The Ungovernable City
Bum Rap on America’s Cities: The Real Causes of Urban Decay
Considering the books under review, I thought it fortunate that Edward Koch doesn’t read much. Friends say New York’s new mayor works “in an oral tradition.” He enjoys movies and conversation. His favorite book, he once told me, was Merle Miller’s Plain Speaking. Neither Douglas Yates’s nor Richard Morris’s book speaks plainly. Each embarks in a different direction, finds different villains, suggests different routes of escape, yet both wind up making the same point: cities can do little for themselves. Hardly a message for a new mayor to learn.
As his title implies, and Yates claims, “the American city is fundamentally ungovernable in its present form.” The reasons are varied: fragmented and overlapping levels of government, rigid and remote bureaucracy, sheer size, constant crisis, the breakup of political machines, scarce resources, a television mentality in which symbols often replace substance, the impossibility of placating disparate special and neighborhood interests, to name a few. Yates mostly blames the confused structures of cities and the processes of running them—not policies—for making cities ungovernable.
Richard Morris, in Bum Rap on America’s Cities, blames policies. Whereas Yates describes cities as victims of tangled social and cultural forces, Morris sees them as victims of identifiable villains. The “real villains of the urban crisis,” he writes, are not “liberals” but (mostly) the banks and the federal government. Greedy banks precipitated New York’s fiscal crisis by turning off the money supply. The federal government is a robber baron, stealing $14.7 billion more in taxes from New York State than it returns. The snowbelt suffers, the sunbelt benefits. “Such a gap between the regions,” he writes, “is the true cause of the urban fiscal and economic crisis.” Sure, he concedes, New York was sometimes guilty of mismanagement, but “liberals are, indeed, taking a bum rap” because New York’s crisis is “not the result of any error in direction or approach.” Those believing otherwise belong to his villainous club of right-wing conservatives, spiritually led by the twin devils, Agnew and Nixon.
The problem of assuming a city is ungovernable is much like the problem of assuming kids can’t learn to read: the prophecy becomes self-fulfilling; the explanation becomes an excuse. Yates’s description of the many obstacles to urban reform—and his modest proposals—become, unwittingly, a prescription for merely tinkering with the system. Sorry, but nothing works. Morris sees little reason to do more than tinker with New York’s government since it did not cause the fiscal crisis. The villains outside did.
Both conclusions merge, for both tend to offer moral support to public officials who make careers of avoiding blame. Because the city was ungovernable, John Lindsay, whom Yates once worked for, sought and narrowly won re-election behind the slogan, “The Second Toughest Job in America.” Robert Wagner, his predecessor, won in 1961 by blaming the failures of his first two terms on “the bosses.” Abe Beame, Lindsay’s successor, first blamed the fiscal crisis on the banks. When, in 1977, the SEC issued a voluminous report accusing him of fraud, Beame’s remarkable response was that everyone was guilty of fraud. Therefore no one was guilty. In the Sixties, urban failures were blamed on Vietnam and misplaced national priorities. When the war ended, we blamed Richard Nixon, the banks, the unions, Robert Moses, the sunbelt.
Which brings us back to Mayor Koch. If all he does is tinker with the machinery, New York is probably destined to declare bankruptcy. The analyses Yates offers of the pressures and obstacles facing a mayor are perceptive. But none of the mayors he cites as models faced the kind of life-and-death crisis which the current fiscal crisis represents. If the city were to declare bankruptcy, local government would be abrogated; the pensions and contracts of city workers would be endangered; a federal judge could decide which creditors—e.g., city contractors or welfare recipients—would be paid first, risking a local civil war. Under bankruptcy, it is unlikely New York would be able to get back in the credit market any time soon, making the city a permanent ward of the federal government. The state might not be able to borrow $4 billion this spring. I have heard reasonable arguments for accepting bankruptcy, but never one that dealt with the risk that a declaration of bankruptcy is akin to a symbolic sentence of death. A city is held together by confidence, and bankruptcy could scare away many more businesses, middle-income taxpayers, and tourists.
Maybe such an emergency, plus iron determination and political skill, would allow a mayor to leap the obstacles. Mayor Beame’s tenure offers little instruction. He was, by nature, a tinkerer, which helps to explain why New York is once again staring at bankruptcy.
Consider: the city is rerunning, like an old movie, warnings to Washington that without federal loans bankruptcy is unavoidable, though the federal seasonal loan program of 1975 was supposed to do the trick of avoiding bankruptcy and still more federal borrowing. In case you missed the city’s deficit figure three years ago, Koch has again pegged the real deficit at $1 billion, and said it will take four more years to close the gap. Like most members of Congress, one doesn’t have to be very sophisticated to be very skeptical.
Besides, how much has really changed? True, there have been some real sacrifices and some minor improvements. Workers have been laid off, free tuition at the City University ended, the transit fare increased, services cut, the city’s management and accounting procedures made more efficient. But the city’s director of operations, Lee Oberst, said last fall that if granted a free hand he could save $50 million by firing excess city executives, starting with public relations aides. The Police Department sacrificed patrolmen but, like the Mexican Army, the brass remained mostly untouched. The city and state comptrollers regularly issue audits documenting municipal waste—during the campaign Koch said it totaled $500 million. The city’s lavish package of fringe benefits for city workers, which its own Temporary Commission on City Finances suggested could be pared by $97 million, remains largely intact. As do most work rules which impede the delivery of services—three rather than two men on a sanitation truck, no part-time workers in the Transit Authority. A rigid civil service system, which suffocates initiative, has only been tinkered with.
Despite reducing the work force through layoffs and attrition by 23 percent (61,000 workers), three years later the city’s labor costs remain roughly the same. How come? Because there has been a “wage freeze” in name only. Workers have continued to receive cost-of-living adjustments. A worker whose average gross wage was $15,200 in June 1975, according to a confidential Treasury Department memo, will be making $17,240 by June 1978. And these numbers do not include overtime, promotions, pay increments, or pay differentials. When these are factored in, an important official of the state Emergency Financial Control Board, which oversees city finances, claims “most employees would be ahead of the cost of living rise.”
Much—and little—has changed regarding layoffs. During the last three years, 25,000 (not the 50,000 claimed by Morris) city workers have been let go. Another 35,000 have been lost through retirement or resignation. Of those laid off, most were quietly rehired with federal funds during Beame’s re-election bid. Of the 14,000 federal jobs financed by the Comprehensive Employment and Training Act (CETA) in mayoral agencies, according to City Hall, 13,001 are rehired city workers. Another 7,000 CETA positions are with independent agencies like the Board of Education. City Hall doesn’t keep track of these, but most are rehired city workers. CETA jobs were supposed to be earmarked for the poor. And since federal funds will only pay up to $10,000 per worker, and since many laid-off workers earned more, the city subsidizes the difference ($35.5 million). Additional laid-off workers have been rehired on other federal programs.
New York’s banks protest that their fiscal health is endangered by the crisis, but they haven’t done badly. Having made loans to the city at high interest rates, they have also, during the last three years, eliminated city notes from their portfolios and reduced their holdings in city bonds to roughly $1 billion. At the same time, employee pension funds have backed the city with three times that amount. New York’s financial institutions have $247 billion of domestic assets, Senators Proxmire and Brooke wrote President Carter in December: yet the largest city investor, Chemical Bank, had only 1.9 percent of its assets in city securities. The senators concluded: “there is no reason to assume that such investments would be any more risky than some of these banks’ foreign loans, which consume a far larger proportion of assets.”
Like the banks, the state has also helped—and not helped. Without Governor Carey’s prodding—and state aid advances—under Beame the city would have gone bankrupt. But, until Carey’s recent promise of more aid, the state has not been forthcoming with new dollars. “State aid to New York City,” Proxmire and Brooke uncomfortably remind Carey, “has remained virtually unchanged”—up 4 percent while federal aid jumped 28 percent.
“The biggest myth,” MAC member and state Economic Development Board Chairman Richard Ravitch said recently, “is that things have fundamentally changed in the way the city does business. We haven’t yet seriously examined the pension system, or the Health and Hospitals Corporation, or how federal dollars are used, or the range of services the city still performs.”
Doesn’t all this prove Yates’s point about ungovernability? Not necessarily. He did his research largely before the fiscal crisis and does not allow for the extraordinary events that have taken place. Like most conventional social scientists he concludes, “Strong evidence to support the conception that a city is controlled by a command-giving power elite simply has not emerged.” Normally, that may be true. But, in many ways, it’s not true in New York. Today one question—bankruptcy—supersedes all others. Grappling with that question is a “partnership” of the city, state, banks, and public unions. Each shares a common commitment to stave off bankruptcy. Each knows it needs the others, so a good deal of backscratching has gone on.
Running for re-election, Beame tried to soothe the unions and business community. The state Control Board eased up on the city government because Governor Carey wants to run for re-election and needs freedom from too close an association with the city. The banks and the unions stayed close to each other—Jack Bigel, the powerful union consultant, is on a first-name basis with Walter Wriston of Citibank. Victor Gotbaum of the municipal employees union invited the head of Morgan Guarantee bank to a dinner party at his house. Each has an investment to protect. As does MAC Chairman Felix Rohatyn, whose reputation as a “fiscal wizard” is at stake. Newspaper editorials cheer on their local gladiators. Common struggle leads to friendships. Loyalties develop, but only so long as there is trust. Which requires that the various parties encounter no surprises and continue to cooperate.