The Streets Were Paved with Gold (24 page)

Of course, these disparities can be as misleading as Moynihan’s balance of payments “gap.” Defense expenditures cannot be “equal.” Strategic considerations often dictate where defense dollars are spent, a prime reason Alaska, Hawaii and California rank so high. Climate also plays a role—inclement weather impedes military training and operations, and cold weather costs more (heavy coats, boots, electricity costs, etc.). I hated every goddamn minute of my winter basic training, but I thank the Lord it was in warm San Antonio, Texas, rather than frigid Watertown, New York. Political climate also plays a part. The Northeast states have traditionally been less politically hospitable to the military than have Southern states. Ours, thankfully, is a tradition rich in social protest. A pass is needed to build here, plus several years of public hearings. We wouldn’t even give the President a pass—by 1968, the only places where Lyndon Johnson could escape demonstrations and speak were out-of-the-way military bases.

But geography and climate played only a part. Congressional barons like Mendel Rivers of South Carolina and Richard Russell of Georgia, by controlling the important Appropriations and Defense committees, delivered the pork for their districts, as Sam Rayburn and Lyndon Johnson delivered space facilities for Texas or Robert Kerr delivered dams and public works for Oklahoma. While members of New York’s delegation tended to deliver speeches on the suffering in Bangladesh, the killing in Northern Ireland.

A similar tilt shows up in federal employment. Between 1960 and 1970, for example, the number of federal civilian employees grew but 3.5 percent in New England and 1.3 percent in the Mid-Atlantic region; at the same time, federal civilian employment jumped 30.7 percent in the South Atlantic region and about 20 percent in the rest of the South and West, where the unemployment rate was lower. In those ten years, New York City lost 9,900 federal civilian jobs. Since 1970, the city has lost another 19,200 federal jobs. But a word of caution is in order: federal employment usually matches population and economic activity. As New York declined, and other areas grew, federal jobs followed.

Because it is a special city—America’s true capital—New York merits special aid. No other city in the world is as much a national treasure or resource. New York is not only the home of the United Nations, but also the world’s center of commerce, communications, finance, fashion, ideas. As New York is diminished, so is the resource. And unlike other nations—England, France, Italy,
which subsidize London, Paris and Rome as national resources—the federal government does not provide special support to New York.

Murder or suicide?

One has to be careful to distinguish between
soft
federal dollars—direct grants, CETA funds, countercyclical aid, community development funds—which tilt toward New York, and
hard
federal dollars—highways, home loans, military and space expenditures, dams, water projects—which tilt toward the Sunbelt. One also has to slice through some thick local gibberish, portraying New York as a victim of a federal conspiracy (like conservatives who blame communists, liberals enjoy scapegoating). The social legislation of the past forty years, we sometimes forget, was promoted by the Northeast, often over the objections of Southern legislators. Some of those bills, including minimum wage laws, liberalized immigration and tariff policies, inadvertently aided the Sunbelt.

For years, a succession of New York officials charged that the United Nations drained New York’s budget and that the federal government should reimburse the city for upwards of $20 million. Along comes a study in late 1977—co-sponsored by the Consular Corps, a city agency—revealing that the 22,000-member diplomatic community pumped about $450 million annually into the city’s economy. We measured the cost of policing the U.N.—but not the tourism it attracted, the sales and other taxes its employees paid. There’s a lesson in this. We need more information and less rhetorical posturing. “We do agree,” the Chairman of the Council of Economic Advisors and President Carter’s chief domestic aide wrote to Moynihan in September 1977, “that the federal government needs more systematic information on the overall impact of all its programs, collectively, on regional economies.”

There’s also a political lesson for New York. New York officials, if they don’t want to be laughed at, need to determine how they can logically complain about those federal policies which hurt New York while ignoring those which help. They also need worry about a political civil war. “Not since the Southern Governors Conference was formed over 40 years ago has there been such a concerted effort against our region,” Oklahoma’s Governor David L. Boren warned the 43rd annual Southern Governors Conference in 1977. “Last year, the Northeast received $300 per person in federal grants while the South averaged $250. This happened even though the South and Southwest remain 10 percent below the national
average in per capita income.” The Sunbelt was marshaling its forces, as the Northeast had earlier done. Emotions ran high. So high that in late 1977 Governor Hugh Carey journeyed to Austin, Texas, to warn, “Our larger society is in danger of splintering badly from a host of real but reconcilable differences. Our Congress of caucuses is in danger of turning into a cacophony of caucuses.…”

Unlike the first Civil War, this time the North couldn’t win. With the loss of population comes a loss of Congressional representation. The 1980 Census is expected to result in New York’s Congressional delegation shrinking by another four members, to thirty-five. Just a few years ago, forty-five members represented New York in Congress, and that bunch, like this one, was not known for its effectiveness. When New York’s representatives are not running for mayor, senator, or governor, they’re usually maneuvering to join a foreign relations committee. Like the Dallas Cowboy cheerleaders, they look pretty but don’t know how to block. Even if they did, the country’s disposition in the mid and late seventies had soured to the kind of spending favored by most Northeast representatives. “The mood of the Congress will not be particularly receptive to massive new federal spending,” Tennessee’s Senator James R. Sasser told Detroit Mayor Coleman Young while chairing urban hearings in February 1978. “So, if you had to choose the most important things for an urban policy, what would your priorities be?” Young replied, “That would be difficult to answer. We came here to give up nothing. We came here to ask for everything.” New York, thank God, is not Peoria. We often forget, Peoria thanks God it is not New York. And the city needs Peoria’s votes in Congress.

It is simpler to make a speech than to change policy. New Yorkers have to get used to the idea that the country and its problems are just as interdependent as progressives used to say the world is. There is a consequence for everything. Amending federal aid formulas to give the North more means giving the South less. Permitting European flights to originate from Southern cities, as President Carter has done, is more convenient for citizens and fair to the South, but it lessens the nation’s dependence on cities like New York. Allowing the two-martini lunch to be tax-deductible is a ripoff for business executives—yet New York’s restaurateurs and their unions plead that their business depends on it. In addition, some things government can’t change, particularly in a democratic society. Part of the Northeast’s decline had nothing to do with
government policies and a lot to do with people’s preferences. Many citizens simply want to live in a warmer climate, seeking space, grass, new schools, lower taxes, a two-car garage—all plentiful in the Sunbelt. In a free society, how do we order people not to vote with their feet?

Instead of platitudes and shrieks about the need for a new national urban policy, says Professor Moynihan (now conveniently ignoring Senator Moynihan’s shrieks for “economic justice”), “The whole point of an urban policy should be that New York does not go bankrupt.” Sipping coffee, Moynihan leaned back and recalled returning from Hubert Humphrey’s funeral with President Carter on
Air Force One:
“I almost said to him, ‘Herbert Hoover wasn’t responsible for the great Depression. Yet it’s called Hooverism.’ ”

In early 1978, Moynihan and most other New York officials were warning that without new federal loan guarantees the city would be forced to declare bankruptcy. The consequences, they said, would be swift. Under this domino theory, the market would close to New York State; then local school boards who depend on state financing would default; then other states and municipalities would follow; then a massive crisis of confidence would likely engulf the nation and the world. The city would become a ward of the federal government. And how would the world react to the spectacle of the United States government callously standing by as the world’s premier city declared bankruptcy? That would be murder. Right?

Yes, and no. There would be no evidence to charge the federal government with discrimination had the Congress rejected loan guarantees, since no other city receives them. New York also rightly suffered a credibility problem. City and state officials sold the $2.3 billion annual seasonal loan program in 1975 on the basis that it was a one-time-only request. That was untrue, and officials knew it. Or, as Moynihan candidly told the White House Conference on Balanced Growth and Economic Development in January 1978, “The persons who put the emergency arrangements together assumed that in three years’ time—in 1978—there would be a Democratic administration in office and that it would take care of the problem with a massive infusion of Federal funds.” City labor leaders in the audience exploded. “We were really angry with Pat,” a prominent union leader told me later that night. Was Moynihan wrong? “No,” he said. “Don’t quote me, but he’s absolutely right, but why did he have to say it?”

New York’s case before the Congress was also weakened because, contrary to 1975 promises, by 1978 the city had not balanced its budget. It is comforting to portray those opposing loans to New York as neanderthals and bigots. Some are. But there was also a legitimate concern—expressed most eloquently by Proxmire—that if Congress made an exception for New York, another domino theory would unfold: other cities would clamor for similar loans; would fail to balance their budgets if there was a federal Santa Claus to protect them; the federal structure, which defines cities as creatures of states, would be altered. Congress, which can’t manage itself, would be asked to manage local budgets, to pass judgment on local labor settlements and policies.

New York’s best case for federal loan guarantees was predicated on practicality, not principle. The consequences of a bankruptcy are matters of judgment, not fact. If New York’s dire scenario is wrong, a catastrophe is avoided. If opponents of federal assistance are wrong, a catastrophe is ensured. Practically speaking, the worst possible consequences come if the opponents are wrong. A bankruptcy would cost the federal government money. As Senator William Proxmire, in urging President Ford to support seasonal loans, declared on November 10, 1975, “A New York City default would cost the federal government $6.5 billion in loan guarantees by 1980, whereas loan guarantees
before
default would lead to a maximum of $2.4 billion in guaranteed bonds, in 1977.” Though federal loans or loan guarantees may help drive up federal interest rates, they otherwise don’t cost federal taxpayers a dime—unless the city defaults on the loans guaranteed by the federal government. In fact, over the three years of the seasonal loan program, the federal government, by charging a 1 percent premium above the normal interest rate on these Treasury notes, earned an extra $30 million in interest. And because these notes were taxable—unlike municipal securities—MAC Chairman Rohatyn estimates the federal government was awarded an extra $200 million in taxes.

While it is true that no other city receives federal loan guarantees, many citizens, businesses and countries do. By the end of fiscal 1978, the federal government was expected to have $324 billion outstanding in loan guarantees—contrasted with the $2 billion asked by New York. Senator John Tower of Texas once sat behind a large desk in his Capitol office inveighing against federal loan guarantees for New York. Yet, just moments before, he had kept this reporter waiting while he concluded a session with Texas
farmers demanding federal support for their “unprofitable” farms. Tower said he saw no inconsistency between pledging to support loan guarantees for these farmers and opposing them for New York. Nor does Senator Proxmire see any inconsistency between his vote for the New Communities Loan Guarantee Program (1970) and his strenuous opposition to city guarantees. The Congress of the United States has voted loan guarantees to bankrupt corporations (Lockheed), foreign dictatorships, college students (with a one-third default rate), small businesses, tenants, even for the construction of RFK Stadium in Washington. After performing these tricks, members of Congress warned that as a matter of principle they wouldn’t go to bed with the City of New York! In August 1978, the federal government went to bed with the city, approving $1.65 billion of loan guarantees. The loan question—at least for the next four years—seemed settled.

But beyond the loan question lurks another: What, if anything, should the federal government do for depressed areas like New York? Faced with a similar question in 1938, President Franklin Delano Roosevelt declared: “It is my conviction that the South represents right now the nation’s No. 1 economic problem—the nation’s problem, not merely the South’s. It is an imbalance that can and must be righted, for the sake of the South and of the nation.…”

Today, the Northeast, and particularly New York, is like the Old South. Its living costs, taxes, climate and aging physical structure are no longer competitive. Its tax base has shrunk as its service needs have expanded. New York, like many small farmers, can no longer compete. Left alone—through a policy of “benign neglect” advocated by laissez-faire professor and occasional
Wall Street Journal
columnist Irving Kristol—the “economic imbalance in the nation” will probably tip further. The nation’s real per capita income grew 6.5 percent between 1970 and 1975, reported Bernard Gifford for the Russell Sage Foundation. Yet in the same period New York City’s income dropped 1.4 percent. “Had the city grown in tandem [roughly parallel] with the national economy,” Gifford writes, “as it had for more than 20 years, its per capita personal income would have increased by 3.9 percent between 1970 and 1975….”