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Steven Malanga
Gotham’s quicker-than-expected recovery
. . . six months after September 11.
11 March 2002

Just a few weeks ago, the city’s attempts to recover from the terrorist bombing seemed stuck in neutral, with the redevelopment of Lower Manhattan mired in political wrangling, the economy sagging, and officials in Washington quarrelling over how much aid to give New York. But the second installment of George Bush’s $21.5 billion aid package to the city, announced last Thursday, topped off a string of good news in the last couple of weeks that may mark a turning point in the recovery from the terrorist bombing. While daunting challenges remain, the city’s outlook is improving rapidly six months after 9/11.

The new federal aid should give an economic boost to Lower Manhattan and to the rest of the city. The package sensibly directs money into much-needed infrastructure work, including $1.8 billion targeted to help the Port Authority and the Metropolitan Transportation Authority realize their vision of not merely reconstructing downtown’s damaged transit system but improving it with a new super transit hub that will link PATH and subway lines. The proposed transit hub could even set the stage for further dramatic improvements, such as bringing the Long Island Rail Road, with its Nassau and Suffolk County commuters, down to Lower Manhattan. The new federal aid also fills in gaps in federal emergency funding, including money to help rebuild Lower Manhattan’s damaged telephone and electric grids. Former Mayor Giuliani argued that the city badly needed a federal tax cut to stimulate its economy; in the absence of a cut, Bush delivered a consolation prize—$5.5 billion in tax credits and incentives to attract and retain businesses in Lower Manhattan. In effect, these are selective tax cuts.

Other encouraging signs are also starting to appear. The cleanup of the site itself has gone much more quickly and smoothly than anyone expected, and a temporary memorial to the victims is even about to debut. Governor Pataki has given Mayor Bloomberg representation on the board of the Lower Manhattan Redevelopment Corporation, from which he had been completely excluded until the last few days. Most important, all the players seem to be reaching a consensus about some basic elements of a new plan for downtown, especially the notion that the city should restore the street grid to the area and re-integrate the site into the rest of Lower Manhattan, including Battery Park City. Developer Larry Silverstein, the leaseholder of the World Trade Center, has moderated his claims and even seems willing to reconfigure Seven World Trade Center to allow Greenwich Street to run through it. As a result, Lower Manhattan seems likely to resume its improvement into a vibrant mixed-use neighborhood, active 24 hours a day, seven days a week.

All of this comes as the nation’s economic outlook brightens after a recession that proved much shorter and shallower than expected—which is good news for New York’s economy, whose bedrock is the securities industry. Venture capital has been returning to the city, along with tourists: hotel occupancy rates have nearly returned to normal, a stunning turnabout from just a few months ago.

Still, the city has huge obstacles to overcome. The Lower Manhattan Redevelopment Corporation has been too lethargic in its revival effort and must seize the initiative presented by this new federal money. It must now move swiftly to provide a master plan for Ground Zero so that building can begin.

The city’s own budget also remains out of balance because of excessive spending and declining tax revenues. In coming weeks, the mayor and city council leaders will begin their debate on how to balance the city’s books. The mayor needs to keep resisting calls to raise taxes—a move sure to short-circuit any nascent recovery. And he should reconsider his risky plan to borrow heavily to fund the city’s operating deficit, a move reminiscent of Gotham’s budget gimmicks of the 1970s, when such borrowing helped plunge New York into a fiscal crisis that came within a whisker of bankruptcy.

September 11 marks the most infamous day in New York’s history. But the revival that seemed so remote that day is now, six months later, clearly under way.

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More by Steven Malanga:
Borrowing Trouble
Why the State and Local Pension Problem Will Get Worse
Grassroots Soccer Mania
More . . .
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