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‘My High-Income Earners’

Kim Phillips-Fein
Eric Adams’s austere fiscal policy seems designed to reassure the wealthy that they will not have to pay their share of New York’s bills. 

Bilgin Sasmaz/Anadolu Agency/Getty Images

The “Panorama of the City of New York” (1964) at the Queens Museum, 2014

Say what you will about Eric Adams: he knows how to give a press conference. Right after Thanksgiving, Adams announced that New York police officers would be empowered to involuntarily commit mentally ill homeless people to psychiatric hospitals in the city. Speaking at City Hall, he decried the human and moral crisis of walking past impoverished people in visible pain and suffering, familiar to any New Yorker in these days of deepening cold. Calling on the city in an accompanying press release to “stop the decades-long practice of turning a blind eye” to those in desperate need, he insisted that his proposal was a response to a “moral mandate” that would allow people to live with dignity they currently lack. Then, wasting no time, he took off for the World Cup (with a stop at a conference on anti-Semitism in Athens along the way)—a cheering reminder that New York will be one of the United States cities to host the global soccer tournament in four years. To use Mayor John Linsday’s old phrase for postindustrial New York: talk about Fun City!    

Adams’s well-publicized proposal to remove homeless people from the streets and subways drew fierce criticism. After all, the city lacks sufficient psychiatric beds even for those who want treatment, and the proposal is frustratingly vague about allocating resources that would provide housing or mental health support following release—not to mention the police are hardly known to be astute or sensitive at handling mental health crises. The plan’s evident shortcomings make one suspect that it was motivated not by a “moral mandate” but by a desire to return the city’s well-heeled residents to the empty glass caverns of Midtown.

Manhattan office vacancy rates are still running at over 21 percent, and discomfort about the city’s homeless population may help explain why. A spring 2022 survey conducted by the Partnership for New York City revealed that the employees of firms such as BlackRock, Facebook, and Bank of America were as concerned about homelessness as they were about safety. The results bring to mind Adam Smith’s Theory of Moral Sentiments: “Persons of delicate fibres…complain, that in looking on the sores and ulcers which are exposed by beggars in the streets, they are apt to feel an itching or uneasy sensation in the correspondent part of their own bodies.”

If workers do not return to skyscrapers, the Adams administration seems to worry, eventually real estate and personal income taxes will plummet, resulting in fiscal disaster. Earlier in November The Wall Street Journal published an editorial warning that New York is careening toward a “fiscal cliff.” The Citizens Budget Commission, a watchdog group, has noted looming gaps in the city budget. Three days before Thanksgiving the mayor told city agencies that they should eliminate roughly 4,700 open positions—half of all the city’s current vacancies. Over the spring and summer high levels of attrition left many agencies scrambling for staff. The city seemed to be lowballing new hires and hiring mostly at the bottom range of the salary distribution. It was as if, without quite saying so, it was trying to shrink the size of its workforce even as it kept advertising new positions. The November announcement made this new policy explicit. As Adams put it, “We are in financial trouble.”


How serious are the city’s financial woes? The budget tops $100 billion, and Comptroller Brad Lander projects that in coming years New York will face growing gaps between revenue and expenses: $869 million in FY 2023, $6.43 billion in FY 2024, $7.07 billion in FY 2025, $9.55 billion in FY 2026. The main reason is that the federal Covid stimulus money that helped the city weather the pandemic without more serious economic pain is drying up. Important budgetary initiatives—such as the expansion of the city’s program of public early childhood education for three-year-olds, or “3-K”—were supported by federal stimulus payments that are slated to expire. No one thought that the money would continue indefinitely, but city officials seem not to have made a plan for what to do once it ended.

Nor has the city received substantial support from the state or federal government to help it settle the more than 23,000 asylum seekers who have arrived in New York City since the spring, many of them Latin American (especially Venezuelan) migrants who have been bussed here by Texas Governor Greg Abbott. The Independent Budget Office estimates that housing, health care, and education for this population will cost the city at least $596 million. This is less than other recent expenditures, for example the $789 million in tax exemptions the city gave for commercial and industrial real estate in FY 2022, but nonetheless a source of fiscal pressure.

There are also signs of local economic problems. The city’s unemployment rate (5.6 percent as of December) remains higher than the national one, significantly so for younger workers, and the amount the city is projected to collect in personal income tax is expected to be lower in FY 2023 than the previous year. The past year’s stock market volatility means that pension funds for city workers fell more than 8 percent in FY 2022 after a record return in 2021. And as the Fed raises interest rates, it is becoming harder for the city—and cities across the country—to borrow money.


A major way cities borrow is by selling investors municipal bonds, which the cities must repay with interest over a fixed period. According to a report from Lander’s office, US cities issued roughly $464 billion in municipal bonds in 2021—a large volume historically speaking. But in the first half of this year, investors withdrew $47 billion from bond funds across the country, and the amount of new debt being issued has contracted sharply. Although debt service as a proportion of city revenues remains low by past standards (about 10 percent, compared to 17 percent in the early 2000s), higher interest rates ultimately mean that more money goes to repay bonds—and the city’s debt service costs began creeping up between January and June 2022.

None of this means that a fiscal crisis is imminent. Commentators often compare any hint of fiscal difficulty in the city to the conditions that led to its near bankruptcy in the 1970s. But in many ways New York is in a different situation today. It has cash on hand and does not engage in short-term borrowing to cover its daily operating expenses. The city now maintains a “rainy day fund” in case a recession hits, which was not the case in the 1970s. The Independent Budget Office, a publicly funded agency, monitors the city’s finances and provides City Council with nonpartisan information about budgetary matters. There was nothing like this fiscal oversight in the 1970s. More importantly, through the 1970s the city lost hundreds of thousands of jobs and about 10 percent of its population. Despite the pandemic’s dislocations, nothing comparable is happening now.

Still, as the historian Michael Reagan has noted, the crisis of the 1970s exploded as it did for reasons that went beyond the city’s balance sheet. The city owed more debt relative to its revenue in the early 1960s, but a markedly different political climate—most notably the federal War on Poverty, which expanded aid to cities—meant that fiscal crisis never materialized. The city was forced to the edge of bankruptcy in the following decade in part because its economic conditions had worsened, but also because the banks that financed its debt were less tolerant and the Nixon and Ford administrations less likely to help ailing cities. New York City may be far less reliant on short-term debt now than it was in the 1970s, but other elements of the city’s situation today—a tightening bond market, rising inflation, higher interest rates, a period of greater federal generosity quickly followed by retrenchment—bear a resemblance to those that precipitated the crisis then.


The current drumbeat of fiscal anxiety reflects a political imbalance as much as a financial one. The pandemic has left the city caught between contradictory political priorities. On the one hand, the rise of remote work and the flight from the city in the early days of the pandemic highlighted the city’s fiscal and political dependence on a small group of extremely high-income residents. More than 40 percent of city income tax revenue is paid by the top one percent of its earners. Although the property tax is the largest source of income for New York’s government, personal income taxes accounted for about 14 percent of its total revenue in FY 2022—so the large share paid by a very small number of people can make city government officials believe that courting this population is the secret to the city’s economic health. These are the people who live in the luxe new condos of Dumbo, who shop at Hudson Yards. From the standpoint of New York City’s leaders, it is easy to argue that their safety, their comfort, their confidence must be catered to absolutely—or else what is to stop them from leaving New York altogether and Zooming into the corner office from warmer, sunnier, lower-tax climes?

And yet the pandemic also demonstrated New York’s moral and material reliance on a far larger population of low-wage “essential” workers who have borne Covid’s physical and economic costs. The city has survived the pandemic because of the labor of nurses, health aides, grocery store clerks, pharmacists, sanitation workers, and public school teachers who kept taking the subway and showing up for work even as the virus raged. Median rents have risen to $3,500 and food costs are climbing fast. Public sector unions will renegotiate their contracts soon, and no one can be sure what the results will mean for the budget. Can the city’s working people really be asked to keep paying more for rent and transit? If not, who will pay the bills?


The Adams administration, far more forcefully than Bill de Blasio’s, seems determined to reassure the wealthy that it will not be them. (As Adams said to raucous applause during a Cipriani event with Governor Kathy Hochul at which they unveiled a “New New York” proposal, “I need my high-income earners right here in this city.”) Accordingly, some of its odd fiscal choices seem performances of moderation as much as rational decisions to save funds. This year, for example, the administration announced that it would slash public school budgets in response to declining enrollment. On its face, this made no sense: the city had stimulus money it could spend to keep school staff employed. Parents observed that enrollment projections based on the pandemic years were unlikely to be accurate and that cuts to school funding might only drive more families out of the public system. But the point was probably neither the cuts nor the savings but the demonstration that the city is taking its finances seriously and won’t be looking to tax the wealthy to make ends meet. (It may also have been a gesture of support for charter schools, which win when public schools seem unstable.)

Similarly, in a departure from de Blasio’s expansion of early childhood education, the Adams administration has indicated that it is not committed to continuing to fund the public 3-K program. Meanwhile, due to bizarre, almost incomprehensible bureaucratic incompetence, many providers have not received the payments the city promised them, leading some to delay paying teachers and others to take out loans to keep doing so. The city insists that it is trying to solve the problem and speed up reimbursements. But it is hard not to wonder whether this snafu falls under the category of what Daniel Patrick Moynihan delicately called “benign neglect” back in the 1970s, when the federal government began to walk back the previous decade’s antipoverty efforts.

Adams’s focus on “eliminating the gap” by requiring agencies to trim their budgets seems predicated on the idea that the city is rife with inefficiencies. Perhaps in some cases it is. But in many others the cuts are likely to seriously impact services: Anthony Marx, the president of the New York Public Library, has indicated that there is no way to cut $13 million from the library’s budgets—as the administration has insisted it must—without reducing hours, branches, or programming.


Along with other big-city mayors, Adams could use this moment to press for a deeper restructuring of the relationship between cities and the federal government. Why should the city’s budget be the only way to address problems that have their underlying causes far beyond its boundaries, from the flight of manufacturing jobs to the ongoing problems of inflation and economic adjustment during the pandemic? New York’s wealth sustains the federal and state governments—shouldn’t the city be able to get more of that money back? Might there be ways to reroute federal funds from defense spending to the emergencies of poverty and homelessness—to think more broadly about what “national security” means? And if the city is limited in what it can do because it depends so heavily on the income tax paid by a tiny fraction of its population, might it not think about diversifying its tax base?

Absent this kind of political debate, one imagines that Adams will keep trying to close the budget gaps by cutting city services and pressing public sector workers to the bone. (The money the city has reserved for wage increases isn’t enough to keep up with inflation.) He has shown himself to be exquisitely sensitive to the sensibilities of New York’s elite. The city did lose about 10 percent of its highest-income earners (those earning more than $750,000 per year) as the pandemic raged in 2020. But Adams seems to be assuming that New York’s wealthy fear higher taxes as acutely as they did a deadly virus in the days before a vaccine.

This is the latest iteration of a vision for the city’s economic development that goes back to the 1970s, when Ed Koch, in his first inaugural address as mayor, urged entrepreneurial “new pioneers” to move to New York. Ever since then, the city has worked hard to attract and maintain a population of elite college-educated workers—especially those in and around the financial sector, with its enormous fortunes and giant bonuses.

And yet it was never primarily by building its elite that the city was able to ride out the challenges of these years, from the fiscal crisis of the 1970s to the AIDS epidemic to September 11 and its aftermath. Public sector unions had a major part in getting the city through its fiscal difficulties in the 1970s by using their members’ pensions to buy the Municipal Assistance Corporation’s bonds. Immigrants from the Dominican Republic, China, Haiti, Russia, Jamaica, and many other countries sustained New York’s population. Artists, actors, and musicians breathed new life into the city’s culture in Soho and the Bronx. A longstanding middle class committed to the city—both a homeowning population and a tenant base supported by rent protections—provided the tax dollars to fund public institutions. These are the people whose presence and economic activity, at least as much as ersatz luxury, make New York a distinctive urban community, one that wealthier people want to be part of as well. Undermining vital city services like public schools and libraries at this juncture would threaten these sources of strength going forward.

As New York gropes its way out of the pandemic, business-friendly groups within the city—along with the Adams administration—will surely continue to press for tough budget cuts in the interest of staving off fiscal crisis and tax hikes for the rich. Such calls are underwritten by a particular idea of what makes New York a great and prosperous city—namely, real estate investment and development, along with the creation of luxury districts. Adams’s emphasis on spending for police makes sense in part because he can undertake it without setting off alarms about higher taxes. Unlike spending on social services for poor people or other city services, police spending is supposed to be intimately linked to activities that generate revenue: limiting crime and visible public suffering makes the city safe for luxury consumption, brings tourists back, and tempts workers back to their offices. It thus makes developers dream about new kinds of investments, too.

And yet the very inequality that holds the city captive to the needs of the rich also threatens their security and comfort. As housing costs rise, more people get forced out of their homes, worsening precisely the poverty and desperation that the Adams administration dreads will make the city’s wealthiest residents flee. This paradox—this sense of being caught in a double bind—is likely what gives rise to the specter of the city’s ungovernability and the mutterings about fiscal crisis. Visible poverty inspires not only moral unease but also fear—less of crime itself than of being asked to do anything about the inequalities in our midst.

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