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about $700 million.) The city’s first four-year plan, for instance, made no allowance for continuation of cost-of-living or COLA II payments (now called “bonuses”). The staff report said these, alone, would consume an additional $335 million in 1981 and $310 million in 1982. By July, officials were beginning to raise the possibility that the city would not achieve a balanced budget by 1982. “Factoring in the full costs of the new contract for city employees and taking into consideration the likelihood of additional costs in the next round of bargaining two years from now,” an analysis from Jac Friedgut, vice president of Citibank and one of the active “partners,” alerted customers, “true budget balance in fiscal 1982 cannot be considered a foregone conclusion.… The city must run very fast to stand still … to close what now looks like a rapidly growing budget gap after fiscal 1980.” In October 1978, Senator Moynihan—who thanked the President for “saving” the city in August—warned the budget gap was “as bad as it’s ever been, and it’s gonna get worse.”

The gap remained because the city’s expenditure patterns did not appreciably change during the first few years of the fiscal crisis. According to the city’s Budget Bureau, between 1975 and 1977 the local budget grew annually by 7.7 percent, compared to a 12 percent average over the previous fifteen years. Thus retrenchment, as defined in New York, meant not cutting but slowing the budget growth rate. Despite an almost 50 percent increase in federal dollars over these years, city spending rose to sponge up the extra funds. Instead of dramatically altering its spending patterns—drastically cutting back the broad range of city services, eliminating whole departments, slashing taxes to make the city more economically competitive—like one of Parkinson’s plants, the budget simply sprouted new leaves. By 1978, New York was back before the Congress requesting fresh federal loans it said in 1975 it would never again need. It would not be unreasonable for a member of Congress to wonder how the city could truly balance its budget by 1982 when it had failed to do so, as promised, by 1978.

Were New York a private business, it would be a classic candidate for bankruptcy—with lagging revenues and rising expenditures and debt. As the Municipal Assistance Corporation struggled to provide financing, over the first three years of the fiscal crisis the city’s debt grew almost 20 percent—from $12.3 billion in April 1975 to $14.2 billion in April 1978. This sum did not include the $753 million (as of February 28, 1978) that the City Comptroller says was owed for “debt-like commitments to public benefit corporations.” Despite fiscal progress, despite a dramatic reduction in short-term debt, despite assurances to the Congress and the public that in four years the horses would in fact fly, MAC board member Richard Ravitch told me that private MAC calculations—based on the city’s original four-year plan—projected that New York’s debt burden could swell to $16.5 billion in fiscal 1983. These calculations were shared with neither the Congress nor the public. Were these calculations true? “It sounds a little high,” responded MAC’s Executive Director Gene Keilen, “but $16.5 billion is not out of the ball park.” Several days later, he phoned to report that new arithmetic, based on fairly optimistic assumptions, showed the total debt could reach $14.4 billion by 1990. None of these figures, he cautioned, were fixed, since this was “not a scientific exercise.” No one knows what the interest rate will be, what the size of the city’s future capital budget will be.

The bad news was not offered to the Congress because “the game,” in the words of one principal, “was to get the feds in. I think Senator Proxmire was right. The city had the local resources. We didn’t need to borrow $4.5 billion of long-term aid, including $2 billion in loan guarantees from the federal government. We don’t even know how to spend the $4.5 billion.” According to this official, who said he would jeopardize his career by publicly speaking