Would It Be So Bad If New York City Dropped Dead?

Writing about a New York City that was groaning under heavy municipal debt in the mid-1970s, writer Ken Auletta observed that "For those with talent, this city is the final test." Fast forward thirty-five years, and Auletta's words remain true.

Whether it is finance, art, architecture, sports, fashion or food, the greatest minds and brightest talents still migrate to New York on a yearly basis in order to test themselves against the best. Lacking any natural resources, New York's sole asset is the incredible collection of individuals thriving within its borders.

This is important in light of all the hand wringing at present over New York's nosebleed levels of spending, and the fear that there will come a time when it won't be able to make good on its debts. The conventional view seems to be that default would signal the city's decline. The conventional view is wanting.

More realistically, a default might be the best thing to ever happen to the greatest city on earth. Indeed, if austerity were forced on New York's bloated government, it's a fair bet that in one fell swoop the city would soon shed some of the very people who subtract from its awe-inspiring brilliance. 

According to the Manhattan Institute's Nicole Gelinas, New York is set to announce a $66 billion budget which, despite the economic downturn and a generalized belt-tightening among its private citizens, includes spending increases over the next two years of $3.4 billion. On its face, the aforementioned increase speaks to city leadership that is divorced from economic realities that its citizenry knows all too well.

Sadly, it gets worse when we consider what some of this increased spending will help fund. Beyond the kinds of expenditures on parks, police and firefighters that New Yorkers presumably like, and are happy to pay for, recent reports from the New York Post point to a great deal of waste.

Within the city's labor unions, there is Lucille Roberts, executive director of District Council 37 whose annual pay tops out $333,000 per year. It's also reported that she enjoys a full-time driver, paid for by New York's hapless taxpayers.

There's also Veronica Montgomery-Costa, president of District 37, whose yearly pay tops out around $300,000 per year, not to mention perks that include expenditures on first-class air travel and luxury hotels allegedly necessary for her to remain aware of the doings of other union grandees around the country. The school aides she represents earn $14.14 per hour.

Considering the city's politicians, to read New York's newspapers is to regularly read about elected officials enmeshed in some kind of scandal. Given their control of New York's massive budget funded on the backs of the city's wildly productive citizens, politicians frequently find themselves in trouble for doling out favors with the money of others.

To reduce this to the absurd and sad, the most meritocratic city in the United States is served by some of the nation's most merit-less politicians. In a city that is the living embodiment of success, the political and union class is a needless blemish that detracts from the city's grandeur.

Importantly, this reduced grandeur brings with it a great cost. Forced to carry on their backs the very politicians and union leaders whose budgetary profligacy frequently threatens to bankrupt the city, the talented suffer nosebleed rates of taxation.

The taxes of course are nothing more than a price foisted on the enterprising, and also an entry barrier for the ambitious living outside New York City who might like to try their luck. In order to prop up the misdeeds and budgetary incontinence of the city's shifty political and labor entrepreneurs, the individuals who make New York the dream destination for the rest of the world must pay a steep price.

All of that in mind, it seems worry over what a New York City default might mean is overdone. Indeed, rather than worry, New Yorkers should embrace the idea of a default finally forcing austerity on those who have no concept of living within their means. Austerity would mean recession for New York's political class, not the brilliant individuals who suffer the politicians' shocking mismanagement of their tax dollars. 

And far from a black mark on New York, default and the resulting spending cuts would lead to the downsizing of a political bureaucracy that harms the city's reputation, and which exists at great cost in terms of tax-averse human capital lost to others cities. In short, the real New Yorkers who actually make New York City great must stop worrying, and learn to love a default.