Rudy's Parochialism Problem

A D V E R T I S E M E N T

The former mayor of New York City, Rudy Giuliani, has been gaining momentum among economic conservatives in recent weeks. At the end of March, he was endorsed by 1996 and 2000 Republican presidential candidate Steve Forbes, champion of the flat tax. Last weekend, he was a hit at the Club for Growth's winter conference in Florida, where he touted his record as the only fiscal conservative who has "actually practiced it, there in the battlefields."

But it is precisely some of Mr. Giuliani's positions taken while in the battlefields that are now raising questions about his fiscal-conservative bona fides. Specifically: his decision to endorse Mario Cuomo for governor in 1994 partly because of George Pataki's "ambitious" tax-cut proposals, his opposition to cutting New York's commuter tax in 1999, and, perhaps most surprisingly, his opposition to the North American Free Trade Agreement (NAFTA) in 1993.

The common thread running through all of these decisions: parochialism. Mr. Giuliani eschewed the apparent free-market position because he judged that it cut against the interests of New York City. Conservatives may be willing to forgive him these transgressions, but it doesn't mean they won't require some explaining.

Perhaps the most uncomfortable misstep for Mr. Giuliani to explain to his fellow Republicans is the endorsement of Mr. Cuomo, a Democrat, in the hotly contested 1994 governor's race in New York. To date, his campaign has yet to address this in any public way; the campaign declined to comment on the issue for this story.

Publicly, at the time, Mr. Giuliani explained his opposition to Mr. Pataki as being based partly on the Republican candidate's plan to cut the state's income tax by 25%. He called the plan "ambitious" and "inconsistent with the performance of the economy of this state," worrying publicly that it could lead to a reduction in state aid to the city, in turn forcing the city to raise property taxes. This is not much of an argument to the ears of supply-siders, who believe tax cuts can usually pay for themselves with the economic growth they spur.

While the negative outcome Mr. Giuliani said he feared was plausible, it didn't come to pass. Mr. Pataki got his tax cuts, and New York experienced a boom that helped leave the city flush with cash by the end of Mr. Giuliani's first term.

However, despite Mr. Giuliani's public opposition to Mr. Pataki's tax cut-plan, this fiscal disagreement was most likely not at the heart of the new mayor's endorsement decision.

"I am fairly convinced from listening to him then, and listening to him now, that he did not believe that," a fiscal-policy analyst at the conservative Manhattan Institute, E.J. McMahon, told me of the mayor's comments about Mr. Pataki's tax-cut plans.

More important to his thinking seems to have been his longstanding feud with the former Republican senator from New York, Alfonse D'Amato. In 1989, Mr. D'Amato encouraged a well-funded challenge to Mr. Giuliani in the Republican mayoral primary; Mr. Giuliani, in turn, blamed Mr. D'Amato for his loss to David Dinkins that year.

Mr. Pataki was Mr. D'Amato's hand-picked candidate in the 1994 gubernatorial election. And Mr. Giuliani clearly had that fact on his mind when making his decision to go against the future governor. "When I speak to Mario Cuomo, I know I'm speaking to the person who's going to be making the decision," Mr. Giuliani told the press in the days after his endorsement. He added, in a clear reference to Mr. Pataki's relationship to Mr. D'Amato, "When I've spoken to his opponent, I felt like I was speaking to a middleman who had to go back and get someone else to make decisions for him."

"It was not a shining moment, to say the least," Mr. McMahon said of Mr. Giuliani's anti-tax-cut rhetoric. Mr. Giuliani's "knee-jerk" reaction to the Pataki tax-cut plan was "word-for-word indistinguishable from what David Dinkins would have said." It all may have been motivated by animosity toward Mr. D'Amato, or maybe Mr. Giuliani simply bet on the wrong horse, but, as Mr. McMahon put it, he "went beyond what he needed to do" when he attacked Mr. Pataki's tax cuts.

If the commuter tax is a bit of a pickle to explain to readers outside of New York City, the maneuvering that surrounded the 1999 repeal of New York's commuter tax is a whole jar of pickles. The short version — which his opponents would no doubt like to see take hold — is that once again Mr. Giuliani was opposed to a tax cut.

The longer version is this. The commuter tax was a small charge on the incomes of people who lived outside of New York City but drew their salaries from jobs inside the city. In 1999, it was .45%. That year, there was a special election for state senate in Rockland and Orange counties. In order to help the Republican candidate, Thomas Morahan, the Republican-held state Senate passed a bill eliminating the commuter tax (a little bit of pandering to suburban voters). However, the Democratic-controlled state Assembly called the Republicans' bluff and passed the same bill — forcing the Republican governor, Mr. Pataki, to sign it. The Democrats, in short, weren't going to let themselves be painted as tax-happy.

Mr. Giuliani blew his stack, filing suit to try to stop Albany from repealing the tax. "Maybe it will hurt me politically," Mr. Giuliani said. "But the message I am trying to send is, ‘Don't mess around with the city.'"

So, will conservatives think it justifiable for the mayor to have opposed this tax cut? It blew a $400-million-a-year hole in the city's budget — money which had been coming in from non-residents.

In defending the tax, Mr. Giuliani cited the usual argument, that commuters should help bear the burden of city services: "Non-residents working in New York City receive a broad range of services and benefits from the city each day, including fire, police and transportation, and, at .45%, this tax is relatively modest and completely justified."

However, conservatives in New York City generally agree that it is an economically destructive tax, treating as a burden people who are net economic contributors to the city.

"The commuter tax is an economically bankrupt concept," Mr. McMahon of the Manhattan Institute said. However, he argued that Mr. Giuliani's opposition to its repeal constituted less than meets the eye.

First of all, one rule of New York politics is that you don't mess with the city or its budget without asking. Albany had ignored that rule, and Mr. Giuliani was understandably furious. More importantly, Mr. Giuliani and the speaker of the City Council, Peter Vallone, had been discussing roughly $700 million in tax cuts at the city level. After the commuter-tax blindside, they had to reduce that to roughly $350 million.

"It's unfortunate that we couldn't do more tax cuts," Mr. Giuliani said when they announced that year's budget in June. "But given what was done in Albany with the commuter tax, I think we've taken the responsible road." They still managed to cut taxes, though, including eliminating the sales tax on clothing and shoes that cost less than $110.

"It would have been more valuable to do other tax cuts," Mr. McMahon said. "I don't think it says anything striking about him that he opposed that tax cut."

NAFTA

If some of Mr. Giuliani's other strayings from the free-market fold have explanations —complicated ones, but explanations nonetheless — it's a bit harder to make heads or tails of his opposition to NAFTA in 1993.

"I continue to be concerned about the effect it would have on the job situation in New York City," the mayor-elect said in November of 1993, quoted by Newsday. "It is somewhat a narrow perspective, but it's my most important narrow perspective, which is the people of New York City," he said. "I don't think it would help New York City."

In the current campaign, Mr. Giuliani hasn't made free trade a major theme. But he did address the topic briefly at the Club for Growth meeting last weekend, in response to a question from the audience. "We no longer have separation between a domestic economy and a global economy," Mr. Giuliani said. "It's one in the same thing. And I generally agree with the principles of free trade and I think and increasingly have become more convinced of those principles because I almost think they are inevitable. If we fight them we hurt ourselves, if we embrace them we kind of move to the future."

However, the Club's president, Pat Toomey, thinks Mr. Giuliani has some explaining left to do as to why he opposed NAFTA. "NAFTA's a different story," he told me, compared to some of Mr. Giuliani's other transgressions. "He's got to be for free trade now, and he's got to explain why he wasn't then."

"My suspicion is that he's prepared to do that," Mr. Toomey added. "He's been saying that he's a supporter of free trade. I'm comfortable that he's pro-free-trade."

Still, NAFTA, the commuter tax, the Cuomo endorsement — taken together, all three are enough to give fiscal conservatives reason for pause as they consider Mr. Giuliani's record. He has an undeniably strong record of conservative reform and tax-cutting in New York City. But it is not an unblemished one. Parochialism, and even personal grudges, have led him at times to stray.

Of course, even Ronald Reagan raised taxes in California when he had to. But it's the myth of Reagan, not the man, conservative candidates are now expected to match.

Reader comments on this article

Comment on this article

LP Columnists