August 17, 2022
Austerity Politics: The Difference in Mayoral Leadership
Lynne A. Weikart, PhD
This book is a book about leadership. It is the story of how each of six New York City mayors since the 1975 fiscal crisis coped with state and financial interference. New York State government in close cooperation with the major banking institutions strongly asserted their power over New York City during the city’s 1975 fiscal crisis. Both state government officials and bankers created strong institutional structures that prevented the City from investing in its citizens in a myriad of ways – City officials no longer had control of its resources – institutions created by these two external powers did.
By the summer of 1975, City officials could no longer sell its bonds in the bond market. Because the city had accumulated billions of dollars in short-term debt, it faced bankruptcy unless it could borrow the money in the bond market to meet payroll. Bankruptcy was not an option – union leaders knew that once a bankruptcy court took over, labor contracts could be voided, the financial markets worried that if bankruptcy occurred, bondholders may not be repaid, and city officials worried that facing a bankruptcy court might mean thousands of layoffs and loss of authority over the city’s finances.
The last worry became reality. In exchange for state and banking officials carving a path back to the bond market, city officials had to agree to lay off thousands of workers to balance the budget. Public schools were in chaos due to teacher layoffs. Hospitals and health clinics suffered severe cutbacks or were closed. Garbage piled up in the street; parks were no longer maintained. Labor unions had to purchase City bonds with their pension funds to protect their contracts. And for the first time in history, City officials had to charge tuition for students who attended the City University of New York.
There have been numerous studies of New York City 1975 fiscal crisis[i]. These studies usually fall into two groups: the fiscal crisis was caused by the permanent government of greedy bankers or the extravagant spending by liberals. Greedy bankers really were interested in a far more global reach and had other uses for their dollars and were no longer willing to bail out the city. Or the fiscal crisis was caused by urban liberals who overspent and ran the city into the red. Much of the urban literature blames liberals for overspending ignoring the lack of control city officials had to run their city. In 1975, when the bankers refused to purchase the city’s bonds and thus precipitated the fiscal crisis, the bankers did so, insisting that the city had used its resources inappropriately by supporting a growing labor force and focusing far too much on the needs of its citizens. Bankers and state officials insisted upon strict adherence to balancing the budget without sizeable tax increases. The result was the chaos created as the city laid off thousands of workers. Regardless of the conclusion drawn about who was responsible for the 1975 fiscal crisis, the result was that every mayor since then has had to work within strict institutional structures that limited their revenues and expenditures.
This book is divided into these sections: the first is the introduction, the second is the buildup to the fiscal crisis and what financial structures were put in place beginning in 1975. The third section explains the current urban political literature that explains the differences among the mayors’ policy making. The fourth section discusses each of the mayor’s attempts to deal with state dominance; it focuses upon each mayor’s leadership style, and how he set his agenda and policy making amid state dictates. A careful analysis of how the city’s resources are used demonstrates that some mayors did succeed in fulfilling their policy goals although no mayor has succeeded in returning to a time when the City was free to invest in its citizens without close regard to state control.
[i] Ferretti 1976, Newfield & DuBrul 1981, Taul 1982, Shefter 1992, Phillips-Fen 2020.