The Streets Were Paved with Gold - Ken Auletta [22]
Borrowing also grew. With the cooperation of its banks and financial institutions, the city devised a novel method to print its own money. Because New York was a financial center, and because its banks were underwriting more than they were purchasing city securities for their own accounts, the financial community was performing more a sales than a credit analysis function. They were salesmen, pulling down handsome commissions. So sell they did. Between 1961 and 1975, city debt almost tripled—from $4.3 to $12.3 billion. The city’s annual debt service payments jumped from $402 million in 1961 to $2.3 billion in 1976. Excessive borrowing led, inexorably, to excessive budget tricks. What didn’t come from Washington, Albany or taxes came from borrowing. An internal memorandum written to Comptroller Goldin in 1975 was appropriately titled “City Debt: The Price of Deception.” Sketching past city gimmicks, Goldin’s staff concluded that more than 20 percent of all short-term debt ($1.5 billion) was attributed to “gimmicks,” as was about 10 percent ($700 million) of all long-term debts. That year alone, the memo said, taxpayers would pay an extra $210 million in interest because of those gimmicks—more than the cumulative total spent annually to maintain city parks, repair streets, run a consumer protection agency, provide public health services, enforce housing codes, administer rent control and provide for the relocation of tenants. By 1976, 56 percent of locally raised tax funds ($3.7 billion) was earmarked not for the delivery of services but for debt service, pension payments and Social Security—consuming 31 percent of the total budget.
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.