The Streets Were Paved with Gold - Ken Auletta [23]
But with the continuance of our present system of government, with an increased appropriation … for regular expenses of government—an increase inexcusable in the present depressed condition of business—with vast public works, such as new aqueducts, docks and streets, looming up in the future, it is plain that without a sweeping change the bankruptcy of the city and the decay of its commercial power are only matters of time.
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