New York’s most powerful banker said Monday the local economy would benefit from more spending on the Long Island Rail Road, New York City subway system and other mass transit.
“Mass transit is old, slow and crowded,” said William C. Dudley, president of the Federal Reserve Bank of New York. “As a New Jersey resident, I’m still waiting for that second set of rail tunnels into New York City that should have been built years ago.”
Speaking to a business group in Manhattan, Dudley said “well-targeted infrastructure spending” would reduce gridlock and give people living in areas with few jobs access to where they are plentiful.
He also called for more job training, affordable housing and child care to address income inequality, both locally and nationally.
Dudley said that since 1970 the wealthiest households have more than doubled their share of the nation’s income.
“Despite the notion of the American dream, income mobility in the United States remains relatively low compared to many countries,” he told the Association for a Better New York meeting at the Roosevelt Hotel.
“Also, the potential for income mobility is not evenly distributed,” he said. “Research has shown that where you are born and raised in the United States still has significant implications for your future prospects.”
Dudley said greater educational opportunities and more affordable homes would ease the income gap.
He praised the SUNY and CUNY systems and called for more apprenticeship programs.
In terms of the U.S. economy, Dudley said Congress and President-elect Donald J. Trump’s incoming administration should consider “automatic” fiscal policies — such as payroll tax reductions and extending unemployment benefits — during recessions.
These would boost the economy by providing more tools, beyond cutting interest rates, to spur business and consumer activity, he said.
Dudley, who serves as vice chairman of the Federal Reserve system’s interest-rate-setting Federal Open Market Committee, predicted the U.S. economy would expand next year by at least 1.8 percent, this year’s growth rate. He also said the inflation rate would be around 2 percent.
The FOMC is scheduled to meet next Tuesday and Wednesday to consider raising short-term interest rates; some analysts are predicting a quarter-percentage-point hike, the second in 12 months.
Dudley said yesterday, “Assuming the economy stays on this trajectory, I would favor making monetary policy somewhat less accommodative over time by gradually pushing up the level of short-term interest rates.”
Asked by a member of the audience about the Fed’s relationship with Trump, Dudley said the central bank was committed to “doing everything to ensure a smooth transition.” Trump, during the presidential campaign, accused Fed Chair Janet Yellen of playing politics in determining interest rates.