Economics 101: The left love themselves some failed policies

October 29, 1975

Remember that famous headline? From The Wall Street Journal:

Taking New York Back to the Bad Old Days
For the first time since the near-bankruptcy of the 1970s, the city will borrow to pay for new obligations.
By Fred Siegel and Nicole Gelinas | May 20, 2014 6:37 p.m. ET

Who should worry the most about New York Mayor Bill de Blasio’s inaugural budget? Liberals and progressives. Mr. de Blasio is the first New York mayor in two decades to hail from the left, which makes him the face of a new progressivism in America. If the public sees that the mayor’s new $73.9 billion budget for fiscal 2015, which starts in July, is not only imprudent but improper from an accounting perspective, voters’ fears about unbridled liberalism will be ratified.

Since the city’s recovery from the 1975 fiscal crisis, mayors and the media have treated the city’s budget-day announcement as a sober technocratic event. Mayor de Blasio, by contrast, used his annual unveiling of the city’s revenue and spending blueprint on May 8 as a campaign-style opportunity to push what he himself called a “progressive” agenda. The budget adds money to enforce the city’s new mandated sick-leave law for private employers, and it spends more for public housing and education. But the most controversial and fiscally explosive portion offers retroactive pay raises to the city’s teachers and, later, raises for other city employees at a projected added cost of $9 billion over four years.

The mayor calls his budget “historic” and “transcendent.” Indeed, for the first time since New York recovered from its near-bankruptcy of the 1970s, the city is willing explicitly to spend beyond its means to buy labor peace. The new teachers’ contract, including $4.3 billion in retroactive pay raises back to 2009, is the acute example.

The United Federation of Teachers did well financially under Mayor Mike Bloomberg, with average pay up 43% over the first eight years of his tenure, beginning in 2002. But after Lehman Brothers collapsed in 2008, Mr. Bloomberg made clear that New York, facing multibillion-dollar deficits, could not afford to give teachers 4% raises in 2009 and 2010, as the city had already given to the rest of the workforce.

More at the link.

New York City had it’s financial crisis in 1975, earlier than most, but, then again, it was American’s largest city, so being first in the budget crunch seems right. Even the liberal journal, The Nation, recently documented what happened, what had to happen, to get New York back on its financial feet. They criticized:

Only a month after Ford’s October speech, after a barrage of criticism from such elite figures as the chairman of Con Edison, the president of the Bank of America and the chancellor of West Germany, the administration reversed its position and agreed to extend loans to New York on the condition that the city continue to move toward a balanced budget. Nonetheless, the fact that Ford had been willing to let New York go broke signaled that ideological purity trumped all other concerns for the rising right. Teaching a lesson about the dangers of the welfare state seemed more important than international prestige, Cold War concerns or even the possible economic impact of the city’s default (Ford’s treasury secretary, William Simon, a former municipal bond trader and future president of the Olin Foundation, insisted that New York’s bankruptcy would likely not have a significant effect even on the municipal bond market).

Emphasis mine. The author, Kim Phillips-Fein, wanted to blame the “ideological purity (which) trumped all other concerns for the rising right,” but in her final two paragraphs, she wound up telling a very unpleasant (for the left) truth:

In the artistic and intellectual circles of the left, there’s an undeniable nostalgia for New York in the ’70s—when CBGB opened its doors, working artists had lofts in SoHo, hip-hop was invented, and the Lower East Side became the home to a new musical and artistic scene. It might be easy to dismiss such feelings as the sentimental romanticism of a privileged generation that has grown used to traveling the subways without being anxious about crime—or just the appeal of a time when rent was cheap. But looking around the city today, saturated with money and starkly divided by wealth, the very bleakness of the ’70s seems a refuge, a time of possibility. The violence and brutality of a city in free fall was real. Yet in the literal bankruptcy of the political establishment, there was also a kind of freedom, a political and cultural openness; there was no need to pretend that everything was all right.

The 1970s—in New York and around the country—saw the dawning of a new era of austerity, as the earlier assumptions of economic growth faded. The contraction of the state also meant the shrinking of the social imagination. The stern dictums about the necessary limits of political dreams contrasted sharply with the new populist utopianism of the free market, where anything might be possible. We still live today in a society defined by these two poles: the harsh limits of the political sphere and the delusional boundlessness of the market. Although it wasn’t solely responsible for bringing the city into this new age, New York’s fiscal crisis marks the boundary between the past and the present we still live in today.

Note what Dr Phillips-Fein said: the liberal “utopia” of New York City in he seventies was one which paid for so many social programs, but in which “(t)he violence and brutality of a city in free fall was real,” and the bills couldn’t be paid. Now, after real, conservative austerity measures had been put in place, today’s New Yorkers have “grown used to traveling the subways without being anxious about crime,”1 and the city was, prior to Mayor de Blasio’s inauguration, fiscally sound and paying its own bills.

Well, now liberalism has been emboldened, and a few people like Mr de Blasio have been elected,2 and they are going to try to turn America from the successes of responsibility back to the failures of old-line liberal policies. Places like Detroit and Chicago and a whole host of smaller cities never got the message from the recovery of New York, and that’s why Detroit is bankrupt, and Chicago and foul, fetid, fuming, foggy, filthy Philadelphia are eaten up with violence and poverty and crime.

In the meantime, we have states like Texas, known for conservative government and low taxes, which are booming, which are creating jobs for the people, versus the states where the Democrats are entrenched in power, like California and Illinois, which have higher than the national average unemployment, high taxes, and productive people leaving the state. Nationally, we have suffered through a period of inordinate deficit spending, which highly educated economists and the Obama Administration told us would lead to a strong recovery and low unemployment, and we had fewer total jobs in America in April of 2014 than we did in April of 2008,3 while the national debt increased from $9,377,557,217,133.44 (on April 30, 2008) to $17,508,437,127,661.62 (on April 30, 2014), an increase of $8.310 trillion, an 86.7% increase, and it still hasn’t made a dent in the real unemployment rate. We have done nationally, throughout the entire Obama Administration, what Mayor de Blasio wants to do in New York, and it hasn’t worked!

You know, it would be great, absolutely great, if the liberals had been right. If being generous and providing support for those in poverty had really worked to get people out of poverty, this would be a wonderful country, and poverty would have been eliminated, because we have been doing exactly what the liberals wanted with anti-poverty programs for fifty years now. We still have poverty, just as much poverty, because the liberals were wrong. If using deficit spending to create jobs had really worked, we’d have low unemployment, because we’ve been blasting our economy with borrowed dollars, but we have fewer jobs today than six years ago, because the liberals were wrong.

So, Mayor de Blasio can do just what he wants, and start to fund New York City on borrowed money again, but there’s absolutely no reason, no reason at all, to think that New York will somehow get a different result from what they did decades ago, a different result from what Chicago and Detroit and Stockton have gotten.
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  1. Several years ago, 2009 I think, my younger daughter and I went to New York City on an architecture tour. My daughter wanted to see the Cathedral of St John the Divine. St John the Unfinished is on Amsterdam Avenue, between 110th and 113th Streets in the Morningside Heights neighborhood. Well, we missed our intended subway stop and got off north of that, at 125th Street, which is in Harlem. My daughter and I walked south (I think down Manhattan Avenue, but I’m not certain of that) to cross through Morningside Park over to St John’s. The street was clean, and we didn’t feel in the least bit at risk, because people like Mayors Rudolph Guiliani and Michael Bloomberg did something really radical, and cleaned up the city.
  2. Meanwhile, in Pennsylvania, the Democrats just nominated Tom Wolf to be their candidate for Governor, running against incumbent Republican Tom Corbett. Mr Corbett isn’t a flashy, and he’s not a terribly popular guy. But he inherited a budget soaring out of whack, and, with the help of a Republican-controlled state legislature, kept his promise by balanced the state budget by cutting spending, and without raising taxes, and that is exactly what a good governor ought to do. Mr Wolf wants to raise government spending again, and raise taxes on the very people who are doing the most in the way of creating jobs in the Commonwealth. Mr Wolf is a whole lot flashier than Governor Corbett, and he just might win, but his policies would take Pennsylvania back into spending more than we can afford and hurting our economy.
  3. April 2008: 146,132,000 jobs; April 2014: 145,699,000 jobs. In the meantime, the civilian non-institutionalizd population increased from 233,198,000 to 247,439,000. Source: Bureau of Labor Statistics.

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