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I love the stereotypical NYC snobbery and unapologetic narcissism at the beginning of the article. As if living in one of the boroughs with eight and a half million other people somehow makes you distinguished. The whole attitude runs entirely contrary to the point of the program, it's really baffling.
Distinguished? I don't think thats what the author was getting at. Just that living in the suburbs is a different experience than living in the city. Thats what I took out of it anyway, I could be wrong.
SF City ID Card Date first issued January 15, 2009
The mayor calls this fraud proof? Nothing is completely fraud proof. What a silly statement.
Why can't the same people get a state issued ID card?

Will the federal government or business or other states or other countries recognize them?

It will make counterfeiting easier to get way with.

LEOs will see this ID as a sign of not being in the country legally.

I think that a state-issued ID requires an address, whereas the IDNYC card makes specific provisions for those without a registered address.
LEO will see having no ID similarly, so mu.
More information about the card: http://www1.nyc.gov/site/idnyc/index.page

One interesting fact is that the discounts and memberships will apparently only be good for one year, something the article seems to gloss over. Still a pretty good deal, but not as great as I'd hoped.