The Streets Were Paved with Gold (55 page)

Throughout the negotiations, people asked the wrong question. The question was not whether it is an “outrage” when workers’ salaries fall behind rising inflation (it is); nor whether workers had borne a burden throughout the crisis (they had); nor whether their pay was slipping in comparison to the pay of other workers (it was) The right question is: What can New York afford? The settlement widened New York’s four-year budget gap, increased the price to be paid two years hence when the contracts expire and union leaders say they will demand “substantial increases,” and continued the past pattern of higher costs for reduced services.

After six months in office, things didn’t go as Ed Koch had planned. “Mayors of New York have governed by the politics of consensus, making short-sighted, destructive attempts to steer a middle course between strongly differing groups,” candidate Koch declared in an August 22, 1977, Op-Ed page article in the
Times.
“If New York City is to survive, it must elect a Mayor who will risk his personal popularity to govern this city along the course of necessity—not convenience.… The battle for this city will not be won by steering the middle course that compromises our future. It is by reaching for excellence, not acceptability, that we will survive, and we can prosper.” A nice speech. Assuming Koch meant what he
said—and I believe he did, and does—the relevant question is:
Why has so little changed?

The answer is complex, and goes to the heart of many of New York’s and the nation’s ills. First, with bigness comes a breakdown in responsibility. We see this on the national level, where officials shape one-half-trillion-dollar budgets and quibble over whether the deficit will be $30 or $50 billion. When dealing with one-half-trillion-dollar budgets, $5, $500,000 or even $50,000,000 seems a pittance. With so much money, so many programs, so many constituent groups to be pacified, what’s another program? The numbers defy human scale. We’re all ants when viewed from 30,000 feet.

Like Ed Koch, Jimmy Carter was an outsider who swept into office promising to be frugal with the public purse. One of his first acts was to boost the salaries of his former campaign aides. James Gammill, who at twenty-two was making $7,500 in the campaign, now earns $45,496 as the White House’s personnel director. The President’s closest aides, Hamilton Jordan and Jody Powell, saw their campaign salaries more than double to $56,000. Richard G. Hutcheson, who at twenty-four earned less than $10,000 in the campaign, now receives $45,496 as the White House’s staff secretary. Midge Costanza, who earned $15,000 as a member of the Rochester City Council, received an almost 400 percent increase to $56,000. Even after she was demoted in 1978, Costanza lost her prestigious office next-door to the President but got to keep her full salary before she ultimately resigned. The taxpayers are abstractions—ants—when viewed from the lofty heights of the powerful.

It’s not as if it’s your money—or, for that matter, anyone else’s. So Mayor Koch conferred huge raises on members of his staff. And so union leaders who struggled to avoid bankruptcy demanded hefty wage and benefit gains. So Assembly Speaker Stanley Stein-gut, who once slipped on a city sidewalk and broke his toe, insisted, though fully recovered, on suing the city. So former Deputy Mayor John Zuccotti filed a delayed claim for sixty-three days of overtime pay after leaving city government in 1977.

So it was for me. When I resigned as executive director of the city’s Off-Track Betting Corporation in 1973—two years before the fiscal storm hit—a check arrived one day in the mail. It was for $5,984. Since I’d taken few vacation days, I assumed it was for back vacation pay. There was nothing to sign, no itemization of what the money was for. Yet here was this big fat check. Terrific.
Or so I thought, until a
Daily News
reporter called in December 1977 to inform me that $2,498 of this sum was for compensatory time (overtime). Ridiculous, said I. Over the years, I’d written several pieces criticizing the practice of paying overtime to city executives.

A call to OTB revealed that the
News
had its facts right. No matter that at the time I didn’t know the compensatory time was included. No matter that the money was officially due me, or that I immediately sent a check to reimburse the city for all of the compensatory time (as did Zuccotti, who also claimed he didn’t know). The moral of this tale is that I didn’t think to ask what the original check was for. It was as if the money rained from heaven. Certainly not from the taxpayers.

To those in or supported by government, taxpayers become abstractions. They were abstractions to the teachers’ union and the Board of Education, who in 1975 agreed to shorten the school week so that teachers could retain some of their free preparation periods. They were abstractions to police sergeants, who threatened a strike rather than give up one of their eighteen to twenty-eight extra chart days off; to members of the City Council and Board of Estimate, who voted themselves lavish new staff support; to Abe Beame, who increased city spending to aid his reelection effort; to Hugh Carey, who behaved likewise with state monies in 1978; to Strom Thurmond, who connived federal crop support for his constituents; and to California state officials, who invited Proposition 13 to pass when they allowed a $5 billion state surplus to accumulate while property taxes soared. The prevalent view of government as a communal trough was given voice by a deputy to former city Police Commissioner Michael Codd. Cornering Jay Goldin in early 1978, the aide berated the City Comptroller for blocking Codd’s request for a tax-free heart disability pension: “Why did you have to do that to Mike Codd? What do you care? It wasn’t your money.”

How can people who preach and believe in fiscal restraint, or those who have worked so hard and believe so deeply in saving New York from bankruptcy, behave so greedily? How can someone be a principal actor in the fiscal drama one moment and behave as a detached observer of a newsreel the next? The obvious answer is selfishness. But it’s more than that. Government becomes the giant commissary where free lunch is served. To the public, government dispenses protection but also programs, grants and subsidies the way a counterman dispenses mashed potatoes and meat loaf. Soon
farmers come to expect their crop support subsidies, tenants their rent subsidies, Lockheed and Chrysler their federal loan guarantees, doctors their huge Medicaid fees and elaborate equipment, cities and counties and states their federal grants. Appetites grow.

To those in government, success is achieved only if the commissary expands fast enough to feed nearly everyone, or at least keep important customers reasonably happy. Politicians know that few care about the chef’s wisdom, judgment or diet recommendations. They know that few think about whether there will be enough food to feed many more customers ten years from now, whether there is money to pay next year’s bills. They know the press tends to focus on
now
, on politics not government. Liberal democracy has become a service business, and the service that counts is
MORE.
Besides, who’ll notice? Government budgets are so big, departments so large, rewards so plentiful, that a sense of personal responsibility breaks down. Everyone’s doing it, so how can it be wrong? What’s the big deal when the city has a $14 billion budget, 60 commissioners and 300,000-odd employees? The federal government has a $500 billion budget and over 3 million employees. What’s a few million?

The future is mortgaged for the present. Ultimately, when the food supply stops growing, there is cannibalization. Liberal democracy, as Peter Jay observed, begins devouring its own tail. Taxpayers lose, but so does the concept of public service. Like us, the people we elect to think about the future and give us their best judgment often fail Publius’ test. Public service does not become quite the sacrifice our public officials enjoy proclaiming it to be. Yes, members of the City Council, the state legislature, the Congress, moan about their salaries. But not about the outside income they’re allowed—the legal and lecture fees, the investment opportunities. Or about the perks that come with the office—the chauffeured cars, swollen staffs, free phone and mail privileges, fat pensions, future job connections, the honor, like royalty, of being addressed by their title. Yes, they receive public abuse. But most folks don’t get their pictures in newspapers, don’t enjoy the ego gratification and sense of power we confer on people in public life. This rarefied atmosphere helps desensitize officials, divorcing them from the people they’re meant to serve. Public life can be ennobling, but it is rarely humbling.

These universal reasons partially explain why so little changed in New York over the first three years of the fiscal crisis. Still, wasn’t
New York a special case? Didn’t everyone agree the fiscal crisis was for real? That bankruptcy was an immediate threat? Why weren’t local appetites curbed? Why didn’t the outside mechanisms imposed to police the city—MAC, the Control Board, the federal Treasury, the outside auditors—function as they were meant to? The answer to this riddle goes back to a commonly shared assumption. All of the actors—City Hall, Albany, Washington, the banks and financial community, the municipal unions, the business community, even the press—agreed: bankruptcy was unthinkable. Start with that common assumption and it follows that each would bend, do what was necessary, to avoid it. Differences revolve around tactics, not strategy. All are scaling the same peak. Since each climber has the power to cut the lifeline, they cling to each other, synchronizing their steps, their every movement. There are no sudden lurches. Alone, the mountain cannot be conquered. A team effort is required, the sharing of each other’s days and nights.

Inching up the mountain together, overcoming the same obstacles, surviving one seemingly hopeless crisis after another, the natural tendency is to celebrate the distance covered rather than the distance to go. One’s constituency becomes each other. The means becomes the end. Success requires continued team effort. Failure is the plunge into bankruptcy, not the failure to fundamentally reform city practices. That would mean risking a break. Instead of criticizing the banks for their shrinking investment in city securities or the unions for their raises and work rules, the other members of the team praise their cooperation. The pressure is off.

Rather than risk offending New York voters by scolding the city, as the Ford administration did in 1975, since the beginning of 1976 first Ford, then Carter, performed more as cheerleader than cop. With the approval of the teachers’ contract in early 1977, Governor Carey started to think of his reelection and began to rein in the Control Board. Hoping to restore investor confidence and seduce additional federal support, MAC Chairman Rohatyn, speaking for the “conservative” local establishment, declared in 1977: “We’ve cut away all the fat. From now on, we’ll only balance the city budget and pay off debts by cutting away New York’s muscles, bones and vital organs.” Teachers’ union president Al Shanker found those words so comforting he reproduced them in paid advertisements in the city’s newspapers. Yet, the next year, Mayor Koch announced he planned to cut $993 million of “fat” from the city budget over the next four years. Because he was
committed to avoiding bankruptcy and Senator Proxmire demanded a labor settlement before considering loan legislation, Mayor Koch says “we had to” achieve labor peace at almost any price (though the same excuse did not apply to Koch’s police settlement, which came after the senate committee had acted). So, too, when the labor settlement was reached, the business/banking establishment, and the editorial pages of the
Times
and
News
, swallowed hard and chimed their support. That was preferable to tarnishing the Big Apple’s image in Washington.

Thus there grew, over the first three years of the crisis, the local equivalent of a military/industrial complex—what one might call a /files/13/52/48/f135248/public/profit complex. The same absence of opposition, of rigorous checks and balances, which helped cause the fiscal crisis now rendered it nearly impossible to cure. Former adversaries were now on a first-name basis. Labor leader Victor Gotbaum hosted a dinner party at his Brooklyn Heights home for Ellmore C. Patterson, Chairman of the Morgan Guaranty Bank. Felix Rohatyn and Gotbaum celebrated a joint Southampton birthday party in 1978. William Ellinghaus, the vice president of AT&T and former member of MAC and the Control Board, agreed to chair a New School dinner in honor of Gotbaum. Rohatyn and Carey are feted as celebrities at chic watering holes like Elaine’s. Gotbaum is featured in Scavullo’s latest book. Jack (Bigel) is a friend of Walter’s (Wriston). Barry and David and Jack and Felix and Abe and Punch and Mike and Jay and Max and Tex and Victor and Don and John are all friends. Despite the 1975 legislation empowering the Control Board to police and approve all city contracts, Don Kummerfeld, its executive director, sat in on the 1978 labor negotiations, as did Governor Carey. “I don’t think it’s appropriate for the executive director to be an active participant in labor negotiations when he’s supposed to look at the contract,” whispered one banker, refusing to be quoted by name. Interestingly, Kummerfeld and Carey’s participation evoked not a word of public criticism. In 1978, the legislature extended the Control Board’s life but gave the mayor, as well as the governor, a veto over the selection of its executive director.

Nor has there been any public notice of why municipal labor officials seemed to know the budget better than the new Koch administration officials and thus were able to extract money from negotiators who claimed there was none. In March 1978, Jack Bigel’s Program Planners, Inc., chief consultant to the Municipal
Labor Committee, reached into the Budget Bureau and hired Allen Brawer, the staff assistant to the director of the Bureau. “They hired a guy right out of our Bureau of the Budget who gave them all of our figures,” Ed Koch told me, adding that there was “nothing illegal or immoral about it.” Such things are common in Washington, where Defense Department officers regularly join aerospace firms whose contracts they monitored.