NYC: Who's to Blame?
To the Editor:
After reading James Ring Adams’s article, “Why New York Went Broke” [May], the members of the COMMENTARY study group to which I belong find that several comments are necessary. . . .
By selectively choosing examples, such as generous pensions and tuition-free higher education, Mr. Adams chooses to emphasize middle-class gains as a major cause of New York City’s financial woes. While these programs undeniably cost money, we do not feel that the middle class has been unduly benefited by city spending. One could just as easily point at programs which have benefited other social groups within the city—for example, the expensive leases the city has signed for day-care centers. While we are in favor of providing such facilities, one could ask whose interests have been served by the long and expensive leases which have been signed. We maintain that it is not families with small children who have benefited but wealthy property owners. This is but one example of how mismanagement has distorted the liberal values of the city’s voters for the profit of a small group of wealthy people.
Even the poor have benefited. Although Mr. Adams tries to play down the role of welfare in the city budget, it is an undeniable fact that welfare does cost a lot of money. While we are in favor of meeting the needs of poor people, one cannot deny that there are abuses in the welfare program. For instance, Trude Lash’s recent study shows that there are approximately 100,000 children receiving welfare who are not eligible according to the census reports. Even if Dr. Lash’s statistics should prove to be incorrect by a wide margin, abuses must still constitute a serious drain on the city’s economy.
The fact of the matter is that any action the city takes will profit some groups at the expense of others. One could ask why Mr. Adams does not analyze city dealings such as the Bronx Market and see who gains and who loses. Perhaps he would then come to the conclusion that the middle class isn’t the only one with its fingers in the pie, or, more accurately, that other groups are taking a proportionally larger share. By selectively choosing the “right” city policies one could “prove” that just about any group in the city is “responsible” for the current economic situation.
Aside from selectively choosing his issues, Mr. Adams does not seem to analyze the issues he lists from more than one point of view. For example, he says that New York City does not have a larger percentage of poor people than other cities, but he neglects the important variable of how much these other cities are spending per poor person.
Another example. Mr. Adams claims that illegal aliens do not go on welfare and therefore do not constitute an economic burden. However, illegal aliens are still a burden because they probably are not paying taxes and are therefore not contributing to revenues.
A final criticism of Mr. Adams is that he writes from altogether too narrow a perspective. He chooses to analyze the city in isolation without taking into account the state and the entire country. It is probably true, as he writes, that the city spends 60 per cent of its revenue on personnel, but instead of chiding the city for this he should ask why it is necessary for the city to do so. In whose interest is it that the city bears the burden of expenses which in other states are paid for by the state, and in other countries by the national government? Instead of chiding the city for spending money in an attempt to give its population a minimum living standard and a chance for education, perhaps he should look to a higher level of government and ask why such a large percentage of the burden should fall upon the city.
New York City
James Ring Adams writes:
When one looks at New York City’s budget and its social statistics and starts to do the necessary multiplying, adding, subtracting, and dividing, one learns that the city’s official explanation for its fiscal embarrassment is not only misleading, it is almost the exact opposite of the truth. The most important source of this problem, I maintain, is not the city’s generosity to the poor and downtrodden, but its attempt to subsidize large portions of the middle class, including its own employees. Just analyze the budget.
The city’s own tax revenues provide approximately $8 billion of its $13 billion budget. As Esther Goldberg agrees, the bulk of this $8 billion goes for personnel costs, including pensions and fringe benefits which are substantially more generous than those reported for other cities. More than 20 per cent is eaten up by debt service, the penalty for a generation of borrowing. About 13 per cent, or $1 billion of this $8 billion, is the city taxpayers’ share of welfare and Medicaid. Certainly welfare is a serious drain on the city, especially since New York’s payments run as much as 50 per cent above the national level (even though the cost-of-living difference from the national urban lower-income budget is only 7 per cent). But the proportions tell the story. The bulk of the city’s tax revenues do not go to the poor; they more or less directly benefit the middle class.
Take the day-care scandal, about which only the half has been told. The long leases apparently were conditions which the banks set before they would provide mortgage money for these centers. The city agreed because it felt the need for great haste in setting up these programs, and one reason for the haste was the fact that the city could obtain reimbursement of seven-eighths of its expenditures, without limit. As I mentioned in the article, John Lindsay’s policy was to maximize the federal contribution to the city budget wherever he could. Well, Washington caught on, and put a limit to the expenditures it would reimburse. The city had to pay 100 per cent of the rest, from $20 to $30 million. This perspective has not been provided by the press or city politicians, but it is necessary to understand why the Human Resources Administration has suddenly decided to close 49 day-care centers. It was the cost of these centers which exceeded the federal funding limit and fell entirely on the city taxpayer.
Furthermore, even though the cost of day care is included in that $1 billion of welfare-Medicaid expenses I mentioned earlier, these programs have been serving a large number of middle-class children. According to a mayoral task-force report, more than a third of the children in the program were ineligible. The state responded by raising eligibility standards. For example, for families of two, the upper limit is 115 per cent of the median gross income, and that by definition includes the middle-middle class.
But obviously not every middle-class child is in a day-care center nor does every middle-class family live in a rent-controlled apartment or own a Mitchell-Lama coop. The worst aspect of the city’s middle-class subsidies is their arbitrary nature. Welfare, at least, has been extended fairly uniformly to those poor who want it, but the middle-class families who benefit are those who know how to pull strings, who have good political connections or a fairly broad network of family ties in the local area. In short, the city’s system works for the people with roots and discriminates against new arrivals. What do you think are the chances of a Midwestern newcomer finding a rent-controlled apartment?
Mrs. Goldberg raises a question about aliens on which I can provide information I did not have available when I wrote the article. In a series of interviews conducted for the U.S. Labor Department, researchers found to their surprise that illegal aliens do indeed pay taxes. More than 77 per cent of the aliens interviewed reported that social security was withheld from their paychecks, and 73 per cent said that federal taxes were also deducted. Since New York City taxes are also deducted from paychecks, it follows that a large proportion of the aliens here do indeed contribute to city revenues.
As a final note, Mrs. Goldberg and I disagree on the extent to which wealthy property owners can be blamed for the city’s trouble. But I share her indignation at the city’s dealings in such cases as the daycare centers and the Bronx Market. These are symptoms of a pervasive corruption which grows up almost inevitably when government tries to take on functions better left to the private sector. The best solution would be drastically to limit the reach of the city-hall bureaucracy.