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Giuliani: Corporate plums help keep NYC afloat

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  • NEW: NYC mayor: "When Wall Street catches a cold, it's a very serious illness to us"
  • Rudy Giuliani: Cutting bonuses means less spending in restaurants, stores
  • President Obama chides Wall Street after report of $18.4B in bonuses in 2008
  • Giuliani says he used to gauge New York City budget by Wall Street bonuses
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NEW YORK (CNN) -- Bonuses for Wall Street fat cats are easy political fodder in uncertain economic times, but former New York Mayor Rudy Giuliani said Friday cutting corporate bonuses means slashing jobs in the Big Apple.

Rudy Giuliani says that when he was mayor, he gauged the New York City budget by Wall Street bonuses.

Rudy Giuliani says that when he was mayor, he gauged the New York City budget by Wall Street bonuses.

"If you somehow take that bonus out of the economy, it really will create unemployment," he said on CNN's "American Morning." "It means less spending in restaurants, less spending in department stores, so everything has an impact."

President Obama admonished corporate America on Thursday after the New York comptroller reported that Wall Street bankers received $18.4 billion in bonuses in 2008.

"This is the height of irresponsibility. It is shameful," the president said. Video Watch Obama blast Wall Street »

These are the same institutions "teetering on collapse" and asking taxpayers to bail them out while taxpayers are dealing with their own tumultuous finances, he said.

Last year, Congress passed a $700 billion bailout for financial institutions, and an $819 billion economic stimulus package is presently making its way through the Senate after garnering House approval Wednesday.

"There will be time for [bankers] to make profits, and there will be time for them to get bonuses -- now is not that time," Obama said of the bonuses, which were about equal to those of 2004.

When Giuliani ran for the GOP presidential nomination, pundits said his stances on issues like abortion rights separated him from self-proclaimed Reagan Republicans in the field. Not up for debate is Giuliani's alignment with the 40th president on "trickle-down economics," the theory that keeping the rich wealthy creates jobs and solvency for the lower classes.

"Those bonuses, if they are reversed, are going to cause unemployment in New York," the self-described fiscal conservative said. "I remember when I was mayor, one of the ways in which you determine New York City's budget, tax revenue is Wall Street bonuses.

"Wall Street has $1 billion, $2 billion in bonuses, the city had a deficit. Wall Street has $15 billion to $20 billion, New York City had a $2 billion, $3 billion surplus, and it's because that money gets spent. That money goes directly into the economy. First of all, it gets taxed as income. Secondly, it gets taxes again when somebody buys something with it."

In announcing the Wall Street bonuses Wednesday, State Comptroller Thomas DiNapoli said the $18.4 billion represented a stark dip from 2007's bonuses, which totaled $32.9 billion

"A 44 percent decline in the bonus pool will ripple through the regional economy and the state and the city will lose major tax revenues," DiNapoli said in a statement. "The securities industry has already lost tens of thousands of jobs and the industry is still continuing to write off toxic assets. It's painfully obvious that 2009 will probably be another difficult year for the industry."

While city incomes taxes are common in Iowa, Indiana, Maryland, Michigan, Ohio and Pennsylvania, they are an anomaly in most parts of the country, according to a 2008 report by Tax Foundation, a Washington-based think tank. New York City and Yonkers are the only cities levying income taxes in New York state, the foundation said.

New York Mayor Michael Bloomberg said Friday the city needs to close a projected $4 billion budget gap in fiscal year 2010. Skyrocketing unemployment is partially to blame, he said, projecting that 300,000 jobs will be lost in the city by the second quarter of 2010.

Of those, 46,000 job losses are expected to have come from Wall Street, a particularly devastating blow to the economy because those in the financial community tend to pay double or triple the taxes paid by employees in other industries, he said.

"When Wall Street catches a cold, it's a very serious illness to us," Bloomberg said.

In 2008, New York had $41.2 billion in expenses and $42.8 billion in revenue, he said. Projections suggest that in 2010 the city will have $43.4 billion in expenses but only $37.1 billion in revenue.

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Bloomberg proposed several measures, including an increase in the sales tax from 8.375 percent to 8.75 percent, in an effort to balance the budget. Bloomberg has already slashed $3.7 billion in spending since last year, an administration official said.

In recent months, the mayor has tried to shore up city finances by raising hotel taxes and pulling back a property tax cut set to expire this summer, the official said.

CNN's Kiran Chetry and Eliott C. McLaughlin contributed to this report.

All About Rudolph GiulianiNew York CityBarack ObamaMichael Bloomberg

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