Christmas in New York
December 23, 2002
by Irwin Stelzer
New York City has even more hustle to its bustle at this time of year. Most buildings are decorated prettily, people are in their usual hurry but the interpersonal courtesies that came to the fore on September 11 continue, and the traffic moves freely enough to make central London look like a parking lot by comparison. On the surface all seems fine.
Mayor Bloomberg, a liberal Democrat who found the route to office easier by becoming a Republican, last week announced continued falls in crime despite a reduction in the number of cops, settled a transit strike by more or less abandoning demands for productivity improvements (a sort of buy-now, pay-later approach to labour negotiations), and pronounced himself pleased with his performance after one year in the unfillable shoes of Rudy Giuliani. And with reason: he has held things together despite the short-term economic impact of the destruction of the World Trade Center towers (70,000 jobs gone), and the decision by several firms to disperse their facilities and work forces from the city.
A quick check of anecdotal evidence suggests that the city's economy, although not unaffected by the national sluggishness that prompted President Bush to revamp his economic team, is not doing badly at all. The eurotrash set is back in full force, swilling $350 per bottle champagne and keeping the city's "hot" clubs filled to overflowing. As the New York Times, not generally known for flowery or even interesting phrasing, puts it, "Yes, those hard-partying jet-setters known to American wags as Eurotrash, who flocked to New York City by the Concorde-load in the 1980s sporting black mock turtlenecks, leather pants, and sometimes dubious aristocratic titles, are back on the town."
That report is consistent with two others. Matty Colla, who runs an executive limousine service, says the past months have been his busiest ever, and reports that the top hotels are once again filling up. And the manager of London shirtmaker Turnbull & Asser's New York store tells me he is chalking up sales of $300 shirts at a rate 7 percent above last year's.
A leading investment banker, one of those merger mavens who is supposed to be deep in gloom at his shrunken bonus, has an explanation for all of this apparent high-level prosperity. He says that, for a start, there is enough pent-up wealth in New York City to keep the wheels of commerce turning even when incomes are down. Moreover, investors are starting to see that the stock markets "haven't fallen apart." And Wall Street types now believe that 85 to 90 percent of the pink slips have already been distributed, and are saying, "Hey, I made it."
So New York seems a pleasant place to be as Christmas rolls in and 2002 rolls out. But it is Christmases future that are a worry.
Mayor Bloomberg has managed to paper over this year's budget deficit of over $1.5 billion by borrowing to pay operating expenses, not a good idea for a city that already owes its creditors $43 billion, more than any of the 50 states. And he has raised taxes, also not a good idea for an already heavily taxed city with a ready-to-flee upper-income population.
Worse still, there is next year's $6 billion deficit to cope with. William Tucker, a columnist with the New York Post, has done a rather scary analysis of the city's budget situation for The Weekly Standard magazine. He finds that the city's financial problem isn't created by what it spends on ordinary and essential city services such as police and fire protection. Those outlays are in line with other cities. The problem, Tucker says, is the unique and expensive welfare state that the city, unlike other municipalities, runs, and has run for decades. By the loose standards applied to those seeking Medicaid, a program that in most places is available only to the poor or near-poor, Tucker writes, "In the 1994 gubernatorial election, both George Pataki and Mario Cuomo had an elderly parent or in-law on Medicaid."
The list of tax-funded benefits is endless. The city provides housing for "people coming right into the system from the Dominican Republic, Yemen, and Scotland[!]", says one disgusted city official who has to pay out as much as $3,000 per month for apartments for homeless people who, says Tucker, "can hold out for lodgings in neighborhoods more to their liking." Add to this the threat of another terrorist attack on a city that remains the worldwide symbol of capitalism.
It was over fifty years ago that essayist E. B. White wrote about "something people don't speak much about but that is in everyone's mind. The city . . . is destructible. A single flight of planes no bigger than a wedge of geese can quickly end this island fantasy, burn the towers, crumble the bridges, turn the underground passages into lethal chambers, cremate the millions. . . . Of all targets, New York has a certain clear priority. In the mind of whatever perverted dreamer might loose the lightning, New York must hold a steady, irresistible charm."
Which is why the financial services sector is dispersing. The bank of New York is moving some staff to Florida; Morgan Stanley is opening offices in Baltimore; New Jersey offers lower taxes and a greater sense of safety.
And yet, and yet. New York has been to the brink of obsolescence and financial ruin before. Its constantly renewing population has somehow always had the energy and, eventually, the political good sense to do what is necessary to retain New York's preeminence. Even now, with all its problems, the city ranks first when Americans are asked to chose a city in which they'd most like to live, according to a Harris Interactive survey. What columnist Pete Hamill described well before September 11 as "the hard, wounded metropolis of New York" just doesn't seem likely to be defeated by a handful, or even several million, Islamic fanatics. Or by some green-eye-shade bean counters.
This article appeared in London's Sunday Times on December 22, 2002, and is reprinted with permission.
Irwin Stelzer is a Senior Fellow and Director of Economic Policy Studies for the Hudson Institute. He is also the U.S. economist and political columnist for The Sunday Times (London) and The Courier Mail (Australia), a columnist for The New York Post, and an honorary fellow of the Centre for Socio-Legal Studies for Wolfson College at Oxford University. He is the founder and former president of National Economic Research Associates and a consultant to several U.S. and United Kingdom industries on a variety of commercial and policy issues. He has a doctorate in economics from Cornell University and has taught at institutions such as Cornell, the University of Connecticut, New York University, and Nuffield College, Oxford.
Click here to view the full list of Op-Eds & Blogs.