Podcast Summary
The unique perspective of real estate managers and fiscal policy's use of deficits: Real estate managers offer local insights and global expertise to identify investing opportunities. Fiscal policy can use 'deficits' as a pretext for changes to government spending, as seen in New York City's fiscal crisis in the 1970s.
The perspective of a real estate manager like Principal Asset Management offers a unique blend of local insights and global expertise, enabling them to identify compelling investing opportunities across various sectors and markets. Meanwhile, in the world of fiscal policy, the term "deficit" can be used as a pretext to make changes to government spending that some may not favor. This was evident during New York City's fiscal crisis in the 1970s. Historian Kim Phillips Fein argues that the city's near bankruptcy was used as an opportunity to implement austerity measures, shifting the city's focus from social welfare programs to fiscal discipline. This episode of the podcast delves deeper into this topic, shedding light on how the narrative around deficits can be manipulated and the significant impact it can have on societal policies.
New York City's Unique Approach to Public Spending Post-WW2: New York City embraced a more ambitious public sector and social safety net in the post-WW2 era, with heavy funding for public health clinics, hospitals, public housing, public transit, and schools, making it distinct from the rest of the US.
New York City in the post-World War 2 period stood out from the rest of the United States by embracing a more ambitious public sector and social safety net, despite the national trend leaning towards suburbanization. This was evident in the city's robust public health clinics, hospitals, public housing, public transit system, and school system, all of which were heavily funded by the local government. The city's labor unions were also strong during this time, with the public sector being the first to unionize. This spending was fueled by a long-standing tradition of liberal to left politics in New York, which grew even stronger after the New Deal. However, this ambitious public spending came with opposition, particularly from the business community, who were concerned about bearing a larger tax burden. Overall, New York City's unique approach to public spending during this period set it apart from the rest of the country and shaped the city into what it is today.
New York City's Economic Anxieties in the 1960s: New economic concerns and anxiety about whose interests mattered most to city government led to a significant revenue crunch in New York City by the late 1960s and early 1970s, setting the stage for the city's fiscal crisis in the 1970s.
The early 1960s marked a turning point for New York City's economy as the city faced growing concerns from its economic elites over new taxes and whose voices mattered most to the city government. This anxiety came amidst real economic concerns about bearing the burden for public services and a deeper sense of unease about whose interests the city was responding to. By the late 1960s and early 1970s, New York City was grappling with a significant revenue crunch. Manufacturing jobs were leaving the city, replaced by lower-paying service sector jobs. The national recession deepened the city's financial woes, and the end of the war on poverty brought new costs for the city to bear. The federal government's commitment to addressing poverty and racial inequality waned, leaving the city with mounting expenses and shrinking revenue. These factors combined to set the stage for New York City's full-blown fiscal crisis in the 1970s.
New York City's Fiscal Crisis: Beyond Revenue: The city's fiscal crisis in the 1970s was driven by its reliance on short-term debt and the state's reluctance to grant more taxing power, leading to high interest rates and pressure to pay back loans. The crisis was resolved through state intervention and a shift in financial management.
New York City's fiscal crisis in the 1970s was not just about revenue generation, but also about the city's increasing reliance on short-term debt due to the state's reluctance to grant more taxing power. This reliance on short-term debt led to high interest rates and constant pressure to pay back loans. At the same time, banks were becoming less reliant on municipal bonds due to the relaxation of financial regulations and the growing importance of overseas income. The crisis was solved through the creation of state agencies to oversee the city's budget, refinance its debt, and provide funds to restrain its spending. This marked a significant shift in the city's financial management.
NYC's Fiscal Crisis and Federal Aid: During NYC's fiscal crisis, labor unions helped purchase debt, but federal aid came with significant budget cuts, potentially impacting essential services. The outcome of bankruptcy is uncertain, and alternative solutions were necessary.
During New York City's fiscal crisis in the 1970s, President Ford initially refused to provide federal aid but eventually agreed to a short-term program. The city's labor unions helped purchase its debt to ease the crisis. However, the federal government required the city to make significant budget cuts in exchange for aid, leading to a reduction in social services such as hospitals, clinics, day cares, and drug treatment programs. It's unclear if bankruptcy would have been a better alternative, as the outcome is uncertain, and opposition from the federal government was strong. Ultimately, the city had to find alternative political or funding solutions to maintain essential services. As a leading real estate manager, Principal Asset Management provides local insights and global expertise to uncover opportunities in today's market.
New York City's budget crisis in the 70s as a symbol of cultural conflict and permissiveness: New York City's unique budgetary challenges during the 70s, exacerbated by cultural differences, led to significant political maneuvering and long-term impacts.
During the 1970s, New York City was seen as a symbol of cultural conflict and permissiveness in the US, and the fiscal crisis was perceived as another manifestation of this lack of restraint. While there may not have been significant grassroots hostility towards New York, politicians capitalized on this perception to further their agendas. New York, unlike the US as a whole, does not have the ability to issue sovereign debt or print its own money, making its budgetary challenges more pressing. The discussion also touched upon the significant cultural differences between New York and the US during this time, with New York seen as a center of radicalism and permissiveness. Today, while New York may have lost some of its rough edges in the national consciousness, the fundamental difference in budgetary power between New York and the US remains. As the federal deficit continues to grow, it remains to be seen whether similar tough choices will need to be made at the national level.
Social services funding: a question of societal values and tolerated inequalities: The expansion of deficits should not lead to cutting social services, as there's enough wealth in the country to fund them. However, the question remains whether to fund them locally or risk instability, with cities' growing strength making businesses leaving less of a threat.
The debate surrounding social services and their funding, both in New York during the 1970s and in today's society, revolves around the kind of society we want to live in and the inequalities we're willing to tolerate. The expansion of deficits should not lead to cutting social services, as there is enough wealth in the country to fund them. However, the question remains whether such programs should be funded at the local level, where people have less ability to exit, or if this could lead to instability. The rise of cities as economic powerhouses today makes the threat of businesses leaving less credible than it was in the 1970s when many were actually doing so. Yet, despite cities' growing strength, businesses have become more powerful and less tied to a single location. Ultimately, the challenge is to find a way to pay for these services and address inequalities in a sustainable manner.
Understanding the Impact of Tax Reform on Cities: Despite some potential negative effects, the financial strength of cities like New York today is vastly different from the past, allowing them to weather tax reform changes. However, other states and cities may face greater challenges.
While businesses have the ability to seek out the best deals, the recent tax reform and budget changes under Donald Trump's administration are not necessarily a dramatic shift against big cities. Kim Phillips-Fein, author of "New York's Fiscal Crisis and the Rise of Austerity Politics," argues that while some aspects of the tax bill may be detrimental to cities, the underlying financial strength of cities like New York today is vastly different from what it was during the fiscal crisis in the 1970s. The city's budgetary disarray and lack of systematic bookkeeping during that time are not present today. However, other states and cities around the country may be in more difficult fiscal situations and could be significantly impacted by these tax changes. Ultimately, budgets reflect political choices and priorities, and the idea that the math is not the only factor in determining spending levels and quality of services cannot be ignored. While deficits do matter eventually, it's essential to have a nuanced conversation about the role of politics and priorities in budgeting.
Understanding the Interconnectedness of Political and Economic Forces: This episode highlights the interconnectedness of radical political movements and economic issues, emphasizing the importance of recognizing their relationship and its implications for fiscal and economic questions.
Learning from this episode of Odd Lots is the interconnectedness of radical political movements and economic issues, as discussed in relation to the events of the 1970s. Our guest painted a picture of a radical hub where various fronts collided, and this interplay had significant implications for fiscal and economic questions. However, this connection is not always apparent or recognized. It's essential to understand how political and economic forces influence each other, and this podcast episode sheds light on that relationship. Moreover, we wanted to share some exciting news with you! Our friend Matt Levine, who writes the popular Money Stuff newsletter, is teaming up with Katie Greifeld, a Bloomberg TV host, to bring the newsletter to life as a podcast. Every Friday, they will delve into Wall Street finance and other topics that make Matt's newsletter a hit. Be sure to check out Money Stuff the podcast on Apple Podcasts, Spotify, or wherever you get your podcasts. Stay tuned for more insightful discussions on Odd Lots and Money Stuff!
