I’ve made a lot of predictions, on record, about New York City under Mayor Zohran Mamdani. How it’s going to be insolvent. Crime-ridden. Dysfunctional. You can find them, timestamped, here, here, here, and here. But a few days ago, Mamdani’s office announced that he had reduced New York’s deficit from $12 billion to $0. Amazing!
Here’s Mamdani’s video where he explicitly makes this claim:
Only one of us can be correct, and we now have the evidence to determine who that is. So, I thought I’d take this moment to pit my predictions—and Mamdani’s claims—against reality.
Who got it right? Who got it wrong? And do I Mamdani an apology?
First, I want to acknowledge the distinct disadvantage Mamdani faced: Eric Adams was, unfortunately, as incompetent as he was corrupt. (He’ll feel right at home in Albania.) His budget failed to accurately reflect how much money the city needed by about $12 billion dollars. That is: He claimed that New York City only needed X dollars to fund the city’s expenses, and he received X dollars, but in fact the city actually needed X + $12 BILLION dollars. Now the bill is coming due, and Mamdani’s stuck with it.
Second, feel not the slightest sympathy for Mamdani: When he was an assemblyman, he voted for the precise spending increases that inflated the budget past what New York City could afford; when Eric Adams vetoed them, arguing (correctly) that the city didn’t have the money, Mamdani and other members overrode the veto. Now Mamdani is claiming to have “uncovered” the $12 billion “Adams gap.” Hmmm. How did that gap get there, Assemblyman Mamdani?
Nonetheless, I’d be willing to look the other way if Mamdani did actually balance the budget. There’s nothing wrong with funding things you can pay for.
So, can he? Or rather, can you, taxpayer?
Essentially, Mamdani’s task was to find $12 billion dollars. There are really only two ways to do this: You cut services, or raise taxes. (The federal govt. prints money.) Both make people hate you, and every politician knows that. Mamdani found a neat way around this: Make your children pay for it! (This works because his devoted base of downwardly mobile and over-educated yuppies have none.) Let’s look at how he accomplished this.
NYC has pension funds from which it draws to pay the pensions of current retirees and future retirees. At current spending levels, however, the fund is on an unsustainable decline. If NYC doesn’t put more money into it, the city won’t be able to afford future retirees’ pensions, and the system collapses. In short: They’re fucked. To prevent system-collapse, every year NYC is required to pay money in so that, hopefully, by 2032, the fund will have enough money that it can self-sustain.
Mr. Mamdani, however, decided that he’d rather not put all that money in this year. It’s expensive to prevent system-collapse! Instead, he increased the amount of time the city has to repay the debt from 2032 to 2037, which reduces the amount the city needs to pay each year. This year, specifically, it allows New York to pay $1.64 billion fewer dollars into the fund. Mamdani, who I’m coming to realize really is an excellent politician (pejorative), has claimed that $1.64 billion as a credit against the $12 billion he has to come up with.
So what? He plays with numbers. What’s the big deal?
The problem with this is that delaying pension contributions doesn’t make costs go away, in fact, it dramatically increases them in the long term. This is because the pension fund expects to earn investment returns on the money that NYC puts in this year, so when contributions are reduced, the city eventually has to pay back the difference plus the investment growth the fund would have generated. That missing money then compounds at 7% per year, which, annualized across 5 extra years, is about $4 billion dollars missing. So, Mamdani really did “save” NYC from having to pay $1.64 billion dollars this year, and all it cost was $4 billion dollars from your children, taken when Mamdani is no longer mayor.
That’s $1.64 billion. What about the rest? The lion’s share of $12 billion comes from a $4 billion New York State aid package ($8 billion over two years). A one-off hand out that is, in effect, a wealth transfer from upstate New York to New York City. Very equitable!
But in truth, there’s nothing wrong with an aid package. Sometimes you’re in deep shit and you need some help to dig yourself out. I don’t think there’s anything wrong with providing temporary budget relief, provided that money is used to fix structural problems. But fear not! Mamdani has actually found a way to use this money to create even more structural problems.
The perfect example: Mamdani is using $1.6 billion in New York State funding to expand free pre-k for 3-year-olds and begin free pre-k for 4-year-olds. But he only secured funding for 2.5 years. So when the time is up there will be a political crisis: NYC will either have to come up with an extra $1.6 billion a year (at least, that number assumes no costs grow), or cut the program and kick children out of pre-k, disrupting tens of thousands of families that have structured jobs, commutes, and childcare around the service. So, it is true that Mamdani secured $8 billion in funding across two years (no small feat!), he just decided to use that money to lock in an extra $1.6 billion dollars of spending, every year, in perpetuity.
There is an argument to be made that free pre-k for 3- and 4-year-olds will actually save the city money: If parents decide to work instead of staying home to take care of children, that increase in earnings will translate into increased tax revenue. This argument, of course, is not the one Mamdani is making however, because he does not care if New York City is fiscally sound.
Another element of his budget is the infamous pied-à-terre tax, or the tax on second homes. Though there’s been a lot of faff about it, and of course Mamdani has already claimed the predicted $500 million in annual revenue as a further credit against his $12 billion deficit, the law hasn’t actually passed.
That $500 million also seems suspiciously high to me because it assumes that no rich people move out as a result of the tax. Famously, Mamdani announced his tax in front of Citadel-CEO Ken Griffin’s home; the CEO, incensed, announced that Citadel would be expanding and adding 400 new jobs in Miami instead of New York. Not a smart move, Mamdani. Although to be fair to the mayor, the most-cited work on this subject (by Stanford researcher Cristobal Young) suggests that millionaire flight is real but small: Per 1% increase in taxes, about 0.3% of millionaires will move away.
Listen to the mayor, in his own words:
youtube.com/watch?v=FLKZnVB4F9k&themeRefresh=1
The lesson I don’t want readers to take away from this is that socialists aren’t fiscally responsible. Because—while true—it’s irrelevant. American politicians, red, blue, and purple, are not fiscally responsible. Since Trump came into office just over a year ago the deficit has grown 2.8 TRILLION dollars. (That was a serious point of contention between Musk and Trump.) Biden, in his four years, oversaw a 7.9 trillion dollar increase (to be fair, much of this was as a result of Trump-era COVID stimulus). Obama and Bush were hardly better.
We are not serious about the future of our nation. At every step we have prioritized gluttony over discipline, and our kids will pay the price. Mamdani is a symptom of this, not the cause.
So no, I do not owe Mamdani an apology. But I do owe my kids one.
Peter
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