How Close Is NYC 2023 to the ‘Fear City’ of the 1970s?

For over a year, New York City's leaders have been warning of an oncoming recession, where New York City will no longer be able to support an expanded social service system that grew with federal financial support during the pandemic. Now with that federal money almost gone, Mayor Eric Adams has pushed cuts across City agencies, cutting social services to head off a financial downturn that has yet to hit—and maybe never will. With each passing month, both the City and state comptrollers' offices put out more reports that the City is overperforming on tax revenues, but possible downturns are an ever-present, if not imminent, threat. 

So why are the City's leaders pursuing this austerity agenda and who does it serve? On the latest episode of the Hell Gate Podcast, we spoke with Columbia professor Kim Phillips-Fein, the author of the book "Fear City," which offers a clear-eyed look at New York City's fiscal crisis in the late 1970s, and how it changed the city forever. We spoke with Phillips-Fein about the Adams administration's current approach to the City budget, whether austerity will truly achieve what the mayor wants it to, and how the federal government could re-envision its role towards American cities. 

Excerpts from the interview are below. You can check out the full interview, and a breezy (and fun!) New York state budget explainer, on this week's episode of the Hell Gate Podcast. 

Max Rivlin-Nadler: So we've been hearing for months, or at least since the Adams administration took office, that New York City is in a precarious fiscal situation, and that we're heading towards a recession. But bank collapses aside or some weird stuff coming from the Fed, that hasn't really happened yet. And it always seems a little bit like the sky is falling. How weird is New York's fiscal situation currently compared to where we were a few years ago under Mayor Bill de Blasio?

Kim Phillips-Fein: If we leave this era of low interest rates, and the speculation that that has helped to create, what's going to happen to the entire economy, nobody really knows. But specifically in New York, there's a couple of major areas of uncertainty, which have to do with COVID and its aftermath. First is a lot of the questions that people have about the long-term impact of remote work, and what that's going to mean for New York and for cities across the country. A lot of this has to do with a sense of great sensitivity about the people who are most likely to be doing remote work, who are upper-income professionals: What is their role in the city? What is it going to be moving forward?

The other is that New York has gotten a lot of money from the federal government over the period of the pandemic. What's going to happen as it stops? Will the programs they've been funding continue in some measure, or will they not? Will other revenue sources be created? So in a way, a lot of the uncertainty has to do with things that have been stirred up by the pandemic, both actual economic and fiscal changes, and also the underlying political and even moral questions that the pandemic raised for the city. 

The Adams administration has used the term "crisis," they've really used some fatalistic language. How does this compare to what you wrote about in your book, "Fear City," about the late 1970s, leading into the early 1980s, and the very well-publicized fiscal crisis that New York faced?

The whole situation is really very different from the 1970s. The easy comparison with the '70s, as a moment when things were very difficult to New York, actually, they were very difficult for really different reasons. In the 1970s, you had a huge decline in the city's population—about 10 percent of the city left between 1970 and 1980. The population shifts we have seen now are just nothing like that at all. You saw a really profound shift in the nature of the city's economy at that time, a shift away from manufacturing, and with the newer jobs that were being created in the service sector not paying as much as the older ones had. I just don't think that what we've seen so far in terms of remote work is anything like that type of elemental change in what the city is. 

And then finally, the City is not borrowing in the same way that it was in the late 1960s and early 1970s. Its short term debt—there's no comparison between the two moments. That's what really created the fiscal crisis itself. If anything, part of the problem of New York right now is that it's so expensive to live here, and that's actually causing people to leave. That is just a very different dynamic and should be addressed within a different set of policies than what was happening in the 1970s.

It's interesting, if you look at some of this fatalism or cynicism regarding the city, a lot of it does seem to be coming from the business community. You've got real estate that wants to push this narrative of a crisis. And then even [last] week, the unveiling of the new I Heart New York logo, which is We Heart NYC. And it was really couched in this very "we've got to fix it together," ethos. And it's touting none of the actual fixes that you were talking about in terms of making this a less expensive place to live.

Right? It's very interesting. We hear a lot about this, about what's going to happen to Midtown and downtown and to property values there. And I know that that's a great concern to the people who own that property. But the impact in relation to the rest of the city is just more complicated than they think. The business community in the '70s got a lot of praise for its heroism and stepping in to "save the city." The business community in the 1970s did actually do some things, like prepaid taxes at one point, so the City would have that money to pay bills. But today, part of the tension, as you point out, is that the things that the business community wants to do, it's not really clear that those are the things that will help address the problems of New Yorkers now, or even more narrowly the fiscal problems that the city hypothetically might run into. 

Recently you wrote an article for the New York Review of Books about a term that Eric Adams likes to use—"my high-income earners," the people that pay the majority of New York City's taxes, who are the millionaires and billionaires. He has come out against further taxing these individuals and maybe scaring them away. New York did raise taxes on millionaires in 2020. There's proposals I believe in both houses of the state legislature right now to once again raise taxes to fill specifically the missing money from the MTA. Has that been borne out, that high-income earners are leaving the city? Is this fear that Adams has at all grounded in reality?

The Fiscal Policy Institute has done some studies on this. There were people who left in 2020, that probably had nothing to do with taxes and everything to do with the pandemic. And it should be noted, not just the pandemic and fear about the virus, but also the school closures and everything that followed in the wake of the pandemic. So people left in 2020. The number leaving really shrank in 2021, though, and so it doesn't seem like tax increases have driven a greater exodus out of the city. Also there are more millionaires now, I believe, but that's because the pandemic has been so extraordinarily kind to people at the upper end of the income bracket.

And I think in general, people greatly overstate the capacity and willingness of people, even very wealthy people, to simply up and move. They're not just utility and income maximizers. They have families, they have social connections, they are part of a cultural and social life in the city, that you cannot just reproduce in some other low-tax city in some other parts of the country. Not to mention that their businesses are tied to this location. I just don't see the outpouring that it often seems that Adams is warning of. 

In some ways, the pandemic really focused attention on this group of people, because there was this specter at the beginning especially, which was so powerful in the city, that anybody with resources and means would just up and leave. Even as that reality has not come to pass, that fear of the mobility of the extremely rich has highlighted the way that the city's image is so dependent on this group. 

I always feel like it's a little overblown. That these wealthy people will leave New York City, they'll go to low-tax states, like Florida or Texas. At the end of the day, these are still New Yorkers. 

How does Eric Adams's approach compare to other mayors when they faced economic headwinds? Obviously, the 1970s is a really extreme example. But you know, Bloomberg as well had to deal with a pretty massive economic downturn immediately when he took office.

Thinking about 9/11 and its aftermath, that was another point where there was a lot of fear about what would happen, to downtown in particular, and the sense of needing to rally to save the city economically. And that situation was very different. But Adams is much more willing to invoke the specter of crisis. Bloomberg, in that earlier moment, was really committed to saying there's not going to be a crisis, New York is strong, we are committed to the city. That was different. Saving New York at that point was also a cause of the nation. There was a tricky politics to that, too. 

However, it is striking how different it is now. It reflects the political divisions in the country at large. You could say something like an argument about how this could be a moment for rethinking federal aid to cities, this can be a moment for rethinking federal aid to New York in particular. Does the federal government have any interest in protecting the resources of the city of New York? You could frame this in terms of the questions about immigration, which the Adams administration has been trying to get a longer commitment from the federal government and from Albany, to help to integrate asylum seekers and refugees into the city. 

The whole thing is very tricky. But you could have a way of describing the situation that presents the social services of the city as something that's in the interests of the country as a whole, a project of uplift and mobility, and of a humane way of coping with the problems of the world and people around the world who are coming to United States in pursuit of better life, and also a way of transcending the conflicts of the pandemic. Why is that not in the national interest of the country as a whole?

Speaking of his kind of different narrative that you could shape around social services and what's in the best interest of the city—how is the opposition to these cuts from the Adams administration taking shape? 

The situation is still evolving and we'll see how many of the cuts endure in the final package that Adams puts forward. There actually is a left in the city, spearheaded by the Democratic Socialists of America, that has been focused on Albany and has been focused on state taxes, and that makes sense given that the state has a lot more leeway to set taxes than the City does. DSA has this core of supportive representatives in Albany and has an analysis of things that's focused on the importance of Albany. So that actually is a difference. 

Compared to the 1970s, the relationship of unions and the unions' desire to find a way to get contracts that will make up some of what their members have lost in inflation over the years, we haven't really seen them at the forefront of oppositional politics at this point. 

In your book, you really trace how the state was able to take away a lot of power and independence from the City, in reaction to these more working-class forces that were predominating in the city. And now we're at the end of a 40-year project of some of these more radical working class-oriented politics finally making it to Albany. Not only unified Democratic control, but things like the millionaire's tax, and weed legalization. However, the state has been pretty reticent to hand any of that power back to New York City. Is that something that New York will ever get back?

That broader dynamic that you described, that has been the case throughout the city's history. The City has never really had full home rule with regard to its ability to determine its own taxes outside of the property tax, which has always set up this dynamic where it's very dependent on Albany. The biggest exception to that was the 1930s, because that is when there was this outpouring of federal money. And the city was able to capture a lot of that through Roosevelt's connections to New York, through LaGuardia's connections to Roosevelt and so on. 

At different points, questions about this home rule issue have come to the forefront in city politics. In New York City's history, it's sometimes come up in terms of the older days, it came up in terms of anti-Democratic machine politics. But I don't really see anyone putting that forward now. I don't know what would change that. I suppose it would change if there were a really intense set of conflicts between the City and Albany, or if there was a federal government that had a very different kind of urban agenda that would then offer the City an alternative to Albany, in terms of how taxes are distributed. In a way, cities are fragile fiscal creatures; the City's power to tax incomes is greatly limited compared to the state or the federal government, because there is always this threat of mobility. And certainly at the high end, you could imagine that that would kick in at some point. You could imagine a fiscal nest or something like that, like a set of nesting dolls. Moving the cost for some of the most fundamental programs upwards is ultimately what makes the most sense, and would be the most stable, not just for New York, but for cities across the country. 

Even policies like universal health care, those things actually would affect the City's budget, because they would shift costs around Medicaid and the like. More than getting greater power for the City to set its own taxes, it may be better to think about what the relationship is of the city and its costs to the state and federal governments, and ask about spending priorities at those levels.

Especially the national government and questions about the military budget come in here as well. It comes back to the framework of the post 9/11. What is in the national interest? Are cities? Is the health of a city like New York in the interests of the country as a whole? Or is it just a question of local home rule, as it were? You can make the case that it's actually in the interest of the security and freedom of the whole country. And that might be what you would need to do to change some of these dynamics in a more lasting way.