Author Lynne Weikart puts a human face on each of New York City’s fiscal crises, analyzes their historical patterns, and compares the tenure of several mayors. This timely book, Follow the Money: Who Controls New York City Mayors, has become an invaluable book for those interested in the future of American cities at a time of the nation’s severe financial crisis.

Through the history of politics, Weikart reveals how financial elites in New York City have exploited recurring fiscal crises and sharply curtailed the range of choices open to mayors in setting priorities and implementing fiscal policy.  In the face of enormous pressure during a fiscal crisis to defer programs and compromise promises to constituents, however, committed mayors from Fiorello LaGuardia to Michael Bloomberg have at times managed to overcome obstacles and achieve progressive goals. 

Weikart concludes: “As the world center of financial services, New York City is an informative case study of the power that financial elites exert over the political leadership and how mayors can push back to assert their own political agendas. In the final analysis, although some mayors do achieve their own policy initiatives, their choices are significantly limited by these powers of the financial interests particularly during times of fiscal crisis.”

This book is available through SUNY Press.

For more information:  http://www.followthemoneyus.com

To Purchase this book goto: Amazon Books

Recently Mayor Bloomberg in New York City sought to install congestion pricing for automobiles in Lower Manhattan. Yielding to cries from the city’s suburbs, at first, the State Legislature refused to permit the Mayor to introduce congestion pricing. The action by the State Legislature is an example of the difficulty mayors face as they attempt to respond to the challenges of climate change. How do we make our cities green when politicians respond so quickly to political pressure of those uninterested in protecting our environment? There is no easy answer to this but there are answers.

Some cities have succeeded in initiating major changes to their environment. Seattle is the leader in environmental awareness. The city has established an Office of Sustainability and Environment which coordinates the implementation of the city’s environmental plans which include light rail, green buildings, cleanest city cars and trucks, rapid bus transit and an urban leader in recycling. Why don’t other cities join Seattle? They are but slowly. Seattle officials constantly play host to dozens of city officials who visit their city to learn how Seattle accomplished so much. We must concentrate our energies on local issues but not neglect state officials who often play a deciding role in environmental issues.

Because New York had just elected a new Governor, Eliot Spitzer, there was some movement. Spitzer and Bloomberg created a commission, NYC Traffic Mitigation Congestion Commission, as part of a state law governing congestion pricing. The Mayor’s initiative would have died without the Governor’s help. Obviously, part of the answer is to elect officials who commit to improving our environment. Voters need to pay particular attention to state elections because it is the states that have control over our cities and suburbs where 80.6% of Americans live. Unfortunately, voters do not pay close attention to state elections as they do to local elections. Voters who will know the name of their city council member will have no idea who their state assembly person might be. Yet, it is these state legislators who will make decisions about the greening of our cities. Politicians listen to voters if they think the voters are a large enough constituency to influence their elections. Certainly, the environmental movement is growing in strength and influence on every level of government. But at the state level, much remains to be accomplished.

New York City has been a city of progressive thought and provider of generous social services for its citizens beginning with the Great Depression of 1929. The Great Depression was the opportunity for progressive elected officials to construct a safety net of social services for citizens. New York City did so by embracing redistributive policies. During the Depression, Mayor Fiorello La Guardia, with financial support from President Franklin Roosevelt, established extensive governmental services for city residents – public housing, new public schools, rent control, expansion of public health services and public hospitals, to name some of the most important actions. The Great Depression brought substantial progressive services for citizens of the city for over 40 years until the fiscal crises of the 1970s unraveled the progressive social services safety net of that earlier period.[1]

Today, the city retains a semblance of rent control, to the consternation of the powerful real estate lobby, and is one of the few remaining cities to do so. It supports 11 public hospitals, the only city in the nation to do so. It also has the largest public housing authority in the country. It retains the third largest public university in the country which, until 1975, required no tuition.[2]

Nevertheless, the city has also lost a great deal. The 1975 fiscal crisis sparked the end of an era in the history of New York City and in the history of America. In 1975 the city had a $1.5 billion deficit out of a $12 billion budget as well as $11.3 billion in debt of which $4.5 billion was in short term notes maturing within a year.[3] There is no question that the city needed rescue. The city, in effect, would run out of cash, unless the banks bought their bonds, and this, in 1975, was what the banks refused to do. They declined to buy any more NYC bonds. “The terms of the financial rescue put the city in a budgetary straitjacket that made it impossible to sustain the high level of social activism and income redistribution that had characterized the Lindsay and Beame mayoral years.”[4] In secret meetings with Mayor Abraham Beame, the Financial Community Liaison Group (FCLG), consisting of officials from the largest New York banks, insisted the Mayor slash services and end free tuition at the City University system.[5] Faced with the worst fiscal crisis since the Depression and under enormous pressure from the combined forces of Governor Carey and the FCLG, Mayor Beame agreed to charge tuition at the City University system (CUNY) and to lay off 40,000 workers, disrupting vital city services.

The cutbacks were devastating. The schools were in chaos as over 10,000 teachers were laid off; park maintenance was abandoned; crime increased as the police force was reduced; fire stations and health clinics were closed, and a third of CUNY’s faculty were terminated. Tuition was established which has now increased dramatically to $2,000 a semester.

The schools were beleaguered. Over a two-year period, 1975 to 1977, over 5,700 classroom teachers were lost in the elementary schools; over 2,000 in the junior high schools, and over 1,800 in the high schools. The impact of these layoffs was a loss of 1 in 5 teachers in elementary schools and about 1 in 6 on the upper levels. [6] It was not simply teachers -assistant principals were gone; guidance counselors were lost – 1 out of every 2 at the elementary school level, school secretaries were laid off, thousands of paraprofessionals lost their jobs, as well as school crossing guards and security guards. The schools were in chaos from loss of staff resources and from teacher transfers as seniority rights of teachers took precedent, and teachers were transferred all over the city in recognition of their seniority.

Public health was compromised for years to come. In 1977, the NYC Department of Health (DOH) lost 1,700 staff members, 28% of its 1974 workforce.[7] The agency lost seven of its district health centers, dramatically cut its methadone program, terminated the employment of 14 of 19 health educators, and closed 20 of 75 child health centers (responsible for TB screening and diagnosis). At the NYC Health and Hospitals Corporation (HHC), the city payroll was cut by 17% between 1975 and 1978. In 1975, HHC cut all of its 50 community-based clinics. John Holloman, president of HHC from 1974 to 1976, fought the cuts and was fired. These budget cuts played an important role in the resurgence of TB in the 1980s and the city’s lack of preparation to deal with the AIDS crisis.[8]

The Parks Department lost 1,440 employees in those two years. The green lawn in Sheeps Meadow became a dust bowl. The Parks Department has never recovered from the drastic cutbacks in 1975-77. NYC now spends the least dollars for parks of all high density cities. Chicago spends more on its parks than NYC with only one-third of the people. Among high density cities, NYC ranks last in the number of swimming pools and recreation centers. Philadelphia has twice as many pools than NYC and four times as many recreation centers for a population one fifth NYC’s size.[9]

The housing stock was equally devastated. NYC had “the first program in the United States which transferred ownership of privately held buildings to low-income tenants. The program expanded rapidly so that by 1973 there were 136 properties, which included a total of 286 buildings, at various stages of the process. However, only 42 of these properties had completed rehabilitation and conversion when the program was aborted as a result of the New York City fiscal crisis in 1975.” [10]

The subway system underwent radical reduction in services and a rapid increase in crime. The subway fare was increased 43%. Ridership dropped 27 percent between 1965 and 1982. Unmanageable graffiti, track fires and frequent train breakdowns became nationally recognized symbols of the degradation of a once-great transit system.[11] And the Second Avenue subway dig was stopped.

Public safety suffered the devastating loss by the Police Department of 20% of its workforce. In 1972, the NYC police force numbered 31,000; by 1980 it had shrunk to 22,000. Robberies increased by 15% by 1983 while murders saw a slight rise of 2%. The Fire Department had undergone cuts before the fiscal crisis which were exacerbated during the fiscal crisis. Ladder companies were reduced from six to five people; engines were reduced from five to four people in 1975. “By 1976, and in rapid succession, some 35 fire companies had been removed from primarily high fire-incidence areas and fire department personnel had decreased from about 14,700 in 1970 to about 10,200 in 1976.”[12] The “burning of the Bronx” was found to be closely related to the reduction in fire protection in the 1970s.

Another disappointing trend was the migration out. Whites fled the city – almost two million left between 1975 and 1983. Although the methodology counting ethnicity changed somewhat between 1970 and 1980, still the drop in the white population was quite serious. Both African-Americans and Hispanics had slight increases, but New York City’s population was in serious decline from 7.9 million to 7.1 million by 1983.[13] In addition, the median family income dropped from $43,952 in 1969 to $38,593 in 1979 as the more educated left for the suburbs. The percent of households with low income increased by almost 10% while medium and high income households decreased 3.3% and 5.4% respectively.[14] New York City was no longer perceived as an attractive place to live.

City residents were infuriated at the ravaging of city services. Abe Beame, a former NYC Comptroller, who had won his job on a platform of financial responsibility, lost all credibility with the voters and became a one-term mayor. No one denies that the city spent more than its revenues. What is open for interpretation was why the only solution was drastic cutbacks that created miserable living conditions in the city, resulting in, for those who could afford it, a mass exodus to the suburbs. Why did conservative forces demand cutbacks before helping the city regain its financial stability? Could Mayor Beame have adopted different strategies to avoid this devastation? Could anyone?

The fiscal crisis did not end with Mayor Beame’s tenure – the Municipal Assistance Corporation (MAC), Emergency Financial Control Board (EFCB), and the NYS Special Deputy Comptroller for New York City, all institutions created by the combined forces of New York State officials and bankers during the fiscal crisis – constrained the fiscal policy choices of subsequent mayors to this day, more than thirty years after the fiscal crisis.

Each subsequent mayor underwent sizeable fiscal crises. From 1975 to the present, New York City has undergone cycles of economic strength and decline – fat surpluses followed by huge deficits breaking over the city. These cycles are closely related to national and regional economic trends.[15] And in each of these subsequent crises, the financial structures established during the 1975 fiscal crisis dominated New York City fiscal policy. These institutions call upon the city to reduce taxes and cut back government services based upon the theory that private business will be stimulated by the tax reductions and that less government spending means more capital for the private sector. However, at some point fewer government services works against the city being attractive enough for business.

Through this case study of New York City’s fiscal crises, we consider the strength of the financial elites in their relationships with elected officials. Is it possible for mayors to oppose business interests, or is the influence of the financial elites indomitable? If states are in close alliance with financial elites, what kinds of options do urban mayors have in developing local fiscal policy? Elkin maintains that “political leaders have choices in how to respond to this economic context.”[16] As the world center of financial services, New York City is an informative case study of the power financial elites exert over the political leadership, and how mayors can push back to assert their own political agendas. In the final analysis, although some mayors do achieve their own policy initiatives, their choices are significantly limited by the powers of the financial interests.

[1] Inman (1995) defines crisis as anytime when the city is unable to raise sufficient revenues to cover the city’s expenditures. Also see Wolff, G. B. 2004.

[2] The City University of New York (CUNY) is third in population behind the State University of New York (SUNY) and California State University system.

[3] Shalala & Bellamy, 1976, page 1125.

[4] Rockefeller 2003, 196.

[5] Ibid.

[6] Weikart, 1983, page.167.

[7] Freudenberg, etc. 2006, p. 425.

[8] Ibid. p. 416.

[9] Croft, 2006, page.2.

[10] Lawson, 1998, page 61.

[11] Schaller, 2003, page 1.

[12] Wallace, 1981, page 433.

[13] New York Times, 1983, B1.

[14] U.S. Census SOCDS Data.

[15] Forsythe, 1997, 15.

[16] Elkin 1987, 8.

The history of the United States can be examined through several lenses. It is the history of the power of ideas centering upon the natural rights of the individual. It is a history of our military power, fledging at first in Concord and Lexington, and later the supreme military power in the world in the destruction of Hiroshima. It is a history of the power of creditors over debtors as recession after recession demonstrated the struggle between the two.

When Americans declared their freedom from Britain, they did so in part because of the struggle between British creditors and American debtors. In 1777, the Virginia legislature passed an act to sequester British property. Virginia citizens could nullify their debts to the British by paying the amount they owed to the Virginia’s treasury.[1] Of course payments could be made in Virginia’s paper currency, not British pounds, and the paper currency was worth only a tenth of the British pounds.

Shay’s Rebellion (named after Daniel Shay, a revolutionary war hero) is another example of creditors and debtors at war with one another. After the Revolutionary War, in 1786, Massachusetts farmers protested the seizing of the farms for debts. The farmers, revolutionary retired soldiers, who returned home with government certificates treated as worthless paper money, found their land taxes horribly burdensome and were unable to pay their debts. Farms were seized by creditors (merchants and government officials). Over 4,000 farmers organized, marched on debtors’ courts to stop foreclosures.[2] The rebellion was over by 1787 when the Massachusetts Governor James Bowdoin organized a militia that fired upon the farmers and routed them. Shay’s Rebellion convinced the merchant class that a stronger national government was a must.

In 1819, the nation’s economic expansion ended as the Second Bank of the United States tightened credit due to western land speculation. The Bank called in its loans which meant that state banks tightened credit upon land speculators who could not repay. State banks failed and with them, farmers and merchants lost needed credit. As a consequence, banks foreclosed on farms and the nation’s prosperity was curtailed.[3] Struggles between creditors and debtors continued through the 19th century culminating in the success of the “robber barons,” such as James Hill and J. P. Morgan, in the late 19th century.[4]

Who controls the twenty first century financial interests? The creditors now are commercial and investment banks, individual American and foreign investors, pension funds, mutual funds, insurance companies and overseas countries. The financial interests who provide the support for financial services are the commercial and investment bankers. These financial leaders in the United States provide financial services to all levels of government – they buy and sell bonds. These financial leaders profit from the need for all levels of government to borrow funds for long-term capital improvements (bonds) and/or short term revenue needs (revenue anticipation notes or tax anticipation notes). Government bonds represent a promise by government to pay back lenders both the principal and interest of the amount borrowed. The borrowed funds are used for a vast array of projects.

Does there still remain tension between creditors and debtors? Indeed there does. Today, these creditors control our local and state governments through the issuing of government bonds and the creditors’ willingness to deny loans to local and state governments that are considered risky investments. These creditors are, indeed, very powerful.

[1] Smith, John. 1996. John Marshall, page 153.

[2] For a detailed account of Shay’s Rebellion, see Richards, Leonard, Shay’s Rebellion, The American Revolution’s Final Battle.

[3] For a detailed amount of the Panic of 1819, read Frederick Jackson Turner’s book, Rise of the New West,

[4] For a radical interpretation, see Matthew Josephson’s The Robber Barons, and for a more conservative interpretation of industrial statesmen, see Allan Nevins, John D. Rockefeller, The Heroic Age of American Enterprise.

Much of Lower Manhattan has been rebuilt with little concern for input from the city’s residents. Although the 9/11 families have had input into the World Trade Center (WTC) site, citizens have been shut out of the rest of Lower Manhattan.

Only a few weeks after 9/11, a group of highly organized business men called for the creation of a public authority that would be responsible for the reconstruction of Lower Manhattan. Who were these business and real estate leaders? – The Partnership for the City of New York and Chamber of Commerce, the Real Estate Board, and the Alliance for Downtown New York.

The Governor and State Legislature created the state Lower Manhattan Development Corporation (LMDC). LMDC’s territory runs from Houston Street to the tip of Manhattan, from the East River to the Hudson, and oversees the revitalization and rebuilding of all businesses and housing except for those areas that are governed by other authorities; namely, WTC site governed by the Port Authority, and Battery Park City governed by the Battery Park City Authority.

The people appointed by Governor Pataki were from the financial and real estate industry with few appointees from local residents. Other than the chair of Community Board 1 and a representative from the construction trades, the list reads like the who’s who from a night at Lincoln Center.

With the establishment of LMDC, developers no longer had to worry about the City’s urban planning process, (ULURP), nor did developers have to worry about the City’s building codes. After all, the City no longer has jurisdiction. Most importantly, what the City Council thinks is no longer relevant including the City Council’s call for more affordable housing in Lower Manhattan.

The creation of state authorities has always been used to cut elected officials and city residents out of the decision making process. The City has lost a huge chunk of real estate to the State and developers. Lower Manhattan is becoming a playground for the rich as one luxury building after another is built.

Red Hook is a neighborhood in Brooklyn right on the water with an incredibly active port on the East River of New York City. Red Hook has a rich maritime tradition – the movie, “On the Waterfront,” was filmed there, and the docks still bustle with container cargo from dozens of large ships. One of the few industrial zones left in the City, many Brooklynites are fighting against high-end real estate developers who see luxury housing rather than shipping docks in Red Hook. Why waste their beautiful views with jobs?

The Red Hook port is owned by the Port Authority, not by the City of New York. The city has tried to acquire the waterfront in Red Hook. City officials would like to see high-end real estate developed on the waterfront in Red Hook; in their minds, container shipping simpy doesn’t provide enough jobs.

City officials may lose out to saner heads, particularly Congressman Jerry Nadler. Congressman Nadler would like to see the city’s economic base far more diversified than it is now. We are far too dependent upon Wall Street, and we are all too familiar with the fact that Wall Street is cyclical economy. Keeping the one remaining port in New York City has become a high priority to many in Brooklyn and to the Congressman. The Congressman has worked to change the view of local officials – “They are warming to maritime uses, I definitely feel that.” (1) Nadler sees the rapid growth in shipping industry throughout the world influencing city officials to recognize the need in the city to maintain and strengthen the city’s shipping industry. The Daily News issued a stinging editorial against the city’s handling of Red Hook’s docks: “If these geniuses had devoted as much energy to eliminating vermin as they have to getting rid of American Stevedoring Inc. (ASI), New York would be rat-free.” (2) A week earlier, 20 elected officals, including Reps. Jerry Nadler and Anthony Weiner, Senator Chuck Schumer, City Council Speaker Christine Quinn and City Controller Bill Thompson, wrote to the Port Authority and Governor Spitzer who controls half of the votes on the Port Authority’s board urging that ASI get a 10 year lease.

Several of these politicians are planning on running for mayor. With the changing political landscape, Congressman Nadler may yet win a 10-year struggle to make the city understand the importance of diversification.

(1) Brown, Elliot. 11/1/07. In Shift, City is Promoting Expansion of Maritime Industry. New York Sun.

(2) New York Daily News editorial, 10/7/07. A Waterfront that Works, page 40.