The Fallacy of the Civic Champion

Why we should stop idolizing the austerity-obsessed "pragmatists.'

This week, the New York Times ran a fascinating story about what New York City is lacking, in this time of pandemic-induced economic collapse: a civic champion. “When New York City has been confronted by crisis, from the near-bankruptcy in the 1970s to the physical and psychic devastation after the Sept. 11 attacks, its recovery has been aided by a civic champion — a leading elected official who can persuade people and businesses to stay, and help convince Washington to do more to speed the city’s recovery,” the Times’ Dana Rubinstein wrote.

The premise of the story is not too difficult to contest. Now, more than ever, New York City needs a politician or famed civil leader to champion the virtues of America’s largest city as its economy falters and residents flee. Donald Trump, a native New Yorker, denigrates his hometown, filled with the liberals he despises. Governor Andrew Cuomo, due to his pathological obsession with undermining Mayor Bill de Blasio, routinely demeans the city, lavishing more attention on the suburbs and upstate. De Blasio himself, too inept and distracted and longing for the national spotlight he never had, cannot fill this role. The civic champion is the sort of person, in the Times’ formulation, who can convince the wealthy to invest in the city, win over recalcitrant lawmakers in Albany and Washington, and restore the spirit of a wounded metropolis.

“The absence of a champion for New York has gained notice, particularly among old hands who witnessed and participated in past New York City crises and yearn for more inspiring leadership,” Rubinstein reported. “Who, they wonder, will emerge to rival labor leaders like Victor H. Gotbaum; businessmen like David Rockefeller and Lewis Rudin; governmental leaders like Felix G. Rohatyn, Gov. Hugh L. Carey, and Richard Ravitch, all of whom set the city on a course to solvency and growth.”

“Who will be the 21st century version of Edward I. Koch, the former mayor whose cadence and mannerisms oozed New York: During the 1980 subway strike, he exhorted commuters crossing Brooklyn Bridge on foot to not “let these bastards bring us to our knees!’”

It’s notable which historical figures are cited and what moments are resuscitated to try to hearten New Yorkers today. What is undeniable is that the city lacks a single labor leader of the stature of Victor Gotbaum or the UFT’s Albert Shanker; today’s labor heavyweights are relatively uncharismatic and squeamish, a blend of Cuomo pawns and largely forgettable personalities. It was Shanker’s decision to put his union pension funds at risk that saved New York City from going bankrupt. If Andrew Cuomo told Michael Mulgrew to let the city default on its debts, Mulgrew would happily oblige. It’s true, too, that today’s ultrawealthy don’t have the same streak of noblesse oblige and paternalism that David Rockefeller and Lewis Rudin possessed. Tech billionaires, their wealth not tied up in real estate or the financing of governments, could care less whether cities live or die, as long as their workforce can get on the internet and answer their Slack messages. Rockefellers wanted to dominate government. Jeff Bezos and Mark Zuckerberg just want it to get the hell out of the way.

Among journalists, historians, pundits, and urban commentators, the narrative of 1970s New York is quite hardened, taught like a catechism to all those too young to remember the dark days, when the city was one night from bankruptcy. It goes like this: big-spending liberals like Robert Wagner, John Lindsay, and Abe Beame were terrible stewards of the city’s finances, racking up debts that couldn’t be paid off to finance overly generous union contracts and social services. Financial gimmicks were used to paper over the debts. There were no adults in the room, merely profligate politicians who would have to be brought to heel. In 1975, the big banks said enough is enough, your books are cooked and we aren’t loaning you more money. Washington and Albany agreed: get your house in order, New York, or you won’t get your bailout. Hugh Carey, the governor of New York, and bankers like Felix Rohatyn effectively took control of New York City to enact necessary cuts that put the city on a path to solvency and growth. These tough men, at the nadir of the financial crisis, saved the city. And the New York Times is hoping new saviors, in this mold, materialize now.

The narrative, like all narratives, has truth to it. Multiple mayors did use financial gimmicks to hide the city’s precarious financial situation. Debts were ballooning. No mayor found a proper way to balance the budget. What’s interesting, however, is how reporters and pundits and students of New York history don’t apply today’s knowledge of economics to the crisis of the 1970s—and how unwilling they are to reevaluate such a disaster. Adam Tooze, the British historian and leading expert on economic crises, explained the nature of this thinking in a recent interview, elucidating how counterproductive austerity measures are when economies are struggling.

“This response is a little obvious, but I think it’s the householder analogy about the limits on deficit spending, which was one of the absolutely key elements of that consensus of the 1990s. This idea that there are hard-and-fast limits to debt sustainability and that governments that spent too much and ran large deficits would face the wrath of the all-powerful bond market. That story suited a wide range of opinion; it could be used to describe the workings of global capitalism or to indict them. For better or worse, though, it just appears obsolete.

Its obsolescence became glaringly apparent during the 2008 crisis. But by 2010, the advanced economies nevertheless reverted back to austerity. Now, in this crisis, it has once again proved possible for large economies with credible central banks to borrow on an epic scale without suffering financial-market disruption.”

Rather than evaluate the 1975 fiscal crisis and the decade-long fallout as a necessary period of pain to eventually spur the growth of the 1990s, it’s better to judge it as the equivalent of doctors trying to cure an illness by bleeding out the patient. New York, pale and wheezing, survived the bloodletting, but this didn’t mean it was ever administered the correct treatment; rather, a catastrophe was endured. The Gerald Ford White House, with its young Republicans lurking, embraced the gospel of austerity and was determined to make an example of liberal New York, with its strong social safety net. The belief had been that heavy government spending without some kind of string attached—cuts elsewhere to offset the expenditures—would mean angry creditors and runaway inflation. The passage of time has shown this to be false. Our federal deficit continues to grow as inflation and interest rates remain almost nonexistent. As Tooze explains, the dirty secret of finance is that the very large holders of private capital must park their money somewhere and they inevitably end up in government debt.

After the 2008 economic crash, the Obama administration failed to support stimulus spending large enough to avoid a prolonged economic slump. European governments, in response to their own fiscal crises, slashed government services and laid off many public employees, worsening their economic outlook. The one bright spot of the 2020 pandemic is the bipartisan recognition that the answer to a looming depression is clearly not austerity. Senate Republicans and the Trump White House, for all their self-sabotage, have authorized trillions in stimulus spending, far more than anything the Obama administration dreamed of, and have yet to talk about forming any kind of deficit reduction commission to halt government spending. Without any kind of stimulus—the enhanced unemployment benefits, the $1,200 checks to every American—the economic carnage would be beyond imagination. And if Republicans don’t continue to spend or Trump wins a second term, that carnage will arrive, unleashing mass unemployment not seen in American history. Like the Ford White House, Trump does not want to send local aid to the states, even though such bailout money would be the closest thing to an economic panacea we have. A rich, sovereign federal government can keep spending money to put people to work and fund a robust social safety net with little consequence. The American government can authorize massive tranches of aid to local cities and states to not only restore the losses from coronavirus but jumpstart a renaissance on the scale of a New Deal. It’s just a matter of will.

To bring this back to New York and the 1970s, it’s important to keep this in mind: one tragedy was the federal government bailing out New York while demanding brutal cuts to social services. The second tragedy was the arrival of local power brokers, like Koch and Rohatyn, who gleefully administered this austerity and pushed it to the sort of limit that inflicted needless suffering on an entire generation. Thousands of teachers and sanitation workers lost their jobs, firehouses and hospitals and libraries closed, the City University of New York imposed tuition and slashed faculty, and welfare rolls were gutted. The city’s Black and Puerto Rican working classes, reliant on these social services, were punished most. When the Financial Control Board, one of the state-controlled vehicles for imposing this austerity, relinquished power over the city’s finances in 1986, even the sober Times made note of its overreach.

It ordered hundreds of millions of dollars in budget cuts above those proposed by the administration and demanded the layoffs of thousands of additional city workers. It rejected a contract negotiated by the city's Board of Education and the United Federation of Teachers. It also rejected a transit workers' contract.

The board, in effect, imposed a wage freeze for municipal workers, modifying it later to permit only cost-of-living increases tied to productivity gains.

On its initiative, the state took over the City University, relieving the city of its subsidies to the university. And it forced major management changes at the city's Health and Hospitals Corporation, including the resignation of the corporation's president.

In their story on civic champions from this week, the Times made a note of Koch, the New York mayor who campaigned against the unions in 1977 and inherited, with relish, a city operating under crushing austerity. The example of civic boosterism the newspaper used, oddly enough, was Koch standing at the Brooklyn Bridge during the 1980 transit strike, taunting the transit union and exhorting commuters, walking to work, to keep coming. It was in direct contrast to how Lindsay, one of his predecessors, managed the 1966 transit strike, urging most New Yorkers to stay home. Though these strikes are often remembered as examples of union profligacy, they were also working class uprisings, with essential workers fighting for wage gains and benefits as powerful actors attempted to erode what they had achieved in the postwar period. The 1980 transit strike was the last great gasp of a municipal union to combat the austerity imposed after 1975. Koch, who never had to operate a train or worry about feeding a family, openly mocked them. He teamed up with the city’s business leaders to pressure the MTA not to give into any worker demands. In the end, there was a settlement with some of the cost-of-living adjustments the union sought. A civic champion for all of New York—those in unions, those scrapping for better wages, and the vast underclass—would not have used his bully pulpit to so vigorously oppose a labor action. But Koch was a soldier of the new order. The bankers and real estate developers called the shots and he was happy to be there with them, allowing them to steer the direction of a city in crisis.

How should the 1975 financial crisis be understood? First, as a catastrophe exacerbated by Washington D.C., since the federal government would not funnel bailout cash to New York without onerous conditions. A different administration, not beholden to a budding neoliberalism, would have offered unconditional aid to America’s largest city to rescue it from the clutches of predatory financial institutions. In addition, these financiers should be understood for what they were: profit-hungry lenders unwilling to consider the economic and psychic damage they would create through a severe contraction of public services. It had been considered “pragmatic” and “intelligent” to do this by people who didn’t rely on government services or wouldn't lose their jobs in a round of mass layoffs. To decry austerity was to be an impractical, bleeding heart liberal. But we now know that slashing and burning local government does not spur economic activity. It shrinks demand and hampers employment. Had Koch and his allies pursued a program of less restrictive spending and attempted to avert the most dramatic of social safety net cuts, it’s possible New York’s economic recovery from 1975 would have been swifter and more humane. Some of the civic champions that today’s prestige media calls for—schmaltzy urban cheerleaders, friends of big business—were the very people who ruined New York’s social democracy and allowed a new and pernicious economic inequality to take root. The saviors of 2020s New York should not follow their example. Our future depends on it.