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January 15, 2003

Remarks by New York Secretary of State Randy Daniels
Address to The Business Council's Government Affairs Council Jan. 14, 2003

The Business Council is an Albany treasure. This is my first appearance before your group, and you may not know me as well as I would like. I hope and expect to change that. But be assured, by your good works, I know you very well. You have been a great friend to our Governor. A source of strength and wisdom. Your advocacy on behalf of growth and prosperity has been essential to all that we have accomplished in our great state, and we are much indebted to you.

I don't know how many of you had the opportunity to see the Governor deliver the State of the State speech last week. For those that did, I think I am in good company in saying that it demonstrated once again, why we are so proud of Governor Pataki, and why he was overwhelmingly re-elected to a third term. Like you, he understands New York. Our greatness, but also our challenges. He understands that high taxes and excessive regulation have real consequences. That they cost jobs and reduce people's income. Like you he understands the importance of investing in new technology and remaining competitive.

One of the most exciting portions of the Governor's speech concerned our university-based Centers of Excellence. As you know, in just two short years, these Centers have proven a remarkable success. Already, they have attracted nearly $1 billion in investment from the private sector and the federal government. International SEMATECH is moving ahead with its $400 million Research and Development initiative. Tokyo Electron Limited has committed to build a $300 million R&D Center at the Albany Center of Excellence in Nanoelectronics, which is now under construction. Ground has been broken in Buffalo on the facility for the Center of Excellence in BioInformatics.

In greater Rochester, they are moving ahead with labs in a new photonics facility.

In Syracuse, site selection has begun for an environmental science facility.

And AMD, the chip maker, has committed to invest hundreds of millions in partnership with IBM in the Hudson Valley. More good news is expected soon on biotechnology in Greater New York City.

All of these represent remarkable achievements and are testament to Governor Pataki's vision and fiscal discipline, because without our investments in higher education and without an improving tax environment, these companies would not be coming here. They are the future of New York's ongoing Renaissance.

The fact is that there is no limit to what we can achieve in New York, provided that we pursue the right policies. For my part, I believe there are five key principles that should guide us in formulating these policies and in creating the kind of future that we as New Yorkers deserve.

The first of these principles is freedom, economic and political, because freedom is what creates prosperity, and freedom is what allows people to change themselves and change the world around them.

Closely related to freedom is opportunity, which I see as the second, key principle. Every person in our state, whatever their background, must have the right to rise as far as his or her ability will take them. We must eliminate all unfair barriers to achievement.

Economic growth is the third, key principle. In a competitive world, those who do not move forward, fall back. Government must pursue pro-growth economic policies. There is no alternative.

A fourth, key principle is quality of life. I am convinced that much of what we have in life is what we share. We must keep our streets safe. Parks and clean neighborhoods, an environment to inspire us, all of these are essential.

And lastly, educational excellence is a fifth, key principle. We must continue to invest in education at all levels of our society. As we do so, we also must demand accountability. I am a firm believer in standards. If you set them high, people will meet them. If you set them low, people will meet those too. Excellence must be our educational North Star.

As we think about these principles, allow me to emphasize the one that I believe is most important, and that is freedom. You know after 9/11, I was asked to speak at many functions. In particular I spoke at several dozen funerals for firefighters. In preparation for those remarks, I was forced to think a lot about America and what makes us different. What struck me, as I thought more and more about these matters, is how incredibly important freedom is, and what it does for a person and a nation.

I was asked one time, along with Mayor Giuliani, to escort Nelson Mandela to Ground Zero, and I will never forget what he said, not about himself or his country, but what he said about us, America. He said that on television, when he watched New Yorkers respond immediately after the attack, he was amazed. What he envied, he said, was not our economic might, or military power, what he envied was our people, our tremendous ability to work together.

Without anyone telling anyone what to do, spontaneously, New Yorkers from all walks of life immediately began to volunteer to help each other. Off-duty nurses and doctors rushed to the nearest hospital. Taxi drivers picked up those, who were injured. Ordinary citizens streamed to emergency rooms and elsewhere to donate blood. Others hurried to the West Side highway with food and beverages. Upstate rushed to aid downstate. Suburbs helped the City. Why? What explains that?

Well I think there is an answer, and the answer has to do with freedom. It might be called the Great Paradox of Freedom. Rather than driving people apart or causing conflict, as those who oppose freedom have always believed, I am convinced that freedom actually impels people to help each other and to cooperate. Why? The reason is that freedom creates in people self-reliance, which in turn makes them more self-confident. And this is key. Self-confident people are more likely to trust each other, and therefore, they are also more likely to help each other. They will cooperate, not because they are told to, but because they want to. This is what economists and sociologists refer to as social capital: the ability of people to work together in pursuit of common goals. It is the Great Paradox of Freedom, and as Americans, it is our Great Blessing!

Freedom is also the reason that a vibrant business community is so important to our social well-being. Nothing does more to create self-reliance than running a business, meeting a payroll, deciding whether to invest and how much. America's entrepreneurial culture is more than anything else a reflection of American freedom. Culture, economics and politics, all are built around this basic belief in freedom. It's central to who we are, and it's central to our future as a people. And that is why I am so pleased to be here. Because what your group does is seek to preserve and, unfortunately too often, recapture economic freedom here in New York. I applaud you for that.

When we think about business, we also must think about taxes. However much we improve our schools or make our neighborhoods safe, we will not be able to bring New York all the way back unless we also confront the issue of taxes. There may have been a time in the past, when taxes were less important than they are today. Some regions of the country lacked adequate infrastructure. In many states, public schools and universities were under funded.

But if taxes may have been less important in the past, no one can seriously make that case today, although I realize that some will continue to try. Other regions of the country have clearly caught up. Computers and the Internet have changed the way people do business. And capital has never been more mobile. The growth of publicly traded companies, in tandem with the shareholders rights movement, has also changed the landscape of business. Nowadays, managers face more pressure than ever to meet their numbers, maybe too much pressure. So, yes, taxes matter. They clearly affect business location decisions. And they clearly affect investment decisions.

As the state's chief economist Steve Kagann points out, large corporations think long and hard about where they want to allocate their investment dollars. It makes headlines, when a company decides to move into or out of a state, but over the long term, investment decisions are just as important. A company that can earn a higher after-tax rate of return in one state rather than another is more likely to invest in new plant and technology, where it can earn the most money. That does not mean that company directors will immediately shut down a factory, or close an office or processing center, just because taxes are high. No, but decision making can change rapidly in a recession. When managers have to retrench, it only makes sense they will concentrate their efforts in states, where taxes are highest and operations least efficient. So yes, taxes matter. They matter a lot.

Now since I read your press releases and research material, I wish I could stand here and say that local and state taxes in New York are as they low as they should be to make us fully competitive. But I realize I cannot say that. What I can say is that if you look across the country, and see how other states are handling their fiscal issues, our pledge to try to hold the line on tax increases clearly stands out. Just last Friday, for example, Governor Grey Davis called for $8.3 billion in new, additional taxes in California. Keep raising taxes Grey. Something tells me that we may be making more announcements this year about high-tech investment in the Hudson Valley. Tax increases also appear likely in New Jersey and Connecticut.

But current fiscal politics aside, there is something else that I want to talk about that I believe is very important for the future of New York State, and I believe holds out tremendous promise for making us, once again, the economic engine of the nation. I do not hide my admiration for Governor Pataki, in part because I consider him a friend, but also because I believe he has been a great Governor with a tremendous record of achievement. Among all his achievements, I am convinced, the one that is likely to have the greatest long term significance is the fundamental realignment that he has engineered in New York State. Under his leadership, the New York Republican Party is now competing successfully among all groups of New Yorkers, whatever their ethnicity. This is tremendously positive news, because I have always believed that there is a powerful voice within the African-American community, and also quite clearly in the Hispanic community, for pro-growth, pro-business economic policies.

What we see in election results, we see even more clearly in poll results. Quinnipiac, for example, did two polls in recent months in New York City on attitudes about raising taxes. Strikingly, what we find is not only that African-Americans and Hispanics are strongly opposed to raising taxes, they are significantly more opposed than White New Yorkers. In one question, only 10 percent of African-Americans and only 12 percent of Hispanics said they supported a tax increase in New York City to close the budget gap. By contrast, 25 percent of White voters said they supported a tax increase. Why? I believe the answer is a combination of old-fashioned common sense and rational self-interest. For all of the progress in recent years, African-Americans and Hispanics are still more likely to find themselves on the periphery of the job market. And that matters, because if you are less certain about your economic prospects, if you are only a few paychecks ahead of your rent or your mortgage, the reality is you are going to be much more wary about government taking money out of your pocket. Yes, you are concerned about services. But you are more concerned about your immediate expenses. In the coming years, I am confident that this basic reality will become better understood, and it will significantly change how decisions about taxes and spending are made.

While we focus on the budget here in Albany, and the need to maintain fiscal discipline, I am reminded by my friends on Wall Street that we must also pay attention to what is happening in Washington. And unfortunately, if history is any guide, our legislators, particularly in New York City will not be our biggest friends. If you go back in time, you find numerous examples, of how New York legislators have voted against our own self-interest.

In the last session, for example, large number of New York City representatives had zero ratings from a group called the Small Business Survival Committee, including districts with predominantly Hispanic populations. You also see it on trade issues. Although New York is the center of global commerce, our legislators regularly vote against trade legislation. Last year, for example, all New York City representatives, except one, voted against Fast Track, which gives the President greater flexibility in negotiating treaties with other countries. Both senators also voted against this legislation.

It is also the case that New York City's congressional delegation often pursues policies that undermine Wall Street, in spite of the obvious fact that the financial services industry provides a huge source of government revenue. Back in the late 1980's, for example, the New York City delegation strongly opposed reductions in federal capital gains taxes. On a regular basis, they fight against reducing marginal income tax rates, even though these rates are the single biggest reason why New York annually sends $18 billion more to Washington than we receive back in aid. And now, we are seeing immediate and predictable opposition to President Bush's new stimulus plan, including criticism of the proposal to eliminate the double taxation of dividends, which may be one of the most pro-New York pieces of legislation in years. As Burton Malkiel wrote in the Wall Street Journal last week, "eliminating the double taxation of dividends would lead to a powerful rally in stock prices and would do much to lift the penumbra of uncertainty that has bedeviled both consumers and corporate managers." So as we think about what is good for business, we must focus not just on Albany, but on Washington as well.

As I close, I want to emphasize that despite the challenges that we currently face, we have the leadership, vision and sense of purpose that is necessary to manage our way through these current difficulties. And that is why I am profoundly optimistic about our state and our nation. We are a great nation, with an imperfect history, a noble people, but not a perfect people. There is a lot of good in us, and we should resist the temptation to always focus on our faults. I believe that we continue to be a beacon of light and a symbol of hope across the world and for all humanity. I believe, as Thomas Jefferson once said, that we are the last, best hope of mankind, and I believe as Ronald Reagan said, that our best days lie ahead of us.

If we are to realize our destiny, and with humility accept it, then we must embrace the weeks, months and years ahead with confidence, courage, commitment and compassion. I am confident we will.