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A Painful Conclusion to 2008
Posted 13th January 2009
In New York, as the year 2008 comes to a close and the fiscal crisis escalates, there is worry that the economically depressed and crime-ridden 1970s have returned.
If one remembers that bleakest of eras, it was when municipal bankruptcy was barely averted; 600,000 jobs disappeared; city services endured severe cuts and broke down (I can still recall how descending into the graffiti-scarred subways often seemed like a plunge into a smoke-filled purgatory); a large number of middle and working class whites fled the city for the suburbs; and arsonists set fire to many buildings in neighbourhoods inhabited by the poor like the South Bronx, leaving it looking like a wasteland of rubble. The crisis took a long time to be righted, aided by the creation of a state-appointed Emergency Financial Control Board, which took over the city budget, approving a three-year austerity plan. And also helped by a harshly reluctant President Ford, who at first took a hard line against a bailout, and then under pressure approved $42.3 billion in direct federal loan guarantees (with severe repayment conditions). The crisis then began to gradually abate, with a New York version of normality ultimately returning.
I’m no alarmist, so I don’t think that New York is returning to the chaos and violence of the 70s. But there are signs that the city’s quality of life is beginning to slowly erode. Just walking around Manhattan, one sees that many stores are now for rent, and more homeless men and women sleeping on top of heating vents and under building scaffolds. My wife has just had her Union Square studio broken into by four junkies who are regulars at a nearby methadone clinic, and a series of West Village muggings of women has caused anxiety in the neighborhood. These are just casual observations and anecdotal evidence without the hard data to permit facile generalisations about an imminent social breakdown. But it stands to reason that with the collapse of Wall Street, the city’s budget gap at $2.3 billion, and the unemployment rate escalating (it jumped to 6.3% in November), the city’s social problems are bound to intensify. In fact, the severity of unemployment has been understated because many laid-off workers have not started receiving checks and many others don’t qualify for benefits.
The financial crisis has also meant that the city’s non-profit theatres and charities will have to confront a drying up of charitable donations and government subsidies.
Bankruptcy filings are accelerating in the New York metropolitan area at a faster pace than in the rest of the nation, and after a boom era where a luxury condo or co-op building seemed to be going up on every block (even in unlikely areas like East Harlem), there will be innumerable construction sites remaining empty - soon to be muddy pits collecting rainwater and becoming rat-infested. For example, downtown Brooklyn’s controversial and enormous 22-acre (9 hectares) Atlantic Yards project no longer has a construction time line. More importantly, essential long-awaited public projects like the Second Avenue Subway, Brooklyn Bridge Park, and Moynihan Station (the proposed replacement for hideous Penn Station) are endangered or even doomed.
The reality is that we can’t close the state and city’s immense budget gaps without higher taxes and some painful reduction of services. And New York’s Gov. Paterson has, in my opinion, courageously proposed a budget whose goal is to have New York live within its taxpayers' means for the long haul. It predictably has aroused protest from every union and interest group, ranging from the police and the teachers to the soda industry that opposes the sensible idea of an obesity tax on non-diet soft drinks. He will also have to get the state’s craven and opportunistic legislature to act - rarely easy. Clearly, the choices that the city and state confront mean real sacrifice (e.g., restraining spending on Medicaid and the schools, and asking the state’s unions to forgo a 3% raise) and will have to be tweaked and improved, but there are no alternatives. Even a tax on the wealthy, which was seen as a last resort (because it may push people and capital out of the state), is now on the table.
Still, few people in New York have begun to rend their garments, or seek out more prosperous places to live. And the city has not suddenly turned into a desolate place, its streets and museums devoid of tourists, and its theatres, shops, and restaurants shuttered. According to one of England’s major newspapers, British tourists, despite the fall of the pound against the dollar, are still cheerfully crowding Fifth Avenue, gazing at Rockefeller Centre’s Christmas Tree, and dropping into the Oak Room Bar at the Plaza Hotel. But they are also hauling fewer carrier bags from stores like Bloomingdale’s, even though they have heavily discounted what they are selling.
Yes, the times are hard, but in contrast to the 70s, the 2008 crisis has not emerged at a time when the city’s crime rate is high, its population decreasing, or the general feeling about the city negative. A recent census, taken before the financial collapse, demonstrated how diverse and dynamic the city is (e.g., first- and second-generation Africans and Caribbean immigrants now account for about 4 in 10 of the city's black residents, and the share of the population with bachelor's degrees increased to 32 percent from 27 percent). The city will face profound economic problems and a diminished quality of life in the next few years, but I’m enough of an optimist to envision New York’s resurrection in the near future.