The Streets Were Paved with Gold (56 page)

But Section 2604 of the City Charter seems to prohibit such switches, proclaiming: “No … employee of the city or any city agency, whether paid or unpaid, within a period of three years after termination of his employment, shall appear before any city agency or receive compensation for any services rendered on behalf of any person, firm, corporation or other entity, in relation to any … matter with respect to which during his employment he was directly concerned, or in which he personally participated, or which was under his active consideration, or with respect to which knowledge or information was made available to him.” The city’s Board of Ethics, which rules on this section of the Charter, was never asked by Mr. Brawer, Mr. Bigel or Mr. Koch for a ruling on the propriety of a former city budget official gifting “all of our figures” to another “entity.”

Mr. Brawer is not alone. Laura Page, once the Budget Bureau’s education budget examiner, now studies—among other duties—the city’s budget for the teachers’ union. She is joined by Joyce Levin-son, once a colleague in the Budget Bureau. The deputy to Al Shanker, head of the teachers’ union, is William Scott, former First Deputy City Comptroller. D.C. 37 lured Bernard Rullman from the Comptroller’s Office; Arthur Van Houten, once the Executive Director of the New York City Employees Retirement System, is now their pension consultant. Basil Paterson, the city’s chief negotiator, used to receive lucrative labor mediation contracts from the same unions he was now negotiating with. In the midst of the 1978 contract bargaining, Anthony Russo, the city Labor Commissioner, told me that he had received a job offer from one of the municipal unions he was negotiating with.

It gets very cozy.

As former antagonists sit together, they come to understand how “complex” issues are. United as they are by a common foe, bankruptcy, they come to believe that all other issues are “manageable.” For good reasons, each party sincerely believed bankruptcy would be ruinous to New York. But, it was often forgotten, avoiding
bankruptcy was not just an act of statesmanship. It was also pure self-interest. The unions knew that a bankruptcy judge might abrogate their contracts and menace the solvency of their pension funds. The banks and financial community knew bankruptcy would open the floodgates to note and bondholder suits. No mayor, governor or President wants to be remembered for, or stuck with, New York’s colossal bankruptcy. Not only would it be bad for New York, it was bad politics. The case of Assembly Minority Leader Perry Duryea is instructive. In 1975, Duryea condemned the city as “profligate,” and voted against both the MAC and Control Board legislation which helped the city skirt bankruptcy. In 1978, as the Republican candidate for governor, Duryea suddenly appeared as a faithful friend to New York, roaming the halls of the Congress to buttonhole support for city loan legislation, issuing press releases commending “the progress” the city had made.

The press, too, often abandoned its adversary role. The fiscal crisis was not just another story. The life and death of a city—our city—was thought to be at stake. We were now all on the same side. New York against the reactionaries, the bigots, the Huns out there who hated us. The issue almost became one of patriotism. Unite to save New York. If New York was threatened, it followed that businesses here were threatened as well. And the city’s three major newspapers, ninety-five radio stations and thirteen television stations are very much businesses. The publishers of the
Times
and the
News
, Punch Sulzberger and Tex James, respectively, had their papers invest $500,000 and $100,000 in MAC securities, served on various Big Apple committees, including one urging the construction of Westway, and encouraged editorials supporting their local gladiators. Why did the
Times
make the investment? According to their spokesman, Lin Whitehouse, the purchase came “at a time when the city was trying to corral big companies. It was a show of good faith.”

With the exception of the New York
Post’s
Rupert Murdoch, who doubles as editor-in-chief, the publishers do not control the news that appears in their papers. Reporters often wrote stories that displeased the local team “partners.” Still, the pattern of their coverage was friendly. So friendly that Rohatyn, in a July 12, 1978, Op-Ed page article in the
Times
, unself-consciously thanked them. Rohatyn claimed the city’s progress was largely “due to the public support we gained as a result of a supportive press.… The press … once it understood what we were trying to do and why, treated us with fairness,
supported us and created the climate in which political leaders could do difficult and painful things.” Clearly, a “supportive press” was not infused with the same zeal to puncture untruths or wrongdoing as they were, say, in the case of Vietnam, CIA spying, Watergate or Bert Lance. Implicitly, the press took the city’s side. During Senate Banking Committee hearings on the city’s loan legislation in June 1978, I asked a
Post
reporter why the critics of the legislation—Senators John Tower, Richard Luger, Jake Garn—were not attending. “It’s just as well the critics are not attending,” he said. “They’d hurt
our
case.” Former Treasury Secretary William Simon describes being confronted in 1975 by one of New York’s better reporters, WNEW-TV’s Gabe Pressman: “On camera, he lunged at me with the question ‘Do you mean to say you’re going to let millions of innocent people go down the drain?’ ”

The daily press also operated with a handicap not of its own making. Journalists are trained to search out at least two sides of an issue. But what happens when both sides are really one? When Felix agrees with Jack? Or Jack agrees with Walter? Abe with Barry? And because the story is so complex, the numbers so confusing, journalists are compelled to keep going back to the same handful of “experts” for information. Dependency, trust, friendships, develop. Felix Rohatyn and Victor Gotbaum, for instance, are not only very smart men, they are also very charming, open, helpful to reporters. It was not hard for those covering the story to grow too close to the people involved; to assume they were all trying to save New York, forgetting they were also desperately trying to save their own ass.

What happened to City Comptroller Goldin is pregnant with meaning both about the role of the press and about the workings of the local version of the military/industrial complex. In the summer of 1977, an agreement was reached between MAC, the city, the unions and the banks to trade in their shorter-term securities for longer-term MAC bonds. This stretch eased the city’s immediate debt service payments, but it also ballooned the city’s long-term costs because a higher rate of interest over a longer period of time was called for. At first, the only major public official to protest was Goldin. “Our major ’complaint,” said one of his principal aides, “was the outrageous interest rate. The banks were making $150 million on the deal. That’s a lot of money. So Goldin publicly protested. We couldn’t interest the press in writing about it. I got a call from one newspaper reporter who said, ‘I lost a lot of respect
for you for opposing the stretch.’ I blew up. That night, someone from MAC called to say, “We have the
Times
and the
News
editorially supporting the stretch tomorrow.’ The next day Goldin got quiet. He was worried.” The stretch passed without opposition. Felix had, cleverly, made sure to first brief his friends on the
Times
, the
News
and the
Post.

Assessing the first three years of the partnership before the state assembly’s Committee on Banks, Ellmore C. Patterson of Morgan Guaranty proudly exclaimed, “It is pride which I am happy to share with many others, not only in the financial community but also in the labor unions, the Municipal Assistance Corporation, and the State and Federal governments.” Patterson had reason to be proud. The partnership had, together, kept the city from plunging into bankruptcy. For that they deserve praise.

But they had not fundamentally altered the city’s government. They had not balanced the city’s budget or returned the city to the private credit market. They had not ended the city’s reliance on federal credit or reduced the city’s debt; had not imposed a “wage freeze”; had not reversed the trend of rising budgets and reduced services; had not drastically overhauled the city’s management. New York could not have avoided bankruptcy without them, yet it couldn’t change ingrained habits with them. A veto power was conferred on each partner. City Hall entered the fiscal crisis as the victim of too many special interests and emerged as the victim of too few.

The banks and the municipal unions and the other partners have a hammerlock on City Hall. The city asks the banks to purchase city securities, and the banks successfully demand that the city grant unprecedented powers to nonelected business auditors. Committed to shaking up the government, Mayor Koch in January asked the state legislature to approve a bill to remove 3,000 city managers and supervisors from union membership. By May, he could not persuade a single Democratic member of the Assembly to sponsor his bill. He asked the City Council to pass legislation declaring that the city’s ability to pay be the paramount consideration in any labor arbitrator’s ruling. Yet he couldn’t muster the votes to get the bill out of committee. “I called in the City Council’s committee,” recalls Koch, a note of disbelief in his voice. “Miriam Friedlander said to me, ‘That’s anti-labor.’ I said, ‘Miriam, don’t you understand, you’re part of management.’ I was later told that of the nine committee members, seven were against me and two
were noncommittal.” Normally, the only difference between the Council and a rubber stamp, Councilman Henry Stern once observed, “is that at least a rubber stamp leaves an impression.”

In 1975, the employee pension funds agreed to purchase $683 million worth of city securities in the spring of 1978. The unions, led by the wily Jack Bigel, made sure the purchase date coincided with the date of the expiration of their contracts. During the 1978 labor negotiations, the unions balked, refusing to make the purchase. Mayor Koch cried that the city was being “held hostage.” No matter. When the contract was settled, Bigel announced, “Everything will now be considered.” The pension funds then purchased the securities. Why are the unions so powerful, particularly within legislative bodies? Seated in a soft leather chair, his long legs crossed over the plush red carpet of his City Hall office, Ed Koch answered, “One, they give to candidates, either by way of groups or to individuals, the funds to run a statewide campaign. Lots of candidates, and certainly a statewide party, cannot run without them. Secondly, the unions threaten to support their opponents or to run someone against them.”

There is also the matter of ideology. Labor has traditionally been perceived as the good guy, the underdog. Habits of thought change no less slowly than habits of governance.

No contract, no loan, said the unions. No Control Board, no agreement on future loans, said the banks. No labor contract or agreement with the banks, no loan legislation, said the federal government. No city agreements, no extension of the Control Board and MAC’s borrowing authority, said the state. “The system will never respond,” says the Control Board’s chief auditor, Deputy State Comptroller Sidney Schwartz. “It’s inherent in the system. You have a kind of democratic environment which provides certain protections for established groups, such as labor. It’s almost impossible to make sudden changes. Under dictators it’s easy—‘Off with your head!’ ”

Labor is not the only culprit. The banks and the investment community and a host of lesser special interests are carrying out, as they should in a democracy, the task of advancing their interests. The problem is that public officials, who are supposed to represent the broader public interest and check the power of special interests, find it difficult to do so. Democratic government cannot function without the consent of powerful groups; it must persuade, not command. And yet, when it succeeds, it does so slowly and at great
cost. Confronted with the fiscal crisis, New York could make only incremental reforms. “I really do believe in the system,” Koch’s thirty-year-old press secretary, Maureen Connelly, says. “But after six months I’ve decided it can’t be done. I mean, little things can be done.” Shell-shocked from being bombarded by interest groups and buffeted from crisis to crisis, she added, “There is a Murphy’s law corollary: A crisis will emerge to fill the vacuum created as another crisis subsides. You don’t have time in government to look ahead. You’re always putting out fires.”

New York’s woes are not uncommon. Detroit and Rutgers University, like New York, chose layoffs of a few of their workers or teachers rather than cuts in benefits for all. Detroit and other cities chose to use federal CETA funds to rehire laid-off city workers rather than give jobs to the poor. President Carter announces a voluntary effort to curb inflation, but business refuses to curb prices, labor to scale down wage demands. By mid-1978, Washington lobbyists had gutted or blocked tax reform, labor law reform, a Consumer Protection Agency and hospital cost containment legislation. Despite proclamations that the energy crisis was America’s most pressing problem, almost two years later President Carter still couldn’t navigate legislation past powerful interest groups in the Congress. The oil companies demand higher profits. Consumer groups demand lower prices. Sometimes the enemy, as Pogo said, is us. Twenty years ago, scientists predicted the energy shortage. That didn’t deter Americans from purchasing electric hair driers, toothbrushes and can openers. If New York now suffers from too few special interests, the country suffers from too many. In all cases, they are too powerful. In a large, diverse nation, interests inevitably collide. Oil-producing states have different interests from non-producers. The Sunbelt doesn’t want to take fewer federal dollars so that the Snowbelt can take more. The rich and the poor don’t share the same interest in tax reform. Cities vie with counties and suburbs and rural areas for a bigger piece of the federal pie. It usually takes a startling event or crisis—a hot or cold war, Sputnik, Barry Goldwater’s smashing electoral defeat, the civil rights revolution, Watergate—to get the system to respond.