Adding to the controversies over both congressional and presidential impotence was the question about the looming financial default of New York City. For eight months, the nation's most populous city, paying the price for attempting to cope with overwhelming economic and social forces, without budgetary discipline, stood at the brink of economic collapse. Only in later months did it become apparent that the New York predicament merely epitomized the problems faced by the nation's older urban centers. Meanwhile, with default virtually a certainty, those with traditionally rural biases against big-city evils found satisfaction that, at last, the "chickens had come home to roost" because of "misguided liberalism." Ford, the conservative, Middle American president, assumed the support of that constituency and kept his distance from the situation even as harried local officials searched for ways to avoid fiscal disaster.
Ford's position was never a mystery. Yet, when he delivered a stern rebuke to the city on 29 October 1975, promising to veto any "bailout" of the nation's premier city, the finality of his statement came as a draconian blow. In one of those journalistic feats that convert a political leader's comments into pungent rhetoric, the New York Daily News reported the president's position with the headline FORD TO CITY: DROP DEAD . The Ford rationale, of course, was simple: only by his display of firmness would the city tidy its financial house.
In the days that followed, there was a growing realization that the administration's position had underestimated how much others throughout the country feared the implications of permitting the collapse of New York City. Vice President Rockefeller openly began to suggest that the government might indeed have to play a role. From within the White House itself came similar signals, especially from Treasury Secretary William Simon.
Ford held to his stern justification that he was forcing New York to restore its own fiscal viability, but at the same time, his retreat had become inevitable. Within the city, frantic negotiations took place involving all parties, including banks that had funded the city's short-term securities. Under the pressure, all interested parties came together during additional weeks of negotiations. Drastic reductions were made in the city's work force. Bankers restructured bond issues. The new Municipal Assistance Corporation was established to sell securities. Union pension funds were committed to their purchase. One near disaster after another was averted in a series of cliff-hanger scenarios.
Finally, with the city seemingly acting to repair the damage and the broader consequences of a default becoming clearer, Ford changed his stance when he met the press on 26 November. "I have, quite frankly," he announced, "been surprised that they have come as far as they have." Ford then asked Congress to approve federal loans to the city on a seasonal basis through 30 June 1978. He covered his own retreat by emphasizing that New York had "bailed itself out." Finally, by a narrow margin in the House, Congress approved Ford's request for a seasonal financing act to provide up to $2.3 billion for short-term loans during the next three years at 1 percent above the federal cost of money. To further fortify the city against default, in case that assistance failed to work, additional legislation was enacted to facilitate municipal bankruptcy proceedings so that New York and other cities could adjust repayment of their debts. Ford's position, combined with local and federal measures, induced some painful cutbacks but did start the process of rehabilitating New York's finances.
With the coming of the presidential election year, the status of the economy acquired a new urgency. Fortunately, by early 1976, inflation was easing off, and there were tentative signs of recovery, but unemployment would continue to fluctuate throughout the year at undesirably high levels. In his State of the Union message, Ford again urged a slowing down of government spending coupled with incentives for the private sector. "We thought we could transform the country through massive national programs, but often the programs did not work, he said, sounding a theme that became heard more frequently and with varying degrees of stress from Republican critics of the Democratic past. "Too often they only made things worse," he added, and called for a "new realism that is true to the great principles upon which this nation was founded.................."
The new york city crisis - Gerald R. Ford - policy, war, election, domestic, foreign, second