Will Governor Kathy Hochul and the New York State Legislature step in to protect taxpayers and shore up the global economy?
Those of us who grew up in New York–for better or worse–can sometimes act like we are the center of the universe. For the most part, it’s just a learned attitude that comes from having the best food, art, culture and baseball team in the world. But every now and then, we have a chance to, as William James noted, “act as if what you do makes a difference. It does.”
Right now, New Yorkers have a unique and urgent opportunity to make a huge difference around addressing the global debt crisis, New York state’s legislature, and its residents. We hope you’ll read on and take action.
What is the global debt crisis?
The last three years have brought overlapping crises–COVID-19, the war in Ukraine, climate disasters, economic instability–that have put many countries at the brink of default. Right now, 40 out of 67 low-income countries (and one out of five middle-income countries) are struggling to pay their debt; this means they are compelled to make impossible choices about the basic necessities that sustain people’s health and welfare, and potentially lift them out of poverty: healthcare, schools, food, and more.
In 2021, low-income countries spent an average of 27.5% of their budgets on interest and debt repayments. This was more than they spent on education, health, and social safety net programs combined.
What can be done?
Global institutions and governments have set up a “Common Framework for Debt Treatment” to negotiate debt restructuring for the poorest countries. But it is moving at a snail’s pace, notably because it does not resolve the problem of debt owed to private institutions like banks and hedge funds.
Here’s the hitch! Over half of the debt owed by low- and middle-income countries isn’t owed to governments, but to corporations (banks or hedge funds).
Some of it is owed to brutish investors known as “vulture funds.” These funds swoop in to buy up the distressed debt owed by poor countries on the cheap. They refuse any negotiation to restructure the debt-knowing that if they hold out long enough, they can use the New York state court system to be paid back at the full face-value of the debt, thereby making a huge profit. The money poor countries are able to save by restructuring the debt they owe to governments (taxpayer money) ends up paying off the vulture funds instead of paying for food, schools, or healthcare.
In other words, taxpayers are paying to set up billionaires on their yachts.
Wait, I thought this was about New York?
Here’s where New Yorkers can come to the rescue! Because New York is a global financial center, about half of all sovereign debt owed to private creditors is governed by New York laws.
While they’re waiting for their taxpayer-funded payday, vulture funds tie up poor countries for decades in the New York court system. The good news is that means New Yorkers can put an end to this abusive behavior.
There is currently a bill in the New York State Legislature to protect New York Taxpayers and poor countries alike from abusive vulture funds. It’s so straightforward it’s almost hard to believe. The bill says that whenever the US government agrees to a multilateral deal to provide debt relief to poor nations, those deals apply to all debt regulated by New York state. It would make a HUGE difference and will mean some of the poorest places in the world won’t have to close hospitals or schools. Lives will be saved.
But wait, there’s more! New York is home to millions of hard-working immigrants that power the state’s economy. Many New Yorkers work multiple jobs to be able to send a little extra support back to their families all over the world. We’re not talking about chump change; these “remittances” can account for a quarter or even half of some low-income countries’ GDP.
That means hard-working New Yorkers are out there grinding only for their paychecks to end up in the hands of billionaire hedge fund owners. It is Robin Hood in reverse.
What can New Yorkers do?
New Yorkers who care about global poverty rarely have such a clear opportunity to make a significant global impact with local action. No other state is able to do this. It can only happen in New York.
We don’t need federal action here. No need for 60 votes in the US Senate. No need to repeal the filibuster. No need for Kevin McCarthy. We don’t need to reform our entire democracy to win this hugely significant changes. We just need the Democratic Governor and the Democratically controlled legislature of New York to take a moment to use their unique position to make a major difference for all of us at a cost of $0 to New York taxpayers.
If you believe that kids should have a chance to go to school and see a doctor and eat nutritious meals whether they’re born in Schenectady or San Salvador, then contact your Assembly Member and your State Senator and ask them to co-sponsor The New York Taxpayer and International Debt Crises Protection Act.