New York City faced a severe fiscal crisis in 1975 that nearly led to bankruptcy. The city’s finances were in disarray, with actual debt far exceeding initial estimates. Mayor Abraham Beame responded by slashing expenses and laying off city employees, leading to protests and strikes.
Garbage piled up, drawbridges were left raised, and unions spread “Fear City” propaganda. Desperate, Beame sought help from Governor Hugh Carey, who enlisted investment banker Felix Rohatyn to form the Municipal Assistance Corporation (MAC) to stabilize the situation. Rohatyn spearheaded efforts to agree on a rescue plan involving banks, unions, politicians, and officials, resulting in state-backed bonds.
The crisis climaxed in October 1975 with bankruptcy just hours away, resolved only when Albert Shanker, president of the United Federation of Teachers, agreed to buy city bonds to avoid blame. The resolution highlighted the interconnectedness of various entities and how New York’s bankruptcy could have had global repercussions.
NYC’s 1975 fiscal crisis revisited
A federal bailout followed, imposing austerity measures that drastically altered the city’s public services and institutions. Now, 50 years later, New York City faces another fiscal crisis with a projected $5.5 billion budget shortfall for fiscal 2026, growing to over $13 billion in fiscal 2028. Parallels to 1975 are unmistakable, with an exodus of high-paying jobs and middle-class residents.
However, the city’s prospects for a bailout look worse this time. New York is now a deep blue state, and the consequences of a president mistreating it are minimal. A Republican president and Congress would likely impose strict conditions on any bailout.
The city’s best hope may be a cooperative relationship with the Trump administration, but mayoral candidates seem to be finding ways to antagonize the president. New Yorkers may regret this when the time comes to seek help from the Oval Office.
