The parceling out of $1.6 billion in Liberty Bonds to finance luxury housing has proved no less contentious. The downtown housing market slumped briefly after Sept. 11 but then swiftly rebounded. Today three-bedroom apartments near Ground Zero rent for $6,500 a month -- and sell for more than $1 million. Manhattan residential occupancy rates -- more than 95 percent -- are higher than before the terrorist attacks, according to real estate statistics.
Yet the state and city agencies that award the bonds -- the New York State Housing Finance Agency and New York City Housing Development Corp. -- awarded nearly all the residential Liberty Bonds to subsidize the rental market.
Common Cause New York reported that 30 percent of the state's residential share of Liberty Bond proceeds went to Leonard Litwin, who is a major campaign contributor to Pataki.
State housing officials said that political favoritism played no part in their decisions and that loans were handed out "on a first-come, first-served basis." Litwin, they say, had projects in the works and simply got in line when the Liberty Bonds came available.
"Market rents had gone down, and it was a market necessity," said Gary Jacob, a vice president of Glenwood Management Corp., Litwin's real estate firm.
Many urban planners doubt the economics of this argument, noting that Litwin put up a huge equity share in these projects, an indicator of his good financial health. But these planners save their most furious criticism for the state's Housing Finance Agency, which decided to waive its own guidelines requiring that developers who get public bonds set aside 20 percent of the apartments for families with low or moderate incomes.
Instead, they required that Liberty Bond developers designate just 5 percent of the apartments for families of moderate income, which is defined in the area as $80,000 a year for a family of three.
A year ago, Mayor Michael R. Bloomberg laid out his master plan for rebuilding Lower Manhattan, saying he wanted to preserve its economic and residential diversity. But Deputy Mayor Daniel L. Doctoroff, who has overseen much of the development, now says that goal is difficult to achieve.
"It's an admirable goal to have a mixed-income community, but maybe over time it's shifting," he said in an interview, adding that affordable housing in downtown Manhattan requires a deep subsidy. "Maybe this isn't the best use of scarce dollars," he continued. "We have to look at the trade-offs."
Surveys have shown that many residents want the federal recovery money used not just for affordable housing but also for economic development, schools and parks in downtown Manhattan.
"I constantly wonder what Congress will make of our lavish subsidies for some of the wealthiest neighborhoods in the country," said David Dyssegaard Kallick, an economist and senior analyst with the Fiscal Policy Institute, a think tank funded by foundations and labor. "It just seems shocking."
from TownHall.com, 2002-Aug-8, by Robert Novak:
Clinton-cooked books?
WASHINGTON -- The Commerce Department's painful report last week that the national economy is worse than anticipated obscured the document's startling revelation. Hidden in the morass of statistics, there is proof that the Clinton administration grossly overestimated the strength of the economy leading up to the 2000 election. Did the federal government join Enron and WorldCom in cooking the books?
Through all of President Clinton's last two years in office, the announced level of before-tax profits was at least 10 percent too high -- a discrepancy rising close to 30 percent during the last presidential campaign. Most startling, the Commerce Department in 2000 showed the economy on an upswing through most of the election year while in fact it was declining.
Although a political motive for Democratic cooking of the government's books is there, nobody -- including Bush administration officials -- alleges specific wrongdoing. Nor is there any evidence. Estimation in 2000 was conducted by career public servants who are doing the same jobs today (working under a highly political Democrat in the Commerce Department). Nevertheless, such discrepancy in earnings statements by corporate executives today would warrant a congressional subpoena.
The Commerce Department's Bureau of Economic Analysis quarterly estimates before-tax profits of domestic non-financial corporations, releasing the information the last week of the month following the quarter. Revised figures last week showed profits were really lower by 10.7 percent, 12.2 percent, 15.2 percent and 18 percent for the four quarters of 1999. In 2000, this gap became a chasm. The revised quarterly profits for the election year are lower than the announced figures by 23.3 percent, 25.9 percent, 29.9 percent and 28.2 percent.
Most startling, original estimates showed a generally rising profit outlook for the two years preceding the election. Starting with $503.7 billion in the last quarter of 1998, the quarterly estimates rose steadily to $543.8 billion in the fourth quarter of 1999 and then took off in the first two quarters of 2000 to $574.9 billion and $606.6 billion, leveling off to $602.9 billion in the third quarter (before falling to $527.3 billion in the fourth quarter after the election).
Last week's revised returns reflect not only different numbers but a different trend (starting at a much lower level of $473 billion). Profits actually fell through much of 2000, dropping from $449.7 billion to $422.4 billion for the second half (before slipping to $372.8 billion).
How could there be this big of a discrepancy? How could the government have reported steadily rising profits when they actually peaked in 1998?
"The gap is a bit larger than usual, but not really out of line," Brent Moulton, associate director at the Bureau of Economic Analysis, told me. Moulton, who was in charge of both the old figures and the new revision, said the problem was the two-year delay in obtaining corporate tax returns (reflecting changes in telecommunications and business services).
Moulton's boss in 1999-2000 was one of the Clinton administration's most politically astute economists: Under Secretary of Commerce Rob Shapiro, a pioneer "New Democrat" and early friend and supporter of Bill Clinton. I asked him flatly: "Did you cook the books?" Shapiro laughed it off, asserting that the Bureau of Economic Analysis is "the most non-political, non-partisan agency in the government."
That begs the question of whether the bureau's very political, very partisan management chief should have known the bureaucrats were on the wrong track. "No," said Shapiro, "2000 looked very good to us." He dismissed the early reports as "an econometric projection based on estimates."
The result: headlines in 2000 spewing false information of corporate profits growing at 25 percent, bolstering the stock market and holding up the state of the economy as the election approached. That is the underpinning for the Democratic myth that a growing and vibrant American economy has been sabotaged by President Bush's tax cut ("We lost the opportunity for long-term economic growth," says House Minority Leader Richard Gephardt).
If the government's books were not purposely cooked in the same way as corporate accounts, there still remains the question of how the government could be so wrong. The Bureau of Economic Analysis may well be free of partisan tilt, but its incompetence can cast a long political shadow.
Contact Robert Novak <http://www.creators.com/opinion_writetheauthor.cfm?pg=write&columnsname=rno>
from Wired Magazine, 2001-Mar-30, by Declan McCullagh <mailto:declan@wired.com?subject=Secret Service Raids Gold-Age>:
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