A Curious Form of ‘Populism’
Bill de Blasio and Wall Street.
Nov 25, 2013, Vol. 19, No. 11 • By FRED SIEGEL
First, a matter of numbers and nomenclature: Bill de Blasio, who is being hailed like Eliot Spitzer before him as the new face of American liberalism, won his race to be New York City’s next mayor with a near-record victory margin but also record low turnouts in both the primary and the general elections. There was no “populist” surge as reported in the press. De Blasio won 40 percent of the 22 percent who showed up for the Democratic party primary. And he won not only because he has a beautiful interracial family; more important, he was backed strongly by 1199, the hospital workers’ union, which has the best get-out-the-vote operation in Gotham.
De Blasio hugs his children November 5.
In a city of well over half a million government employees—city, state, and federal—in which the largest source of “private sector” employment is government-subsidized health care providers, as well as numerous, often government-funded, “nonprofit” organizations, de Blasio’s “populist” vote came heavily from those with a direct personal stake in the outcome.
Populism in America has been traditionally associated with self-employed farmers and miners fighting the great railroads and agricultural combines, looking to get a fair shake from government. Gotham’s “populists,” better described as “statists,” are people looking for a greater transfer of wealth from the private to the public sector. And therein lie the limits of de Blasio’s agenda.
De Blasio is a first-rate politician. He won office after Anthony Weiner self-destructed for a second time, because he alone among the Democrats, any one of whom would have won in a landslide this year in a city that had voted 81-19 for Obama in 2012, pursued an anti-Bloomberg course in the Democratic primaries. But that said, de Blasio—like Obama and even more than Bloomberg, with his vast personal wealth—will depend on Wall Street profits and crony capitalists to fund his agenda. His program involves intensified extraction from the private sector by way of greater housing subsidies, higher wages in government-subvented work, and more state spending from Albany to keep failing hospitals with empty beds open. None of this touches the underlying framework he inherited from Bloomberg of a city sharply divided between top and bottom with a hollowing middle. Nothing de Blasio does will reduce inequality, but what it will do is make the working poor a bit more comfortable and the gentry liberals, in his home base of Brownstone Brooklyn, a little less guilty when they look into the mirror.
The last mayor with an agenda for moving people into the middle class was Rudy Giuliani, who was therefore reviled by the New York Times for his misplaced priorities. The de Blasio version of a middle-class agenda involves offering pre-K classes to all the city’s children, paid for by a tax increase on the roughly 40,000 New Yorkers who earn more than $500,000 a year. There is, as Kay Hymowitz of the Manhattan Institute has explained, scant evidence that pre-K advances learning in the later grades or reduces inequality. It will, however, both employ more members of the teachers’ union and provide baby-sitting for poor and middle-class families.
But for all the continuity the election heralded, it also signaled a change little discussed in the local press. The dominant political player, thanks to Gotham’s peculiar party system, is the Working Families party (WFP) that was created 15 years ago by the city’s public sector unions. Candidates cross-endorsed by both the Democrats and the WFP, of which de Blasio was a founder, won the city’s top three elected offices and now control the single-largest bloc on the 51-member city council. In a city that is 33 percent white, Republicans contested only 29 of the 51 council seats—mostly with token candidates—and only 4 of the 29 were victorious. Under big-spending, socially liberal Michael Bloomberg, who had ties to the private sector and its real estate industry, the council’s left-lurching tendencies were held somewhat in check. But no more: The new mayor and new council largely see eye-to-eye, although some tensions are bound to emerge in terms of which interests are best watered.
When de Blasio takes office in January he’ll be faced with declining revenues and a roughly $2 billion deficit out of the city’s nearly $75 billion budget. De Blasio will, with some justice, blame Bloomberg for his fiscal difficulties since the city’s debt doubled under the billionaire mayor. City spending increased 55 percent on Bloomberg’s watch, while pension costs grew 300 percent. The city now spends $6.5 billion a year on debt service. That leaves de Blasio with very little to spend on new programs.
Politically, de Blasio has a path out of his problems. He can shift some of his debts onto the state. His key backer in the Democratic primary, the hospital workers’ union (which also helped found the WFP), has merged into the Services Employees International Union, the very same SEIU that was central to both Obama’s 2008 victory and the creation of Obamacare. And there’s the political rub.
New York City has closed eight hospitals since 2007. During the campaign de Blasio made a splash when he was arrested while protesting the threatened closing of fiscally defunct and medically deficient Long Island College Hospital. Keeping the virtually empty hospital staffed by 1,199 workers costs city hall nothing. But it’s costing Albany more than
Obamacare will make this problem more difficult. In order for Obamacare to work, the federal government needs to reduce its “disproportionate share” payments to Gotham’s voluntary hospitals that treat the indigent. It also needs to reduce hospital readmission rates. Both will reduce the need for the workers at the city’s voluntary hospitals, which are organized by 1199. And to make matters more fraught, the city’s League of Voluntary Hospitals, which represents these heavily government-subsidized “private” hospitals, wants to reopen contract negotiations because even with all the hospital closings the city is still “over bedded” as new technologies reduce patient stays and transfer minor operations to outpatient facilities.
De Blasio will be forced to face the problem of city workers head-on. One hundred and fifty union contracts involving 300,000 city workers have been pending renegotiation while union leaders waited out Bloomberg’s third and last term. New York’s public sector workers, who contribute virtually nothing for their pensions and health care, saw these contracts expire three or four years ago. Meanwhile, some city workers have continued to get their seniority step raises as guaranteed by state labor laws. The issue at hand is whether they will receive retroactive wage increases as well. Like a driver parking his car in a tight space, de Blasio will bump and scrape his allies, because the more generous he is with retroactive raises, the less money he’ll have to close the city’s budget gap. When all is said and done, the unions will likely get modest raises in return for decorative concessions.
But the shaky financial architecture could come tumbling down should the Federal Reserve end its feckless policy of quantitative easing, which has been wonderful for New York City and Wall Street but miserable for Main Street. The irony of a Sandinista-supporting mayor dependent on Wall Street will no doubt be entirely lost on de Blasio. But then again, it’s also lost on most of the city because Occupy Wall Street, with which de Blasio was loosely aligned, and much of Wall Street itself shared a fondness for President Obama.
Like all of Gotham’s mayors, de Blasio will depend on Wall Street. But the historic New York Stock Exchange is no longer owned by New Yorkers. It is now owned by the 12-year-old Atlanta-based and digitally driven Intercontinental Exchange. At the same time the NYSE and the New York-based NASDAQ (National Association of Securities Dealers Automated Quotations) are being challenged by new non-New York-based electronic trading platforms such as BATS Global Markets Inc. and Direct Edge Holdings LLC, whose possible merger would challenge the dominance of the New York financial sector.
The irony is that should the Federal Reserve’s quantitative easing taper off, and should the city’s financial sector continue its relative decline, the effect of fulfilling Occupy Wall Street’s wish to punish Gotham’s financial sector would leave de Blasio’s public sector union supporters in a starkly weakened position. While the financial sector continues to disperse and the city struggles, the ex-San-dinista will ride to the rescue. Come the revolution, he may bravely have to ask New York’s Wall Street-dependent government unions to chip in to their health care and pensions.
Fred Siegel is a scholar in residence at St. Francis College in Brooklyn and a senior fellow at the Manhattan Institute. His new book, The Revolt Against the Masses, will be published in January by Encounter Books.
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