New York’s democratic socialist mayor Zohran Mamdani is focusing on affordability. But his “free stuff” policy agenda would not survive an introductory economics midterm.
For example, free bus rides will increase demand and cause overcrowding as service deteriorates. Can you imagine New Yorkers queuing like Londoners? Ditto free childcare, with the risk of fraud. Ditto rent freezes, which are unlikely to lead to an increase in rent-relieving housing supply.
Does Mamdani really think that government employees will work the same long, intense hours in city-owned supermarkets as private sector owners to earn a living while building their generational wealth? Or whether it’s a good idea to shut down natural gas plants that provide 500 megawatts of reliable energy, which New York’s independent system operator has extended beyond their planned retirement in mid-2025, fearing the city will experience power outages. With much lower renewable energy grid taxes than Mamdani wants, Germany had to import dirty coal to avoid going dark.
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Remarkably, however, these attempts to revoke the laws of economics are not even his worst ideas.
Even more dangerous for New York – and for the nation, as the anti-progressive “progressive” left continues its political ascent – is Mamdani’s deep hostility to capitalism and capitalists. What an oddity for the mayor of the capital of global finance. Nothing could pose a greater threat to prosperity, especially the quest for upward mobility of the very groups that helped elect Mamdani.
The most fundamental force for prosperity is people’s drive to improve their lives and the lives of their children. For two and a half centuries, it has been well understood why competitive capitalism and free-market incentives – not socialism, not what Mamdani calls “the warmth of collectivism” – are the surest route to prosperity.
In “The Wealth of Nations,” Adam Smith noted, “It is not to the benevolence of the baker, butcher, and brewer that we owe our daily dinner, but rather to their respect for their own self-interest.” When President George HW Bush put me in charge of our aid programs after the fall of the Berlin Wall, East Germans described the collectivist undermining of incentives more sharply: “They pretend to pay us, and we pretend to work.” No wonder their cousins in West Germany enjoyed such a dramatically higher standard of living.
SOCIALIST MAYOR MAMDANI INTEGRATED NEXT TO BERNIE SANDERS AND AOC ON NEW YEAR’S DAY
“I don’t think we should have billionaires,” Mamdani has stated. For the political left, “billionaire” has become an epithet dripping with contempt. But most of us still admire the talented inventors and entrepreneurs who create the products and processes that expand our opportunities and improve our well-being. Yes, there is disruption along the way, and our safety net systems need to do a better job of mitigating the damage. But when was the last time you heard the pioneering builder of Tesla and SpaceX referred to in the mainstream media as the greatest entrepreneur of this generation, rather than disparagingly “billionaire Elon Musk”?
For New Yorkers, who already have to contend with the city’s exorbitant taxes (and who have far from exemplary public services available to them), Mamdani proposes both a wealth tax on the very rich and the highest corporate tax in the country. Only time will tell if he gets the necessary approvals from Albany. But the likely consequences would include an exodus of successful companies, their high-paying jobs and heavily taxed people, plus the jobs of many more people who provide services to them. If you doubt that, just look at California’s high taxes, mismanaged and over-regulated, which puts pressure on private sector jobs.
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More fundamentally, it is not possible to tax the rich without also taxing those who are trying to get rich. “Yes, there’s the problem,” as Hamlet might say. Mamdani and his consiglieres Bernie Sanders and Alexandria Ocasio-Cortez want us to emulate democratic socialist Sweden and Denmark. But the lessons to heed are surprisingly different from their misguided vision.
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Both countries abolished their wealth taxes because they were difficult to administer and raised little revenue, thanks to the disincentive to grow and localize wealth in the countries. The top income tax rates for New Yorkers, combined with the federal levy, are similar to those for Sweden and Denmark – but with a huge difference. The Swedes and Danes add a regressive 25% value-added tax (similar to a national retail tax) to finance their bloated welfare states. The result: U.S. gross domestic product per capita, after taxes, is 50% higher than those of Sweden and Denmark (there are other differences, both positive and negative, but high taxes and the disincentives of the welfare state play a large part of the story). Trading lower incomes for higher taxes to pay for free stuff is a bad deal that will only get worse over time.
Mamdani promises: “We will prove that there is no problem too big for government to solve and no concern too small to worry about.” He also promises “fair” budgeting. When the revenues raised are not sufficient to cover expenses, higher taxes will have to include the broad middle class. Emulating democratic socialist Sweden and Denmark can only lead to large increases in the city’s sales tax, which would hit lower-income and younger New Yorkers especially hard. What a “warmth of collectivism” scam.
