New York or Bust


Back in 1975, the last time the city couldn’t pay its bills, New Yorkers were terrified of two things: That the middle class would abandon the city forever; and that liberal New York would be left to wither and die by I-told-you-so Republicans in Albany and Washington. What we had, aside from empty pockets, was a PR problem: Gerald Ford’s spokesman, Ron Nessen, likened the city to an errant daughter hooked on heroin: “You don’t give her $100 a day to support her habit.” He actually used the junkie metaphor more than once, leaving the troubling impression that he really meant it.

The eighties and nineties had their fat-wallet moments, but you could argue that fiscal crisis is New York’s default condition. September 11 notwithstanding, it’s our Kramden-and-Norton hustle to pay the landlord a couple days after the first of the month. Back then, the city had disguised operating costs as capital investments, racking up $6 billion in short-term debt and tarting it up as a balanced budget. Today, our deficit is about the same size—we’re paying the piper for almost tripling our debt (albeit for straight capital costs) and hiking expenses during the last boom. Back then, the subway fare doubled and City University instituted tuition; today, the fare’s going up and so is tuition. We hear echoes of ’75 every time we switch on NY1.

Of course, this is not your father’s fiscal crisis; it’s potentially worse. Back then, the state had money to help. Today, the state is as broke as we are. Felix Rohatyn calls Governor Hugh Carey the real hero of 1975, since he was willing to devote state funds in conservative-controlled Albany. It’s hard to expect courage like that from this governor.

In the seventies, to our relief, New York’s bailout dovetailed with a market recovery. That and inflation did wonders—as soon as our spending was capped, bigger revenues got us back on our feet. Today, inflation is not on our side—and no one knows how much longer our budget will leak money.

The last crisis started when banks decided New York was no longer a good lending risk. But back then, “the New York banks were very much New York banks,” recalls Rohatyn, and they helped in the recovery. Today, no bank that lends the city money is really a New York bank.

And last time, there was farce: number-crunching by candlelight on the lawn of Gracie Mansion; panicky after-midnight phone calls to the White House; Albert Shanker, the teachers-union president, deciding not to hand over hundreds of millions in promised emergency funding; Carey ordering Manufacturers Hanover to stay open until midnight while he personally cooled Shanker down.

Today, we have war. Our pathos plays a supporting role in a global drama: It’s less about mismanagement and more about recession, the tech bubble, and, of course, September 11. Rohatyn, emerging like an oracle, has lectured that the only way to avoid the worst of 1975 is to repeat the best of it: He wants the White House to step in, helping not just us but 46 states that are in deep financial trouble. “If they don’t do it,” he says, “the measures the states will take—layoffs and tax increases—will only go against the recovery they want to happen nationally.”

He knows that what we had then, and what we may still have now, is leverage. Ford finally did help us out, to the tune of $2.3 billion, once the French president and German chancellor told him he’d trigger a world economic crisis if he let the city collapse. (Hard to picture them thawing W.’s heart.)

So … it’s both worse now and better. The city is better run now, its budget tighter. And in ’75, New York proved to the world that it mattered, we couldn’t be ignored. In the end, the last crisis wasn’t really about money or PR—it was about power. And this time, with most of the country also hurting, we’re not alone in demanding our fix.

New York or Bust