July 31, 2008 3:07 PM

A bellwether on state budget crises enters prime time

In a televized address yesterday, the policy details of which went surprisingly unremarked even in the Times, New York Governor David Paterson announced what should come as a no-brainer to just about anyone with a pulse: the state of New York, home to an imploding Wall Street and buckling housing markets, is "officially in a recession." You don't say.

Like most states in the country, New York is facing unprecedented budget pressures that typically result in cutbacks to crucial social spending programs, layoffs of public employees, and, of course, tax breaks that expand the already regressive nature of state tax systems. Paterson is playing it fairly close to the chest at this point with regard to specific policy proposals. However, peeking through the poker face are some fairly unpromising sings.

He has indicated that he wants to cut back state agency spending by as much as 7 percent (approximately $650 million). Whether these cuts will manifest in the kind of draconian pay cuts for state workers that California Governor Arnold Schwarzenegger is hoping will see his state through the recession is unclear. Certainly making public employees foot the bill for Wall Street's blunders seems as unfair as it would be ineffective at jumpstarting the flagging economy.

And it doesn't bode well that one of Paterson's few explicit policy proposals involves the pseudo-privatization of the state's Thruway through a convoluted "lease-back" program. As we've seen in plenty of other cases, the temptation of privatization all to often amounts to a scam in which states sacrifice long term financial stability for short term gains, meanwhile losing crucial control over public assets and infrastructure to profiteering multinationals.

Fortunately, there are robust progressive strategies to steer states through the current economic crisis (including, duh, closing corporate tax loopholes instead of bailing out the neo-robber barons that got us into this mess in the first place.) Only time will tell if Paterson can seize the moment to set an example for the rest of the country of what this kind of bold progressive leadership might look like, or whether he will instead back into the pool of insider politics-as-usual mediocrity that his administration is all too sadly shaping up to be.

One thing is sure, as with the subprime meltdown that got us into this mess, all eyes are likely to be on New York, for better or for worse.