The NYC Fiscal Crisis Of The 1970s Has Some Important Lessons For Today

Tracy Alloway (0:08)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:13)

And I'm Joe Weisenthal.

Tracy Alloway (0:15)

So Joe, it is firmly that time of year again. It's the time when we start talking about deficits.

Joe Weisenthal (0:24)

Do we have to?

This is actually one of my favorite subjects. I love discussions about fiscal policy. I hate the way fiscal policy is typically discussed in the media, in which deficits are always per se bad and attempts to cut the deficit are always considered good and neutral. So I'm actually very excited about anything having to do with deficits, and I'm confident that whatever we're going to talk about we will frame in a non-cliche manner.

Tracy Alloway (0:54)

Okay, so let me set the scene a little bit. We did just have the US government pass a spending proposal, which is widely expected to boost the deficit by a significant degree. And at the same time, of course, we have deficit and spending hawks who get all worked up about the prospect of America basically spending too much money, and that could be bad over the long term. And in theory, it should force the US government to ratchet down some of its expenditure. That's how the mainstream theory goes. But as you pointed out repeatedly, that's not necessarily correct.

Joe Weisenthal (1:34)

Right, so the mainstream view seems to be, oh, we're spending all this money, what can we take a hatchet to? Whereas I think the more realistic way to think about it is, here's this thing on paper that we call a deficit, how can we use this as a pretext to take the acts to government spending we don't like?

Tracy Alloway (1:53)

Ah, okay, so you have said the magic word for this particular episode, which is pretext.

Today, we're gonna talk about an example in US history, which one historian reckons was really a good instance of a deficit of overspending being used as a pretext to change social policies. So this should be an interesting one.

Joe Weisenthal (2:17)

I think this is the kind of conversation that will not make me cringe.

Tracy Alloway (2:21)

All right, and just before I bring her on, so the example that this particular person uses is New York in the 1970s, when it sort of teetered very, very close to the brink of bankruptcy.

And she argues that New York actually made a certain number of decisions that ended up having a very, very big impact on where the city went from there. So we're gonna bring her on.

Joe Weisenthal (2:45)

I can't wait.

Tracy Alloway (2:52)

So without further ado, our guest for this episode is Kim Phillips-Fein.

She is the author of Fear City, New York's Fiscal Crisis and the Rise of Austerity Politics. She's also a historian of 20th century US politics and a professor at NYU. So Kim, thanks so much for coming on.

Kim Phillips-Fein (3:11)

Thanks for having me.

Tracy Alloway (3:13)

So before we begin, I wonder if you could sort of set the stage for us about what New York was like before this budget crisis hit, because a lot of people don't remember now, you know, three or four decades later, that at one point, New York was this almost, I guess, social democratic utopia, or maybe that's pressing it a little bit, but it was close to it.

Kim Phillips-Fein (3:38)

Yes, well, I think one of the things that I talk about in Fear City and which I think many people have been interested in is New York in the post-World War II period was a city that built on but also departed from much of what was dominant in terms of New Deal liberalism in the country as a whole.

New Deal liberalism, kind of as it played out across the United States, had a strongly suburban quality to it. There were the Federal Housing Administration subsidies and loans for mortgages, and there was a way in which on the national stage, in some ways, was tilted towards the suburbs. New York, however, was always very different than this, obviously. And the city had one of the strongest social safety nets that we see in the United States in the post-war years. The local government, in some ways, kind of takes elements that are present in the national scene and pushes them further.

There are more than 20 at the peak, public hospitals, a network of public health clinics that run through the whole city.

Public housing is very powerful in New York, especially kind of federal public housing. The public transit system, of course, is unparalleled in the country and also has very low fares throughout this period. The school system was, in contrast to the New York City public schools today, which are very heavily reliant on a lot of private fundraising for many of the perks like art and music, even reading enrichment in some places. Those things were really all paid for via the Board of Education. The city's labor unions were quite strong. This is the point in time when the public sector is unionized for the first time. So in all of these different ways, the city's public kind of has a ambitiousness in terms of its public spending and the kinds of services that city residents come to expect simply by dint of being New Yorkers.