Mamdani’s city grocery plan could leave taxpayers paying for every banana
Thirty-five years after the Soviet Union collapsed, the Communist bread line is poised for a comeback in the Big Apple, as Mayor Zohran Mamdani announces his government grocery stores will be undercutting real groceries by 30%. Not to worry, socialism will work this time.
The announcement came during a press conference on July 27, where Comrade Mamdani promised 30% discounts for "essential" products at his new city-run grocery stores. The problem, of course, is grocery stores are in a razor-thin industry, sporting profit margins of roughly 2%. And that's with competent management, which New York City government is decidedly not famous for.
That means even if the socialists somehow manage to run a grocery as efficiently as Aldi, Walmart or Gristedes, the city will be losing an ungodly amount of money — at least 28 cents on the dollar. Since New York’s best and brightest in government will be far less efficient than the private sector, the losses, predictably, will be even higher.
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Of course, operating in the red for a government establishment means taxpayers get stuck with the tab. The losses of Comrade Mamdani’s state-run enterprises will be covered by New Yorkers’ tax dollars — derived from tax rates that are already among the nation’s highest.
And that's where the fun begins. If city groceries were genuinely selling food 30% cheaper, that would rob enough market share from real grocery stores that they would start going out of business. After all, private stores must pay rent, property taxes, insurance, labor, utilities, security and New York’s regulatory army.
Conversely, Mamdani’s stores get city property tax exemptions, and apparently an unlimited allowance from dad who's willing to lose 28 cents on the dollar. Marginal supermarkets will close while others will cancel plans to open.
And what stops anyone from buying deeply discounted groceries for resale? After all, 30% off is cheaper than wholesale. Will Mamdani then prohibit purchases by grocers? Good luck telling who’s who in the checkout line since asking for ID is racist in New York.
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Then we enter Act Three: What happens when taxpayers get tired of the money pit? Every time New York has seized an industry, it turned into a money loser. New York's city-run transit system — MTA — replaced private-sector alternatives that used to be profitable with a government-run system that loses $11.7 billion a year — roughly $3,000 per household in New York City. That’s how much the government has to subsidize the MTA to keep it running.
If city groceries approach that number, there will inevitably be calls for subsidy cuts. Given the mandate to keep groceries cheap combined with the costs of government efficiency, that means the groceries will have to cut back on quality. No longer a giant money pit, they’ll become slightly smaller money pits full of rotting food.
When the smoke clears, New Yorkers get a couple years of cheap bananas, tens of millions of dollars in new debt and real companies fleeing, so residents have to take two trains and a bus to get to a real grocery store.
In fact, this is exactly what's happened in dozens of government grocery experiments across the country, from Kansas City — which lost $18 million on a grocery that sold rotting food — to Chicago — which blew $26 million running seven stores into the ground. But socialism will work this time if Comrade Mamdani smiles hard enough.
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Instead of recreating Soviet breadlines on the taxpayer dime, Mamdani should sit down with functioning grocery stores and ask how he can help them expand. For example, reducing property taxes, permitting costs and construction costs.
He could relax parking rules and stop converting every curb into a dedicated bus lane. Disused public space could be leased at a discount to real grocery stores. Enact zoning reform so groceries don't wait years in limbo for the ministry of red tape to green-light a location. Perhaps Mamdani could even try arresting shoplifters occasionally.
The hallmark of socialism is it breaks things, then uses the detritus as an excuse to break more things. New York already has a distinct absence of proper grocery stores thanks to dysfunctional local government. Handing that bureaucracy the entire food supply will turn an annoyance into a crisis.
E.J. Antoni, Ph.D., is chief economist and the Richard F. Aster fellow at the Heritage Foundation and a senior fellow at Unleash Prosperity.
