reads Metro NY. Two weeks after I debunked the claims that the recent theater stagehands’ strike was costing New York City $2 million a day, this week’s New York magazine declaims, in 30-point type no less:

…the stagehands’ strike kept hundreds of people out of work and cost the city an estimated $38 million…

As I wrote in my Metro column: “That’s [only] true in terms of ‘economic activity,’ a nebulous creature that includes all dollars spent on city turf. In terms of fiscal impact - actual city tax dollars lost - the three-week total was likely closer to $1 million, according to the comptroller’s office.”

A letter to the editor will be forthcoming. Then we can see if New York mag is as diligent about corrections as some other news outlets are.

Starting today, I’m going to be writing a weekly op-ed each Monday for Metro New York, which for the uninitiated is one of New York’s two free daily papers. (Metro is most readily identified as “the green one.”) For my debut column, I revisit a topic I touched on here before: how much the recent theater strike really cost the city economy, and whether the numbers being thrown around by the news media are really justified.

If most New Yorkers gave much thought to the stagehands’ strike - other than those in the theater district, who were either bemoaning lost customers or cheering the suddenly uncrowded sidewalks - it was because, we were told, the dispute was of vital importance to the city. The shuttering of one of the city’s key industries, news coverage incessantly repeated, was costing the city millions of dollars every day Broadway remained dark… [read more]

[NOTE: I haven’t quite figured out the inner works of the Metro website just yet, so until I do, the only link I have is to an image of the actual print edition page.]

Stagehands at most Broadway theaters are on strike, and here’s how Newsday reported the story today:

The stagehands’ union took its cause to the public yesterday, the second day of a strike that has shut 27 Broadway theaters and cost the city economy an estimated $17 million a day in the busy pre-holiday season.

Wondering where that $17 million figure comes from? According to Newsday’s sister paper, the L.A. Times, it’s an estimate by the League of American Theatres and Producers - in other words, the people the stagehands are striking against. Complaining about the economic impacts of labor uppityness is a time-honored tradition - the city did the same thing during the recent transit strike - but as in that case, it misses two main points.

First off, the $17 million figure is actually the cost to “Broadway” - in other words, the amount of lost ticket sales per day (and, perhaps, the lost spending by theater workers no longer drawing paychecks). The city only collects a small fraction of that in the form of income, payroll, and sales taxes, so the actual effect on city taxpayers is far smaller.

The bigger problem, though, is that it overlooks what economists call the “substitution effect”: People who don’t spend money one place will often spend it somewhere else. And Newsday should have known this, given that on the very same page as the dire warnings about economic ruin, it ran an article by reporter Daniel Massey headlined “Visitors find other things to do” (not online, apparently, or if it is I can’t find it in the mess that is the Newsday website):

A select few got into eight shows that continued to run because they are housed in theaters covered by separate contracts. Most improvised plans - eating, drinking, shopping and visiting the city’s non-theater attractions.

“It’s New York. What’s the problem?” said Lilach Yanai, 37, a computer programmer from Tel Aviv, who had planned to get tickets to a show, but instead said she would tour the New York Public Library and check out Van Gogh’s letters at the Morgan Library & Museum.

The only way the theater strike would have a significant effect on New York’s economy would be if it lasted long enough that tourists started cancelling their vacations here out of fear that they wouldn’t get to see “The Lion King.” Otherwise, what’s bad for Broadway will likely be good for 5th Avenue.

UPDATE (11/15): The city comptroller’s office has downgraded the estimated cost to the city economy to $2 million a day, based solely on the 18% of theatergoers who are making day trips into the city to see shows. (Actual impact on city tax revenues would be an even slimmer fraction of that.) The theater operators now say the $17 million figure is a “worst-case scenario.”