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Fear City: New York's Fiscal Crisis and the Rise of Austerity Politics. By Kim Phillips-Fein. New York: Metropolitan Books, 2017. 401 pp. Notes, index. Cloth, $32.00. ISBN 978-0-805-095-258.

Published online by Cambridge University Press:  25 July 2018

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Abstract

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Book Reviews
Copyright
Copyright © The President and Fellows of Harvard College 2018 

For years historians have relied on outdated and incomplete accounts of New York City's fiscal crisis. Finally, Kim Phillips-Fein has given us this excellent and thoroughly researched historical account. In so doing, she properly places the crisis in the context of the ideological battles that have roiled the country for the last half-century. She also does away with flat and oversimplified explanations for how the nation's greatest city ended up on the brink of collapse, debunking the misguided notions that the entire debacle can be chalked up to local causes, a simple combination of mismanagement and irresponsible spending. Instead, she starts out by building a foundational argument, upon which her subsequent analysis rests, that much of the city's structural financial problems were the result of external factors. Federal housing, transportation, and industrial relocation policies had driven an exodus of capital, both human and monetary, a mass migration away from older cities, toward suburbs and newer cities in previously less-populated areas. This reduced the cities’ tax bases, straining budgets at the very same time that federal programs required local governments to come up with cash for their share of nationwide social programs. This “perfect storm” was a nationwide urban fiscal crisis, and it was not specific to New York City.

In New York, the fiscal buzz saw hit harder than in most other cities, partially because of the city's longstanding liberal tradition. New York had made commitments to subsidized middle-income apartment projects, on top of a robust embrace of federal low-income housing programs. The City University of New York was tuition free, providing broad access to the American dream. Still, the city would probably have been able to afford its liberalism, if federal policies hadn't so successfully encouraged so many taxpayers to leave. New York City had, after all, been the biggest metropolitan economy in the nation for more than a century and a half. Nevertheless, the financial crisis had been brewing for years—arguably since the 1950s—as the increasing costs of the ambitious social-welfare programs, some created locally and others mandated by Washington, increasingly butted up against the federally induced flight of capital. The looming meltdown was somewhat masked by recurrent budgetary maneuvers, most notably the practice of taking on more and more debt to close recurring budget deficits. These fiscal sleights of hand did not cause the crisis; they merely concealed it and deferred it, until finally the city was unable to make debt-service payments in 1975. As the crisis escalated, the federal government stepped away, refusing any help to New York, even though federal policies had been a primary cause of the problem.

In the second and third sections of the book, Phillips-Fein moves on to what will be her more lasting and singular contributions. She digs into the responses to the crisis, both politically and ideologically, and then explores the lasting legacies of the resultant policy solutions. Here, she makes big and important arguments that have implications far beyond New York City and the minutia of municipal budget management.

The specter of impending bankruptcy for the city in 1975 made otherwise impossible policy paths seem not only possible, but necessary. With the rhetorical backing of “shared sacrifice” and “fiscal discipline”—two hallmarks of what would later be known as austerity budgets—and with the backdrop of a disengaged and actively unhelpful federal government, this meant cutting or eliminating a wide array of longstanding services and programs, many of which had been heralded components of New York City's seemingly exemplar social compact. As Phillips-Fein points out, though, this shift in the role and scale of government would also happen elsewhere. But, because the New York example was so dramatically visible and took place at the heart of capitalism and of twentieth-century liberalism, she argues that this should be regarded as an iconic moment. It was representative and illustrative of two simultaneous and related political nationwide transformations: the rise of contemporary antigovernment neoconservatives, and the making of a new liberalism, combining a greater emphasis on market-based inducements and incentives with a new reluctance to engage in direct provision of government services.

This is one of the great strengths of this book: the way in which the author carefully and thoroughly connects this local moment to broader subsequent shifts in American politics, especially the rise of neoconservatism, neoliberalism, and austerity politics. New York adopted an austerity-driven approach to government activities before Ronald Reagan and a new generation of conservatives reduced federal domestic spending and deregulated industry. This was also before neoliberalism coalesced in the 1990s into the so-called Washington Consensus. Phillips-Fein shows us a discourse in the 1970s during the fiscal crises in New York that is strikingly similar to the language and ideology that would later become associated with these important ideological movements.

There is a lost opportunity here, however. Phillips-Fein does not put on paper the details of the recovery package, the exact mechanisms and institutional structures used to implement the nascent austerity politics in New York. Central to the rescue plan for the city were two newly created nondemocratic institutions that took over foundational functions of the local government. The city lost control of its own budget, which instead had to be approved and overseen by the new Emergency Financial Control Board. The city lost the ability to directly engage with bankers and lenders on its own behalf in the capital markets. And, the city lost direct access to money raised by new taxes imposed to balance its budget and pay off its debt. Instead, the new Municipal Assistance Corporation borrowed on behalf of the city and controlled the city's access to its own tax revenues. While the author does a fine job of illuminating the ideological and policy dimensions of the rescue plan, she leaves unanswered many questions about the new budget processes and outcomes, the new borrowing mechanisms, and how these two new shadow governments, led by unelected businessmen and bankers, really worked.

The heart of Fear City: New York's Fiscal Crisis and The Rise of Austerity Politics is the link implied by the subtitle, the conceptual line that starts at the federal and local debates about how to respond to New York's fiscal crisis almost fifty years ago and ends at the ongoing contemporary debates over the size of government, the responsibility of government to provide social services, and the capacity of local governments to do more (or less) than is supported by federal policy. This connection and the related contextual framings offered in this book are so logical and self-evident that it seems silly that they've not been in print for years already. Phillips-Fein has deftly assembled this analysis and, finally, put it to paper and supported it with superb archival research. For historians of cities, of politics, and of business, the scholarly record and assessment of this pivotal historical moment is far more complete now than ever before.