New York City’s problems make for depressing front-page news. More
than 11 percent of its jobs have vanished. Small shops are shuttered.
Residents are fleeing. The city’s tax base has shrunk, just as its needs
and crime rates soar. The celebrated melting pot is no longer melting.
Over 30 percent of city residents receive public assistance. The mayor
tries hiding New York’s dire fiscal straits, including its dwindling
economic base and rising taxes, through accounting shenanigans, as the
city’s deficit and long-term debt spiral.
This is not a portrait of New York after more than a year of
pandemic, though it could be. It was how journalist Ken Auletta
described his beloved “Statue of Liberty city” in 1979 in The Streets Were Paved With Gold, his highly regarded account of how and why New York reached the edge of financial ruin.
There are stark differences between the fiscal crisis of the 1970s
and the city’s pandemic-induced plight. While the fiscal crisis
threatened the financial survival of the city and its inhabitants, more
than 50,000 New Yorkers did not die of a novel virus back then. Nor has
the federal government left the city to fend for itself, as it initially
did under President Gerald Ford. Though Ford eventually agreed to give
New York a $3 billion line of credit to stave off bankruptcy, he
initially balked, seeing New York’s problems, not inaccurately, as the
result of its own profligacy. In contrast to Ford’s initial
reluctance—commemorated by the New York Daily News’ iconic
headline, “Ford to City: Drop Dead”—the Biden administration has poured
billions into the city, dramatically improving its short-term prospects.
Among the most ominous differences between the 1970s fiscal crunch
and today’s economic plunge is the sharply contrasting responses of the
city’s most influential citizens.
In the mid-1970s, New York’s financial,
labor, and political leaders came together to ward off bankruptcy by
hammering out dramatic reforms and extracting drastic concessions from
those with a stake in the city’s prosperity. The partnership among City
Hall, the banks, municipal unions, big and small business, Albany, and
the federal government produced compromises hard to imagine today. For
the first time, Gotham’s powerful unions acceded to demands for layoffs
of 25,000 and deferred 6 percent of negotiated pay increases, along with
more than $40 million of previously won fringe benefits. The city’s
“rescuers,” as New York Times journalist Steven R. Weisman called
them, were institutional rivals or even former adversaries. Among them
were Felix Rohatyn, the financial wizard of Lazard Freres; Walter
Wriston, the head of Citibank; Richard Ravitch, a developer who was a de
facto minister without portfolio for New York’s governor; Jack Bigel,
the sanitation union official and financial advisor to most of the
city’s unions; Victor Gotbaum, the head of the nation’s largest
municipal employees’ union; retired Judge Simon Rifkind, a chief partner
at the law firm of Paul Weiss, Rifkind, Wharton & Garrison; and a
slew of lesser known city champions from the private and public sectors.
One of the most striking features of New York’s current plight is the
absence of a comparable group of would-be saviors. Many of the
wealthiest and most influential residents have been asking not what they
can do to help their city, but whether and how quickly they can move
their families and companies to places with low taxes and laissez-faire
regulation. (Texas and Florida, in particular, have attracted more than
200 formerly New York-based companies.) “There is no comparable effort
today by the city’s political and financial elite to unite and forge the
compromises and sacrifices needed to spur the city’s revival and save
it from long-term decline,” said Ravitch, one of the few veterans of the
fiscal crisis still actively involved in efforts to enhance the city’s
welfare. (Ravitch believes, however, that the city will eventually find its way back.)
The reasons for the lack of a comparable private-public rescue effort
say much, not only about the differences between the past and present
crises but also about the ways in which New York’s economy and political
culture have changed. Most analysts put the blame primarily on New
York’s political leadership—in particular, on the inexplicable failure
of Mayor Bill de Blasio and Governor Andrew Cuomo to promote such
efforts. “Put kindly, New York has a leadership gap,” said Carol
Bellamy, a Democrat who served three terms in the New York State Senate
and the first woman elected to citywide office as president of the New
York City Council. “De Blasio seems bored being mayor. He is not a
cheerleader for New York who mobilizes people as New Yorkers.”
Critics say that de Blasio, whose approval rating currently stands at
28 percent, has utterly failed to build the relationships that a mayor
can call upon in a crisis. “When was the last time you saw him having
dinner with the city’s top 50 business leaders, or even with New Yorkers
in the arts?” asked Richard Aborn, president of the city’s Citizens
Crime Commission. “Have you ever seen him at a Met gala?”
De Blasio’s perceived war on the rich, big business, and the police
has also militated against a rescue plan supported by Wall Street and
that attempts to bring New Yorkers together across class lines. Wealthy
residents of the Upper East Side who fled during the pandemic have not
forgotten that their neighborhood was the last to be plowed
after the first snowstorm in de Blasio’s tenure, an act widely seen as
class revenge. Six years later, when so-called peaceful protests
devastated Manhattan’s chic commercial arteries, the city’s response was
to cut the NYPD budget by $1 billion, release violent offenders without
bail, and basically inform business owners that what had befallen them
was the just desert of historic wrongs.
“While Hugh Carey brought key players together, the current political
class has not even acknowledged there is a problem,” said Kathryn
Wylde, president and CEO of the Partnership for New York City, a leading
large-business group. When real estate, restaurants, and small and
large businesses sought partnership, she said, “there was no one on the
other side of the table. What we’ve heard is the sound of one hand
clapping.” Because de Blasio has consistently campaigned against the
rich and corporate elite, “he has shown no interest in the business
community, except as a source of revenue, not jobs,” she complained,
noting that the city’s budget has risen 20 percent during his two terms
as mayor.
For 12 years under Michael Bloomberg, a billionaire who served three
terms as mayor, “we got used to the government taking care of things at
the local and state level,” Wylde said. “He repeatedly called upon
business to be cheerleaders, but for what he wanted us to do.” As a
result, she said, “city government has mostly forgotten how to ask for
help, to the great frustration of the business community.”
While the city’s private sector lost nearly 1 million jobs in 2020,
Wylde noted, local government had neither furloughed nor fired employees
for the past year; some city offices actually added jobs.
Moreover, the Democratic-dominated state legislature in Albany, which
now enjoys veto-proof super-majorities in both houses, has increased
the budget by 15 percent and imposed at least $4 billion in additional
taxes. “Their proposed budget is larger than California’s,” Wylde noted.
But rather than focus on ways to help businesses reopen and remain in
New York, the funding is focused on “income inequality and the fiscal
problem of not having all the money they want to spend.”
Ed Koch was elected mayor because he promised New Yorkers that he
would “take responsibility for making tough decisions, including
decisions that would restore home rule,” says Ken Auletta. “What’s the
last tough decision de Blasio has made?”
The poisonous relationship between New York
governor Andrew Cuomo and de Blasio has also undermined potential rescue
efforts. A three-term centrist Democrat, Cuomo opposes many of the most
onerous proposed tax hikes—including a so-called pied-à-terre tax in
New York City and plans to raise state and city income and corporate
taxes on the city’s top earners from 13.5 percent to 14.8 percent
income, the nation’s highest rate. He and others argue that such
taxation risks driving away even more of the businesses and middle-class
residents who pay the bulk of New York’s tax revenues. But he has been
hobbled by sexual harassment charges and the scandal over his handling
of Covid-related deaths in New York nursing homes. Those who know him
well add that conciliation is not his style. “Cuomo was quite
effective,” said Steven Rattner, an investment adviser who led President
Obama’s effort to rescue the auto industry. “But he’s a
command-and-control guy. He’s not a convener.”
Without the “convening” power of leaders, agreements aimed at shoring
up New York’s longer-term financial stability and restoring confidence
in the city’s future are destined to fail, said former New York governor
David Paterson. Governors Nelson Rockefeller and Hugh Carey and Mayor
Ed Koch were “giants, larger than life,” he said. “Rockefeller and Carey
could pick up the phone and get anyone into the room. They were
respected, irrespective of their political views. That was one of the
reasons they could get things done. There aren’t people of such stature
in these posts today,” he said. “Koch and Carey didn’t love each other,
but they needed each other. A crisis like this should bring people
together. This one hasn’t.”
Labor and business, too, are increasingly at odds and isolated from
each other. “One of the most important union leaders in the city today
is George Gresham, president of the United Healthcare Workers East, the
nation’s largest health-care union,” Paterson said. “But I bet a lot of
the city’s major developers and financial leaders have never heard of
him.”
The quality of many city employees and their commitment to their jobs
have also changed, said Alexander Garvin, a noted urban planner who
teaches at Yale and has held various city government jobs, including
director of comprehensive planning. In the 1970s, he said, city jobs
were still a plum. People valued them and held onto them. They were
proud to work in public service. “That is less so today,” said Garvin.
“That kind of idealism is not what you see.”
Intense political polarization has also made bipartisanship and
deal-making into political career-killers. Journalists Auletta and
Weisman argue that the venomous political culture in New York and the
nation as a whole presents a formidable obstacle to achieving
compromises like those of the 1970s.
The pandemic, of course, has inflicted a far
greater suffering on the city than the fiscal crisis. In addition to
killing more than 50,000 New Yorkers and infecting almost 2 million of
them, Covid-19 has prompted the loss of 1 million jobs, or 12.9 percent
of the city’s employment (nearly double the job-loss rate of Los Angeles
and triple that of Chicago), and shuttered 5,000 restaurants and 200 of
the city’s 700 hotels, half of which are in default on their mortgages.
While middle-class New Yorkers in the 1970s fled the city for the
suburbs in search of more space, safety, and better schools, this past
year they have fled out of fear for their lives. “The coronavirus was
more than an economic challenge to the city,” said Paterson. “It was a
social crisis as well.”
Paterson and others argue that New York is less important than it was
during the 1970s. “New York was Mecca back then, the financial center
of the universe,” said Paterson. “You had to physically trade on the
stock market floor, unlike now; all the major corporation headquarters
were in the city, and all commercial centers were focused around the
city. That is less so today.” The office closures, social distancing,
and remote work have reinforced the notion that gathering around a water
cooler may no longer be the only way to spur creativity, and that the
brick-and-mortar office in expensive midtown can actually be run more
effectively and more cheaply with fewer employees—many of them working
not in that New York office but from remote locations in Florida, Texas,
or Colorado, or even London or Anguilla.
Nor are banking and manufacturing, once the city’s economic spine, as
vital to the economy as they were in the 1970s. Thanks in part to
Bloomberg’s efforts, New York has also become a tech center, with all
that this implies. “The tech business today is global, not local,” said
Bellamy. Most of tech’s leaders haven’t grown up in the city. Their
business interests and community loyalty are global. Their philanthropy
and civic activism are focused more on macro issues like climate change,
world hunger, public health, and STEM research and education, rather
than on local causes, charities, and cultural institutions. Their
foundations increasingly think globally, showing little interest in
acting locally.
“This is a totally different crowd,” said Donna Shalala, the former
member of Congress and University of Miami president who served on the
board of the Municipal Assistance Corporation, created in 1975 to
provide financing assistance and oversight of the fiscally distressed
city. “Those who helped save New York back then had often grown up here,
made it big here, and had a passion for the city that I don’t see in
their successors today.” Shalala disputes the notion that the vast
infusion of federal funds—more than $6.5 billion so far—means that New
York no longer faces a serious fiscal challenge. “That money will help
stabilize the city and state’s economy in the short-run,” she said. But
in the long run, “New York will need four times as much investment.”
Even worse, said Rattner, the injection of billions in federal cash
may have reduced the local incentive to make deals for the sake of the
city’s long-term financial health. Periodic efforts over the years to
bring business and labor together to address the city’s staggering
pension liabilities, the repair and replacement of its 100-year-old
infrastructure, and other urban challenges “went nowhere,” he said.
“During the 1970s fiscal crisis, when the banks stopped lending the city
money to cover operating expenses, the communities got together because
they had to. Now, neither perceives that there is a crisis, because
thanks to the stimulus money, there isn’t one. Which means that nothing
will change.”
Nor is there much hope that the next mayor will do more to address
the city’s long-term needs and fiscal peril. While more than 50
candidates have filed papers seeking the job in this crowded field, few have the leadership skills
and knowledge of the city needed to spearhead a rescue effort
comparable to that of the 1970s. “Hugh Carey will be regarded as a great
governor because he established a business-dominated control board that
took home rule—spending and key financial decisions—away from the
city,” said Auletta. “You couldn’t do that today. You’d have a riot if
the governor imposed a control board of mostly business people. Back
then, people were willing to sacrifice for the sake of the city. So
painful concessions were reached. Not today. Our politics today at every
level are too polarized.”
Judith Miller is a City Journal contributing editor and the author of The Story: A Reporter’s Journey. Paul du Quenoy is a private investor and critic. He holds a Ph.D. in history from Georgetown University.
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