A Half-Century After New York City’s Fiscal Collapse, Have We Learned Nothing?

the staff of the Ridgewood blog

NEW YORK, NY — Nearly 50 years after New York City teetered on the edge of financial collapse, the city appears poised to repeat its historic mistakes. Last week’s Democratic primary results stunned political observers as voters backed Zohran Mamdani, a progressive candidate whose platform many say could trigger another economic crisis if enacted.

Despite the painful lessons of 1975, when the city nearly declared bankruptcy, New York’s political class—and its voters—seem to have forgotten the past. Rising debt, unchecked spending, and anti-business sentiment are once again gaining traction under the banner of social equity, but critics warn the results may be devastating.

🔙 Flashback: NYC’s Fiscal Crisis of 1975

In October 1975, New York City faced a dire reckoning. With $453 million in debts due and only $34 million in cash on hand, the city stared down the possibility of bankruptcy. A last-minute rescue came through federal intervention and bank agreements, but the damage had been done.

As former Treasury Secretary William E. Simon described in A Time for Truth, the city had engaged in illegal and unsustainable financial practices—essentially running a Ponzi scheme using municipal bonds. Yet, no one was held accountable, and the narrative was quickly spun to portray city officials as victims rather than culprits.

🏙️ Fast Forward to 2025: A Familiar Path?

With Mamdani’s rise and support from prominent progressives like Alexandria Ocasio-Cortez, New York may be heading toward a similar fiscal disaster. Mamdani promises expanded rent control, government-owned grocery stores, free city bus service, and higher taxes on wealthy neighborhoods.

Critics argue these measures are economically unsound:

• Rent control has historically led to housing shortages and urban decay.

• Increased taxes on high earners may drive businesses and residents out of the city, shrinking the tax base.

• Public services expansion without revenue growth threatens to balloon the city’s budget deficit.

As with the 1975 crisis, the political narrative may overshadow the economic reality—until it’s too late.

📉 Lessons Ignored

William Simon warned decades ago that NYC’s problems stemmed not from helping the poor, but from over-subsidizing the middle class and municipal unions. Today, the same excessive public spending, coupled with hostility toward private enterprise, puts the city at risk of:

• Declining investor confidence

• Flight of capital and talent

• Escalating debt and budget deficits

• Deteriorating public services

And yet, the city’s political establishment continues to rely on high-tax, big-government solutions—despite evidence that they have historically failed.

🏛️ What’s Next for NYC?

Unless bold, pro-growth reforms are implemented—such as deregulation, tax reform, and free-market solutions to housing and transportation—New York risks a prolonged economic downturn. Mamdani and his allies may have media momentum, but history shows that ideology can’t defy economic reality.

📢 Final Thought

New York doesn’t need another 1975. It needs leadership that understands finance, prioritizes fiscal responsibility, and promotes economic opportunity for all—not just more government intervention.

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