Barack Obama’s war on Wall Street has claimed one significant casualty so far: the state of New York. While the Pay Czar claws back bonuses and salaries from bailed-out investment firms, which was a condition of taking the TARP money (not exactly a voluntary act anyway), the big reduction means a big hit in New York state income revenues. Governor David Paterson took the opportunity to slam Obama over the missing money, observes the New York, er, Observer:
David Paterson, ever the friend of the White House, just attacked the Obama administration’s decision to restrict bonus pay with John Gambling on WOR.
“That probably cost New York $1 billion,” Paterson said. “And look, I’m not going to defend these people that run these companies. They’ve frittered away a lot of money in these reckless schemes. But the reality is, in the end, we’ve lost $1 billion dollars because of that act. And there goes that pipe dream legislators engaged in reacting to my cuts.”
This comes as no shock, since the Obama White House publicly pushed Paterson not to run for re-election. Paterson suggested that Obama was just cranky because the President hadn’t accomplished much in his term, and Paterson’s wife suggested that Obama might have something against black governors. By those standards, this is pretty mild.
Paterson apparently seeks to undermine Obama’s populist bragging rights on the clawback. While his progressive wing fumes over Afghanistan and Obama’s tepid support for a public option, Obama must have hoped that stripping Wall Street executives of large amounts of cash would endear himself to their class-warrior hearts. Paterson just reminds everyone that a large and unintended side effect is that the money won’t come to the state coffers, leaving the Empire State with a billion-dollar hole in the budget.
Of course, there are other side effects as well. That money won’t get spent in New York, either, at least not directly. That means the local and state economy will drag as billions of dollars that might go for consumption get seized instead. Paterson fails to mention this, perhaps not wanting to get too supply-side ahead of his primary battle against Andrew Cuomo. We can bet that Rudy Giuliani will eventually pick up that argument, though, and many New Yorkers will understand it when he does.