There are Differences and Similarities Between the 1970’s Bankruptcy and Today’s NYC Economic Crisis . . . Both Made Worse by Crime Coverage

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By Gary Tilzer

NYCs near bankruptcy in the 1970s had the same damaging effect as today’s NYC COVID shutdown of the city. Both crises put the city’s economy on life support. Mayor Beame and the city’s next mayor in 2022 faced similar and quite different problems. Both mayors face out of control crime fueling the economic decline, job and business loss in the millions, the middle class and wealthy moving out of the city. However, Mayor Beame had a united government, with the machine-controlled Board of Estimate (which passed the budget until it was eliminated in 1989) behind him. Beame also had the unions (the UFT loaned the city money), and Wall Street was behind him. The next mayor will have a City Council which will have a large left-wing voting bloc, and a controller and public advocate who are socialist against the rich and bankers and a Wall Street that is uncoupling itself from NYC, as it moves to the South.

Before the Tonight Show moved to the West Coast, nightly host Johnny Carson would, in his opening monologue, make fun of crime in NYC. The rest of the media picked-up on the ratings dominant Tonight Show’s put downs of City. The popular image of New York from that era was best captured in Neil Simon’s 1970 movie The Out of Towners, where the city had a significant role in the plot. The New York City as shown in the movie — dirty, crime-ridden, filled with graffiti, and hit by transit and garbage strike.

Mayor Lindsay wrote letters to the Tonight Show’s producers requesting they stop making up crimes to create jokes for their show, because it was hurting the city’s economy. In the 1970’s tourism numbers were tanking; the middle class and businesses were moving out before the city ran out of money. When the airline Alitalia released an ad in 1971, headlined “Today, New York City disappears,” it was intended to be a humorous way to introduce the airline’s new nonstop service between Rome and Washington DC, Boston, Detroit, and Philadelphia.

Today the media is once again hurting the city’s economic recovery, but it is not the Tonight Show or a movie making fun of NYC’s crime. The cause of today’s attacks on the city, are the daily crime videos, shown nationally and internationally on cable or in the newspaper, put out by the city, showing horrific shootings, muggings and hate crime. The videos which capture a lot of the city’s serious crimes, are made possible by the millions of cameras placed around the city, in its subways and the private phone cameras that everyone has. There is no doubt that the crime videos shown all over the world are causing the city’s slow economic recovery, especially from lack of tourism.

 

How and Why the Famous New York Daily News Headline Happen: “Ford to City: Drop Dead,” as NYC Teetered on Bankruptcy

Despite numerous entreaties, President Gerald Ford was adamant that New York would receive no bailout from Washington. Goaded by his chief of staff Donald Rumsfeld — who hoped for Chicago to usurp New York’s position as the world’s financial capital. Ford after a Wall Street pressure campaign backed down and allowed the loan to the city to go through.

In the 1970’s Mayor Abraham Beame who ran for office with the slogan that “He Knows the Buck,” was forced to face the consequences of near bankruptcy. The city he ran was suffering from economic stagnation, industrial decline, crime rates rapidly increased as drugs, vandalism, theft, and with overspending and corruption at City Hall. When the power unexpectedly failed on the night of July 13th, 1977, the darkness and confusion provided an opportunity for even more acts of aggression, such as looting, to take place throughout the city.

To obtain the loans for his city Beame was forced to lay off thousands of city workers and cut municipal services such as police, sanitation, teachers, and after-school programs. Once the layoffs started the unions turned against the mayor. As a result cuts, the city’s already high unemployment rates got higher, businesses moved out of the city and a million middle-class families— fled to the suburbs in a movement known as flight.

The city was forced to give up financial control to qualify for the federal bailout and financial help from the Governor of New York State, Hugh Carey. He advanced state funds to the City to allow it to pay its bills, on the condition that the city turn over the management of its finances to Wall Street wizard Lazard Frères’ Felix Rohatyn  Carey appointed Rohatyn to head the Municipal Assistance Corporation (MAC), an independent corporation which was authorized to sell bonds to meet the borrowing needs of the city.

MAC insisted that the city make major reforms, including a wage freeze, city workers layoffs, subway fare hike, and charging tuition at the City University of New York. A State law converted the city sales tax and stock transfer tax into State taxes, which when collected were used as security for the MAC bonds. Because MAC did not create enough profit fast enough, the State created an Emergency Financial Control Board to run all the City’s budget. But even with all of these measures, the value of the MAC bonds dropped in price, and the city struggled to find the money to pay its employees and stay in operation. In November 1975, the Federal government stepped in, with Congress extending $2.3 billion in short-term loans in return for more stringent measures. By 1985, as crime began to go down under Mayor Koch, the City no longer needed the support of the MAC, and it voted itself out of existence.

 

 

The Service Cuts and Worker Layoff Because of the 1970’s Fiscal Crisis Almost Caused a Union Led Civil War in NYC

The unions fought back; garbagemen and teachers went on strike, which wound up hurting the city even more. The PBA distributed a booklet entitled “Fear City,” to tourists coming into the City.

Despite its success there were large social costs to fighting the bankruptcy. Royatyn and other bankers on the MAC Board also drew fire of union critics, who accused them of bailing out the banks, while slashing workers’ jobs, wages, and benefits. So did reducing city services and police protection to New Yorkers angered the public. Trouble ahead? Municipal unions since the 2000’s as the City’s economy grew to record levels, were able to negotiate healthy wage increases for its members. It will be hard for the leadership and its members to go back to the 1970’s wage freezes and cuts in the city workforce.

 

Federal Aid is Making it Difficult to Predict the Economic and Social Costs of the COVID Shutdown of NYC

The billions flowing from the Federal government to the City and State to cover day to day costs during the shutdown is making it impossible to analyze the long-term economic effects of the shutdown of the city, once the Washington aide ends next year. According to the media and the candidates 2021 campaigns, the loss of a million jobs, a third of its businesses, hundreds of thousands of office workers, subway riders and the flight the middle class, wealthy and Wall Street out of the city, will not have significant effect on the city’s economy, because they did not discuss it during the campaign.

 

The Politicians Disconnect of Responsibility for the Current Economic Crisis, Gave Them the Opportunity to Promise More Services

The media did not question the candidates this year on their plans to recover NYC’s economy, or what they would do if the economy does not recover. The media is not connecting the dots to educate New Yorkers on the economic crisis facing New Yorkers, and the heavy cost of the fix as we witnessed during the cuts in services and city jobs in the 1970’s. The media, mayor and governor have not warned New Yorkers like Governor Hugh Carey did during the 1970’s fiscal crisis that the “Days of Wine and Roses are Over.’

The candidates took advantage of the public confusion of the City economic condition to promise more funds for education, city union jobs, and social services, during their 2021 campaigns. The media by acting as publicist for the city “The City is Back,” did not inform New Yorkers of the possible economic dangers facing the city. By not following its Bill of Rights role to inform, the media allowed a lot of left-wing candidates to win seats at City Hall, promising the voters millions of increased city services, by taxing the rich. The media and candidates ignored the economically dangerous fact that 65,000 of the city’s rich pay 51 percent of city’s income taxes. And if you say to those 65,000 to leave, then we are not going to have the firefighters, eighteen city hospitals, the teachers, all of those basic city services, that progressives promise to increase funding for.

The far-left candidates elected this year, won on the platform of taxing the rich on Wall Street, the city’s cash cow. The securities industry’s which delivered five billion to the city’s budget this year, with average salaries surpassing $400,000, is endangered by an accelerating exodus of jobs to places with lower taxes and cheaper operating costs. The State Legislature in April raised taxes on millionaires, citing the need for high earners benefitting from Wall Street’s boom to help deliver New York from the pandemic recession. But Kathy Wylde, CEO of the Partnership for New York City, slammed the move as “cavalier,” saying it marked “the last straw” for some companies. Growing signs that a substantial chunk of Wall Street will leave New York City comes as its recovery continues to falter.

City Hall is ignoring that this year, the city will lose 5,000 Wall Street jobs at a time when the rest of the nation will add 23,000 securities positions, according to the annual comprehensive report on the industry released Comptroller DiNapoli. Combined with a decline of 3,200 jobs last year, the city’s share of securities industry employment will fall to 17.8%, the lowest level in three decades. In Florida, financial jobs are up 6% since August 2019, to 422,000. Recently another small investment firm, ARK, said it would close its NYC headquarters and move to St. Petersburg.

The media is adding to the public confusion on the economic health of the city by pushing that NYC is back, while newspapers published stories about areas of the economy that have not come back:

The city failed to add jobs from July through September and remains 525,000 positions below the record of early 2020. The local unemployed number 9.8% is more than double the national rate of 4.8%. Measuring from February 2020, private employment nationally was within 3.2% of the pre-pandemic level, but NYC is still down 9.7%.

19% percent of office buildings in NYC are STILL vacant – the highest on record. The City slashed its forecast for tax collections this year, as commercial real-estate values fell thanks to too few people working at their offices. But tax collections are not even meeting those lowered estimates: tax collections are down more than $100 million compared to last year. “The city is now facing a new long-term challenge from employers and workers permanently remote work. The move to remote work means that retail sales could fall by as much as $1.6 billion annually according to Comptroller Stringer.

The occupancy rate of the 700,000 available hotel rooms in NYC was about 62 percent, down from 88 percent in the comparable week of 2019. There were eighty-two hotels with about 25,000 rooms that had yet to reopen. At its peak, the tourism industry employed more than 280,000 workers — about one of every 14 jobs in the city. The hotel business in NYC is rebounding slower than in many other places, especially Sunbelt cities like Miami and Tampa, Fl., where hotel occupancy rates have surpassed pre-pandemic levels. Adams wants to turn hotels into permanent housing.

The city’s hard-hit leisure, Broadway and hospitality industry saw scant job growth over the last three months. 94% of Broadway business comes from the suburbs and tourist. They are also shoppers in SoHo, Madison Are, Chinatown, and 5th Avenue which caterer to Free-Spending Tourists are now empty.

NYC restaurants are still struggling to attract diners, with reservations down more than 30 percent compared to 2019. Thousands of restaurants have permanently closed across the five boroughs.

The outgoing lame duck mayor and media are continuing to do all they can to distract the public from the understanding that the City’s economy is on life support, with daily headlines like ending gifted schools, vaccine mandates and Rikers Island Conditions, that the new mayor will decide or fix. What does it mean when New York faces a $4.1 billion budget deficit next year, 15% in the next four years and has elected its most far-left government ever? Stay Tuned.

 

 

 

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