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Does Downstate Subsidize Upstate? (No.)

By James Ostrowski
If the conventional wisdom was right, Upstate NY wouldn’t be in the midst of 50 straight years of decline.
The conventional wisdom is that Downstate subsidizes Upstate NY. (The old conventional wisdom had it the other way.)
Matthew Crosson, president of the Long Island Association writes:

A few years ago, the Center for Governmental Research in Rochester found that in 2001, Long Island taxpayers sent $2.7 billion more to the state than they got back in aid and services. Today, that figure surely exceeds $3 billion. Those billions of dollars help support Upstate.

Call me a skeptic on this.
Here’s the study they always cite. They know it well because they paid for it!

“Prepared for: NYC Office of Management & Budget Long Island Association and Long Island Federation of Labor, AFL-CIO”

First, the fact is that Upstate is a colony of Albany, which is just another name for the New York City Metropolitan area. Since we are their colony, we can assume that they perceive this relationship to be beneficial to them.
Do they ever say, “Hey, we subsidize you, let’s go our separate ways?” Do they ever say, “Let’s cut spending to reduce the degree of subsidy?” No. They just throw that in our faces when we complain about getting screwed by Albany or NYC.
So, even if Upstate gets subsidized, we are still a colony. The only real solution is to create two separate states.
The above study says that NYC gives upstate $10 million. Long Island gives Upstate as much as $3 million.
First, you have to understand that it’s not Upstate that is subsidized but the Upstate political class. By definition, the political class are the folks who are net consumers of state money. Thus, the Upstate working class, the net tax payers, do not get subsidized but screwed–just as you thought. Likewise, the Downstate working class subsidizes the Downstate political class. Since “whose bread I eat, his song I must sing,” our Upstate politicians are in the thrall of Downstate’s such as when Silver put our man Mark Schroeder in the dog house a few years back.
Second, much of this so-called subsidy does not go to Upstate per se but to the Capital Distinct. No arguments there. The Albany area gets loads of tax money. So what does that have to do with Buffalo or Rochester?
Third, the study was done during a Wall Street boom and may not be valid for other times.
Fourth, the study counts SUNY aid as going to the county where the school is located not where the students reside.
Fifth, any claim that downstate subsidizes upstate would have to factor in federal money. It’s possible that Upstate federal taxpayers subsidize Downstate’s. For example, all the military spending that benefits all those fat cats on Wall Street. No one has done that analysis as far as I know.
Sixth, Wall Street, the basis for the claim of subsidy, is itself, subsidized by various federal regulations that make it difficult to compete with Wall Street. Also, they are subsidized by inflation since inflation is caused by the creation of new money and, as Ron Paul pointed out, much of that new money goes to the big banks.
[Re six and seven, Rothbard writes:

Commercial bankers, engaged as they are in unsound fractional reserve credit, are, in the free market, always teetering on the edge of bankruptcy. Hence they are always reaching for government aid and bailout.
Investment bankers do much of their business underwriting government bonds, in the United States and abroad. Therefore, they have a vested interest in promoting deficits and in forcing taxpayers to redeem government debt. Both sets of bankers, then, tend to be tied in with government policy, and try to influence and control government actions in domestic and foreign affairs.]

Seventh, Downstate gets much of its water and cheap power from Upstate. Why isn’t that factored in?
Eighth, a huge portion of Upstate is parkland off limits to economic development. These lands such as the Adirondacks are a veritable playground for Downstaters.
Ninth, many wealthy Downstaters own land in Upstate, so they are subsidizing themselves.
Tenth, you Downstaters get much of your food from Upstate so again, you are subsidizing yourselves.
Eleventh, some of the “subsidy” money is surely kicked back to politically-connected Downstate firms.
Does Downstate subsidize Upstate? It’s a Scotch verdict: Not proven.
Bottom line: Upstate is a colony of Albany, state government, which is really controlled by Downstate. We want our liberty back. We do not need you. Much of the Industrial Revolution took place Upstate. We were among the economic leaders of the world way before any half-baked, bought and paid for study was released in 2001.

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