FOR ME, the off-Broadway show was the last straw. Sure, New York is our largest and probably most important city; it is not surprising that it should get so much attention. But just the thought of a musical based on Mayor Ed Koch's ego-inflated autobiography made me cringe.
It was in this mood of sour cynicism that I opened Martin Shefter's book about the fiscal collapse and economic recovery of New York City. Could another book about the Big Apple be anything more than a Big Bore?
Yes. Shefter, a political scientist at Cornell University, has written a book that can interest and inform even those who feel they have heard quite enough about our big sister to the north. Other books have been written about the financial problems that nearly drove New York into bankruptcy in 1975. Ken Auletta's The Streets Were Paved With Gold, Charles Morris' The Cost of Good Intentions, and Jack Newfield and Paul DuBrul's The Abuse of Power were all well-written and widely read. Shefter, though, brings to bear an historical perspective that these other books lack. And with this historical perspective comes an important insight: Tensions endemic to large U.S. cities -- tensions having as much to do with political bargaining among competing groups as with columns on financial balance sheets -- produced a series of crises and recoveries in New York, and may produce them elsewhere as well.
To those writing in its immediate aftermath, New York's near default seemed rooted in the personalities and idiosyncracies of the time. The scapegoats included John Lindsay, the charismatic reformer with presidential ambitions, who promised to fund expanded services to the poor by beating back the excessive demands of the city's powerful public employes and wound up increasing expenditures in both areas at once; Abe Beame, the clubhouse politician, whose budgetary gimmickry helped to mask the ballooning deficit until it was too late; faceless bankers, who profited as underwriters of the city's loans until they got nervous, then quietly dumped their own bond holdings before suddenly announcing that New York was no longer a viable credit risk; even the nature of the times, the 1960s, when people's high hopes about the good things that the public sector could accomplish outstripped the private sector's willingness or ability to be taxed.
Shefter puts these factors in their place. Fiscal crisis is nothing new. New York underwent similar traumas in 1856, 1871, 1907, 1914, and 1932-3. In these cases, too, "the city was unable to sell its bonds in the open market; it faced the prospect of having no funds to pay its employes, suppliers, and creditors (with the accompanying danger of a disruption of municipal services); and in most instances the city was saved from bankruptcy when a consortium of banks agreed to bail it out, after extracting some stiff financial and political concessions from City Hall."
ON THE FACE of it, the suave and handsome Lindsay could have little in common with the nefarious Boss Tweed, whose demands for kickbacks in return for city contracts helped drive the city into debt in the 1860s and early 1870s. Tweed escaped to Spain when his shenanigans were exposed, but eventually was extradited and died in a city jail.
Despite their differences (even Lindsay's fiercest detractors have never charged him with personal corruption), Shefter suggests that Lindsay and Tweed were responding to similar forces. All city officials, he argues, must respond to four basic "imperatives" if they are to gain and retain power. "They must pursue policies that will win votes, prevent social and political conflicts from getting out of hand, contribute to the health of their city's economy, and generate sufficient revenues to finance the operations of the municipal government." These imperatives, however, frequently are in conflict with one another. Mayors are forced to juggle hand grenades: a community health program might win votes but throw the budget out of balance; a tax rebate to expanding businesses may stimulate the economy but stir strikes and disruption by city employes whose wages fail to rise. They must perform this juggling act, moreover, while being buffeted by national economic forces, policy changes at the state and federal level, and the immigration and outmigration of people and businesses with distinctive needs and demands.
The need to confront these conflicting pressures leads cities into a recurring pattern. Periods of spending are generated by the need to build a political coalition. These stir a backlash on the part of the financial community when the weight of the public sector threatens to impede economic growth. A newly elected reform administration may succeed in imposing financial reforms, but the internal political demands eventually reemerge and the cycle begins again.
Shefter documents his case with a balanced and scholarly attention to evidence and detail. At times the historical parallels he draws seem a bit far-fetched, but this makes his basic argument only a little less convincing. The result is a more subtle and complex appreciation of the nature of urban fiscal crises.
Residents and officials of the District, take note. If Shefter is correct, New York City's problems cannot be written off to blunder, corruption, personal ambition, misguided liberalism, or outmoded management techniques. Mayor Barry's political foundation currently is strong enough that he can satisfy most important interest groups without bloating the budget excessively. But an economic downturn, a more hostile Congress, or a divisive local issue could lead things to unravel. The fact that we "know better" might not be enough to keep us from being drawn down a rocky path.