Bread, Circuses, Mamdani

New York City is pretending to have a primary election for mayor.  I say “pretending” because the metropolis switched to a “ranked choice” voting system four years ago.  Ranked choice voting is fine in competitive races, but anywhere a single party holds a large lead over a minority party, computer modeling shows that it almost always results in a majority party victory by minimizing the effects of a third party splitting the ballot.  Which is usually the reason the majority party imposed the new system of voting.

With ranked choice firmly in place and Democrats outnumbering Republicans 7 to 1in NYC, I can reliably predict that a Democrat will win, but which one?  If you believe the polls, the race is a toss-up between former Governor Andrew Cuomo and State Assembly member Zohran Mamdani.  Cuomo’s candidacy proves there is political life after public death and the Mamdani’s is a perfect example of why watching politics is better than viewing any television show.  Currently, Mamdani has strong backing among younger voters and progressive constituencies, while Cuomo maintains support from older and more moderate demographics.  The primary is set for June 24, so we will learn the winner shortly.

Thirty-three year-old Zohran Mamdani was born in Uganda and moved to the US at the age of seven.  After earning a bachelor’s degree in Africana Studies, he became a US citizen in 2018.  Two years later, he was elected to the New York State Assembly.  Apparently, Mamdani has never held a management job in the private sector.  Now, just five years after that, he is running to become the mayor of the largest city in the nation, on a platform that is…well…unique.

Mamdani, a Democratic Socialist running as a Democrat, wants to enact some sweeping economic reforms that would change New York City forever.  Here are some of his more striking proposals:

Rent Freeze: He proposes an immediate freeze on rents for all rent-stabilized apartments in NYC, impacting over 2 million tenants.  He plans to appoint members who support this initiative to the Rent Guidelines Board.

City-Run Grocery Stores: He advocates for establishing one municipally-owned grocery store in each borough that would offer affordable food options, especially in underserved areas.  These stores would operate without profit motive, aiming to reduce overhead costs and pass savings to consumers.

Free Public Transit: He aims to make all city buses fare-free and improve service by expanding bus lanes and reducing delays.

Universal Childcare: He plans to provide no-cost childcare and to increase wages for childcare workers to match those of public-school teachers.

Tax Reforms: He proposes raising corporate taxes from 7.25% to 11.5% and implementing an additional 2% flat income tax on millionaires to fund his programs, aiming to generate approximately $9.4 billion annually.

Let’s tackle each of these points individually.

Rent controls, like all price controls, simply do not work, and we have more than 2000 years of economic data to prove it.  If property owners cannot raise rents to align with rising costs, they either turn the apartments into salable condominiums or take the property off the market, creating a housing shortage that inevitably leads to rising prices. 

I could give you the well-established arguments and facts on rent control, but perhaps, it would be better to just relate what happened when the Argentine President Javier Milei repealed rent control in Buenos Aires in December 2023.  The effects have been both dramatic and aligned with free-market predictions.  Landlords who had exited the market promptly reentered it, increasing the number of available units by more than 170%.  More supply meant landlords competed on price—especially after allowing dollar-denominated contracts—resulting in a drop in rents by approximately 40%, adjusting for inflation.  Both of these conditions led to a “rental-market-boom” which gave prospective tenants more choice and bargaining power.

City-run grocery stores might sound nice—like a public library with bananas—but economically, they’re a recipe for wilted lettuce and financial indigestion. 

First, the government isn’t exactly known for its retail instincts.  If you’ve ever been to the DMV, imagine that vibe—but in the frozen food aisle.  Want a cart?  Fill out Form 27-B and return it to Window 3.  Prefer bagels over bureaucracy?  Too bad—the state has decided rice cakes are better for you.  My local store carries two dozen types of olives—the city-owned store will offer one type.  Thankfully, I’ll never have to shop at the only store left in a New York borough, since I like olives stuffed with anchovies.

Second, these stores would be funded by taxpayers, meaning everyone from grandma in Queens to a kid in the Bronx is helping subsidize Chad’s organic turmeric habit.  And if the store loses money (which, if they pride themselves on being non-profit, they absolutely will), the city just raises taxes or cuts funding to pothole repair.  Either way, the avocado hits the fan.

Private grocery stores already compete fiercely to bring you arugula at midnight and 87 flavors of hummus.  Government grocers would have no incentive to improve—because when profit doesn’t matter, neither do customers.  They won’t improve service or selection for you, but the competition will close some of the private stores, meaning you will have fewer choices, while the city is still open but receives less in taxes.

And let’s not forget politics.  One council member demands more kale, another wants a beef boycott, and someone inevitably proposes a tax on Pop-Tarts and Coca-Cola.

So, while the idea of city-run groceries might sound noble, the reality is more freezer-burn than fresh produce.  When it comes to stocking shelves, it's best to let the people who know a cantaloupe from a meatball do the shopping.  If that pothole has been sitting in the street in front of your house for the last three years, why would you want them to pick your pot roast.

Free and expanded public transit services and universal childcare sound good, but the New York Pension Service is already $177 billion in debt.  Dramatically increasing the number of people receiving those benefits will only make the problem worse, even if those services are run well.  How will the city pay for these new services?  It sure as hell won’t be with the profits from those grocery stores.

Which brings us to higher business taxes and a special tax on the rich.  In the last 20 years, 160 major financial firms headquartered in New York collectively managing $1 trillion in assets has left New York City, primarily because of existing taxes.  Let’s put that another way:  New York City has already lost the business equivalent of the entire economy of Switzerland. 

Many businesses have already left New York for New Jersey where the business taxes are already roughly 6% less.  If Mamdani can implement his tax proposal, New Jersey business taxes will be more than 10% less than New York City.   Currently, 22% of Manhattan commercial property is empty, the equivalent of 90 million square feet of property.  If Mamdani gets his way, a hell of a lot more buildings are going to become empty.

As for that additional tax on high earners, Mamdani believes this will result in a tax revenue increase of $9 billion, a figure he needs to fund all the progressive measures he has proposed.  Multiple cities and numerous countries have tried to pass punitive taxes on the rich only to discover that capital flight is always the result.  The rich simply move their riches where they will be left alone.  The cost of enforcing those draconian taxes frequently cost more than the new revenue produced. 

Well, in only four days from now, we will see who the voters of New York City select to be their new mayor.  Well, then technically, he will only be the winner of the Democratic Primary, but as I have already explained, that’s a minor detail.