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Why New York Went Broke
- Abstract
“THE commonest mistake of Europeans who talk about America,” said Lord Bryce in 1888, “is to assume that the political vices of New York are found everywhere. The next most common is to suppose that they are found nowhere else.” Today the same mistakes are once again being made, not by Europeans but by Americans, and they have imparted an atmosphere of vagueness and irrelevancy to the ongoing national debate on “bailing out” New York City.
Unable to sort out the purely local and even technical aspects of New York’s fiscal crisis from its more general or national overtones, the oracles of the Left and Right have also experienced a certain difficulty in fitting the problem into their usual schemata. Even the participants have failed to resolve the issue of whether New York’s problems are a local matter or whether they are national in origin. Thus, although nearly everyone considers the New York City crisis to be enormously significant, almost no one can say with confidence just what it signifies.
Those who see the crisis as national in origin claim that New York is a victim of the national economy. Until recently, they point out, the city suffered from an inflation rate greater than the national average. (Toward the end of 1975, the situation reversed, and New York’s cost of living actually rose less than the national one.) The national recessions of 1970 and 1974 also hit New York with unusual severity; in fact, the city never shared in the national economic recovery after 1970. As a major importer of OPEC-produced oil (primarily from Venezuela), the city took the brunt of the OPEC-dictated quadrupling of fuel costs in 1973. The blow fell especially heavily on Consolidated Edison bills and apartment-house operating costs, where it produced a genuine crisis in the city’s real-estate economy. Even the arcane operations of the Federal Reserve Board played a significant role: the City Comptroller, who conducts municipal borrowing, complained that some of his difficulty in early 1975 grew out of the federal “tight-money” policy, involving a sharp reduction in the money supply and hence funds available for loans.
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