Some Cheers for an Underdog

Before President Ford's speech two weeks ago rejecting federal aid to New York City, a Gallup poll showed that 42% of the public favored such assistance, while 49% were opposed. But a nationwide survey conducted by the New York Times and CBS after the speech indicated a turnaround: 55% of those polled approved of aid and 33% did not. A Harris poll revealed that the American people favor federal loan guarantees by a margin of 69% to 18% --if the city "balances its budget and such a plan would not cost the taxpayers any actual money." Pollster Louis Harris told congressional leaders: "The President's attitude of 'New York be damned' has changed the attitude of the American people."

City officials and sympathizers, meanwhile, embarked on a national campaign to try to encourage such feelings. In Washington, New York Mayor Abraham Beame cited the ways in which the city had cut back: a reduction of almost 36,000 public jobs, a freeze on wage increases and new construction, a boost in the transit fare to the highest in the nation (50-c-). Ford's "bumper-sticker philosophy," said Beame, had "triggered hatred, disunity and confusion." New York Governor Hugh Carey lobbied his former colleagues in Congress, then at the end of the week he headed for the West Coast to try to convince people that their fate was entwined with New York City's. Joining the fight, Terence Cardinal Cooke of the New York Archdiocese declared that the human needs of the city required the Federal Government to show "compassion and justice."

President Ford's attacks on beleaguered New York seem to have stirred a backlash of sympathy for the profligate city. As if in recognition of this, Betty Ford adopted a more conciliatory attitude when she went to New York to accept a Family of Man award for the President. Seated next to Beame at the New York City Council of Churches dinner, she expressed her "deep attachment, compassion and love ... for America's greatest city."

To be sure, many Americans had not changed their minds. Senator Howard Baker, a Tennessee Republican, reported that of 88 letters he had received on the subject by midweek, 79 opposed federal aid to New York and only nine favored it. Notes Bob Turner, district representative for New Hampshire G.O.P. Congressman James Cleveland: "Nobody we've talked to wants the President or anybody else to bail out New York City."

Nonetheless, New York's city hall reported sympathetic letters as well as contributions were flowing in from around the country. Wrote Mrs. Jean Fowler of Little Rock, Ark.: "This won't buy more than a few light bulbs, but I like the lady in the harbor that belongs to all of us." Even George Wallace, who has smitten New York more vigorously than any politician alive, said that he would no longer oppose loan guarantees for the city.

Congress became bogged down again in its efforts to aid the city when the AFL-CIO announced its opposition to a $7 billion loan-guarantee bill approved earlier in the week by the House Banking Committee. The labor leaders objected to the provision that would empower the city's overseers to renegotiate contracts with the public service unions. The House then put off consideration of the bill for at least a week.

There was no indication of a softening of the Administration's stand. Testifying before the Senate Banking Committee, Federal Reserve Chairman Arthur Burns admitted: "My concern over the possible consequences of a default by New York City was greater three weeks ago than it was three months ago and is greater today than it was three weeks ago." Nevertheless, he still opposed federal aid. He thought default would not have a "very lasting or very severe" effect on the sale of other cities' securities.

Facing an almost inevitable default, New York officials were patching together their most improbable refinancing scheme to date. "This is like throwing an 82-yard pass with four seconds to go," said Felix Rohatyn, finance chairman of the Municipal Assistance Corporation. "There's no point in throwing a ten-yard pass." The aim is to raise as much as $14 billion to cover the city's debt through fiscal 1978, after which the budget is supposed to be balanced. The plan includes generous contributions from city union pension funds as well as further loans from New York banks. Also contemplated is an exchange of short-term city notes for ten-and 15-year MAC bonds at 9% interest. If this is to succeed, most of the city noteholders must somehow be persuaded to make the switch--a dubious proposition.

Chain Reaction. In the event of default, city suppliers worried that they might not get their money, and there was talk of demanding cash on delivery. Some $268 million remains to be paid on city contracts with businesses in 22 states. Says Comptroller Harrison Goldin: "The impact of default on city contractors would set in motion a chain reaction adversely affecting their own suppliers, their own credit standing and in some cases their own local governments."

As costs mounted relentlessly for New York, revenues continued to shrink. The fiscal 1976 budget deficit, estimated at $724 million in August, has swelled to almost $1 billion. As always, the city is overestimating its real estate tax revenues. Delinquencies reached 7%, or $207 million, in fiscal 1975; and some 25% of all apartment buildings are already in arrears this year. At the same time, taxpaying corporations continue their exodus. Texaco is vacating 17 floors in Manhattan and relocating 1,450 employees upstate. Says Governor Carey: "Anything we haven't done and anything we haven't pursued we'll explore." But without federal assistance nothing is likely to work.

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