An austerity plan that hits almost everyone

New York faces nation's largest budget deficit, but it's better off than in the 1970s.

Almost overnight, he's gone from "Mayor Mike" to "Mike the Knife."

Facing a gaping $7.5 billion budget hole during the next 20 months, New York Mayor Michael Bloomberg has put almost everything on the chopping block: from police and fire services to senior centers and tree pruning. At the same time, he's reached agreement with the City Council for an 18 percent property tax hike, the highest in the city's 300-plus-year history. He also wants to reinstitute the commuter tax at five times its previous level. Call it a "slash and tax" policy.

While most cities across the country are coping with severe budget problems, the immensity of New York's troubles - its deficit is bigger than most other municipalities' entire budget - puts it in a league of its own. That's in part because of the costs associated with 9/11, but it's also because the city is more dependent than any other on the sagging financial sector to make up its tax base.

Wall Street is a pale reflection of its former self. It's expected to generating less than $8 billion in profits this year. In 2000, it brought in $20 billion.

As a result, Mr. Bloomberg, the billionaire businessman-turned-politician, is presented with a political reality that is making no one happy. It's testing his fiscal acuity as well as his mettle as leader. The Citizens Budget Commission, an independent watchdog group, has given him a "D." And his approval rating has plummeted 16 points since July.

"The honeymoon is over," says Maurice Carroll of the Quinnipiac Polling Institute, which keeps track of the city's pulse. "But he's also won the argument: 89 percent of New Yorkers believe the budget crisis is ... serious."

Some pundits parallel this fiscal situation with the city's near brush with bankruptcy in the mid-1970s - the era that produced the famous headline "Ford to City: Drop Dead." But as historian Kenneth T. Jackson notes, this is a far different place from a quarter century ago. Even before 9/11 reignited New Yorkers' love affair with their big, gritty city, the metropolis had already transformed itself into a pretty nice place to live and work. And that, he believes, bodes well for a solid recovery.

'Stronger sense of affection'

"In the 1970s, the general view was that cities were dying and as soon as people had enough gas in their tanks, they'd head for the suburbs and the hills," says Mr. Jackson, president of the New-York Historical Society. "There's a much stronger sense of affection and loyalty to the New York City than there was then, and a much stronger sense that the city is the future and not the past."

But what kind of future will be determined in the next few months as the city known for its excesses is forced to economize. At first blush, it's clear that it's not going to be pretty.

The marble steps of City Hall, mostly empty this year, are again thronged with protesters. Last week, hundreds of seniors crowded together shouting "No cuts" and "Seniors vote!" to protest the proposed closing of 32 senior centers. Less than an hour before, it was City Council members and dozens of firefighters shoulder to shoulder, demanding that as many as eight fire stations slated for closure stay open.

In the new budget agreement, they got their wish: The mayor has agreed to keep the stations open for now. A commission will look at ways to cut $2.2 million from the department's bottom line and will decide whether to close any stations. "We have to balance the budget," Bloomberg says. "We have to keep the city going and the quality of life up."

If the cuts are generating ire, the tax increases are prompting outrage, particularly among conservatives. They're incensed that the Republican mayor chose to make up the bulk of the deficit with taxes. For every $1 in cuts, there would be $2 in tax hikes.

E.J. McMahon of the conservative Manhattan Institute, for one, thinks that's ludicrous. "This is already the most highly taxed city in America," he says. "You need to unleash the private sector in the city and not burden it."

More frugality ahead

The tax hike and cuts agreed to will close the additional $1.1 billion gap that materialized this year. They will also help in closing next year's projected $6.4 billion gap. But New Yorkers are braced for even more cuts and tax hikes next year.

City Councilman Bill de Blasio is concerned that the fiscal situation could put at risk improvements that have been made in the quality of life. "For every year you slide backwards, it takes a lot more than one year to get back to where you were. There's a real multiplier effect," he says. "People are really going to get used to doing without for the next two or three years."

But he, like most New Yorkers, is confident the city will get through this. "New Yorkers are resilient," he says.

"You could say we've already been through the worst with 9/11."

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