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Fear City

Fear City

New York's Fiscal Crisis and the Rise of Austerity Politics

Kim Phillips-Fein

Metropolitan Books

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PULITZER PRIZE FINALIST

An epic, riveting history of New York City on the edge of disaster&mdashand an anatomy of the austerity politics that continue to shape the world today

When the news broke in 1975 that New York City was on the brink of fiscal collapse, few believed it was possible. How could the country’s largest metropolis fail? How could the capital of the financial world go bankrupt? Yet the city was indeed billions of dollars in the red, with no way to pay back its debts. Bankers and politicians alike seized upon the situation as evidence that social liberalism, which New York famously exemplified, was unworkable. The city had to slash services, freeze wages, and fire thousands of workers, they insisted, or financial apocalypse would ensue.

In this vivid account, historian Kim Phillips-Fein tells the remarkable story of the crisis that engulfed the city. With unions and ordinary citizens refusing to accept retrenchment, the budget crunch became a struggle over the soul of New York, pitting fundamentally opposing visions of the city against each other. Drawing on never-before-used archival sources and interviews with key players in the crisis, Fear City shows how the brush with bankruptcy permanently transformed New York&mdashand reshaped ideas about government across America.

At once a sweeping history of some of the most tumultuous times in New York's past, a gripping narrative of last-minute machinations and backroom deals, and an origin story of the politics of aust… More…


PULITZER PRIZE FINALIST

An epic, riveting history of New York City on the edge of disaster&mdashand an anatomy of the austerity politics that continue to shape the world today

When the news broke in 1975 that New York City was on the brink of fiscal collapse, few believed it was possible. How could the country’s largest metropolis fail? How could the capital of the financial world go bankrupt? Yet the city was indeed billions of dollars in the red, with no way to pay back its debts. Bankers and politicians alike seized upon the situation as evidence that social liberalism, which New York famously exemplified, was unworkable. The city had to slash services, freeze wages, and fire thousands of workers, they insisted, or financial apocalypse would ensue.

In this vivid account, historian Kim Phillips-Fein tells the remarkable story of the crisis that engulfed the city. With unions and ordinary citizens refusing to accept retrenchment, the budget crunch became a struggle over the soul of New York, pitting fundamentally opposing visions of the city against each other. Drawing on never-before-used archival sources and interviews with key players in the crisis, Fear City shows how the brush with bankruptcy permanently transformed New York&mdashand reshaped ideas about government across America.

At once a sweeping history of some of the most tumultuous times in New York's past, a gripping narrative of last-minute machinations and backroom deals, and an origin story of the politics of austerity, Fear City is essential reading for anyone seeking to understand the resurgent fiscal conservatism of today.

Less…

Pulitzer Prize - Finalist, Publishers Weekly Best Books of the Year

Introduction On October 30, 1975, the New York Daily News printed the most famous headline in its history: “Ford to City: Drop Dead.” The previous day, President Gerald Ford had delivered a speech at the National Press Club in Washington on the looming bankruptcy of New York City. Once inconceivable, such a collapse fit with the climate of the time. American politics in the autumn of 1975 had taken on the qualities of a grotesque. Saigon had fallen just a few months before Ford’s speech. The memory of President Nixon’s resignation in the midst of the Watergate scandal was still fresh. Oil shocks in 1973 had made it clear that the United States could not control supplies of the black gold on which its economy depended, and rapid inflation throughout 1974 and 1975 transformed each paycheck into a game of chance. Across the country, people had been boycotting meat and sugar to protest exorbitant prices. Massive corporate bankruptcies, near-bankruptcies, and financial collapses shook familiar business icons: the Penn Central railroad in 1970, the defense giant Lockheed in 1971, and the Long Island–based Franklin National Bank, the twentieth largest in the country, in 1974. The prospect of New York City’s collapse seemed a further terrifying lurch. The leading men at the city’s biggest banks—including First National City Bank (the forerunner of Citibank), Morgan Guaranty, and Chase Manhattan—had spoken out in favor of federal aid for New York. Executives from around the country had traveled to Washington to testify that if the city went under, the fragile national economy might topple as well. Cold Warriors warned that the city’s bankruptcy would bolster the Soviet Union. Lawmakers in Washington, Albany, and New York City itself eagerly awaited any hint that Ford might lend his support to a bailout deal. How would it look—what would it mean—for New York City, the country’s largest metropolis, the home of Wall Street, the heart of American finance, to wind up in bankruptcy court? But President Ford and his closest advisers—a circle that included his chief of staff, Donald Rumsfeld, and the chairman of his Council of Economic Advisers, Alan Greenspan—strongly opposed federal help for New York. They were convinced that the city had brought its problems on itself through heedless, profligate spending. Bankruptcy was thus a just punishment for its sins, a necessary lesson in how the city should change to move forward. And as far as the national economy was concerned, Ford and his circle believed that the banks, the businessmen, and the city were scaremongering, that the economic impact of the city’s financial collapse would easily be contained—that the market had already factored it in. Accordingly, Ford promised to veto the bills that were circulating through Congress to provide emergency aid to New York. Instead, he supported reforms to existing bankruptcy regulations that would make it easier for the city to file. The meaning was clear: New York could go bankrupt, and the federal government would do nothing to help. For the president, as for much of the nation, New York City stood for urban liberalism, an example of the central role that government might play in addressing problems of poverty, racism, and economic distribution. At the National Press Club, Ford challenged New York’s network of municipal hospitals and its free public university as lavish, unnecessary extravagances. The federal government should not give a penny in bailout funds that allowed New Yorkers to continue these indulgences, he said. Why should other Americans “support advantages in New York that they have not been able to afford for their own communities?” The harsh lesson was intended not only for New York. Ford believed that the United States had to face a new reality: the country—indeed, the world—had entered an era of slowed economic growth, an age of austerity, in which it was no longer possible for the government to pay for many social services to which the American people had grown accustomed. The citizens’ basic attitude toward government had to be transformed. Americans needed a revived philosophy of individual initiative centered on fiscal responsibility and limited spending. In the last few minutes of his talk, Ford scolded the nation : “If we go on spending more than we have, providing more benefits and more services than we can pay for, then a day of reckoning will come to Washington and the whole country just as it has to New York City.” And “when that day of reckoning comes, who will bail out the United States of America?”1 On that note, the president departed for California. He was embarking on a fundraising trip for his 1976 presidential campaign on the home turf of his main rival on the right: the former governor of the state, Ronald Reagan. Even before Ford’s speech, there were many in New York who felt that they had been abandoned. A few months earlier, in the spring of 1975, a woman named Lyn Smith wrote a letter to her senator, the liberal Republican Jacob Javits. Smith described the housing conditions in a South Bronx neighborhood near her home. The city, it seemed to her, had stopped making any effort to demolish burned-out buildings, despite their dangers. “When a house burns down they don’t destroy the frame, they leave it standing—you never know when it’s going to fall. A little boy I know or knew named Ralfy lives in the South Bronx he was playing in one of the broken down houses and he fell through the floor he’s dead now but if that building had been torn down he wouldn’t be dead.” Smith’s tone—flat, apathetic, resigned, quietly bearing witness but hardly even launching a protest—is perhaps the most haunting aspect of her missive. “I don’t know why I wrote this letter you’ll probably never read.”2 For a woman like Lyn Smith, austerity meant not only budget cuts but a political mood of bleak hopelessness. The fiscal crisis involved discarding a set of social hopes, a vision of what the city could be. For Ford and those around him, the New York City fiscal crisis was a story of the bankruptcy—economic and moral alike—of liberal politics. It proved that using government to combat social ills would end in collapse. It provided a spectacular repudiation of the Great Society, the War on Poverty, even the New Deal. But for ordinary people, the fiscal crisis meant something different: it marked a change in what it meant to be a New Yorker and a citizen. We are still living with the consequences of this transformation today. Forty years after the fiscal crisis, the 1970s remain a touchstone of New York City politics, the nightmare era to which no one wants to return. The classic cinema of the 1970s and 1980s memorialized these years of disinvestment and blight in films such as Taxi Driver, The Panic in Needle Park, The Taking of Pelham One Two Three, and Fort Apache, The Bronx, which portrayed New York as a sea of filth and despair, an urban cesspool. The decade is widely remembered as a time of crime, violence, lawlessness, disorder, graffiti-covered subways, inflation, unemployment, and budgets completely out of control—an era of social breakdown, economic malaise, and political collapse.3 The politics of the country more generally are recalled with a similar sense of failure: this is the decade when the old American dream fell apart, when unemployment and inflation replaced the steady prosperity of the postwar years, and the international supremacy of the United States ceased to be something to take for granted. As Christopher Lasch wrote in the opening pages of his 1979 bestseller, The Culture of Narcissism, “Those who recently dreamed of world power now despair of governing the city of New York.” 4 The common wisdom about the crisis holds that its primary cause was the flagrant irresponsibility of politicians such as John Lindsay, the idealistic mayor in the late 1960s who saw fighting poverty as a top priority for city government, and, even more, his successor Abraham Beame, who submitted to political pressures that endangered the city’s solvency. Lindsay threw money at entrenched social problems without regard for budget realities; Beame was unable to resist the newly powerful public sector unions. The result of their foolish overspending was that the city soon found itself with debts that it had no reasonable way of ever paying back.5 At the same time, paradoxically, the crisis is sometimes noted as a great triumph for New York: the moment when the city repudiated an older tradition of irresponsible altruism. Everyone—labor, business, the banks, ordinary citizens—is thought to have accepted the need for austerity and chipped in. Many of those who led New York through the valley of the shadow of default remember it as a time of solidarity, an era when the common people were willing to do what it took to rescue the city from its shame. As Felix Rohatyn, the Lazard Frères investment banker who helped to broker the deals that ultimately kept the city out of bankruptcy, later wrote, “The people of the city were willing to make real sacrifices as long as they believed that those sacrifices were relatively fairly distributed, that there was an end in sight and that the result would be a better city, a better environment, and a better life.” 6 This book takes a different view. Here, the budget comes to life as the place where opposing visions of the city’s future were contested, fought out, and finally decided. For much of the twentieth century, New York City did have an unusually expansive and generous local welfare state, the result of generations of organizing by labor unions, reform groups, and working-class and poor people. The institutions they built were hardly extravagant or unnecessary. New York’s public sector—which made the city, in the words of historian Joshua Freeman, something like an island of social democracy in the midst of postwar America—helped to create much of what was most distinctive in the city: its democratic sensibilities, its working-class ethos, its common public life. The fiscal crisis permanently altered these ideas and this vision. Contemporaries were stunned by the swiftness of the cuts to social services, enacted at a time of intense need. And in addition to the pain caused by the contraction of the public sector, the experience of the fiscal crisis seemed to delegitimize an entire way of thinking about cities and what they might do for the people who live in them. But just as the city’s pre-crisis spending should not be treated as wasteful and irrelevant, its financial difficulties should not be reduced to a parable of municipal irresponsibility or a story about how local governments tend to succumb to the insatiable demands of pressure groups. The dynamics of the crisis created a sense that New York City’s problems were entirely its own fault, which made it harder to see where the power really lay: at the level of the state and the federal government, which had created the policies that led to the unraveling of the city. It was federal subsidies for homeownership and federal investment in highways, for instance, which encouraged middle-class residents to move from New York to the surrounding suburbs, depriving the city of income tax revenue even though it remained the economic motor of the tristate area. And it was federal policies that made it easy for manufacturing companies that had once formed the city’s economic base—such as the celebrated garment industry—to move away in search of cheaper labor, first to the southern United States and then overseas. Nor did New York create the racial fears and hostilities that led middle-class white people to flee to the suburbs as the city drew in more African Americans, as well as Latinos and other immigrants. America’s political system failed to adequately confront such challenges, just as it failed to confront the urban poverty that was the result of capital flight and deindustrialization. The city’s politicians tried to skirt these problems in myriad different ways, but in the city budget they proved impossible to avoid forever. The city turned to debt in an effort to sidestep an open debate over whether it could continue to make good on its efforts to carve out a distinctive set of social rights. While the city’s financial problems were real enough, its elected leaders’ evasion of these political arguments—the attempt to use debt to settle problems that were at heart political—was the deeper failure. New York expanded its borrowing at a time when public debt was growing across the country, when bankers were enthusiastically marketing and buying its bonds and notes. Although they would later excoriate the city for its irresponsibility, these financiers played a central role in encouraging its indebtedness when it suited their purposes to do so.7 Finally, it is important to recognize that many of the New Yorkers most affected by the budget cuts did not meet the crisis with a spirit of equanimity and sacrifice. To remember it this way is an act of forgetting, for the retrenchment brought into the open fierce disagreements over the city’s future. It is certainly true that people in the economic and political elite quickly reached consensus that sharp budget cuts and the restructuring of the city government were the only way back to fiscal health. Beyond the inner circles of power, though, there was far more resistance to the transformation of New York. Rather than accept a shrunken version of their city, ordinary New Yorkers loudly protested the contraction of the public sphere. When they were faced with the withdrawal of services that had become tantamount to rights, many people asserted their demands all the more forcefully, as long as they were able to do so. They were driven to do so because they intuited that New York would emerge from the crisis a changed metropolis. The people who would come to have the deciding vote would be those who belonged to the moneyed elite: the ones who could decide whether or not to invest in New York, who had the access to private capital on which, it was suddenly clear, the city relied. The 1970s crisis was a crucial point on the way to a new New York, helping transform the city into the highly stratified metropolis it is today—a city of apartments bought as investment properties for the wealthy of the world even as almost 60,000 New Yorkers live in homeless shelters, a city that’s among the most unequal in a nation that has itself become radically more hierarchical than it was during the postwar era. Today, many people describe this transformation as “progress,” seeing the shining contemporary city as a vanquishing of the dismal past. This book, though, suggests that in the process, New York lost as much as it gained. The struggle over whom the city government would serve, and on what terms, echoes the deepening conflict over the future of the United States as a whole. Crises are disorienting events, revealing that long-accepted facts differ from a new reality. New York’s fiscal crisis, in addition, also threw sharply different perceptions of the city—indeed, of the world—into conflict with each other. For the bankers who rebelled against the city’s old fiscal practices, it became the chance to assert a modern, technocratic, and market-oriented ethos, rejecting New York’s long tradition of a robust public sector aimed at supporting the working classes. For the residents who saw their firehouses threatened with closure, their children’s teachers laid off, and their roads going unpaved, the crisis marked a power grab by financiers who wanted to recast New York as a white-collar professional city. For the men who were catapulted by the events of the crisis into positions of unusual decision-making power (and the few women who joined them), the fiscal crisis was a nerve-racking but exciting time of late nights, early breakfasts, and meetings around the clock, an urgent struggle to save the city from bankruptcy against all odds. For lifelong New York politicians, it was a bewildering shift in priorities and expectations, a time when they were blamed for bankrupting the city by trying to protect services and jobs, the very things they formerly had been lauded for providing.8 Race and class were at once omnipresent and invisible in the fiscal crisis. The crisis saw a group of almost universally white elites remake life in a city that was becoming increasingly black and brown. The collapse of the postwar social compact in New York happened at the very moment when it was losing its white middle-class population, when more and more of those using city services were low-income minorities. Many of the elites at the time blamed those impoverished African Americans and Latinos (and the public sector workers who served them) for New York’s financial problems. And yet the crisis provided a way to change the politics of the city in profound ways without ever talking about race or class explicitly. The threat of bankruptcy elided policy choices, making it appear as though there were simply no alternatives—as though the transformations were brought about not by anyone’s decisions, but by the abstractions of fiscal rectitude and financial necessity.9 The story of this sea change in political rhetoric is not only one of New York City, or even of urban politics.10 Some left-leaning scholars have described the 1975 crisis as the dawning of a new conservative age.11 In a certain sense it was: the spectacular failure of the New York City government crystallized the antigovernment ethos that was gaining momentum nationally during the 1970s. But at the same time, the crisis was also the product of the postwar liberal era, and it transformed liberalism as much as it galvanized the right. After all, the people who brought austerity to New York City were not free-market zealots or right-wing political leaders. Many of them were self-identified liberals who believed government had a legitimate role to play in the economy. Yet these people also became ardent promoters of the idea that New York had to make deep budget cuts, drive a hard bargain with its unions, streamline services, improve efficiency, and reinvent its government. They continued to see themselves as committed to a liberal agenda, but what this meant had undergone a profound change. The transformations in the city’s politics mirrored those taking place within the national Democratic Party, where longtime liberals were re-evaluating their old commitments and priorities as the long postwar economic boom drew to a close. Like liberals at the local level, national Democrats became far more ambivalent in their support for labor unions, for civil rights, for an activist government. The story of the fiscal crisis reminds us that the move to the right in American politics of recent years should not be seen only in terms of the rise of the conservative movement, but also as a story of the remaking of liberalism, a shifting of the common ground of American politics for people on both sides of the aisle.12 Today, fiscal crises are back in the headlines. A wave of municipal bankruptcies followed the financial panic of 2008, culminating in the collapse of Detroit in the summer of 2013. Greece is still on the verge of collapse, its society imploding as its government strips away social benefits despite a 2015 voter referendum rejecting austerity. Puerto Rico has already defaulted on some of its nearly $70 billion debt. And in late summer of 2016 its finances were placed under the management of an unelected fiscal control board charged with slashing government spending. The politics of inevitability that defined New York in the 1970s have been at work in all these cases as well. Just as happened in New York, the long-standing tensions that create fiscal crises seem to vanish from consideration in the heat and drama of the moment. Modern politicians and economists employ a moralistic rhetoric of responsibility and belt-tightening just as they did in 1975, but they do so with far more confidence than at that earlier moment, thanks to the intervening forty years of antigovernment politics. As a city, or a nation, struggles to avoid default, the debate becomes framed in the narrowest possible terms: Which programs to cut? Which taxes to levy? How to balance the budget most quickly? How to satisfy the lenders and the banks, whose presence is under normal conditions invisible, but who become the main actors in the fiscal drama the moment their money seems in danger? Nonetheless, today as in the 1970s, austerity remains a political choice. The forces that make it seem the only option obscure the underlying reasons why cities become poor, why wealthy metropolises come to have governments starved for funds. Beneath the narrow debates about how debts can be repaid reverberate larger, as yet unresolved questions about what kind of society we want to have, about who will pay for certain kinds of social provisions and whether we will have them at all. At the end of the day, these are inescapably political questions, not accounting ones. In the contemporary crises, from Detroit to Greece to Puerto Rico, there has been a sense that events are at once completely shocking and entirely anticipated. That is how it was in New York City in 1975 as well. At first no one could believe that the city could actually go bankrupt. And yet once its finances began to unravel, failure appeared almost to have been foreordained. Both the crisis and the government responses to it suddenly seemed almost inevitable. To question that inevitability is the project of this book. 1. Transcript of President’s Talk on City Crisis, Questions Asked and His Responses, New York Times, 10/30/75. 2. Lyn Smith to Jacob Javits, 4/16/75, Roll 5, Series: General Correspondence, Federal and State, Abraham Beame Papers, New York City Municipal Archives. 3. See Stanley Corkin, Starring New York: Filming the Grime and the Glamour of the Long 1970s (New York: Oxford University Press, 2011). There are many wonderful works on the cultural life of New York City in the 1970s more generally; among them, see Tim Lawrence, Love Saves the Day: A History of American Dance Music Culture, 1970–1979 (Durham, N.C.: Duke University Press, 2003); Will Hermes, Love Goes to Buildings on Fire: Five Years in New York That Changed Music Forever (New York: Farrar, Straus and Giroux, 2011); Jay Sanders, ed., Rituals of Rented Island: Object Theater, Loft Performance and the New Psychodrama: Manhattan, 1970–1980 (New York: Whitney Museum, 2013); Brian Tochterman, “Welcome to Fear City: The Cultural Narrative of New York City, 1945–1980”), Ph.D. Diss., University of Minnesota, 2011; Jim Fricke and Charlie Ahearn, Yes Yes Y’all: The Experience Music Project’s Oral History of Hip-Hop’s First Decade (New York: Da Capo Press, 2002); Jeff Chang, Can’t Stop Won’t Stop: A History of the Hip-Hop Generation (New York: Picador, 2006); and most of all, Jonathan Mahler, Ladies and Gentlemen, the Bronx Is Burning: 1977, Baseball, Politics and the Battle for the Soul of the City (New York: Macmillan, 2005). 4. Christopher Lasch, The Culture of Narcissism: American Life in an Age of Diminishing Expectations (New York: W. W. Norton, 1979), xiii. 5. See, for example, Fred Siegel and E. J. McMahon, “Gotham’s Fiscal Crisis: Lessons Unlearned,” Public Interest, Winter 2005; also Peter D. McClelland and Alan L. Magdovitz, Crisis in the Making: The Political Economy of New York State Since 1945 (New York: Cambridge University Press, 1981), and Charles Morris, The Cost of Good Intentions: New York City and the Liberal Experiment, 1960–1975 (New York: W. W. Norton, 1980). Some of the other journalistic treatments of the crisis in its immediate aftermath also reflect these arguments although without making them so polemically: Ken Auletta, The Streets Were Paved with Gold (New York: Vintage Books, 1980); and Fred Ferretti, The Year the Big Apple Went Bust (New York: Putnam, 1976). 6. Felix Rohatyn, “The Coming Emergency and What Can Be Done About It,” New York Review of Books, 12/4/80. 7. Here I echo arguments made by Greta Krippner, Capitalizing on Crisis: The Political Origins of the Rise of Finance (Cambridge: Harvard University Press, 2011), about the rise of the financial sector and the adoption of policies that favored it on the national level. 8. On the idea of crisis more generally, see Janet Roitman, “Crisis,” Political Concepts, Issue 1, http://www.politicalconcepts.org/issue1/crisis/. 9. A rich literature addresses civil rights politics and the political movements of poor and working-class people in postwar New York City: Martha Biondi, To Stand and Fight: The Struggle for Civil Rights in Postwar New York City (Cambridge, Mass.: Harvard University Press, 2003); Clarence Taylor, ed., Civil Rights in New York City: From World War II to the Giuliani Era (New York: Fordham University Press, 2011); Tamar Carroll, Mobilizing New York: AIDS, Antipoverty and Feminist Activism (Chapel Hill: University of North Carolina Press, 2015); Walter Thabitt, How East New York Became a Ghetto (New York: New York University Press, 2003); Jeanne Theoharis and Komozi Woodard, eds., Freedom North: Black Freedom Struggles Outside the South, 1940–1980 (New York: Palgrave Macmillan, 2003); Roberta Gold, When Tenants Claimed the City: The Struggle for Citizenship in New York City Housing (Urbana-Champaign: University of Illinois Press, 2014); and Craig Wilder, A Covenant with Color: Race and Social Power in Brooklyn (New York: Columbia University Press, 1994). 10. Social scientists have looked at the crisis in terms of what it reveals about urban political dynamics, and in doing so have produced extremely important accounts of the city’s fiscal structure. See, for example, Martin Shefter, Political Crisis/Fis cal Crisis: The Collapse and Revival of New York City (New York: Basic Books, 1985); Ester Fuchs, Mayors and Money: Fiscal Policy in New York and Chicago (Chicago: University of Chicago Press, 1992); Raymond Horton and Charles Brecher with Robert A. Cropf and Dean Michael Mead, Power Failure: New York City Power and Politics Since 1960 (New York: Oxford University Press, 1993); and John Mollenkopf, A Phoenix in the Ashes: The Rise and Fall of the Koch Coalition in New York City Politics (Princeton, N.J.: Princeton University Press, 1994). There are also a number of historical accounts that deal with city politics in the postwar years, although less focused on the fiscal crisis. Among the most important for this study are Joel Schwartz, The New York Approach: Robert Moses, Urban Liberals and Redevelopment of the Inner City (Columbus: Ohio State University Press, 1993); Samuel Zipp, Manhattan Projects: The Rise and Fall of Urban Renewal in Cold War New York (New York: Oxford University Press, 2010); Suleiman Osman, The Invention of Brownstone Brooklyn: Gentri fi cation and the Search for Authenticity in Postwar New York (New York: Oxford University Press, 2011); Vincent Cannato, The Ungovernable City: John V. Lindsay and His Struggle to Save New York (New York: Basic Books, 2001); and Joseph P. Viteritti, ed., Summer in the City: John Lindsay, New York and the American Dream (Baltimore: Johns Hopkins University Press, 2014). 11. For interpretations of the fiscal crisis that reflect a left political perspective, see Roger E. Alcaly and David Mermelstein, eds., The Fiscal Crisis of American Cities: Essays on the Political Economy of Urban America with Special Reference to New York (New York: Vintage, 1977); Jack Newfield and Paul DuBrul, The Abuse of Power: The Permanent Government and the Fall of New York (New York: Penguin Books, 1978); William Tabb, The Long Default: New York City and the Urban Fiscal Crisis (New York: Monthly Review Press, 1982); Robert Bailey, The Crisis Regime: The MAC, the EFCB and the Political Impact of the New York City Financial Crisis (Albany: State University of New York Press, 1985); Eric Lichten, Class, Power & Austerity: The New York City Fiscal Crisis (South Hadley, Mass.: Bergin & Garvey Publishers, 1986); Doug Henwood, Wall Street: How It Works and for Whom (New York: Verso, 1997); Joshua Freeman, Working-Class New York: Life and Labor Since World War II (New York: The New Press, 2000); Kim Moody, From Welfare State to Real Estate: Regime Change in New York City, 1974 to the Present (New York: The New Press, 2007); Miriam Greenberg, Branding New York: How a City in Crisis Was Sold to the World (New York and London: Routledge, 2008); Lynne Weikart, Follow the Money: Who Controls New York City Mayors? (Albany: State University of New York Press, 2009); Jonathan Soffer, Ed Koch and the Rebuilding of New York City (New York: Columbia University Press, 2010); Julian Brash, “Invoking Fiscal Crisis: Moral Discourse and Politics in New York City,” Social Text 76, Vol. 21, No. 3, Fall 2003; Alice O’Connor, “The Privatized City: The Manhattan Institute, the Urban Crisis and the Conservative Counterrevolution in New York,” Journal of Urban History, Vol. 34, No. 2, January 2008, 333–53; Jamie Peck, “Pushing Austerity: State Failure, Municipal Bankruptcy and the Crises of Fiscal Federalism in the USA,” Cambridge Journal of Regions, Economy and Society, June 2013; and John Krinsky, “Neoliberal Times: Intersecting Temporalities and the Neoliberalization of New York City’s Public Sector Labor Relations,” Social Science History Review, Fall 2011, 381–422. Also see two dissertations, as yet unpublished: Michael Spear, “A Crisis in Urban Liberalism: The New York City Municipal Unions and the 1970s Fiscal Crisis” (CUNY, 2005), and Benjamin Holtzman, “Crisis and Confidence: Reimagining New York in the Late Twentieth Century” (Brown University, 2016). 12. For works on the politics of the 1970s, see Daniel Rodgers, Age of Fracture (Cambridge, Mass.: Harvard University Press, 2011); Laura Kalman, Right Star Rising: A New Politics, 1974–1980 (New York: W. W. Norton, 2010): Jefferson Cowie, Stayin’ Alive: The 1970s and the Last Days of the Working Class (New York: The New Press, 2010); Judith Stein, Pivotal Decade: How the United States Traded Factories for Finance in the 1970s (New Haven, Conn.: Yale University Press, 2010); Rick Perlstein, Nixonland: The Rise of a President and the Fracturing of America (New York: Scribner, 2000); Rick Perlstein, The Invisible Bridge: The Fall of Nixon and the Rise of Reagan (New York: Simon & Schuster, 2014); Lily Geismer, Don’t Blame Us: Suburban Liberals and the Transformation of the Democratic Party (Princeton, N.J.: Princeton University Press, 2014). Copyright © 2017 by Kim Phillips-Fein. Excerpted from Fear City: New York's Fiscal Crisis and the Rise of Austerity Politics.

Praise for Fear City

“A powerful and involving work of narrative history… You come away from Fear City with a clear sense of what was lost as New York left behind one set of priorities and embraced another.… This is a book that deserves an audience beyond New York City history buffs, and all the more so because of its relevance to our political moment. The young Donald Trump makes a brief cameo appearance as an icon of the new New York, a real estate mogul who leveraged his father’s connections and the city’s desperation into massive tax breaks, starving the city of badly needed revenues for education and other basic municipal functions as he developed properties for the rich.
—Jonathan Mahler, The New York Times Book Review

Fear City is the best account of the New York City fiscal crisis of the 1970s and, more than that, an indispensable contribution to understanding the rise of austerity economics and the long decline of the public sector. This is a history with huge implications for the remaking of American politics and economics in our time.”
—Thomas J. Sugrue, author of Origins of the Urban Crisis

“The remaking of New York City under cover of crisis was a prelude to what would become a global economic tidal wave. In zeroing in on this little-understood chapter of urban history, Fear City helps sheds much-needed light on a range of contemporary crises, from the starvation of public services amidst enormous private wealth to th… More…

“A powerful and involving work of narrative history… You come away from Fear City with a clear sense of what was lost as New York left behind one set of priorities and embraced another.… This is a book that deserves an audience beyond New York City history buffs, and all the more so because of its relevance to our political moment. The young Donald Trump makes a brief cameo appearance as an icon of the new New York, a real estate mogul who leveraged his father’s connections and the city’s desperation into massive tax breaks, starving the city of badly needed revenues for education and other basic municipal functions as he developed properties for the rich.
—Jonathan Mahler, The New York Times Book Review

Fear City is the best account of the New York City fiscal crisis of the 1970s and, more than that, an indispensable contribution to understanding the rise of austerity economics and the long decline of the public sector. This is a history with huge implications for the remaking of American politics and economics in our time.”
—Thomas J. Sugrue, author of Origins of the Urban Crisis

“The remaking of New York City under cover of crisis was a prelude to what would become a global economic tidal wave. In zeroing in on this little-understood chapter of urban history, Fear City helps sheds much-needed light on a range of contemporary crises, from the starvation of public services amidst enormous private wealth to the rise of Donald Trump. Kim Phillips-Fein is a historian of the first order.”
—Naomi Klein, author of The Shock Doctrine and This Changes Everything

“Fair, thorough, incisive, and stylish, this is the best book to read not just on New York’s fiscal crisis of the 1970s, but about how bankers became our unacknowledged legislators ever since.”
—Rick Perlstein, author of Nixonland and The Invisible Bridge

“Before there was Reagan, before there was Thatcher, there was New York City’s fiscal crisis. Here we can see the blueprint for what has since been done to the entire world. This is the story of how the gears were shifted and the age of liberalism put into reverse, told with all the engrossing details, all the forgotten characters, and a memorable style.”
—Thomas Frank, author of What’s the Matter with Kansas? and Listen, Liberal

“A tour de force. If you want to find the roots of modern conservatism, don’t look in Louisiana, Arizona, or rural Wisconsin. Look in New York, and read Kim Phillips-Fein’s superb Fear City. New York in the 1970s, as Phillips-Fein compellingly shows, was the first sustained victory in the New Right’s long war against the New Deal. Extremely well written and impressively researched, Fear City is essential reading to understand how finance capital, real estate speculation, austerity budgeting, and punitive policing first came together to create the toxic politics of today.”
—Greg Grandin, author of Fordlandia and Kissinger’s Shadow

Fear City provides the definitive account of the moment when New York City liberalism ran out of momentum and money, and the conservative reaction that has culminated in Donald Trump began. Phillips-Fein chronicles not only the tense dance with municipal bankruptcy but the largely forgotten efforts by ordinary New Yorkers to stop the legal coup by local and national elites. Lucid, elegantly written, full of new information, it belongs on the shelf of key books about the city, alongside The Power Broker, Gotham, and their like.”
—Joshua B. Freeman, author of American Empire and Working-Class New York

“This revealing narrative of New York’s transformation from working-class social democracy to the glittering home of fancy finance reminds us that behind the mask of austerity there always lurks a bitter politics of class.”
—James K. Galbraith, author of The Predator State and Welcome to the Poisoned Chalice

“The story of New York’s financial crisis in the seventies is really a story about the role of cities in America today. New Yorkers pride themselves on being cosmopolitan, on welcoming immigrants, on being willing to spend money on education, healthcare, and infrastructure. Kim Philips-Fein convincingly explains why that caused problems for the city in the past and why now we need New York values more than ever."
—Joseph E. Stiglitz, author of Globalization and Its Discontents and The Price of Inequality

“Paced like a thriller and extremely well written . . . Phillips-Fein narrates with almost cinematic flair, and by the time the credits roll, the significance of her accomplishment becomes clear. The book should be required reading for all those interested in the past, present, and future of democratic politics.”
—Publishers Weekly (starred review)

“Deftly recounts the clash between government entities and vested interests as New York struggled to cope with slashed social service . . . Given events since, New York’s crisis—and the author’s astute account of it—seems oddly timely . . . Sobering, smart reading with many pointed lessons for activists.”
—Kirkus Reviews (starred review)

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Kim Phillips-Fein

Kim Phillips-Fein is the author of Invisible Hands: The Businessmen’s Crusade Against the New Deal. She teaches history at New York University's Gallatin School of Individualized Study, and has written for The Nation, Dissent, The Baffler, The Atlantic, and The New York Times, among other publications. She lives in New York City.

Metropolitan Books

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