Does Downstate Subsidize Upstate? (No.)

Does Downstate Subsidize Upstate? (No.)

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Think Financial Student Loans

By James Ostrowski

If the conventional wisdom was right, Upstate NY wouldn’t be in the midst of 50 straight years of decline.

The conventional wisdom is that Downstate subsidizes Upstate NY. (The old conventional wisdom had it the other way.)

Matthew Crosson, president of the Long Island Association writes:

A few years ago, the Center for Governmental Research in Rochester found that in 2001, Long Island taxpayers sent $2.7 billion more to the state than they got back in aid and services. Today, that figure surely exceeds $3 billion. Those billions of dollars help support Upstate.

Call me a skeptic on this.

Here's the study they always cite. They know it well because they paid for it!

“Prepared for: NYC Office of Management & Budget Long Island Association and Long Island Federation of Labor, AFL-CIO”

First, the fact is that Upstate is a colony of Albany, which is just another name for the New York City Metropolitan area. Since we are their colony, we can assume that they perceive this relationship to be beneficial to them.

Do they ever say, "Hey, we subsidize you, let's go our separate ways?" Do they ever say, "Let's cut spending to reduce the degree of subsidy?" No. They just throw that in our faces when we complain about getting screwed by Albany or NYC.

So, even if Upstate gets subsidized, we are still a colony. The only real solution is to create two separate states.

The above study says that NYC gives upstate $10 million. Long Island gives Upstate as much as $3 million.

First, you have to understand that it's not Upstate that is subsidized but the Upstate political class. By definition, the political class are the folks who are net consumers of state money. Thus, the Upstate working class, the net tax payers, do not get subsidized but screwed--just as you thought. Likewise, the Downstate working class subsidizes the Downstate political class. Since "whose bread I eat, his song I must sing," our Upstate politicians are in the thrall of Downstate's such as when Silver put our man Mark Schroeder in the dog house a few years back.

Second, much of this so-called subsidy does not go to Upstate per se but to the Capital Distinct. No arguments there. The Albany area gets loads of tax money. So what does that have to do with Buffalo or Rochester?

Third, the study was done during a Wall Street boom and may not be valid for other times.

Fourth, the study counts SUNY aid as going to the county where the school is located not where the students reside.

Fifth, any claim that downstate subsidizes upstate would have to factor in federal money. It’s possible that Upstate federal taxpayers subsidize Downstate’s. For example, all the military spending that benefits all those fat cats on Wall Street. No one has done that analysis as far as I know.

Sixth, Wall Street, the basis for the claim of subsidy, is itself, subsidized by various federal regulations that make it difficult to compete with Wall Street. Also, they are subsidized by inflation since inflation is caused by the creation of new money and, as Ron Paul pointed out, much of that new money goes to the big banks.

[Re six and seven, Rothbard writes:

Commercial bankers, engaged as they are in unsound fractional reserve credit, are, in the free market, always teetering on the edge of bankruptcy. Hence they are always reaching for government aid and bailout.

Investment bankers do much of their business underwriting government bonds, in the United States and abroad. Therefore, they have a vested interest in promoting deficits and in forcing taxpayers to redeem government debt. Both sets of bankers, then, tend to be tied in with government policy, and try to influence and control government actions in domestic and foreign affairs.]

Seventh, Downstate gets much of its water and cheap power from Upstate. Why isn’t that factored in?

Eighth, a huge portion of Upstate is parkland off limits to economic development. These lands such as the Adirondacks are a veritable playground for Downstaters.

Ninth, many wealthy Downstaters own land in Upstate, so they are subsidizing themselves.

Tenth, you Downstaters get much of your food from Upstate so again, you are subsidizing yourselves.

Eleventh, some of the “subsidy” money is surely kicked back to politically-connected Downstate firms.

Does Downstate subsidize Upstate? It’s a Scotch verdict: Not proven.

Bottom line: Upstate is a colony of Albany, state government, which is really controlled by Downstate. We want our liberty back. We do not need you. Much of the Industrial Revolution took place Upstate. We were among the economic leaders of the world way before any half-baked, bought and paid for study was released in 2001.

feed your soul buffalo

What Others Have To Say

  1. WilliamZabkaAllStars

    7 ratings12345
    May 21st, 11:52

    Wow. I've read some poorly written articles in my time on BRO, but this has to take the cake.

    Some sentences are run-ons, others make little to no sense whatsoever, still others are so poorly composed they look like the writing of an English as a Second Language student...

    ... I won't even touch the ridiculousness of the argument or the irrelvant nature of several of the points made, I'm sure others will do that for me.

    Oh, and there's no way in hell anyone with a rational thought in their head could construe Upstate New York as "among the economic leaders of the world." Maybe during said Industrial Revolution, but that's how many decades ago? Typical living-in-the-past Buffalo.

    We need Downstate. Period.

  2. mjman4

    1 ratings12345
    May 21st, 12:03

    whaaa?

  3. buffalo339

    0 ratings12345
    May 21st, 12:06

    Listen, if your point is to say NYS politics is corrupt, then yes, if it is to say that poor state policy probably hampers economic success in upstate/western NY yes again. If you are saying The new yorks should separate, then you're insane. Granted a lot of UB students are from down state, but I bet a lot of the subsidy does help Greater buffalo last I checked UB is the largest employer here. Something is wrong in NY state, and playing the regional blame game is clearly the best way to fix it.

  4. buffalo339

    1 ratings12345
    May 21st, 12:16

    Listen, if your point is to say NYS politics is corrupt, then yes, if it is to say that poor state policy probably hampers economic success in upstate/western NY yes again. If you are saying The new yorks should separate, then you're insane. Granted a lot of UB students are from down state, but I bet a lot of the subsidy does help Greater buffalo last I checked UB is the largest employer here. Something is wrong in NY state, and playing the regional blame game is clearly the best way to fix it.

  5. buffalo339

    0 ratings12345
    May 21st, 12:17

    Listen, if your point is to say NYS politics is corrupt, then yes, if it is to say that poor state policy probably hampers economic success in upstate/western NY yes again. If you are saying The new yorks should separate, then you're insane. Granted a lot of UB students are from down state, but I bet a lot of the subsidy does help Greater buffalo last I checked UB is the largest employer here. Something is wrong in NY state, and playing the regional blame game is clearly the best way to fix it.

  6. buffalo339

    0 ratings12345
    May 21st, 12:19

    sorry for the triple post, the site wasn't loading. oops.

  7. JimOstrowski

    7 ratings12345
    May 21st, 12:22

    I'm insane? I can't write?

    Well, I'm sure glad I said yes when BR asked me if they could re-publish my blog post. (This was a blog post not a research paper.)

    Is that what you learned at UB, to call people insane when you disagree with them?

    I majored in philosophy there and tried to learn the rudiments of a logical argument.

    When someone makes an actual argument here or cites a relevant fact, I'll be back to have a civilized dialogue.

  8. UnionAMG

    1 ratings12345
    May 21st, 12:29

    Sorry James... but you lost me with this:

    "First, the fact is that Upstate is a colony of Albany, which is just another name for the New York City Metropolitan area. Since we are their colony, we can assume that they perceive this relationship to be beneficial to them." (the Albany-New York City Metropolitan area connection I just don't get)

    I'm not usually a commenter that rips on people for their grammar, spelling, or sentence structure. But I just don't know where your points or facts are in this "article" because I cannot follow. I can't follow it and, therefore, cannot have an actual argument.

    And don't take too much offense to these comments... we aren't so much disagreeing with your post, but are disagreeing with BR putting it on here as a submission (due to lack of quality).

  9. STEEL

    4 ratings12345
    May 21st, 12:32

    Anyway,

    I think the report should include the growth deficit in Upstate caused by a state that gears regulation toward downstate circumstances.

  10. JimOstrowski

    0 ratings12345
    May 21st, 12:38

    "Albany" refers to the state government. That's a common, ordinary use of that word.

  11. sally

    5 ratings12345
    May 21st, 12:38

    JimO - Sorry but based upon this submission you can not write. Your rambling is incoherent and has no facts supporting your assertions. It is the type of tripe one would expect from talk radio, based only upon an emotion of feeling wronged.

    If you are going to make an argument you should at least try to have a few verifiable facts to back it up. Just because a study was funded by a particular group does not mean it's conclusions are wrong. If you are to take that position then you need to point out FACTUAL errors in their study.

    How sad that you deem yourself qualified to speak of the issues facing WNY, it is clear from your writings that you are in over your head.

  12. eliotspitzer

    1 ratings12345
    May 21st, 12:52

    Does Jim Ostrowski also go by the name of Crittenden?

    I love the notion that inflation benefits 'big banks.' See, banks lend money in today's dollars. Borrowers pay the bank back in future dollars. When the value of the dollar declines (ie inflation), the bank loses. Inflation benefits debtors, not creditors.

    Oh, and investment banks make very little money structuring government bonds. I would bet it's less than 1% of all investment banking revenue.

    This rambling, unsubstantiated post has the feel of an old guy sitting in a booth at his local McDonald's bitching about the 'government' and 'the banks' and 'the oil companies' and every other bogeyman that comes across the USA Today.

  13. sbrof

    1 ratings12345
    May 21st, 12:52

    Without knowing the actual numbers for how much money in contributed to the state based on county via taxes any of these arguments could go either way. But I tend to agree that when possible the political clout that is downstate wins when it comes to policies.

    Laws that are good for NYC are not necessarily the same as Law that are good for Buffalo. But in those respects NYC wins.

    Look at the Niagara Power Project. There were some News articles about it a couple months or years ago that talked about even with the lost of some insane percentage of power it is still sent downstate to subsidize housing and their transit system. How about our transit system? Does the NFTA get access to this power. If so why don't we just have all electric buses and really make a huge environmental difference. I love how they would rather waste energy on transmitting it than let us use our own resources. Instead what do we get? Two of the most polluting coal powerplants in the entire state.... How about putting one of those plants on Long island where you don't have the falls. Why must we have it? Niagara Falls generates more than enough energy and could be expanded for WNY needs. The only reason we have coal powerplants around is because politicians didn't want them downtstate. And that isn't fair and just one example of probably many of the inconsistencies between policy and region.

  14. flyguy

    1 ratings12345
    May 21st, 13:16

    Maybe becaue downstate is flush with cash down in Long Island and theres more to tax. The services generally remain the same as we are all people. Get some cash in upstate pockets and this wont be the case and that means a hardcore effort to promote economic development upstate, at least on an even level as whats going on downstate in NYC.

  15. UnionAMG

    0 ratings12345
    May 21st, 13:27

    "Albany" refers to the state government. That's a common, ordinary use of that word.

    No I get that Albany refers to the stat gov't... I don't get what you mean by "Albany, which is which is just another name for the New York City Metropolitan area".

    Albany is not considered within the NYC Metropolitan area. Is that what you were trying to say? That paragraph just makes zero sense.

  16. UnionAMG

    0 ratings12345
    May 21st, 13:29

    "Albany" refers to the state government. That's a common, ordinary use of that word.

    No I get that Albany refers to the stat gov't... I don't get what you mean by "Albany, which is which is just another name for the New York City Metropolitan area".

    Albany is not considered within the NYC Metropolitan area. Is that what you were trying to say? That paragraph just makes zero sense.

  17. UnionAMG

    1 ratings12345
    May 21st, 13:33

    Damn... how can this site be so un-user friendly? Whatever programming system they used for this site is awful as it is very unresponsive and constantly leads to repeat posts.

    And I'm not an idiot that doesn't understand technology just clicking buttons incessantly here... come on BR, step up your game. You are no longer viewed as a simple community blog... you are a business with employees, advertisers, and customers. And if you don't take care of simple functionality issues like this, your customers (ones that are pretty loyal and WANT to use your product) are going to stop coming!

  18. buffalo339

    1 ratings12345
    May 21st, 13:38

    Look, I'm not arguing the fact that upstate has been restricted by state policy geared towards downstate, some of the arguments used are just ridiculous. I think what you were trying to do was compare pstate ny's current situation to that of colonies during the times of european empires, if so it seems to me to be an overly simplified comparison and even when simplified to such a degree, it is still very flawed. I didn't mean to sound so negative, I apologize for calling you insane but I just failed to see much rational logic in the argument.

  19. allfit

    2 ratings12345
    May 21st, 13:48

    The fact is that the State of New York is over-taxed, poorly run, and inherently inefficient. I beleive that all New Yorkers have the right and obligation to complain about the tax burden and where their money is spent. The taxes have been a long standing discussion for the people of New York, and every year we are informed that the next wave of politicians will cut them, but every year we see a budget that increases at twice the rate of inflation. We see the creation of more specialized authorities that have absolutely no concern for the people of New York, it is all about political patronage that is paid for with our tax dollars (see Thruway Authority as relevant example). The problem here is that we accept this as business as usual for the State of New York, we don't question our taxes or demand change, instead we sit back and pay the increases every year. I am not sure why we don't see this as a problem, my theory is that we each collect enough specialized services from the state that we are afraid to complain for fear that those things that are close to our own self-interests will be cut. Perhaps it is the feeling that we are all getting screwed, so eventually someone else will lead the charge for change and we will jump on board when that happens. I don't know what it is, but in my time in New York, my yearly contribution to state and local taxes, property taxes, sales taxes, special use fees, registration fees, one-time charges for services, etc, have all increased at a pace that far exceeds inflation, yet the services that I receive are being reduced including funding for parks, schools, roads, commercial investment, etc.

    To mirror Matthew Crosson's sentiments above: As a taxpayer, I feel like I am paying more to the state than I get back in aid and services. At what point will we see real change in Albany? At what point will our politicians realize that it is prohibitive to do business in the State of New York, and it is prohibitive to live in the State of New York. There are other options available to businesses and residents, and many of them are exercising those options by moving out of the State instead of fighting for change.

  20. B_lo_Kingz

    0 ratings12345
    May 21st, 14:05

    By reading these posts, u can really tell who's from upstate and who's from downstate ha ha ha.

  21. JimOstrowski

    3 ratings12345
    May 21st, 14:10

    "The fact is that the State of New York is over-taxed, poorly run, and inherently inefficient."

    Now, were getting somewhere.

    That's true and has resulted in 50 years of decline for Upstate. But NYC Metro is thriving. So, since they control the state, they refuse to do anything about Upstate's plight. (And I don’t mean sending up some corporate welfare for Pete's sake.)

    We are trapped in the same state as the world's economic capital.

    Because it's a world capital, NYC just shrugs off the burdensome taxes and regulations that kill lesser cites like Buffalo.

    There is no political roadmap to breaking away, but that doesn't change the fact that separation is only logical solution.

    A good recent example of Downstate’s control—Brian Higgins told us we were going to get a locally-controlled authority for the Canal Zone. Nope, it’s controlled from Manhattan, a fact that Free New York exposed. And lots of the contracts have gone to Downstate firms.

    Can I end a sentence with “to”? I always get a kick out of “word sniffers.”

    “The pen must at length comply with the tongue.” (Samuel Johnson)

  22. doc

    2 ratings12345
    May 21st, 14:25

    Admirably passionate but a little light on fact and grammar. I do often feel that upstate is a colony of New York City which is arguably the "tail that wags the dog" in New York State. Its too bad that the reciprocal relationship between down staters and upstaters was not further elucidated instead of the diffrences. Citing the differences makes for a rather divisive perspective. My argument has been to align upstate, particularly metro Buffalo, with the overheated economy of Southern Ontario which is only about 2000 feet away over the Niagara River. We must first enact legislation in Albany that will improve the business climate in this region then back fill with Canadian businesses. Most Canadians want a USA presence. Why not metro Buffalo? We can relieve NYC of theri perceived "burden" of supporting us.

  23. impressingagent

    3 ratings12345
    May 21st, 14:26

    sally, do us all a favor and write a better article.

    You can tell who is from downstate, they all walk around campus with the smolinski smerk.

  24. TheWhyNotGuy

    0 ratings12345
    May 21st, 14:40

    I'm not an expert on whether upstate subsidizes downstate or vice versa, but that's only a small part of a complex issue. For example, I feel as though we have little enough influence in Washington as it is. Splitting New York into two seperate states wouldn't help. Or how about the thousands of downstate students who attend Buffalo's SUNY schools because of affordable in-state tuition? We wouldn't be such a great option for them if we were a seperate state.

    I'm not saying it's a terrible idea, but it needs a lot more thought.

  25. Joshua

    0 ratings12345
    May 21st, 14:54

    Alright - here is a POSITIVE , whooooo, positive article from the Buffalo News: Buffalo budget cuts tax rates, boosts funding for pet projects . Taxes for home owners decrease by almost 5%!!!!!

  26. Keith

    0 ratings12345
    May 21st, 14:56

    Wow that was fast! It looks like Paterson is reading your work Jim.

  27. Keith

    3 ratings12345
    May 21st, 14:58

    Silicon firm plans 500-employee plant in Niagara Falls

    "The reopening is aided in large part by a 40-megawatt allocation of low-cost power from the New York Power Authority approved today. Globe also will get a boost from about $25 million in state Empire Development Zone benefits tied to job creation.

    "In these fiscally tough times, these are the kind of collaborative investments of state resources we must strive to bring to local communities throughout New York," Paterson added, noting the aid underscores his administration's commitment to bolstering the upstate economy."

  28. Freeasinbeer

    0 ratings12345
    May 21st, 15:09

    Never mind the comments by the usual grammar and spelling nazies... Well this is an old exercise. While working for a large unamed and now defunct statewide bank, we used to sit around in the dead of night while waiting for computer time and speculate on what we would do if: David Rockefeller called for advice on Chase (sell to BofA), Tom Watson called for advice on IBM (go as they have done to one operating system) and how to fix NY if Nelson called. Split from the 'City" Next where do you draw the line? First proposal was to the lright of Interstate 84 which gives them the water supply and the Catskills. Newburg and folks to the south may not buy into the "City' however. Next proposal was south of Suffern to Port Chester Route 202, which is a continuation of the existing southern line with PA. The third proposal was the NYC city line south which was never very popular with the debaters. (It included members from the Manhattan data center as well, and some of them wanted to transfer Staten Island to New Jersey)! Never listen to those who said it couldn't be done as 'Upstate was originally Mass. and in the Great Compromise West Virginia didn't want to be part of the slave states. Hence the two Virginias. Others in the Western Territories had similar considerations... What goes around comes around. I think this the only viable solution to the Upstate problem.

  29. tonyarmani

    3 ratings12345
    May 21st, 15:22

    Jim - Stop trying to combat these people, you'll never win.

    UnionAMG - You're right, this site does suck when it comes to load times, efficiencies, and posting. It took me 5 minutes just to log in to write this. I'll talk to Newell about this soon.

    Sally - Hilarious!

    Where is Damp to think of something witty in situations like these to calm everyone down?

  30. JimOstrowski

    1 ratings12345
    May 21st, 16:31

    Freeasinbeer--I think you would split off Long Island, NYC and two or three of the Northern suburbs. Perhaps the point where the high NYC cost of living ends would work.

    Not as political impossible as you might think. You would take one blue-leaning state and make one solid blue state (but with a Rep. mayor) and one red-leaning state. That shouldn’t change the US Senate too much.

  31. AtwaterLouse

    0 ratings12345
    May 21st, 17:47

    Tony - I heard Damp was banned from commenting because of something he wrote.

    Where is Damp to think of something witty in situations like these to calm everyone down?

  32. AtwaterLouse

    2 ratings12345
    May 21st, 17:59

    Also I've noticed a few others seem to have disappeared. Maybe they all just lost interest here, ormaybe got tired of waiting for pages to laod, or maybe some others were Damped too. I have no idea.

  33. Einstein

    1 ratings12345
    May 21st, 19:00

    This is not a new debate! We heard the same thing about Northern Virginia (Fairfax, Alexandria, Arlington, Prince William Counties) carrying the rest of the state financially. I listened to the same thing while living in Western Colorado (all our money goes to Denver), and the same thing in Georgia (if it wasn't for Atlanta, the state would die). There are two sides to this argument and neither one is correct. There is a reason that we have states, dividing them up is like splitting a football team into positions. It is great for practice, but you don't get anywhere when you have to compete in the game. The entire State should work together instead of holding these discussions that only serve to create animosity.

  34. JimOstrowski

    1 ratings12345
    May 21st, 20:27

    Could you be more specific?

    New York City is thriving and Upstate is not. We suffer from high taxes and burdensome regulations that do not plague the city the same way because of its status as the world's capital. For example, people come to NYC in droves to make a name for themselves in a hundred different fields and are willing to tolerate the high cost of living there.

    We in Upstate lack the political power to force changes though a state government controlled by Downstate interests. For that matter, we lack the power to kick out our own politicians even after years of their poor performances. (Quick, how many WNY state legislators have lost an election in the last fifty years?)

    What’s your solution?

    As I said in my blog post, there is a part of the state that is working together, the political class. The Downstate and Upstate political class works together for their own mutual benefit while the rest of suffer.

    Why don’t the rest of us work together? Political scientists know the answer: rational apathy.

    http://www.ncee.net/news/story.php?story_id=65

  35. tonyarmani

    3 ratings12345
    May 21st, 23:33

    All - I talked to Damp today - it's true he was banned from posting. Apparently if you say anything anti-BRO you get banned (which sounds a bit Nazism, but its not my site and I don't make the rules) so please watch what you post.

  36. gaustad

    4 ratings12345
    May 22nd, 00:52

    yea, I have not seen him on here anymore - thats too bad - I thought he added a nice change of pace to the posts

  37. Ray

    0 ratings12345
    May 22nd, 21:34

    I love the way the one who calls himself "eliotspitzer" challenges not only Jim Ostrowski but Rothbard too. There's some vast monetary holes in your arguement. Under the fractional reserve system the bank barrows from the FED and creates new money. If the bank borrows $1Mil, it turns that money magically into $10Mil and loans it out and collects interest on it. Poor bank, I wish I could run a racket like that. How can you lose unless you're a complete idiot and start lending money in the subprime market to people who have no way to pay the loan back when the interest rate jumps and property values decline?

    How does inflation benefit the debtor? The debtor can't create magic money like the fractional reserve bank. How can the debtor possibly benefit from the destruction of the purchasing power of his dollar? He's paying back his loan in devalued currency but he's poorer too because the present buying power of his dollar has been destroyed by monetary inflation.

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