HOW TO SAVE NEW YORK

What is a citizen of depressed Detroit, booming Houston or bucolic Sauk Centre, Minn., to make of the phenomenon of New York City? A visitor is immediately struck by the signs of New York’s unsurpassed wealth: majestic skyscrapers thrusting boldly into the air, great ships busily plying its waters, expensive limousines hurtling down its avenues, well-dressed people rushing along Wall Street, Fifth Avenue and the other storied thoroughfares. These signs of affluence symbolize the city’s position as the capital of American finance and commerce. All the more incredible, then, that the New York City government is broke.

Moreover, it became abundantly clear last week that without some form of emergency federal assistance, New York will go into default by Christmas and quite possibly earlier—meaning that the city will have to postpone paying off its bills and loans. Said Investment Banker Felix Rohatyn, chairman of the Municipal Assistance Corp.: “The dikes are crumbling and we’re running out of fingers.” Added New York Governor Hugh Carey: “We have done all that we can to help New York City.

Our resources as a state are stretched to the limit.”

The basic question was whether the Federal Government would act to prevent default—and if so, how and when. The question involved many factors: the way the rest of the country feels about New York; its reputation as the very symbol of lavish welfare spending; excessive expectations and inept management. Much of the country believes that New York is simply asking hard-working Americans hundreds of miles away to go bail for the city’s profligacy. Many New Yorkers in turn believe that much of their trouble has been imposed on them by the country, through welfare legislation and Great Society programs that the city could not control. In addition to suffering the ailments of all big, old U.S. cities, New York has many special problems: it is a magnet for poor immigrants and rural people; it has an unusually large number of unemployed or otherwise dependent citizens and tax-exempt institutions; it also has huge numbers of commuters—many from neighboring states—who do not carry a full tax load.

Obviously, New York is a victim of both outside events and a massive misrule that started long before Mayor Abraham Beame came to of fice. It is so far gone that reform may no longer be possible without serious social unrest. Yet the immediate problem is what its default might do to the rest of the country. Shock waves from the city’s financial collapse could hurt the national and perhaps even the world economies.

The state of New York, having reluctantly moved to lend money to the city, was itself in serious trouble. New York City and state bonds account for about 19% of the $200 billion state and municipal notes and bonds in circulation. As a result, a double default could well undermine investors’ confidence in the market, causing them to shun the bonds of many other cities, states, counties and local authorities, imperiling their ability to borrow money. That could lead to their defaults too, and more business failures and higher unemployment. The nation’s economic recovery could be set back, and overseas financial markets might be disrupted.

West German Chancellor Helmut Schmidt told President Ford that the New York crisis might have a domino effect that would have a dire impact on Europe’s finances. Doubts about the city’s ability to meet its obligations caused the dollar to slide on exchange markets. Many Europeans have a hard time understanding the complex American system of federal, state and local governments. A great number of European cities are financed largely by central governments; thus people abroad fear that if New York is broke, America must be broke. Indeed, Governor Carey warned Congress at week’s end:

“I cannot deny that there is a contagion in New York which is about to sweep across the nation. Don’t kill us be cause we are ill.”

The symptoms of New York’s ill ness are all too obvious. The city’s expense budget has soared to $12.3 billion this fiscal year — more than twice as high as in the late 1960s. The deficit this year will be at least $800 million. But the toughest problem is that, to pay off some of the accumulated deficits of earlier years and meet other expenses, New York must raise some $4 billion by June 30, the end of the fiscal year.

The troubles became apparent last winter when the city fell so deeply into debt that it could not borrow the hundreds of millions of dollars it needs each month to meet expenses. In exchange for help, the state put the city into the hands of businessmen and investment bankers; they set up the Municipal Assistance Corp. (Big Mac) to do the city’s borrowing and the Emergency Financial Control Board to oversee the city’s spending. To avoid a default last month, the legislature in Albany approved a complex financing plan; it amounted to using the state’s credit to help the city raise $2.3 billion to tide it over until December. But the intertwining of state and city credit caused investors to lose confidence in both governments, even though the state is basically sound. Prices for both state and most Big Mac securities dropped precipitously, raising a too real possibility that the state might have to default along with the city (TIME, Oct. 13). Thus the latest crisis erupted because none of the prestidigitation could persuade private investors to touch the securities of either the state or the city.

Now seven quasi-independent state agencies—including the Dormitory Authority and the Housing Finance Agency—are in danger of defaulting unless they can raise a total of $1.5 billion by June 30. Beginning in March, the state government will cast about for ways to sell some $4 billion in short-term notes, primarily to supply a variety of subsidies to local governments for welfare, school costs and other services. One high-risk proposal is to avoid the bond market by selling the notes directly to the state’s employee pension funds. State Comptroller Arthur Levitt prudently opposes the move.

Largely because of New York’s trauma, the municipal-bond markets are in turmoil. Rates on the tax-free securities have jumped almost one percentage point in the past year, costing states and municipalities hundreds of millions of dollars. In recent weeks, states as varied as Massachusetts and Georgia and cities as disparate as Buffalo, Atlanta and Newark have been forced to with draw bond issues or pay historically high interest rates.

The prospect of an economic domino effect from defaults by the city and state has caused Government officials and financial experts across the country to change their minds about a federal rescue of New York. When members of the American Bankers Association arrived in Manhattan for a convention last week, a New York Times poll found heavy opposition to a federal bailout. But the bankers’ resistance softened after speeches on the city’s crisis from, among others, Mayor Beame, Carey, Rohatyn and Brenton Harries, president of Standard & Poor’s Corp., the investment-research firm. Harries warned that civil disorder might follow a default and added: “As unpalatable as the specter of federal intervention is, the social and economic consequences of default of the proportions we are facing clearly make it the lesser of two evils.”

Chicago Mayor Richard Daley told TIME that even though he blames New York’s crisis on its management, the Government cannot let the city go broke. He added: “After all the foreign aid that we’ve sent abroad and the billions that we spent in Viet Nam, I don’t see why Washington can’t help out New York.” Houston Mayor Fred Hofheinz believes that “cities that are living within their means should not have to pay taxes to bail out cities that are not fiscally responsible.” Still, he reluctantly favors federal help for New York because the city “has been forced to solve problems created elsewhere in many cases.”

The Ford Administration has opposed federal help, arguing that the effects of a default would be short-lived and limited. Administration officials contend that some 75 banks around the country hold New York City debt equal to 50% or more of their net worth, and only about half of them would be in serious danger if the city defaulted. The Federal Reserve Board has promised to make loans to tide these banks over in case of a default. Last week, however, there were some signs that the Administration might be wavering. Vice President Nelson Rockefeller recommended that Congress consider creating a “temporary bridge” to relieve the financial pressures on the city while it takes steps to win back investors’ confidence. He gave no details but indicated that the bridge might somehow aim to help convert the city’s $4.9 billion in short-term debt into long-term bonds.

Similarly, Arthur Burns, chairman of the Federal Reserve Board, obliquely suggested that Congress draft a bailout program. He carefully noted to the Joint Economic Committee that the Federal Reserve lacks authority to help New York; only Congress can do that. Somewhat contradictorily, he continued to maintain that “the damage stemming from a prospective default is likely to be short-lived.” But under questioning, he hedged and said that a default could trigger a recession. Added Burns: “If I were a member of Congress and a vote were taken today, I’d vote against help for the city. How I would feel two weeks from now, I cannot say.” He suggested that the best way to help New York would be a federal guarantee of city bonds. If Congress decides to act, Burns urged that it do so quickly because “the markets do not thrive on uncertainty.”

Next day Treasury Secretary William Simon insisted to the Senate Banking Committee that the Administration still opposes helping New York. But Simon, like Burns, had ready advice for the committee in case “Congress, in its wisdom, determines to do something.” Simon recommended that he be put in charge of a federal bailout “to determine that the city was irrevocably and unalterably on the path to fiscal responsibility before any aid could be given.” He added: “Such aid should be so punitive in its terms and so painful that no other city not facing absolute disaster would think of applying for help.”

In his forays around the country,

President Ford had been asking audiences for a show of hands from those who favored some kind of federal bailout for New York. In Knoxville, Tenn., last week the President asked: “How many in this room would recommend that the Federal Government go in and take care of the financial situation that the city of New York has?” Inevitably, only a few hands were tentatively raised, which the President obviously regarded as evidence that the people support his position. But top Democrats, including Senators Hubert Humphrey and Henry Jackson and Party Chairman Robert Strauss, charged that Ford was trying to punish overwhelmingly Democratic New York and play on the anti-New York sentiments in the country.

Last week the President seemed to alter his position slightly. He told a press conference that he saw no justification for assisting New York and had not yet heard of any bailout plan that would “justify approval by myself.” But he did not say flatly that he would veto any bill passed by Congress. The President hedged: “I just am very reluctant to say anything other than no until I see the fine print.”

Despite the rising fears, congressional action seems improbable until the crisis grows even worse. At best, New York Senator Jacob Javits hopes that Senate and House committees will have prepared bills by next month.

Then, if New York again teeters on the very brink of default, Congress can quickly debate, approve and send to Ford an orderly, well-considered rescue plan.

Opposition to helping New York is chiefly based on arguments that it will set a dangerous precedent. Before he softened his view slightly, Burns, for instance, argued that if the Government intervenes in the crisis, “self-reliance in our country, which has been diminishing, will be dealt another blow.” Said he: “There’s now a tendency to run to Washington to solve all of our problems. The free enterprise system involves a certain degree of risk, and we should let that risk be taken and the consequences as well.”

Congress is least likely to approve proposals to loan funds to New York. The approach winning the most support in Congress and among city officials would have the Government guarantee enough Big Mac bonds to keep the city solvent while it undertakes the drastic reforms needed.

All of the eight proposals before various congressional committees would require the Governor to give ironclad assurances that the city would balance its budget within three years. The guaranteed bonds would be taxable and, if the city and state defaulted, would be paid out of their allotment of future federal revenue sharing. Declared Rohatyn: “We’re not asking for a handout. Taxpayers elsewhere are not going to be penalized. Quite the opposite; if a federal guarantee is available, other cities will be vaccinated against the virus that has weakened us.”

If New York is to get any relief, it must take still stronger and more visible action to prove that it has changed its irresponsible fiscal ways. As Rohatyn put it very early in the crisis, “New York must be perceived as changing its life-style.” That has not been the case so far. Said one Big Mac official: “The city has had to be dragged kicking and screaming to do what had to be done.” For example, a deferral of a wage increase of up to 6% for city employees was supposed to take effect Sept. 1, but will not begin for most workers until Oct. 11 because of delays in reprogramming computers.

Last week Beame’s extraordinary slowness brought him into sharp conflict with the Emergency Fiscal Control Board. He was supposed to deliver details of how and when the city was going to chop the rest of the deficit, year by year. Instead, Beame presented a nine-page outline. Among other things, he proposed to trim thousands of more employees through attrition, continue the wage freeze for two more years, and try to save on equipment purchases, building rentals and capital construction. But to the dismay of the board members, many of them top businessmen, the document was maddeningly vague.

At first the board members were shocked into silence. Then one of them, William Ellinghaus, president of New York Telephone Co., almost shouting, demanded of Beame: “When are we going to get specifics? Where are the details? What about the next two years?” Beame quietly asked whether the telephone company can plan ahead for three years. Snapped Ellinghaus: “We can do it for six.” After the meeting. Beame told his agency heads to produce firm proposals for cuts by Oct. 22. He hopes to trim police and fire department budgets by an additional 3% and other departments by up to 8%.

The mayor’s austerity plans outraged city union leaders. They had agreed to a partial one-year wage freeze only after Beame agreed last summer not to lay off any more workers except in an extreme emergency. The control board seemed to be forcing him to defer wage increases in the city’s labor contracts for another two years. Further, union leaders were upset by the board’s rejection of the agreement that ended a five-day teachers’ strike last month; the board found the settlement too expensive.

After meeting with Beame, two labor leaders threatened a general strike, which would shut down most public services, paralyze transportation, further diminish investors’ confidence and seriously disrupt the city’s economy. Said local Teamster President Barry Feinstein: “We have given our blood. The unions are bleeding to death.”

Next day, however, Feinstein and other labor leaders—notably Albert Shanker of the United Federation of Teachers, Victor Gotbaum of the American Federation of State, County and Municipal Employees and Ken McFeeley of the Patrolmen’s Benevolent Association—were talking more calmly. Moreover, while TIME correspondents found that union members were universally unhappy with Beame and his cost-cutting plans, most were not enthusiastic about striking. Explained an adviser to several of the labor leaders: “They are aware that if the police, the firemen and the bridge tenders go out, there could be chaos, there could be deaths. It would be horrible. They don’t want that.” Even so, many corporate leaders in New York were making emergency plans for ways to stay in business in case of the nightmare of a strike.

Because New York City has lived so high, borrowed so heavily and taken so long to cut back, the necessary reductions in its life-style will be all the more painful. Every citizen will feel the pinch. Yet cutbacks alone are not the entire answer to the predicament. The city must devise new strategies for survival, new policies that are more suited to the realities. Some of the most urgently needed reforms:

REDUCE PAYROLLS

The fattest place for still more pruning is the city’s swollen public payroll —some $7 billion a year, or 60% of the budget. It has increased almost mindlessly, as if there were a job for everybody at the taxpayer’s expense. From 1961 to 1974, even though the city population declined from 7.8 million to 7.5 million, 100,000 people were added to the work force. The total of full-time city employees jumped to some 300,000; nobody knew the exact number because management was so slipshod. In the last few months of crisis, the Beame administration has been able to shrink the number to 263,000, half through layoffs, the rest by retirements and resignations. But many thousands more will have to go if the city’s budget is to be balanced.

Though some desk-bound bureaucrats are beginning to be laid off, a far greater number of lineworkers—policemen, firemen, teachers—have been dismissed. In an analysis of layoffs up to Sept. 1, City Councilman Henry Stern figured that total personnel costs had been reduced by 5.23% while administrative costs had been trimmed by only 2.27%. Said Stern: “The desk-bound seem to be the hardiest flowers in the urban jungle. Those who give the orders seem to save their own.”

City employees will also have to accept very modest pay increases even after the current freeze is lifted. Their wages and perquisites make them generally the best-paid city-government workers in the country. A policeman, for example, gets four weeks’ vacation his first year on the job and quite a bit more free time. If he donates a pint of blood, he is allowed the remainder of the day off to rest up from the ordeal. After three years he earns an average $17,458. Many city posts now pay much more than comparable jobs in private industry or the Federal Government. A subway coin changer, for example, gets $229 a week, while a New York bank clerk earns $164.

City pensions also must be scaled down. They are a legacy of the years of Mayor John Lindsay (1966-1973), who not only spent lavishly but agreed to the fattest municipal union contracts on record. Many city employees who were hired before 1974 can retire at half pay after 20 years on the job; their pensions are based on their last year’s salary plus overtime.

A remarkable number of workers, after 19 years of uninspired performance, become virtual dynamos in their 20th as they frantically build up overtime. It is possible for a worker to retire in his early 40s with a $15,000-a-year pension and then take another job in the prime of his life. Pensions already cost the city $1 billion a year for funding —and they are considered to be dangerously underfunded. Unless they are trimmed, they will cost $2 billion a year by 1980.

The city puts yet another $20 million a year into a separate annuity fund for the uniformed services and the teachers. As if their pensions were not enough, these city workers receive $1 a day for every day worked until they retire—and that is a luxury that New York can scarcely afford.

INCREASE PRODUCTIVITY

While some New York City workers, notably the firemen, are rated among the best in the country, too many others do not earn their pay. The city’s Productivity Council recently reported that in a single division of the parks department there are five supervisors, all charged with much the same responsibilities. The report notes: “Consequently the probability of no one doing a job is as great as having five people do it.” Nearly one-third of the 74,393 employees of the board of education are classified as nonpedagogical: they do not teach. Many teachers aspire to administrative ranks where the work is easier, the pay is higher, and bothersome students are remote. Says Mary McAulay, a veteran teacher: “If 110 Livingston Street [headquarters of the board of education] were moved to Afghanistan, the classroom teacher would be unaffected.”

Much of the blame for bureaucratic slackness rests with the public-service unions whose rigid rules impair productivity. It takes yards of red tape and constant bickering to shift anyone to another department or category. Only by sweetening fringe benefits three years ago could the city persuade the Patrolmen’s Benevolent Association to allow more men to be put on the streets during the high-crime shift from 4 p.m. to midnight.

Though some bus drivers work an eight-hour day, they are paid for eleven. The reason is that they are needed during the city’s rush hours but not in between. During the midday break, they are paid time and a half for three hours that they may spend as they please: taking a snooze, going to the movies, tending bar. A more rational solution would be to hire part-time drivers for peak periods, but the Transit Authority claims that this would be even more expensive than paying employees for not working. The part-timers would have to be given all the hefty fringe benefits that the unions have wrested from the city.

Better ways must be found to measure productivity in the city government. Progress has already been made in sanitation. Instead of judging performance by the amount of refuse collected, the city is conducting on-the-spot surveys. Photographers are sent to take pictures of the streets to determine their cleanliness.

The city bureaucracy will probably never be fully productive until it has to face some kind of competition. Says E.S. Savas, who was first deputy city administrator under Mayor Lindsay and is now a professor of public-systems management at Columbia: “There is a myth that government can do a job more cheaply because it doesn’t have to make a profit.” Private industry, in fact, does many city jobs more efficiently than the public work force. While it costs the city $45 a ton to pick up garbage, private contractors do it for $22 a ton in San Francisco, $19 a ton in Boston and $18 a ton in Minneapolis. Their incentives are far greater since the more refuse they collect, the more they are paid. City sanitation men receive the same pay no matter how much—or little —work they do.

“The problem is not public v. private,” says Savas. “It is monopoly v. competition.”

Where monopoly exists, productivity invariably suffers.

Visiting Eastern Europe recently, Savas was surprised to find more competition in some Communist cities than in that citadel of capitalism,

New York. In Moscow, for example, sanitation men who work the hardest are paid the most. Ljubljana, Yugoslavia, solicited competitive bids for a project from city planners in a neighboring municipality as well as its own planners.

CUT SERVICES

New York offers more services than any other U.S. city. Inevitably, some of these will have to be cut back. A prime target of almost every disinterested observer is the municipal hospital system, which costs the city more than $304 million a year. The bed-occupancy rate of the 18 hospitals continues to decline because patients receiving Medicaid prefer to go to the better-equipped private institutions. Thus the occupancy rate in city hospitals is 77%, v. 87% or more in the private hospitals. Without imperiling medical care, the number of city hospitals could be reduced to five or six—with a major one in each of the city’s boroughs. But there would probably have to be an expansion of outpatient services in private hospitals or clinics.

The closing of even a single hospital sparks a bitter political fight. The hospitals not only provide health care but are also a source of jobs, and they are overstaffed with doctors and other employees. Dr. John Holloman, $65,000-a-year director of the city’s Health and Hospitals Corporation, has resisted cutbacks; he even quashed a report on possible economies that was prepared by his own staff. A close observer of city affairs notes hyperbolically: “Some of the neighbors, in league with the more radical doctors, will riot, kill and burn to keep the hospital from being closed.”

No other city runs a huge university system, let alone one that costs virtually nothing for undergraduates to attend. While tuition at most public universities, including New York State’s, amounts to at least several hundred dollars a year, an undergraduate at the City University of New York pays a mere $110 in fees. CUNY has a splendid history of helping innumerable indigent students become leaders in business. Government and professions. But today, with an enrollment of more than 265,000, CUNY costs $595 million a year. The city, which pays 45% of CUNY’s budget, has trimmed its payment this year by $32 million. CUNY will either have to reduce its enrollment sharply or charge tuition, a necessity that has been steadfastly resisted by the board of higher education.

Another solution would be to transfer CUNY to the state, which would charge tuition, raise educational standards and close overlapping facilities. In addition to a free education, less affluent students who belong to SEEK (Search for Education, Elevation and Knowledge) receive a stipend averaging $30 a week. The state education department recently complained that SEEK students were not learning fast enough and were taking dubious courses, such as Caribbean religion and education and the Third World. Says Savas: “This is a very expensive way of achieving remedial education.”

Some city agencies can be abolished in their entirety or shifted to state management. Among them: the addiction services agency, which duplicates state services and has a questionable record of success with its drug-withdrawal and methadone-maintenance programs (estimated savings: $18 million a year); the city department of corrections, which also duplicates state penal facilities (savings: $92 million); the municipal broadcasting system, which provides quality material but must be considered a luxury at the present time (savings: $2.4 million); vocational counseling and job placement, which is ineffective and overlaps state services (total savings: $57 million); the board of examiners, which certifies teachers already certified by the state department of education (savings: $3 million).

END RENT CONTROL

New York’s housing has deteriorated alarmingly. More than 30,000 apartments are being abandoned each year. One major reason is the city’s archaic rent-control law, which has been on the books since World War II. Because landlords in many instances cannot raise rents enough to cover costs, they simply walk away from unprofitable buildings, leaving them in the hands of the city, which can scarcely afford to rehabilitate them or even maintain them. With fuel costs high and climbing, abandonments are bound to accelerate. Real estate tax delinquencies are also ominously rising; they reached $220 million in fiscal 1975.

Rent control must be phased out.

That process could be combined with a modest building program to encourage home ownership in the city. Though more than a thousand acres of largely abandoned areas in The Bronx and Brooklyn are next to slums, they are potentially desirable because they are conveniently located. The city could clear them and erect row houses to be sold to middle-class buyers. Says I.D. Robbins, a builder and former president of the City Club, a civic watchdog group: “There is a tremendous capital investment left over from the time these neighborhoods thrived. All that is missing is people.”

ENCOURAGE BUSINESS

No matter what cuts are made, the city’s future depends largely on its business climate, which has turned decidedly cloudy because private employers are moving out. Since 1969, when there were 3,798,000 jobs in the city, 456,000 have been lost. In part, this reflects a national trend of manufacturers escaping the high-cost, crime-ridden inner cities. Even so, New York has done next to nothing to stem the exodus. Says Savas: “City officials look upon business as a convenient cow to be milked.” Until recently, the city offered few of the tax breaks or sundry inducements that other places use to attract and keep industry. “New York City has had a totally planless economic development,” says Herbert Bienstock, a U.S. Labor Department employment expert.

As the fiscal crisis has deepened, the city has belatedly dangled a small carrot to attract business. The Economic Development Administration has started issuing bonds and using the proceeds to cover construction costs for certain industries that want to move to the city or expand their operations. There are also signs that the city’s economy may be bottoming out. A recent report by the New School for Social Research suggests that New York has once again become cost-competitive with the rest of the country; because of overbuilding, office space, for example, has become less expensive.

Five years ago, space in midtown buildings was renting for $9 to $14 per sq. ft.; today the cost is down to $7 to $12. The city is still the nation’s center of banking, the stock market, broadcasting, publishing, advertising and the arts. Its cultural, medical and scientific facilities are unrivaled. The number of tourists in creases each year. But without proper support from the rest of the city, the healthy core will also begin to rot.

HOLD DOWN TAXES Aside from borrowing, the city’s favorite way of paying its bills has been to raise taxes — as if there were no limit. Yet the more it has increased taxes, the more people and businesses it has driven from the city, thus further eroding the tax base. In addition to an 8% city sales tax, a city income tax is levied on residents and — to a lesser extent — on commuters. A New York family of four earning $15,000 a year pays a city tax of $179 (as well as a state in come tax of $475).

Confronted with a 20% tax boost that brought its total bill to $449 million last year, Con Edison charges the highest rates of any U.S. utility. Electricity costs for industrial users are 50% higher in New York than in Connecticut, 35% above rates in New Jersey and Massachusetts. Last month Weeden & Co., the large brokerage house, announced that it will move more than half of its operations to New Jersey because of a recent increase in the city’s securities tax.

Both President Ford and Treasury Secretary Simon have called for a boost in the city sales tax — a sure way to drive still more shoppers to the lower-taxed suburbs. An increase in the state income tax is widely predicted. As recently as last August, Mayor Beame once again raised the city corporate tax, which comes on top of state and federal business levies. Beame even tried to win approval of a tax on beer, though his own administration had worked feverishly last year to prevent two breweries from leaving the city. Writes Ken Auletta, a sometime Democratic Party official who is a vocal critic of New York’s government: “The city’s unique form of socialism just doesn’t work in a general capitalist economy. People who cannot afford it, after all, have a choice: they don’t have to live or keep their job-producing business here.”

NATIONALIZE WELFARE

One of the greatest drains on New York’s wealth, patience and civic stability is the enormous welfare community, which has defied all efforts to cut it down. Relief rolls tripled in the 1960s, the most prosperous years in the nation’s history. Today more than 1 million people—one out of every eight New Yorkers —are on welfare. Their benefits are the nation’s highest. A family of four gets an average $258 a month along with $130 for rent, as well as food stamps and free medical care. The city also offers the widest range of supplements, such as payments to single men who attend drug-addiction programs and free day-care centers for mothers, one-third of whom are not actually working, though they may be trying to find jobs.

Most people on the rolls deserve welfare; many others do not, even by New York’s generous standards. Though the number of ineligibles has been reduced, they still amount to 8% of the total number of recipients, according to the city’s conservative estimate. A state audit revealed that the city had squandered $19 million because of tardiness in removing ineligibles and inaccurate recording of outside income. Nor is there any excuse for a $434,000-a-year welfare public relations outfit, which includes a television camera crew and staffers who churn out press releases glorifying the welfare department.

Though the city will have to reduce its welfare budget, it cannot—and should not—solve the problem alone. Its dependent population was largely created by federal policies. By subsidizing mechanization on the farm, the U.S. Government helped uproot hundreds of thousands of poor Southern blacks, who flocked to Northern cities during the 1950s and 1960s. The city has also been forced to accept an unlimited migration from Puerto Rico; traditionally, New York has served as the port of entry for most immigrants to America. Yet that function has never been properly recognized or reimbursed.

The Federal Government pays 46% of the city’s $2.4 billion welfare bill, and the state pays onequarter. In view of the national service that New York has rendered, it deserves more federal aid. Some New Yorkers urge the U.S. to carry 75% of the city’s welfare costs, as it does in a number of other states. A more limited scheme would reimburse New York City for the $110 million it pays in home relief—a program directed at people who have lost jobs in the recession.

Eventually there should be a federalization of welfare that would provide equal benefits throughout the nation, with some gradations because of the cost of living. The U.S. Government would assume the cost of the program. It would not, of course, pay for all of New York City’s present welfare benefits; they would have to be reduced, or the city would have to make up the difference. Aside from the fairness of the program, it would discourage people from moving from places with low benefits to those with high payments, notably New York. Thus the bigger cities would be relieved of some of their burden.

MOVE TO REGIONALISM

Looking further into the future, New York will have to consider some revision of its governmental structure. The city is really part of a tristate region and thus has a problem unique among American municipalities. Many of its most affluent commuters live in Connecticut and New Jersey and do not pay their fair share of taxes for the city’s upkeep. They are determined to keep it at a distance; yet its problems continue to spread and will ultimately engulf them.

Despite opposition, notably from the suburbs, a sensible approach would be to increase regional government in the tristate area. Some starts have been made. The Port Authority maintains maritime facilities and bridges and tunnels connecting New York City and

New Jersey; the Metropolitan Transportation Authority supervises commuter and mass transit. These agencies could serve as models for units to deal with other regional problems such as land use, air and water pollution and taxation. City Planning Commission Chairman John Zuccotti also contemplates a regional development authority that would plan orderly industrial growth and discourage one area from recruiting a business from another—a practice that wastes money and effort.

In addition to thinking big, the city should also think small. The city’s bustling communities are potential sources of good government. Over the years, as city government became more centralized and the Democratic Party structure grew weaker, neighborhoods were stripped of their powers. “Citizens pay their taxes, and then they abdicate,” says Savas. “They have lost their skills as citizens; they have contracted them out to public employees.”

Yet many acts of government could be performed better on a local level. Neighborhood leaders, for example, would know better than city hall when to patrol the streets and how to clean them, how to maintain the parks and collect the garbage. The flourishing block associations in the city are a modest revival of local self-government. A portion of the city labor force might be dispatched to work in the neighborhoods. One employee could serve as a captain to coordinate activities for a five-block area and stimulate volunteer work. With a limited power of the purse, communities could choose among services provided by the city government or by private contractors. Next month New Yorkers will be given an opportunity to vote for city charter changes that will strengthen local governing boards.

New York City will not be the same as cutbacks and reforms are inevitably pressed upon it. “When you leave New York, you’re only camping out,” boasted Jimmy Walker, the 1920s mayor whose smart-talking, big-spending style symbolized the city then and now. New York has to do more of everything—do it first and do it longest. But New Yorkers will now have to live in a more subdued style. “The city must shed its big-government psychology,” says Dick Netzer, dean of New York University School of Public Administration and a member of Big Mac’s board of directors. “It must disclaim its pretensions that it can resolve fundamental social problems or provide a tremendous range of worthy services. Officials should attempt to lower expectations—or at least shift them toward other levels of government that have some hope of satisfying these expectations.” If the crisis really does teach the city to match its swollen expectations to its shrunken means, New York—with its rich concentration of talents and resources —might pioneer a new way of life for the American city.