The Magazine

France on the Hudson

It's 1973 all over again, as New York enters the ninth year of the reign of Michael Bloomberg.

Nov 16, 2009, Vol. 15, No. 09 • By FRED SIEGEL and HARRY SIEGEL
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The Manhattan Institute's Nicole Gelinas points out that local taxpayer-supported spending has risen 31 percent under Bloomberg--to $41.5 billion a year, a spike of more than 20 percent in real dollars and more than the budgets of most states. Pension costs now eat up a third of the money the city takes in ($13.6 billion). Add in education spending, which has spiked 40 percent in real dollars under Bloomberg to $21.8 billion, and the city-funded part of the budget (excluding state and federal contributions) is entirely consumed by what the mayor likes to refer to as "uncontrollable" costs. They rise every year as he adds to the benefits baseline the city is committed to pay in good times or bad.

The city's record-low turnout last Tuesday was partly a matter of demography. The civic-minded middle class (especially anyone with children of school age) has headed for the exits and the promise of a better life elsewhere. According to a recent Brookings Institution study, the city has the second-smallest share of middle-income families in the nation, trailing only Los Angeles. In what was perhaps his best line of the campaign, Thompson, referring to the roughly 1 million New Yorkers who've left the city since 2000, defined the middle class as "the people who are leaving .  .  . squeezed out by Bloomberg's tax hikes." They have been replaced, but by new immigrants with more pressing concerns than municipal politics. And they too will head for the exits as soon as they move up into the middle class. The New York Post nicely captured the dynamic recently when it ran two stories side by side: "Tax refugees staging escape from New York" and "Bloomy sees bright future."

But New York's civic anomie is more than just a matter of demography. New York is home to a vast nonprofit sector. Civic and charitable organizations that were once largely autonomous representatives of civil society have been annexed to government by the flow of social service contracts, as well as vast private contributions from the mayor's fortune. The effect is that much of civil society is now, for all practical purposes, part of the public sector.

New York City has become France on the Hudson. Its highly centralized, highly politicized government employs one-seventh the number of federal civilian employees with less than one thirty-sixth the population of the United States at large. In New York, big government and Wall Street profits are fiscally incestuous twins. The profits enable the city to offer subsidies not only to the poor but also the middle class. It was middle class housing subsidies that triggered the 1975 New York fiscal crisis. But the cost of living keeps rising. Teachers, who've received a 43 percent increase in pay over these past eight years of Bloomberg, complain they're being priced out of New York. And no wonder, it's New York's vast public payroll (and benefits, which since 2000 have grown twice as fast as those in the private sector) that makes the city so expensive. In other words, the public-sector middle class is increasingly chasing its own tail--even as the costs of government drive away private-sector jobs.

Government in New York is now not a matter of elections but of cutting backroom deals. The levers of power are accessible only to the very wealthy, such as the real estate barons Bloomberg has favored with hefty subsidies and the generals of the public employee unions. For the vast majority of well educated and well off New Yorkers, local politics is someone else's business. The people who do bother to participate in elections have been bought in one way or another either by Bloomberg's money or by government connections. The underside of Bloomberg's generous giving, some of it to highly worthy causes, is that it taints everything he touches. Is someone supporting Bloomberg out of conviction, however weak, or out of an elegantly greased palm?

While Bloomberg's generous donations preceded his decade in politics, they spike every time he runs for election. Last year, he was the single largest charitable donor in the United States with gifts of $235 million, much of that going to groups in the city who are then put in a position where they can't offend their patron. The supporter who phoned the White House, for instance, is Geoffrey Canada, head of a nonprofit called the Harlem Children's Zone, which has received $600,000 in personal donations from the mayor. This year he spent $200 a vote to gain victory.

Bloomberg, who's asked to be judged on the performance of the schools under his leadership, has spent an additional 8.5 billion public dollars on the schools to no effect. National test scores are flat despite the torrent of spending and Bloomberg's vast PR campaign promoting the illusion of academic improvement. The mayor has to date bribed the teachers--that 43 percent increase in pay over the last eight years--to buy into his pretense of progress. But with a new teachers contract up for negotiation the price Bloomberg is willing to pay for union cooperation could be the first test for his third term. In one of his few memorable lines during the campaign, Thompson spoke of Bloomberg's claims about test score improvements as "the Enron of education."

There's a small incident that symbolizes Bloomberg's failings--and Thompson's failure to exploit them. In the East Flatbush section of Brooklyn a crack gang caught on tape making more than a 100 sales to undercover cops discovered a business more profitable and less dangerous than dealing drugs. They systematically sue the city for civil rights violations and, thanks to Bloomberg's policy of aggressively settling lawsuits rather than risk court judgments, the gangsters have raked in more than a half-a-million dollars. They are richer and the neighborhood is cowering. The story ran two days in a row on the front cover of the Daily News, but when asked about the problem Bloomberg replied, "That's just the real world .  .  . you're settling for small amounts of money compared to what they could win in a jury trial."

New York is still generous for many of the wealthy. Goldman and Morgan are turning out record profits in the midst of the downturn, and as always the lower end service economy is still churning out jobs. But jobs ladders for the upwardly mobile are few and far between. Unfortunately Thompson with his tin ear and ties to the public sector unions--he had been especially vocal in calling for raises for the Transit Workers Union that shut down the city's public transportation with an illegal strike in 2006--was unwilling or unable to effectively raise the issue of New York's bifurcated class structure. In the words of New York writer Eamon Moynihan, "It's 1973 all over again."

In the 1973 mayoral election, with a fiscal crisis around the corner, Gotham's parochial politicians, demonstrating formidable powers of self-delusion, fought among themselves to satisfy the interest groups. Then the skies opened, and the city sank into near bankruptcy. The city was rescued, in large part, by the state government. But today Albany has descended into dysfunction, and New York City is on its own. The 2009 election was a rerun of 1973, but this time around there will be far less in the way of middle-class civic capital to draw on when the crisis breaks.

Fred Siegel is a contributing editor to the Manhattan Institute's City Journal and a visiting professor at St. Francis College in Brooklyn. Harry Siegel is an editor at Politico.