Urban America is in free fall. New York City may hold answers
Crime, drugs and homelessness are plaguing cities like Portland, Seattle and San Francisco. New York City’s history shows another way forward for urban America.
“Given New York Today, Could Anyone Lead It?” a 1991 New York Times headline bemoaned after decades of failure and futility. Crime was endemic, schools were failing, poverty was pervasive and the economy stagnated. From John Lindsay to David Dinkins, mayor after mayor had tried to tackle these problems. They had all failed. After three decades of policy futility, New Yorkers were giving up. In 1991, surveys indicated that more than half of New Yorkers wanted to leave. Political leadership had come to regard the city’s ills as intractable pathologies. Daniel Patrick Moynihan, then New York senator, said at one public hearing on juvenile violence in 1993, “There is nothing you’ll do of any consequence, except start the process of change. Don’t expect it to take less than 30 years.”
Surveying the United States today, there are lessons from New York City’s past that should inform ongoing debates about America’s big cities. From Seattle and San Francisco to Chicago and New York, commercial real estate vacancies mixed with soft-on-crime mayors and high taxes are creating a new vicious cycle of urban flight. New York City once overcame this. And it didn’t take 30 years.
The specific personalities which helped lead to New York City’s resurgence are perhaps less important than the policies they choose to implement. From the mid-’90s through the first decade of the 2000s, through Michael Bloomberg’s three terms, with a strong assist from Gov. George Pataki who served from 1994-2006, New York’s leaders transformed the city from a nearly bankrupt basket case, a cautionary tale, into an engine of opportunity and a model of urban governance.
What happened? How had the “ungovernable city” turned itself around?
I had a front-row seat to this remarkable change. Growing up in Brooklyn in the 1970s, I witnessed the depths of the crisis. And, while leading welfare and social services programs for the state and city in the ’90s and 2000s, I got to be part of the solution. What changed was the city’s governing philosophy. Previous mayors had favored an urban liberalism rooted in the policies of Lyndon Johnson’s Great Society. They put their faith in expert planning and generous social spending. They believed it was the government’s job to correct the “structural inequities that drove societal ills.” Government, not individuals, businesses or civil society, was the engine of progress.
But “mugged by the reality” of failure, many New Yorkers began to reexamine their assumptions. Where the Great Society looked to government, the new reformers looked to individuals to revitalize the city. The key was for government to empower individuals and businesses with the space and the tools to succeed. By embracing these ideas — the power of individual opportunity, market-based solutions and rigorous accountability — New York City did the seemingly impossible.
By embracing the power of individual opportunity, market-based solutions and rigorous accountability, New York City did the seemingly impossible.
As a kid, I saw crime explode and quality of life decline as the city government abandoned law and order. The crime I witnessed was indulged by a governing philosophy that excused criminals as victims of larger social forces and treated effective law enforcement as inherently racist. John Lindsay derided calls for law and order as calls for the “official terror of the state.” By treating crime as a mere manifestation of poverty, Lindsay viewed police as powerless to fix what really ailed the city: “Peace cannot be imposed on our cities by force of arms, nor can people be converted at the point of a gun.” Only ever-more social spending could fix the problems, and in the meantime, New York’s citizens would just have to accept high crime as the price of avoiding explosive riots. Since Lindsay did not want police maintaining order, they instead became a reactive force. Officers would respond to individual crimes but did nothing to treat problems systematically. As the city’s fiscal crisis, driven by over-generous social spending, forced cuts to the force, police officers ceased to be a constant presence on the city’s streets.
The effects of this reactive indulgence were disastrous. Both petty and violent crime exploded. In the Lindsay years alone, from 1966 to 1973, violent crime increased 117 percent, with murders more than doubling, while robberies increased 168 percent, according to the FBI’s Uniform Crime Reports. Lindsay’s crime wave became the new normal for the city as these elevated rates continued through the 1970s and 1980s. Fear threatened the city’s trademark vibrancy.
Beyond the direct victims, crime’s toll on the city was immense. The disorder hollowed out communities and drove away businesses. For those that stayed, criminal activity cost the city’s small firms an estimated $1 billion a year, according to a 1989 study by the New York think tank Interface.
Fed up, New Yorkers refused to accept this status quo. In 1993, voters rejected incumbent David Dinkins and elected Rudy Giuliani, a former U.S. attorney, on a promise that crime could and would be brought under control. Unlike his predecessors in the mayor’s office, he refused to regard crime as the untreatable symptom of societal ills. “The criminal act is about individual responsibility, and the building of the respect for the law and ethics is also a matter of individual responsibility,” he declared in a 1994 speech.
To hold criminals accountable, police commissioner Bill Bratton would return police to their traditional role of unapologetically maintaining order. Giuliani and Bratton’s approach was a real world application of the “broken windows” theory developed by social scientists James Q. Wilson and George Kelling. Wilson and Kelling argued that tolerating low-level disorder, like “broken windows,” undermined communities’ ability to police themselves and created conditions that bred more serious crime.
Bratton redeployed officers to the streets, embedded in and patrolling neighborhoods as symbols of order. Officers aggressively policed minor offenses that impacted quality of life. Public spaces, like Times Square, the subway and parks, were reclaimed from drug users, pickpockets and panhandlers. But Bratton’s effectiveness was not simply a matter of changing deployment strategies; as much as police now held criminals accountable, the city’s leadership began to hold the police accountable. Under Dinkins, Bratton recalled, “they weren’t being held accountable for crime because it was believed that crime was beyond their power to control.” NYPD’s new CompStat program allowed police to track and understand criminal activity across the city, while providing hard data on law enforcement effectiveness.
The results were dramatic. Across the board, crime fell almost 50 percent. Murders decreased from 2,420 in 1993 to 960 in 2001. By attacking crime at its source in disorder, and holding police officers “ruthlessly accountable” through a pragmatic, data-driven strategy, New York became livable again.
With order restored, it was possible to tackle the city’s poverty crisis. Much like crime, poverty had become entrenched because of a retreat from individual responsibility. Faced with appalling urban poverty and violent racial unrest in the 1960s, liberals took on what Moynihan called “a near-obsessive concern to locate the blame for poverty … on forces and institutions outside the community concerned.” If structural inequities rendered individuals and communities powerless, only government action could end poverty. And Johnson’s Great Society proposed to do just that by increasing government spending on welfare. In New York, Lindsay embraced Johnson’s liberal agenda and took the lead expanding the city’s welfare rolls.
In practice, the city’s programs became no-strings-attached cash assistance. This amounted to a vast transfer of responsibility from individuals to the government — creating what Fred Siegel called “dependent individualism.” Without any incentives to find employment, welfare recipients dropped out of the workforce.
Skyrocketing drug abuse, teenage pregnancy and family breakdown followed. And poverty deepened. In 1969, New York’s poverty rate was 14.5 percent, but it had increased to over 25 percent by the mid-’80s.
From Seattle to Chicago, commercial real estate vacancies mixed with soft-on-crime mayors and high taxes are creating a new vicious cycle of urban flight.
The persistent failure of the city’s reigning liberalism provided an opportunity for change. Giuliani’s welfare commissioner, Jason Turner, turned the city’s welfare programs into an engine of individual opportunity by combining aggressive enforcement of work requirements with increased government investment in job training and placement for welfare recipients. Able-bodied recipients that did not find work were no longer entitled to the city’s support.
Giuliani and Turner’s efforts were part of a larger revolution on the local, state and federal levels in the 1990s that transformed welfare policy by embracing work and opportunity. In 1992, Bill Clinton won the presidency promising to “end welfare as we know it and break the cycle of dependency,” and in 1996 he signed a welfare reform compromise forged with Speaker of the House Newt Gingrich.
The Personal Responsibility and Work Opportunity Act reflected the new, bipartisan, national consensus that combined strict work requirements with generous benefits, and the bill provided block grants to states to reform their welfare programs along these lines. In 1997, Pataki embraced the opportunity, passing his own welfare reform bill. Together, these efforts significantly expanded the city’s resources to use work to move recipients off welfare.
Working for Pataki in the state’s lead social services agency, and serving as commissioner of New York City’s largest social services provider during Bloomberg’s second and third terms, I saw firsthand how these reforms transformed welfare and poverty in New York City. From 1995 through 2013, the city’s cash-welfare caseload shrunk from 1.1 million to 347,000 recipients.
Effective administration and a commitment to work turned welfare in New York City into a genuine pathway out of poverty. The results were dramatic. Data produced by Columbia University’s Center on Poverty and Opportunity showed that for the state as a whole, child poverty declined during the period from 31.6 percent to 18.3 percent, a reduction driven by the unprecedented progress in the state’s largest city. But while requiring work and subsidizing wages played a large role in these gains, one of the most important things I learned working in the city’s welfare system was how essential a strong economy was to reducing poverty. This was another lesson lost on the city’s liberal mayors during the city’s bad times.
Across the ’60s and ’70s, the city government’s philosophy of urban liberalism had hollowed out the city’s economy. Lindsay’s ambition to use government to rectify the city’s societal ills was expensive. “The budget is large, but the needs of the city are great,” Lindsay declared in his inaugural budget, and by the end of his first term, spending on welfare and social services had doubled. Lindsay’s commitment to the poor and the resulting growth of the city’s government far outstripped the city’s ability to pay, but progressive moral urgency trumped economic sense: after all, as he explained to one voter, “we have 300 years of neglect to pay for.” To cover the city’s deficits, Lindsay took on increasing amounts of debt while raising taxes on individuals and businesses far beyond any other U.S. city.
Lindsay’s tax and spend policies sent the city spiraling into a vicious cycle. As taxes increased, businesses and individuals fled the city. Between 1969 and 1977, the city lost almost 600,000 jobs, especially among manufacturing and high-income white-collar sectors like finance and real estate. As the city’s tax base evaporated, the city was forced to squeeze those who remained even harder. A proposed tax on financial transactions almost caused the New York Stock Exchange to leave, as NYSE’s president bemoaned the “deterioration of the climate for business, especially in the realm of taxes.” Ultimately, only a federal bailout with harsh conditions was able to stave off total bankruptcy. But the cost of avoiding bankruptcy was economic stagnation.
Imposed cuts on city services like police deepened the city’s quality of life crisis. Rampant disorder only deepened the city’s unattractiveness to businesses. As a result, New York City’s economy lagged behind the nation’s for most of the 1970s, ’80s, and ’90s.
The crime-fighting efforts of the 1990s were an important first step in bringing the city’s economy back. But taking office in the midst of a recession and inheriting a $2.3 billion deficit, new leaders recognized that the city and its finances needed a fundamentally new vision. The city could not “tax its way out of recession,” Giuliani announced in his 1994 State of the City address. Quite the opposite — it would harness the power of the market with tax cuts. Giuliani combined a supply-side approach to the city’s tax policy with fiscal management that kept the city living within its means. Choice and competition would be introduced into city services to lower costs and improve delivery. Lower taxes and improved public services would bring business back to the city.
This vision required cooperation from the state government, and thankfully the city had a partner in Pataki, equally committed to improving the state’s economic climate. Together with Albany, New York City managed to reform or eliminate the commercial rent tax, the hotel occupancy tax, the sales tax, the unincorporated business tax and the personal income tax. Overall, Giuliani cut some $2.2 billion from the city’s annual tax burden by the end of his tenure. Economist Robert P. Inman estimated that one out of every four jobs created in the city since 1993 could be attributed to these cuts. And Pataki’s statewide Income Tax Reduction Act in 1994 supercharged Giuliani’s efforts by reducing most New Yorkers’ tax liability by 25%.
By emphasizing growth and harnessing opportunity, the city’s economy rebounded from the recession of the early 1990s. New York benefitted from the explosive growth in financial and tech sectors in the 1990s, and Giuliani’s hotel occupancy tax cuts cleared the way for the hospitality and tourism sectors to become pillars of the city’s economy. And most tellingly, after decades of population decline and stagnation, the city’s population increased to over 8 million people by the end of the 1990s. Bloomberg consolidated Giuliani’s successful economic policies, especially by opening up much of the city to redevelopment by breaking down nonsensical zoning restrictions. Hudson Yards, The High Line and One World Trade Center all symbolized the city’s economic renewal. And when recession returned in 2008, rather than being the sick man of the American economy, New York’s economy recovered much faster than the rest of the country.
Surveying the United States today, there are lessons from New York City’s past that should inform ongoing debates about America’s big cities.
“New York City has never been stronger than it is today, and I think it’s fair to say our future has never been brighter,” Bloomberg declared upon leaving office at the end of 2013. But he warned, “The progress we’ve made over the past 12 years, thanks to the work of so many dedicated people, has been incredible — but it has not been inevitable. Success can never be taken for granted.”
New York today is not what it was when Bloomberg left office, but it is still much safer and more prosperous than the city I grew up in. The city’s improvements between 1994 and 2014 did not happen by accident. It took a concerted effort by political and civic reformers, fighting against the entrenched power of the city’s liberal consensus, to transform the city with accountability, choice and opportunity. We unleashed the power of the city’s residents and businesses to end the disorder, dependence and decline that had brought New York to its knees. But the succeeding administrations, and numerous big city mayors across the country, have shown little interest in this history. And the social fabric in America’s urban core is starting to fray again. If the leaders of America’s cities want to avoid the fate of their predecessors, they’d do well to remember these lessons.
Robert Doar is president of the American Enterprise Institute.