The Streets Were Paved with Gold

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population—324,000—received public assistance. By 1970, the figure was 14 percent—over 1 million people. The age composition also changed. The city’s working-agepopulation, aged twenty-five to fifty-four, dropped from one half of all residents in 1950 to less than two-fifths. At the same time, senior citizens and youths swelled from one-third to two-fifths of the populace. New York lost its “money-providers,” as Wallace Sayre and Herbert Kaufman dubbed them in their classic
Governing New York City
, and gained “service demanders.”
    Thus the city’s fiscal crisis, which burst into headlines when New York was no longer able to borrow money in the spring of 1975, was really a symptom of a deeper social and economic malaise. Historically, it is New York’s most severe crisis, but not the first. Youth gangs roamed New York streets more freely in the nineteenth century; the stench of horse manure and dead rats hugged the air; children and laborers were exploited; the division between rich and poor was greater; communicable disease and fire were constant perils.
    Nor was this New York’s first fiscal crisis. The January 12, 1884, issue of
Harper’s Weekly
carried this editorial:
    But with the continuance of our present system of government, with an increased appropriation … for regular expenses of government—an increase inexcusable in the present depressed condition of business—with vast public works, such as new aqueducts, docks and streets, looming up in the future, it is plain that without a sweeping change the bankruptcy of the city and the decay of its commercial power are only matters of time.
    Between 1918 and 1932, the city’s budget grew by 250 percent to $631 million; its total debt nearly equaled that of all of the forty-eight states combined; and as a percentage of the city’s budget its annual debt service payment was almost twice the 1975 percentage. Expenditures were climbing faster than revenues, leading to a series of budget gimmicks, tax increases, and more borrowing. The payroll was larded with Tammany retainers. In 1930 and 1931, Tammany’s docile instrument, Mayor Jimmy Walker, reluctantly fired 11,000 teachers. But, like Abe Beame, his austerity measures were too little and too late. Worried about the city’s ability to repay, investors clamped down in 1933. The banks refused to “roll over” (postpone) city short-term debt repayments, prompting a pact between Governor Herbert Lehman, Mayor John O’Brien, who had by then succeeded Walker, and the banks. This “Bankers Agreement,” as it was called, imposed a strict 7-point fiscal regimen uponNew York, with the government sacrificing some of its democratic prerogatives—as it would, again, forty-two years later.
    There are two basic schools of thought regarding the origins of the current crisis. One stresses that New York is the victim of historical or economic forces, federal or bank decisions, beyond its control; the other, that New York is the victim of self-inflicted wounds. There is merit in both arguments.
    America’s migration patterns were largely beyond the city’s control. New technologies led to the mechanization of farms, which freed many poor blacks and others to search for work in the North. The automobile and federally sponsored roads opened up the country. The airplane and modern telecommunications lessened the dependence of businesses on the New York megalopolis, spawning new, easily reached markets and creating regional cities to serve them. Multiple-story factories were no longer required, and space for expansion was more plentiful elsewhere. As incomes rose, people’s thirst to own land and a home—to have space—was not satisfied in crowded cities. Air conditioning made warmer climates more attractive. National immigration policies, particularly toward the Commonwealth of Puerto Rico, opened New York’s door to many economic refugees. In this sense, New York was the victim of progress.
    Unlike many

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