Saturday, August 2, 2008

Opportunity Knocks as Paterson Tackles Budget

Published: August 2, 2008

As he prepared to deliver a live address from the State Capitol on Tuesday night about New York’s deteriorating economy, Gov. David A. Paterson planned to sit behind the grand paneled desk used by previous governors, perhaps most notably Franklin D. Roosevelt

Andrew Councill for The New York Times

Gov. David A. Paterson has been loudly ringing the alarm on New York’s economic woes this week. He spoke Thursday at the National Press Club in Washington.

Then he scrapped the idea — the desk was in bad light and too bulky to move — but the message would have been unmistakable: Mr. Paterson was determined to project the image of a commanding and sure-footed leader at a time of deepening uncertainty.

The state’s economic woes are a test not only for New York, but for an unproven governor as well. And over the past week, Mr. Paterson’s actions and words have suggested that he wants to make the most of the opportunity.

In the rare live television address from Albany, in a speech to the National Press Club in Washington and in meetings with senators, the chairman of the Federal Reserve and the secretary of the Treasury, Mr. Paterson repeatedly described New York this week as facing its worst economic downturn in decades. He called for immediate action, from freezing state hiring to cutting prized programs, possibly including education and health care.

He warned that the situation could become as bad as in the Great Depression, and invoked the name Herbert Hoover in telling the State Legislature and Washington that inaction could lead to disaster.

“An example of how not to do things would be the Great Depression,” Mr. Paterson said in an interview this week. “The president sat there, twisting in the wind for three years. You didn’t hear anything from Herbert Hoover during that time.”

Thrust into the limelight by the fall of his predecessor, Eliot Spitzer, Mr. Paterson is facing what his advisers, colleagues and political rivals view as his defining moment. Clearly stung by criticism that his governorship is accidental and that his administration lacks a fully formed agenda, his response since his budget director presented him with sharply lower tax collection numbers on July 15 has been to engage in a full-court press.

“Even if he’d been on the job for 10 years, it’d be a defining crisis. But he’s new, and therefore a lot of people are still forming their opinions of him,” said Representative Jerrold Nadler, a Democrat who represents the West Side and was a state assemblyman for 16 years. “People will judge him on how he responds.”

Over the course of two weeks, Mr. Paterson has consulted with high-profile economists like Robert E. Rubin, the Treasury secretary in Bill Clinton’s administration. He decided that a televised address to the state rather than an op-ed article or a news conference would best convey the gravity of his message. And he arranged meetings with Ben S. Bernanke, the Federal Reserve chairman; Henry M. Paulson Jr., the Treasury secretary; and members of Congress during a highly visible trip to Washington after his televised speech.

As he was riding in a Chevrolet Suburban on his way to brief New York’s Congressional delegation on Wednesday night, Mr. Paterson made clear that he was thinking about his, as well as the state’s, future.

“They’re going to blame me if I sit here and act like it’s not happening,” Mr. Paterson said. “That was why I wanted to get right out in front of it.”

But by ringing the alarm on the state’s fiscal condition so loudly, the governor is putting himself at some political risk. Many legislators and some economists do not believe that New York’s economy is in recession, suggesting that a modest recovery on Wall Street could rectify many of the state’s revenue problems. Many economists also say that despite the slowdown, the state’s budget problems are not as severe as they were in previous recessions, including the one after the Sept. 11 attacks.

Given such pronouncements, it is far from clear that the Legislature will be open to reducing spending, or that Congress will be inclined to increase aid, as much as Mr. Paterson wants.

“It is a big risk,” said Gerald Benjamin, a former dean of the College of Liberal Arts and Sciences at the State University of New York at New Paltz. “But I think he’s made the calculation that first, New York needs this kind of leadership, and second, that this risk is worth taking because he wants to keep his job.”

The criticism that the governor may be crying wolf is one Mr. Paterson said he had anticipated. “I’m already hearing that people are saying that I’m overestimating the problem,” he said. “And I understand that’s because it’s very difficult to cut spending. It’s very difficult to take the responsibility of reducing the work force, or cutting health care or cutting education if necessary. And yet, as I said, the faster we address it, the stronger we’ll emerge from it. It’s really very simple.”

Mr. Paterson’s approach to dealing with the impact of a weakening economy has been nothing if not urgent. When he decided to call back the Legislature for a special session, legislative leaders agreed to Aug. 19 — far earlier than lawmakers had expected. He did not want to wait until after November, when the entire Legislature will be up for election, even though it would be easier politically to persuade legislators to accept spending reductions then. He did not even want to wait until after Labor Day.

“Suppose I’m totally wrong. The budget deficit is $5 billion. It’s not $6.4 billion,” he said. “So what are we doing about the $5 billion? Why aren’t we opening up the budget and cutting?”

His sense of urgency has irritated some in the Legislature, who bristled at his comment on Tuesday night that he was going to “end the legislators’ vacations” and call them back to Albany. Mr. Paterson later said he should have chosen his words more carefully.

Mr. Paterson, who was a state senator for more than two decades, said he knew that the only approach that would work with the Senate and the Assembly was a delicate but firm one. “I used to be one of them, so I think I know how they feel,” he said. “And I think that they do not want to be treated as if they have caused this problem.”

Then, referring to the Senate majority leader, Dean G. Skelos, who is a Republican, and the Assembly speaker, Sheldon Silver, who is a Democrat, he added: “This is a moment. And I think Senator Skelos and Assemblyman Silver know it.”

But even as he criticized state spending run amok and made confident predictions that the Legislature would ultimately see things his way, Mr. Paterson acknowledged the stress he was under.

“I felt this pressure to be absolutely perfect,” he said of his address on Tuesday. “It’s, I guess, raising yourself to the greater expectation.”

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