KEEPING NEW YORK IN THE BLACK
Insight on Today’s Fiscal Problems from the People Who Solved the 1975 Crisis
An engaged crowd was treated to a mixture of an economic history lesson with a critique of the present and advice for the future of New York City and New York State as St. Francis College and the Manhattan Institute hosted the panel discussion, Keeping New York in the Black, Our Current Fiscal Woes In Light Of The 1975 Fiscal Crisis, on Thursday, May 7 at St. Francis College.
The Chancellor of St. Francis College Dr. Frank J. Macchiarola, who was Chief of Staff of the Emergency Financial Control Board, moderated the panel which featured his former co-workers in the 1970’s; Stephen Berger, who was Executive Director of the Emergency Financial Control Board at the height of the 1975 crisis and is now the Chairman of Odyssey Investment Partners; Eugene Keilin, who represented New York City in negotiations with New York State and became Executive Director of the Municipal Assistance Corporation which was created to deal with the crisis and is a co-Founder of KPS Capital Partners and John E. Zuccotti, who was First Deputy mayor under Abraham D. Beame and is now Co-Chairman of Brookfield Properties Corporation.
Fred Siegel, a Professor at The Cooper Union for Science and Art, Contributing Editor to the Manhattan Institute’s City Journal and soon to be a visiting professor at St. Francis College for the 2009-2010 school year delivered the opening remarks. He described the situation in 1975 as a city that, “was stumbling towards the brink of bankruptcy. Garbage was piling up in the streets, the murder rate was skyrocketing. The west side elevated highway, since ripped, down was collapsing.” Siegel summed up the crisis best by asking and answering the question, “How close were we to bankruptcy? So close that the police cars were mobilized to serve the papers on the banks. So close that Beame had a speech ready to go.”
After introductions by Dr. Macchiarola, Mr. Zuccotti offered a national perspective on the situation in New York City in 1975. He pointed out that numerous other cities were dealing with similar problems and that the economic crisis was not something that was created out of malice. Instead, Zuccotti said that what happened was New York City leaders felt a moral obligation to take care of the needs of the people, like provide cheap or free health care and a cheap transit system. “The city of New York absorbed some of those social responsibilities which in fact the federal government and other agencies of our society were not prepared to do. The single distinction to understand what that meant was that they borrowed, they borrowed billions of dollars.”
Mr. Berger followed by pointing out that it was not a secret that the city was heading for trouble. He said that the warning signs were there for ten years but that politicians at the time were more willing to preside over a slow decline than to acknowledge the looming crisis and make the difficult changes necessary to fix the debt and borrowing problems.
Mr. Keilin pushed that idea further saying that the problems in ’75 only came to a head when people from outside the political system stepped in and put a stop to what had become business as usual. He said that bankers went to the mayor and told him they would no longer lend the city money. “The fact is that if the tap had not been shut down by the financial market things would have continued for a much longer period of time. The explosion would have happened eventually. It just would have been bigger and more people would have been hurt,” said Keilin
This put in motion the steps that brought all the people on the panel to government. Several times, they stressed that they were not elected to do their jobs, but rather mandated to fix a problem and given the authority to do so only because of the magnitude of the crisis.
The panelists all agreed that New York City today is in much better shape than it was in 1975, in many ways because of the strict controls that were put in place and attention that was given to make sure the city’s books were kept appropriately and responsibly.
While Mr. Zuccotti acknowledged that tens of thousands of market related jobs have been lost due to the recent economic troubles, he pointed to several other times when the city was counted out, only to reinvent itself each time, bigger and better. Zuccotti says that the reforms made in the 70’s combined with the city’s growth and infrastructure make him optimistic about another recovery.
Looking to the future, Mr. Berger offered the sternest warning about the economic picture. He said that the gaps in the current state budget are only being plugged by the billions of dollars New York is getting from the Federal Stimulus Package. “That’s a two year plug and when that plug goes away you’re not diving off a 12 foot cliff, you’re in Acapulco diving into the waters.”
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