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Ester R. Fuchs
A Tale of Two Cities
Autumn 1992

Ester R. Fuchs’s new book, Mayors and Money: Fiscal Policy in New York and Chicago, explores the political culture of those two cities and how it has affected the governmental structures and fiscal policies of each. Fuchs, an associate professor of political science and director of the Urban Affairs Program at Barnard College, Columbia University, discussed her book at a recent City Journal Forum.

Why is it that some cities have a history of balancing their budgets while others do not? It may seem obvious that local politics largely determines a city’s fiscal affairs. But when New York had its fiscal crisis in 1975, many people didn’t see it that way. Instead, most observers pointed to the local economy, financial management, even to the personalities of individual politicians.

What seemed to be missing from the debate was the role local politics played in the city’s fiscal instability. Most people dismissed the idea that local politics mattered. They said the city was at the mercy of national and international economic trends over which local government officials had little control.

If this were true, it would have to be true for cities everywhere. Yet Chicago, where I happened to be living during New York’s fiscal crisis in the mid-1970s, had balanced its budget, even though it had the same economic problems as New York: the loss of its manufacturing base, the flight of the middle class to the suburbs, and an increase in its poverty population. In fact, quite in contrast to New York, Chicago has been a fiscally stable city over time.

I looked at the differences in how the political systems of these two cities had evolved. During the 1930s, both New York City and Chicago had fiscal crises in which they were locked out of the bond market and had to go to their state legislatures to have their debt restructured. Virtually everything we associate with New York’s 1975 fiscal crisis occurred in New York and Chicago in the early 1930s. Unlike New York, however, Chicago used its fiscal crisis to restructure its local policy, putting the city on a stable footing in the long term.

During the Depression, Chicago didn’t begin spending on welfare relief until the Federal Government made money available. Moreover, Chicago’s Mayor, Ed Kelly, used the Democratic Party machine to consolidate power in the Illinois State Legislature. The machine’s clout enabled Chicago to create a system of service delivery which included special districts and the county government. This enabled the city government to spread the fiscal burden outside the City limits. The city of Chicago avoided budgetary responsibility for such costly services as education, public welfare, hospitals, and transportation. At the same time, it kept political control of these services. When a regional district or authority was created, the Mayor would appoint the majority of its board members. But the city itself had responsibility only for such basic services as police, fire, and sanitation.

Meanwhile, New York took on more and more new services. In 1929, New York spent about 39 percent of its budget on basic services, while Chicago spent 74 percent. By 1975, only about 16 percent of New York’s budget was being spent on basic services, while in Chicago the proportion remained at a high 57 percent.

Chicago’s mayors were also able to control fiscal policy by using the political machine to control the City Council and local political interest groups. In New York, however, Fiorello La Guardia reformed the city by destroying its political machine. As a result, New York’s mayors are weak politically and need to placate interest groups in order to get re-elected. New York politics is characterized by what one of my colleagues calls “street fighting and pluralism.” Mayors end up giving in to the loudest interest groups. They resolve political conflict by spending money. That’s why city spending rose dramatically in the 1980s, based on a temporary improvement in the economy that turned out to have no long-term significance. In Chicago, the machine crushed this tendency—to the benefit of the city’s fiscal policy.

I examined fifty years of budget data and found that in New York, inflation-adjusted spending rose continuously between the Depression-era fiscal crisis and the 1975 fiscal crisis, except during World War II. In Chicago, there were periods when the budget rose and periods when it declined.

One of the interesting differences between machine politics and interest-group politics is that with the former, as in Chicago, the payback usually comes in the year immediately after the election. In New York, the payoffs always come before the election. When you have to pay in advance for your support, rather then rewarding it after you’ve been elected, it’s usually more expensive.

New York’s reformers traded away what was seen as a corrupt city machine, supposedly to get good government. But not only didn’t they get it, they also lost the positive part of machine government—the accountability it provided. There’s no political accountability in reform cities, and there’s no good government either, since political corruption continues. That seems to be true no matter what kind of government you have. Reform government has not brought efficient service delivery, nor has it remedied inequalities in service delivery. On the whole, the destruction of New York’s political machine turned out to be a poor trade for the city.

New Yorkers have great expectations each time they elect a new mayor. But it is very difficult to change a structure that has been in place for so long. Unless the underlying political structure is dealt with, the best intentions to achieve fiscal stability and effectively provide essential city services will not be realized.

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