New York

New York City is America’s largest city, its financial capital, its center of arts and letters and media, and its largest immigrant destination. Since September 11, 2001, it also has been a symbol of the country’s war on the constant yet unseen threat of terrorism. New York’s achievements were not inevitable. They happened because New Yorkers—and not least those who came from elsewhere and opted to become New Yorkers—worked to make them happen. They did it in a city that has a certain enduring character that goes back to its birth as the 17th-century Dutch colony of Nieuw Amsterdam. Simon Schama’s The Embarrassment of Riches paints a picture of the Old World Amsterdam that speaks to the character of the New World settlers. They came to America from “the richest city in the world; full of people who work hard all day and stay up late at night, smoke too much tobacco and drink too much coffee and gin, but are dazzlingly smart and shrewd; people who know their way around every corner of the globe and can make fine aesthetic discriminations, but are attached to their uncomfortable, crowded, bad-smelling city. They were merchants and manipulators with no aristocratic pedigree, welcoming any religious or ethnic group who can achieve and accumulate and show good taste, cherishing education and culture but indifferent to credentials.” Probably fewer than 2% of today’s New Yorkers are descended from the Dutch of Nieuw Amsterdam, but the character of the place endures in daily life and in its great institutions, and helps explain its miraculous growth. Combine Amsterdam and America, Dutch character with British-born political freedoms and American military strength, and you have the opportunity to build a city-state that can lead the world—and be the natural target of terrorists who hate that civilization.

New York was not always the nation’s leader. In 1776, it was only the seventh-most populous colony. Only in the 19th century did the descendants of Dutch patroons, Huguenot refugees, British West Indies traders and Yankee farmers become the nation’s most successful merchants and capitalists, forging the first routes to the great American interior through the valleys of the Hudson and the Mohawk and building grand brownstone mansions on broad midtown Manhattan avenues. That early diversity provides one clue to New York’s success. If New York has been cynical, ready to cooperate with Loyalists and Revolutionaries, depending on who was ahead, it has also been tolerant, ready to accept anyone smart or rich enough to be counted a success. It has been propelled upward at each stage—forging ahead of London as a financial and manufacturing center by World War I and staying ahead of surging Chicago—by incorporating every immigrant wave and consistently rewarding intelligence and hard work, with no concern about preserving hierarchies.

New York’s success has been a product not only of market economics, but also of government—and politics. The English saw New York as a pivotal point in North America, a connecter of its northern and southern colonies and an avenue to the interior. That is why the Lord High Admiral, 30-year-old James, Duke of York, ordered his fleet to take Nieuw Amsterdam in 1664; the city and state are named for the man who was later King James II. The Iroquois, the most deeply rooted and militarily strong Native Americans, were kept in place for 100 years by an alliance with British troops, then were driven out of their homelands in upstate New York after the Revolution. The Erie Canal, which connected western New York State with the Hudson River, was the project of Federalist Gov. DeWitt Clinton’s state government. New York led the nation in political innovation. Martin Van Buren’s Albany Regency was the first state political machine, an ally of New York City’s Tammany Hall. Van Buren invented or institutionalized the Democratic Party, the national convention and the inaugural parade. His adversaries, Thurlow Weed and William Seward, formed the Whig Party and ultimately became Republicans. Noting that Van Buren’s Democrats were winning large margins from Irish Catholics and other immigrants, the Republicans too made bids for the newcomers’ votes. Both parties served the function of mediating between the divergent interests of the New York City masses and upstate New York’s farmers and burghers, a conflict still evident in New York between city and country, immigrant and native, Catholic and Protestant, the Big Apple and the apple-knockers.

Both parties also worked to protect New Yorkers against the untrammeled workings of free economic and political markets. Old-line Democrats embarked on an unprecedented, labor-intensive campaign to build infrastructure, the bridges and tunnels that made Greater New York possible. The tradition carried on from the time of Mayor Abram Hewitt, elected in 1886 over the single-taxer Henry George and the young Theodore Roosevelt, up through the time of Gov. Al Smith in the 1920s and his protégé Robert Moses, who built bridges, tunnels, highways, beaches and two World’s Fairs. Progressive Republicans, from Theodore Roosevelt through Elihu Root and Henry Stimson, worked to create civil-service laws and bureaucratized purchasing and spending to protect taxpayers from corrupt party machines. The Democratic Tammany machine led by Charles F. Murphy and the talented young men he advanced, Smith and Robert Wagner, responded to the shocking 1911 Triangle Shirtwaist fire—when hundreds of women jumped 11 floors to their death because fire escapes were blocked—by passing labor and safety laws. The results included minimum wages, maximum work hours, working-condition regulations, encouragement of unions, and state-owned electric utilities—the prototype of the New Deal, 20 years later, and the first American welfare state. In later years, New York pioneered public-housing and fair-housing laws, industry-wide unions (in the garment trades), rent control and dairy-price controls to help both New York City tenants and upstate farmers.

Statewide elections were exceedingly close, with Democrats carrying the New York City Catholic vote and Republicans winning upstate Protestants. Swing votes were cast by the 2 million Jewish immigrants, who supported a generous welfare state but mistrusted the Tammany machine and valued civil rights. The politician who combined these appeals most cannily was Fiorello LaGuardia, a nominal Republican but almost a socialist, an Episcopalian who was half Jewish as well as Italian, and the man who, as mayor of New York City from 1933 to 1945, built much of the public housing and many of the civic monuments that still stand. Incensed that New York had no airport, he built what is now LaGuardia within a year. Both parties produced politicians whose positions appealed to these swing voters, politicians who became nationally prominent and often presidential candidates at a time when the national media was much more concentrated in Manhattan than in Washington, D.C.: Democrats Smith, Wagner, Franklin D. Roosevelt and Averell Harriman; Republicans Thomas Dewey, Wendell Willkie, Nelson Rockefeller and Dwight Eisenhower, who was a New Yorker by virtue of the fact he was president of Columbia University when he was elected president in 1952.

The polity that these men built was productive, generous, tolerant and closely regulated. The country was becoming accustomed to working in big units—being employed by big corporations, represented by big unions, regulated by big government—and in this, New York was a natural leader. The financial dominance of Wall Street and the big banks was protected by federal regulation. The high-technology thrust of America in the mid-20th century was directed by big companies headquartered in New York’s suburbs or upstate: General Electric and IBM, Eastman Kodak and Xerox. New York took for granted the productivity of its thousands of entrepreneurs and the high skills of its largely immigrant-born, public- and Catholic-school-educated workforce. It was blasé about its own miraculous infrastructure—the bridges and subways, electronic cables and electric wires connecting it better than anyplace else with every corner of the world.

But in the last quarter of the 20th century, New York’s public strengths became weaknesses. The state that was clearly the national leader of a big-unit America lost the leadership of a country where growth had shifted to small economic units, where flexibility and adaptability had become more important than centralized planning. The institutions, practices and infrastructure that had helped produce New York’s successes became ossified. Welfare-state benefits became too expensive, measures meant to protect against corruption stifled innovation, and both failed to achieve their objectives: Ghettos throbbed with the pains of disorganization, and payoffs and rackets remained part of the everyday cost of doing business in New York as in no other place in the country. The noble aim of creating a public sector that would guarantee cheap rents and top-notch public schools, colleges and public hospitals, instead guaranteed that none of these were readily available. Rent control kept housing scarce, school bureaucracies and teacher unions stifled good teaching, public hospitals rationed care. The attempt to create a fail-safe government had produced a government that was sure to fail. The government that intended to aid growth seemed to be cutting it off—not completely, but enough to explain why New York State, which grew 32% in population from 1940 to 1965, grew only 1% from 1965 to 1990; during that same period, California grew 67% and Texas 64%.

People and businesses started voting with their feet, especially during the terms of Mayor John Lindsay, a liberal Republican who caved to municipal unions’ demands and borrowed against next year’s revenues to pay this year’s bills. That brought the city to the brink of bankruptcy in 1975, two years after he left office. In the 1970s, the population of New York, city and state, dropped by 1 million, an unprecedented hemorrhage of talent and productivity. Retrenchment followed, and private financiers and the state government took control of city government, cut spending and negotiated cutbacks in jobs and salaries with public-employees’ unions. In the 1980s, Wall Street boomed, and Manhattan once again brimmed with confidence. Taxes were cut further under Democratic Mayor Edward Koch (1978-90) and Democratic Gov. Mario Cuomo (1983-95), public-employees’ unions were for a time reined in, and rational management was installed. But institutional problems remained. New York’s Legislature remained unusually tightly controlled by the two chambers’ leaders, the Democratic Assembly Speaker, from New York City, and the Republican state Senate President, from upstate or the suburbs, and these leaders engaged in classic political logrolling, lavishing taxpayers’ dollars on each other’s pet projects. Public-employees’ unions reestablished their stranglehold. The mild recession of the early 1990s struck New York with force. Big upstate companies—Xerox, Kodak, IBM—suffered serious reverses, and a private sector that had grown little if at all outside Wall Street could no longer finance the growing demands of the oversized welfare state.

By the end of the 1990s, New York seemed to have adapted and changed. Republican Mayor Rudolph Giuliani, first elected in 1993, cut crime and welfare rolls in half and cut hard deals with the unions. Republican Gov. George Pataki, first elected in 1994, imposed huge tax and spending cuts in 1995. Wall Street and the financial-services industry boomed in the late 1990s, to the point that the jobs lost in the 1990-94 recession were replaced. Then came September 11, 2001.

It was a beautiful fall morning, the sunshine lighting a blue sky above the skyscrapers of Manhattan, commuters hurrying through the streets and subways to work. At 8:46 a.m., the first plane hit the North Tower of the World Trade Center, and everything changed. When the second plane hit the South Tower 16 minutes later, it was clear that America was under attack, at war, even as office workers fled the burning buildings and New York firefighters streamed in. The terrorists had chosen to attack a facility in the seat of government in Washington—the Pentagon (and a second target, but they were stopped by the heroes of United Flight 93)—and the seat of commerce in New York, to inflict the maximum possible damage. The people of New York, like those at the Pentagon and on United 93, responded with courage, determination and devotion to duty. Firefighters, police officers and rescue workers risked death to help others. Strangers helped strangers. People who had no experience with disaster figured out how to cope and help others. Millions volunteered to give blood, sent money, and provided food and supplies. The Wall Street Journal, headquartered across the street from the World Trade Center, scrambled to put out a newspaper that was distributed at the regular time across the nation the next day. In less than a week, the New York Stock Exchange reopened.

Giuliani and Pataki performed well in the national spotlight. But New York faced an economic downturn and a turn in the course of government. Despite heroic efforts at recovery, Manhattan and New York lost 200,000 jobs in 2001 and 2002. Downtown real estate values tumbled as financial-services firms decentralized and sought office space elsewhere. Giuliani was term-limited, and all the leading contestants were well to his left. Media billionaire Michael Bloomberg, long a Democrat, became a Republican and spent $70 million of his own money on the campaign; he beat Public Advocate Mark Green 45.1%-44.5%. Pataki, running for re-election in 2002, made a $1.8 billion deal with the hospital workers’ union and ensured that he would be re-elected without serious opposition. Faced with a fiscal crunch in 2002, Bloomberg increased property taxes 18% and raised other taxes as well. In his third term as governor, Pataki tried to hold down spending, but big tax increases, supported by Assembly Democrats and Senate Republicans, were passed over his veto. Nevertheless, the financial industry boomed as never before, generating revenues well beyond expectations. But the boom turned out to be fueled by mortgage-backed securities and other toxic assets, and in September 2008, the financial industry collapsed, with repercussions nationally and internationally, and with grave consequences for New York City and New York State.

New York City’s growth in the first decade of the 21st century was fueled almost entirely by immigration. The city’s population grew 3% from 2000 to 2007, to 8.2 million, and the four close-in suburban counties grew by a similar percentage as well. But this small change masked much greater movements. In those seven years, there was an immigrant inflow of 8% of the 2000 population and a domestic outflow of 14%. For the most part, the people moving out were the elderly, who headed to Florida, and middle-income workers and young blue-collar workers, who headed to lower-cost and lower-tax states like Virginia, Georgia and the Carolinas. Moving in were immigrants, who streamed into outer-borough neighborhoods and created new businesses, churches and neighborhood institutions—Caribbean blacks in Flatbush; Chinese in Flushing, Borough Park and on Staten Island; Colombians and Mexicans in Corona; Pakistanis and Bangladeshis in Jackson Heights; Greeks in Astoria; Russians in Brighton Beach; and Dominicans in Washington Heights and much of the Bronx. The Bronx is now majority Hispanic. New York City has about the same number of Puerto Ricans as it did in 1970, 800,000, but the number of other Hispanics has risen from 467,000 to 1.5 million.

Today’s immigrants are arriving in a different sort of city. New York has long since lost most of its manufacturing jobs, and many corporate headquarters have moved elsewhere. The financial-services industry paid enormous salaries and bonuses to those at the very top and generated service-sector jobs for those who tend to the needs of the rich. But even those jobs were cut back drastically starting in 2008. As historian Fred Siegel points out, the outer boroughs are increasingly dependent on public-sector jobs, with one-third of jobs in Brooklyn and half in the Bronx directly dependent on the city or state governments. New York’s Medicaid program, designed by Republican Gov. Nelson Rockefeller in 1966 to be far more generous than any other state’s, provides a lot of jobs, including many for immigrants: Hospitals are major employers in the outer boroughs and did not cut back during the recession. The bad news is, the trend tends to squeeze the life out of the private sector. Subprime mortgages encouraged immigrants to buy houses in the outer boroughs at what turned out to be unsustainable prices.

The suburbs have similar problems, exacerbated by much higher property taxes than those in the city. The immigrant inflow in the four close in suburban counties of Nassau, Rockland, Suffolk and Westchester is smaller, 3% from 2000 to 2008, with a domestic outflow of 6%. Places like Levittown, buzzing with young families moving in from Brooklyn in the 1950s, are aging and losing population. The high property taxes are in effect tuition to good suburban school districts, but become a heavy burden when the kids go off to college. Immigrant communities are coalescing in low-income suburbs whose first residents have departed. But with their high taxes and utility rates, the suburbs are not attractive to new businesses—the hedge-fund sector bloomed across the line to Greenwich, Conn.—and population is growing more sluggishly than in the city.

Upstate New York has even greater problems. Burdened with a state tax system constructed to support New York City’s welfare state, it has been at a substantial disadvantage compared with nearby Northeastern states, not to mention the Sun Belt, when it comes to attracting jobs. Medicaid mandates have forced upstate counties to raise property taxes as much as 70%. Large, formerly paternalistic companies have been shedding jobs. In the 1990s, IBM cut back heavily in the Hudson Valley. Kodak, hard hit by competition from digital cameras, employed 60,000 people in the Rochester area in 1981 but had cut its workforce by half by 2007. Xerox jobs in the area fell from 16,000 to 8,000. General Electric, which employed 40,000 in Schenectady in the 1950s, cut the payroll there to 3,000 in 2006. Buffalo, once one of the nation’s great steel producers, has become a center for the debt-collection industry. The 7 million population of upstate New York increased by only 6,000 people between 2000 and 2008, and 32 of 50 counties lost population. (Only two, Orange and Saratoga, gained more than 5%.)

In the first half of the 20th century, New York politics was a battle between the Democratic city, then with more than half the state’s population, and the Republican upstate. Jewish voters, concentrated in the city and moored to neither party, provided critical swing votes. In the post-World War II period, the suburbs grew and tended to produce small Republican majorities. Today the picture is different. New York voters turned to state and city Republicans amid the economically straitened and crime-ridden early 1990s—Giuliani as mayor, Pataki as governor. But they left no political heirs unless you count Bloomberg, a Democrat who changed his party registration so that he could run for mayor without the inconvenience of going through a left-wing gauntlet in a Democratic primary. (Bloomberg changed again in 2007, to unaffiliated, then persuaded the City Council to abolish term limits so he could run for re-election in 2009.)

In national politics, New York is one of the most Democratic states. In 2008, Democratic presidential nominee Barack Obama carried New York City 79%-20%. But even if the city had not cast a single vote, he would have won comfortably. He carried the four suburban counties, 55%-44%, and he carried upstate New York, which had voted against upstate native Franklin Roosevelt in four presidential races. Large numbers of Jewish and black voters have turned Westchester from a Republican to a Democratic county. On Long Island, Nassau and Suffolk County threw out Republican machine politicians and installed Democrats. The upstate counties containing Buffalo, Rochester, Syracuse, Albany and Binghamton produced Democratic margins to counterbalance Republican margins in smaller counties. Democratic Sen. Charles Schumer, who defeated Republican incumbent Alfonse D’Amato in a close race in 1998, was re-elected in 2004 by 71%-24%. That was the pattern again in 2006. Democrat Eliot Spitzer, who narrowly defeated a Republican incumbent attorney general in 1998, used the office to bring charges of wrongdoing against corporate executives and Wall Street figures, and in the process restructured securities-market regulation. Even before Pataki announced that he would not seek a fourth term, it was apparent that Spitzer would be the next governor, and he won 70%-29%. Democratic Sen. Hillary Rodham Clinton, the 55%-43% winner in a vigorously contested Senate race in 2000, did not draw a serious opponent and was re-elected 67%-31%. Democrats hold a 109-41 margin in the Assembly. The state Senate got a Democratic majority in 2008, although that was thrown into limbo in June 2009, when two Democrats announced they were defecting from their party and joining Republicans on organizational issues affecting party control of the chamber. A few weeks later, the two returned to the fold, and majority control was back in Democratic hands.

For all of the recent Democratic triumphs, New York politics seems to be in flux. The huge victories of Spitzer and Clinton in 2006 suggested they could hold two of New York’s highest offices indefinitely. But Spitzer resigned in March 2008 after he was caught patronizing prostitutes, and Clinton, having narrowly lost the Democratic nomination for president in 2008, resigned in early 2009 to become Obama’s secretary of State. Incoming Democratic Gov. David Paterson wrestled with budget problems and dithered over whether to appoint presidential daughter Caroline Kennedy to fill Clinton’s vacancy in the Senate. His job ratings fell, and in polls in spring 2009, he trailed behind Attorney General Andrew Cuomo in the Democratic primary and Giuliani in the general election. His appointee to the Senate, U.S. Rep. Kirsten Gillibrand of upstate New York, had no statewide name recognition and was threatened with opposition in the Democratic primary. Cruising above all this was Schumer. His position in New York is impregnable, and in his two terms as chairman of the Democratic Senatorial Campaign Committee, Democrats gained 14 seats in the U.S. Senate. In the Democratic Senate leadership, Schumer is a steadying force behind Majority Leader Harry Reid of Nevada and Majority Whip Dick Durbin of Illinois, soothing tempers behind the scenes even as he, a notorious media hound, races to the microphones and cameras to comment on the latest developments. He seems to have a long and consequential career ahead of him in American politics.