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Friday, November 24, 2017

The New York Times shows its ignorance of basic economics, again.

I subscribe to a group on Facebook called "Fans of the Best of the Web," and a few days ago an author (I regret I deleted his name, I wanted to give credit...sorry.) had a link to a New York Times iditorial (At least they didn't put it on the front page as news, give them credit.), wondering why so many store fronts are empty right now. And they go forth with one leftest idea after another to get the stores filled, but "...much like the neutered dog, they just don't get it!" (From the late great Sam Kinison.) It would be funny, if it were not the fact that many powerful people read this rag and think it means something.

From last week's Manhattan tabloid, with comments.
Why Is New York Full of Empty Stores?


In his classic 1949 essay “Here Is New York,” E. B. White described the city as “a composite of tens of thousands of tiny neighborhood units,” each “virtually self-sufficient” with shops that met most residents’ basic needs, from groceries to shoes, from newspapers to haircuts. Every neighborhood was so complete, White wrote, “that many a New Yorker spends a lifetime within the confines of an area smaller than a country village.”

Nearly seven decades later, that observation is still largely valid, but it is being sorely tested by a scourge of store closings that afflicts one section of the city after another, notably in Manhattan and parts of Brooklyn. This plague has been underway for several years, but its familiarity does not diminish the damage inflicted on the economic and the psychic well-being of neighborhoods. One by one, cherished local shops are disappearing, replaced by national chains or, worse, nothing at all. To borrow from Tim Wu, a Columbia University law professor who has examined the issue, “Blight extracts a social cost.”

Thus far, coming to grips with the problem has not been a de Blasio administration priority. But it should be high on any to-do list in its second term.

“For lease” signs all but define every block in some neighborhoods, rich as well as poor. Take the Upper West Side. Its City Council member, Helen Rosenthal, reports that her staff recently surveyed shops along Broadway and Amsterdam and Columbus Avenues, and on some side streets. Of 1,332 storefronts, 161, or 12 percent, were unoccupied. The situation, Ms. Rosenthal correctly says, is a threat to the area’s character, its “sense of community” and even its residents’ sense of safety. While a comparable citywide census of empty storefronts is needed, the Upper West Side is obviously not alone.

On one level, there’s just so much the city can do. Online shopping is here to stay, and it takes an inevitable toll on brick-and-mortar stores.

But landlords can be blamed mightily for this blight — the greedy among them who raise rents to stratospheric levels, figuring that some deep-pocketed company will pay top dollar for the space. Speculative behavior has led to boom-or-bust cycles, as on Bleecker Street in Greenwich Village. It was fancy boutique heaven for a while. But how many $400 T-shirts does even the wealthiest New Yorker need? Boutique heaven turned into vacancy hell...

No, it's not greed, but the market that drives rents. You have a company that will pay $5,000 a month for your storefront, or $20, 000 a month, who do you go with? Or put another way NYT, if someone is ready to purchase your paper for a quarter (Much more than it's worth,) or another buyer willing to pay a buck, who do you sell it to. We know who you will sell to, and in your mind that's not greed. That's different.
"...What kind of lifeline might be thrown to imperiled local businesses and their neighborhoods? One idea floated among lawmakers is to restructure the commercial rent tax, a 54-year-old levy that principally affects business tenants in Manhattan below 96th Street. If their annual rent bill exceeds $250,000, they must pay the city 3.9 percent of it. This is on top of any real estate taxes they may also owe. It’s a burden. One proposal from some officials is to raise the threshold to $500,000 for the rent tax to kick in.

Another idea that merits consideration — and is likely to need Albany’s approval — is some sort of a “vacancy tax” on those landlords who leave storefronts unoccupied for years, hoping against hope that Sephora or Marc Jacobs or whatever will move in someday. Details would, of course, have to be worked out, including how steep a tax after how long a period of vacancy.

The core point is that all these dead spaces hurt, and neighborhoods have a right to protect themselves. “The city is losing what makes it appealing, what makes it New York,” Professor Wu said. Amen to that. The last thing anyone wants is a sequel to the E. B. White essay that might well be titled, “There Goes New York...”

This may shock you, but that is exactly the wrong thing to do. You make it too expensive to do business in your town, guess what? The business goes under. At some point the owner may even say, "Screw it, I'm out of here, I'll sell at a loss, but there is no way I can break even, much less make a profit. At least I'll stop the hemorrhaging..."

Forbes magazine caught on this a few days ago and made an excellent point. And I've made this point countless times to people who think they can artificially (i.e. without the influence of the market) raised wages without negative impact:
"...What happened? For starters, the state of New York embarked on an unprecedented experiment in raising the minimum wage. At the start of 2016, the city's tipped minimum wage increased by 50 percent, and the minimum wage for fast food workers jumped by nearly 17 percent to $10.50. At the start of 2017, the wage floor rose higher to $12 an hour, and the minimum wage for all businesses in the city rose by 22 percent to $11 an hour..."

I would say there may be some hope, but not right now. In a city that had as a legitimate canidate for mayor a petafile (Anthony Weiner), a communist (de Blasio) and another communist (Christine Quinn), and no Giuliani on the horizon to undo the damage of 20 years of democratic rule, it's gonna be bad. God knows they would be expecting a bail out from DC if Mrs. Bill Clinton had won last fall. I still think they will try and get the nation's taxpayers to bail them out soon enough. And I think it's time to remember the wisdom of former President Gerald Ford. "Drop dead!"

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