Echoes of New York in 1975 as views harden (Click Here)
In 1975, years of fiscal mismanagement came to a head when banks refused to finance the short-term debt sales that New York relied upon. Elected officials, bankers and union leaders furiously cut deals, averting repeated threats of default for months, and eventually hammered out a long-term plan.
Traditional adversaries – Republicans and Democrats, banks and the head of city workers’ unions - worked together for a common goal of “saving” the city. In today’s divisive US political environment, such compromises have been harder to find.
While lessons can be learnt from the New York saga, those who were at the centre of it say today’s problems in US states and cities are different. The mounting issue of unfunded public pensions was not part of the mix in 1975, while states and the federal government also face fiscal deficits.
But some veterans of the New York crisis say the latest downturn has revealed more fundamental problems that will not fix themselves even if if the economic rebound continues. “Even assuming an improvement in the economy, I think structural deficits and the neglect of infrastructure, maintenance investments, the level of new roads, bridges, subways [are all] a ticking time-bomb,” says Mr Ravitch.
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