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Paterson calls on U.S. help for deficit-ridden states

BY JAMES T. MADORE AND JANIE LORBER | james.madore@newsday.com; janie.lorber@newsday.com

August 1, 2008

Referring to hardships in the Depression, Gov. David A. Paterson yesterday called for the federal government to help states mired in budget deficits and vowed New York would not exempt education and health care from possible spending cuts.

Paterson, in his third major address on the economy this week, said Washington must invest in highway and school construction, mass transit and job training in order for the country to speed recovery from the downturn. Budget cutting without reinvestment, even if it means incurring more debt, is required to put people back to work, he said.

New York, which derives 20 percent of its revenue from Wall Street, has been hit hard by the roiling stock markets and home foreclosures. Paterson has ordered the State Legislature to reconvene on Aug. 19 for a special session aimed at cutting $1.2 billion from the current $122-billion state budget - the biggest "midyear correction" in modern state history.

"New York State and the United States are experiencing a downturn in the economy that is worse than the energy crisis of 30 years ago ... and may yet be as challenging to the American population as even the Great Depression," he told the National Press Club in Washington. "State governments must cut spending ... [and] the federal government is going to have to put more into the states ... before we have what will be a national crisis of bankruptcy."

He noted that New York sent $82.6 billion more to Washington last year than it got back. He suggested higher Medicaid reimbursements, more money for the Metropolitan Transportation Authority and federal loans.

But amid the economic gloom, Paterson insisted there was a silver lining to soaring gasoline prices: manufacturers who left the United States for cheap labor overseas now want to come back because transporting goods here is exorbitant. He hopes some will resettle in upstate towns blighted with shuttered factories.

In comments sure to upset lawmakers and unions, Paterson said the state's combined budget deficit of $26.2 billion over the next three years meant "we're obviously going to have to cut" big-ticket items such as school aid and health care. "People should expect that nothing is sacred - no area is sacred - because we face such a skyrocketing deficit."

On politicians, VP picks

Gov. David A. Paterson displayed his trademark wit yesterday at the National Press Club in Washington, poking fun at former Gov. Eliot Spitzer's reported liaison with a prostitute at the city's Mayflower Hotel, his own martial infidelity and the probable Republican presidential candidate, John McCain.

Moderator: "A member of the audience says, 'Your rise to the governor's seat is, if anything, an illustration of the fallibility of our public officials. What lessons do you draw about the imperfection of politicians?'"

Paterson: "Be careful when you come to Washington ... And yet our public servants are just like the rest of us in society ... We all have our fallibilities. But when we are running for office, we pretend that we don't have them. And so what happens is that it becomes almost sport to see people ascend to high leadership positions and then to tear them down. And so I saved you the trouble. I did it myself."

Moderator: "Which vice presidential pick would help Barack Obama win your state? And which would help John McCain win New York?"

Paterson: "The vice presidential pick that Senator Barack Obama would choose that would help him win New York, I think, would be any of about 10 or 15 people whose names I won't bother to run through, starting with our own senator, Hillary Clinton ... The candidate that would help John McCain win New York would probably be a resurrection."

- James T. Madore and Janie Lorber