Big MAC saves New York

There's an old American saying that it's the job of a politician to lower taxes and keep everybody happy. There's a modern corollary of this which more or less implies that it's the job of a politician to keep raising taxes and strengthen everybody's character.

When a nation or a city is in deep financial trouble, there seem to be only three choices. To keep taxes low, or at least keep them stable and save money on public services by dismissing as many people as possible who work in the public service – civil servants, school teachers, policemen, firemen, hospital staffs and the like – or to try and keep everybody at work and keep on raising taxes to meet the increased costs of providing those services. The third way, which was anathema to even the boldest economists until the Depression of the 1930s, was to invent public jobs and print more money to pay for them. This is a way of postponing the day of reckoning. 

Now New York City, as I told you last time, was on the verge of bankruptcy a week ago and the mayor could get neither the state legislature nor the bankers to help. The bankers were being asked to put up loans at impossible or unacceptably low rates of interest. Well, New York would not be New York if it solved anything in a humdrum, un-dramatic way. New York's government, I sometimes think, is an extension of Broadway and its favourite occupation is cliffhanging. Two hours before the city was to go broke, the governor of the state came up with a solution. Naturally, it would have been dull to discover the solution by daylight. It had to come after an all-night session and emerge with the dawn. 

It's something called the Municipal Assistance Corporation and since the initials spell MAC, it's already known as 'Big MAC, the saviour of little old New York.' So-called, because as cities go, it's not an old city and it is ludicrously large. The Big MAC then, the Municipal Assistance Corporation, is a new state agency, and by 'state' of course we mean a new agency of the government of the state of New York. Till now, New York City has been responsible for assessing and raising its own taxes, though it always hopes to get – and does get – help from the state government up in Albany. Most of the taxes of New York City come from property, from sales taxes on everything except food and drugs, and from that particular bugbear which has not so far been adopted by any other American city, namely a personal income tax on everyone who lives here or has an office here, or otherwise conducts his work or business here. 

Now it has come out in the coroner's inquest on the city's deathly financial condition that about ten years ago, the mayor of New York started the practice of counting the running expenses of the city in the capital budget. Now the capital budget is what is normally the estimate set aside for construction, building and, in a city of this size and these skyscrapers, it's normally a huge budget. Under the forgotten Galahad, Mr John Lindsay, this practice became a regular habit. The day-to-day expenses of the city were not kept apart as a separate budget. They were lumped with the estimated costs of, say, five proposed new schools, a couple of hospitals, a sewage disposal plant, the World Trade building, and we seemed able to afford these things because we were able to inflate the expected cost of them by adding the costs of running the city. 

This sleight of hand can be simply explained. The city finances are handled by the mayor and by his so-called controller, controller of the budget. Now suppose they agree that the building that's got to be done in the next year will cost the city $500 million and they also know that the day-to-day costs of running the city, the buildings already there – the hospitals, schools, the underground, the police department, the firemen and so on – the day-to-day costs will come out at, say, $250 million. But by the city's new accountancy practice, that $250 million budget is added on to the construction budget of $500 million. 

So what they say they have is $750 millions for construction, though in fact they have only $500 millions. What this does, what it has done, is to make everybody, builders especially, live in a fool's paradise. If you tell a team of architects, cement manufacturers and builders unions that you have $750 millions to spend on new buildings, naturally the architects will get out rather more elaborate designs, the cement makers will offer a larger estimate, the unions will assume there's plenty in the kitty for a wage increase in the next year. In effect, the city is pretending to run itself on no money at all. 

Well, last Wednesday, the city was $792 million short of the money it needed to pay the school teachers, the policemen, the firemen, and so on. The same morning, a banker handed over to the city controller a cheque for $280 million. This was an extension, or rollover, of a banker's loan and is the first instalment to pay off the $792 million that had become due that morning. The rest of the morning is to be guaranteed by Big MAC which is now going to be the overseer of the city's budget. This new state corporation, Big MAC, is going to move in on the city's budget in several drastic ways. Mayor Beame confused things a little by assuring New Yorkers that Big MAC was not an intruder on the city budget. This is rather like saying that the Chancellor of the Exchequer is not an intruder on the Cabinet. Quite right! The Municipal Assistance Corporation is no intruder. Big MAC is moving in as a resident, as the resident housekeeper. 

Well, till now, the city has collected its own tax revenues, put them into a general fund and then allocated various sums to what the mayor figured each department of the city needed. No longer. The new corporation now counts New York City taxes as supplementary state taxes. Income tax, sales taxes, property taxes, the lot, will not be collected or handled by the city. The state will collect them and hand them over to Big MAC which will act as a creditor who's being owed a lot of money. Big MAC will take in the city taxes, figure out how much the city owes, subtract that from the total revenue and then pass on the rest to the city for its budget. 

This, of course, foreshadows a drastically reduced budget and it may, eventually, see New York solvent but a lot of people are shuddering when they guess at the cost in human terms. The mayor, for instance, has announced that we must lay off 6,000 policemen and 2,000 firemen as a starter. 

Let's take the firemen first. On the face of it, and with New York's splendid, almost science fiction, fire-fighting equipment, it shouldn't hurt too much if one fireman in four is dismissed. But we all thought right away about a particular borough of the city called the Bronx, the South Bronx, to be exact. It used to be a rather crummy but respectable section where working people lived, black and white, more or less amiably together. It's now a hopelessly rundown slum inhabited by bitter old people, junkies, the sidewalks piled with refuse, the night streets deserted except by the most bold or careless citizens. It's what they call a 'high crime area'. 

Well, what's this got to do with fires? Quite simply and brutally, the hopeless people who live there have a spark of hope left. It's the hope that if they burn down the whole rotting borough, then the city will have to find new homes for them. In the past 17 months, South Bronx alone has over 5,500 fires. That works out at over ten fires a week. The sirens sound in the Bronx as in a perpetual Blitz. And the burning is not being done only by slum teenagers and other young desperadoes. 

The day the city announced its financial salvation, eight people, all of them South Bronx landlords and their associates, were indicted on charges of arson, attempted arson, possession of fire bombs and bribery. The district attorney of the Bronx said there was no large criminal conspiracy. The fires had been set by various people from various motives – the landlord can't get anyone to pay his rent and he isn't going to go on paying property taxes but he has his fire insurance. A decent, desperate family grows sufficiently tired of the rats and the general filth that they do nothing when a teenage gang decides it would be a cool thing to burner the corner warehouse. Block by block, the rundown housing is being burned down. Of course, the South Bronx is an extreme case but it needs firemen out of all proportion to the normal ratio the city assigns to each borough. 

As for the police, the mayor proposes to abolish all mounted police, to dismiss 600 traffic controllers, all school crossing patrols and over 4,500 men on the beat who are assigned to crime prevention. It's hard to think of a city, unless it's Detroit or Phoenix, Arizona, which can least spare 600, let alone 6,000 policemen. The fire commissioner, asked if he had a statement to make, said, 'No, unless you let me cry'. Well, as the sweltering summer comes in, when crime normally increases, we shall soon see if these cuts are endurable. We shall get a first hint of the human price of keeping the city solvent. 

The usual answer to what amounts to enforced unemployment and a balanced budget is higher taxes but the governor of New York – who is regarded as the hero, the inventor of Big MAC – astounded everybody the other day by saying that you can't solve everything with taxes. 'The tax day,' he said, 'is over.' And this was the same man who, when he took the governor's oath of office said, 'the days of wine and roses are over.' Put the two maxims together and what he's saying is that you can keep taxes where they are, only if you forget the wine and roses. 

What he's saying is no more and no less than that awful prescription of Mr Micawber, all the more galling because we all know in our bones it's true: 'Annual income twenty pounds, annual expenditure nineteen, nineteen and six? Result, happiness. Annual income twenty pounds, annual expenditure twenty pounds, no shillings and sixpence? Result, misery.’

This transcript was typed from a recording of the original BBC broadcast (© BBC) and not copied from an original script. Because of the risk of mishearing, the BBC cannot vouch for its complete accuracy.

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