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.