The Streets Were Paved with Gold (8 page)

As the city’s economic base shrank, losing one of every six private-sector jobs between 1969 and 1976, New York pioneered its very own WPA. In 1950, government employees comprised 10.8 percent of the city’s work force. By 1975, this number grew to 17.5 percent, most with city jobs. In the sixties, four of every five new jobs were for the government.

All of this took place against a backdrop of massive migration in and out of New York. Though the city’s population remained a stable 8 million, between 1950 and 1970 the composition of New York changed dramatically. In those years, the city lost about 25 percent of its white middle-income population (1.6 million) and gained an equal number of (mostly) poor blacks and Hispanics. In 1960, just 4 percent of the city’s population—324,000—received public assistance. By 1970, the figure was 14 percent—over 1 million people. The age composition also changed. The city’s working-age
population, aged twenty-five to fifty-four, dropped from one half of all residents in 1950 to less than two-fifths. At the same time, senior citizens and youths swelled from one-third to two-fifths of the populace. New York lost its “money-providers,” as Wallace Sayre and Herbert Kaufman dubbed them in their classic
Governing New York City
, and gained “service demanders.”

Thus the city’s fiscal crisis, which burst into headlines when New York was no longer able to borrow money in the spring of 1975, was really a symptom of a deeper social and economic malaise. Historically, it is New York’s most severe crisis, but not the first. Youth gangs roamed New York streets more freely in the nineteenth century; the stench of horse manure and dead rats hugged the air; children and laborers were exploited; the division between rich and poor was greater; communicable disease and fire were constant perils.

Nor was this New York’s first fiscal crisis. The January 12, 1884, issue of
Harper’s Weekly
carried this editorial:

Between 1918 and 1932, the city’s budget grew by 250 percent to $631 million; its total debt nearly equaled that of all of the forty-eight states combined; and as a percentage of the city’s budget its annual debt service payment was almost twice the 1975 percentage. Expenditures were climbing faster than revenues, leading to a series of budget gimmicks, tax increases, and more borrowing. The payroll was larded with Tammany retainers. In 1930 and 1931, Tammany’s docile instrument, Mayor Jimmy Walker, reluctantly fired 11,000 teachers. But, like Abe Beame, his austerity measures were too little and too late. Worried about the city’s ability to repay, investors clamped down in 1933. The banks refused to “roll over” (postpone) city short-term debt repayments, prompting a pact between Governor Herbert Lehman, Mayor John O’Brien, who had by then succeeded Walker, and the banks. This “Bankers Agreement,” as it was called, imposed a strict 7-point fiscal regimen upon
New York, with the government sacrificing some of its democratic prerogatives—as it would, again, forty-two years later.

There are two basic schools of thought regarding the origins of the current crisis. One stresses that New York is the victim of historical or economic forces, federal or bank decisions, beyond its control; the other, that New York is the victim of self-inflicted wounds. There is merit in both arguments.

America’s migration patterns were largely beyond the city’s control. New technologies led to the mechanization of farms, which freed many poor blacks and others to search for work in the North. The automobile and federally sponsored roads opened up the country. The airplane and modern telecommunications lessened the dependence of businesses on the New York megalopolis, spawning new, easily reached markets and creating regional cities to serve them. Multiple-story factories were no longer required, and space for expansion was more plentiful elsewhere. As incomes rose, people’s thirst to own land and a home—to have space—was not satisfied in crowded cities. Air conditioning made warmer climates more attractive. National immigration policies, particularly toward the Commonwealth of Puerto Rico, opened New York’s door to many economic refugees. In this sense, New York was the victim of progress.

Unlike many newer cities, such as Houston, New York could not replenish its tax base by annexing its richer suburbs. In effect, that’s what Manhattan did in 1898, after a public referendum permitted the consolidation of the City of New York (Manhattan) with the City of Brooklyn and three largely unsettled areas containing just 150,000 people—the Bronx, Queens and Staten Island. The new City of New York, which had been about equal in population to Chicago and Philadelphia, suddenly more than doubled its population to 3.4 million, becoming the nation’s undisputed first city.

New York was also the victim of outside economic forces. A healthy national economy or modest inflation eases local economic woes. When the national economy was zipping along in 1969, the country’s unemployment was below 4 percent; black unemployment in urban areas, 7.2 percent; black teenage unemployment, 27.9 percent. In 1975, when the economy was in a tailspin, unemployment more than doubled nationally to 8.3 percent and among urban blacks to 17.7 percent; black youths out of work soared to 41.4 percent.

Unavoidably, New York fell prey to what the Marxists call “capitalist accumulation.” In their book
The Fiscal Crisis of American Cities
, Roger E. Alcaly and David Mermelstein trace the roots of the crisis to “a system of economic growth dictated by capital’s need to seek ever greater profits.” It became less economical to do business in New York. Labor was cheaper in other parts of the country, where unions were less strong, taxes and costs lower, the business climate better. In a competitive system, New York lost its edge.

Larger, older cities are uneconomical in still another way: they cost more. Ponder, for a moment, the sheer size of New York City. In 1977, it generated 30,000 tons of garbage and other waste daily—more than the combined total of London, Paris and Tokyo. Each day, its public transportation system, which accounts for 29 percent of all mass transit trips in the U.S., carries 3.4 million passengers. The replacement of this equipment alone would cost $27 billion. The city maintains 25,000 acres of parks; 1,956 miles of reservoirs provide 1.4 million gallons of water a day. There are 6,000 miles of sewers, 6,200 miles of streets, 950 public schools, 223 firehouses.

It costs more to feed an elephant. New York City’s population is the size of Sweden’s; its budget is almost equal to India’s. According to the Bureau of the Census, cities of 100,000 to 200,000 people spent an average of $280 per person for local government in 1972–73. Cities of 1 million or more were two and a half times as expensive, costing $681 per person. Thomas Muller of the Urban Institute has calculated the cost of providing basic services to be three times greater in cities of more than 1 million residents than those with fewer than 50,000. This is not just a function of size. The entrenched politics and mismanagement of older cities also contributes to steeper costs.

Mayors lost control of their government. As state and federal aid grew, their control of city budgets diminished. In 1961, state and federal aid accounted for 23.9 percent of New York City’s budget. Ten years later, the figure was up to 44.1 percent. Usually, these aid programs mandated costs on the city; often, they required matching city funds. Since the federal government usually provided 75 percent “free money,” there was a natural inclination to seek more—more programs, more grants, more funds. New York got trapped. When the rate of increase in federal and state aid slowed in the early seventies, the city found it difficult to pare its budget
because powerful new constituents were loose and because for each dollar the city cut it could usually save only 25–50¢ of its matching local share. Increased state and federal aid also trapped the city into new borrowing. The bulk of this was reimbursable aid, meaning the city had to raise and spend money in order to qualify for reimbursement. To raise the sums, the city issued revenue anticipation notes (RAN’s). When processing and other delays ensued, however, the notes were rolled over, backing up from year to year. By 1975, according to Mayor Koch’s first budget message, the city had $2.6 billion in RAN’s outstanding against federal and state aid—only part of it the result of fabricated city claims.

Mayors also lost political control. It was politically popular to remove education from “politics,” to set up independent agencies and authorities outside of direct mayoral control. Ironically, mayors gained too much power over their budgets (particularly the art of revenue estimating) as they lost control of their governments. By the early 1970’s, mayors were held responsible for but did not control public and higher education, health care, and transportation; the books of the powerful Port Authority were closed to City Hall review. Social progress led to aroused public expectations and a proliferation of government, community and neighborhood organizations—city, state and federal agencies, local planning boards, community action agencies, neighborhood health councils, PTA’s, church groups, civil rights groups, police precinct councils, senior citizens’ centers, ethnic societies. The growth of government spending and citizen involvement, as well as the influence of television and mass communications, liberated New Yorkers from the shackles of political party bosses. But there was a price paid for that freedom. Mayors lost the ability to discipline interest groups, to curb new spending demands, to make decisions stick. “Forty years ago a Tammany political boss could give an order to a mayor,” Daniel Bell and Virginia Held wrote in 1969.

Today, no such simple action is possible. On each political issue—decentralization or community control, the mix of low income and middle income housing, the proportion of blacks in the city colleges, the location of a cross-Manhattan or cross-Brooklyn expressway, etc.—there are dozens of active, vocal, and conflicting organized opinions. The difficulty in governing New York—and many other cities as well—is not the “lack of voice” of individuals in city affairs, or the “eclipse of local community,” but the babel of voices and the multiplication of claimants in the widened political arena.

Even if “the city had had prudent, statesmanlike financial management over the last decade or two,” David Stanley wrote in
Cities in Trouble
, “it still would have been in trouble—not so deep or so soon, but clearly in trouble.” Probably.

But to blame historical or social and economic forces, everything and everybody, is to blame nobody. We run the risk of learning nothing from what happened to New York. That’s where the other school of thought comes in. In my view, New York is much more the victim of self-inflicted wounds than it likes to admit. After a searching analysis of the city’s economy and budget, the Mayor’s Temporary Commission on City Finances issued a June 1977 final report which debunked what its authors called the “captive-of-events” theory of the fiscal crisis: the belief that the city had “little or no control over the events leading to the fiscal crisis.” Such a theory was “popular,” according to the report, because “it tends to absolve local political leaders of responsibility for the fiscal crisis and buttresses the also-popular view that the solution to the City’s financial problems lies in increased Federal and State aid rather than local political reform. The ‘captive-of-events’ theory thus has political as well as theoretical underpinnings that provide a justification for previous City policies and a rationale for not changing them in the future.” Pretty strong stuff, particularly when you consider that those signing the report included former Mayor Wagner, Governor Rockefeller’s former Chief of Staff, Alton Marshall, former City Corporation Counsel Leo Larkin, and the head of the Central Labor Council, Harry Van Arsdale.

The following pages attempt to isolate some of the key events and city, state and federal decisions which helped cripple New York. Some of these decisions were bad; some were good, some neither. All had profound consequences. At the risk of overdramatization, they might be called the “original sins.”

Americans were shocked in the mid-1970’s when the Marxist government of Cambodia harshly ordered the resettlement of a nation. Millions were forced out of cities and into the countryside. The intention of the ruling claque, backed by a murderous militia, was to yank Cambodia back into an agrarian, preindustrial society. An entire people was uprooted at gunpoint.

America experienced a voluntary but no less massive migration, as poor blacks and Hispanics moved north and middle- and upper-income whites fled to the suburbs. The causes of the fiscal crisis cannot be fully comprehended without charting this exodus of wealth and flood of poor people. Admittedly, population shifts were inevitable. They result from “progress”—air conditioning and superhighways and the airplane helped open the South. People’s natural desires for newness and space and property are not easily satisfied in aging, congested cities.

But a good deal of this population shift was foreordained by city, state and federal policies promoting highways and low-interest government-sponsored home loans. Such policies did not originate with masterbuilder Robert Moses or the federal government, as is commonly assumed. In a fascinating piece of research, Cornell’s Robert Finch unearthed the original 1929 plan of the New York Regional Plan Association. Today, the Association is dedicated to mass transportation and controlled growth; fifty years ago, it was dedicated to and controlled by Manhattan real-estate interests whose aim was to replace the sprawling, low-rise lofts and tenements with high-rise buildings. The Association’s twelve-volume plan urged a “highway system, designed like a sculptor’s armature to serve as infrastructural support for the desired suburbanization and decentralization of the region.…” The plan proposed to shift Manhattan’s economic base from light industry to office towers. It was silent about the subway system and largely ignored the issue of mass transportation. It was this plan that was later followed and supplemented by Robert Moses. Manhattan real-estate values soared, and roads cut wide swatches through neighborhoods.