Economic Context of the City and Country
With the war still continuing in the early 1970s, New York City underwent a fiscal crisis that was characterized by budget deficits, high debt levels, and a looming threat of bankruptcy. The crisis was triggered by a combination of factors including economic downturns, rising expenses, and ineffective fiscal management. The city had short-term debt that was approximately $485 per person which constituted 32% of city budget payments and was much higher than that of any other major U.S. city (Gramlich 2). The economic crisis was pushing industry and affluent individuals out of the city. The city was plagued by rising crime, falling city services, and worsening race relations. Violence erupted when Thomas Gilligan, a white, off-duty police officer shot and killed James Powell, a 15-year-old African American boy (Burns). Riots ensued for five days. Similarly, many low-wage municipal employees went on a series of strikes with the 12-day New York Transit Strike bringing the entire subway and bus system to a standstill (Burns).
For the entire country, the escalating costs of the Vietnam War strained government finances and contributed to budget deficits. The economy faced immense pressure from the build up of social unrest that was caused by the civil rights movements and the various labor strikes throughout the 1960s. On October 19, 1973, immediately following President Nixon’s request for Congress to make $2.2 billion available in emergency aid to Israel for the Yom Kippur War, the Organization of Arab Petroleum Exporting Countries (OAPEC) instituted an oil embargo on the United States. This embargo led to a significant reduction in oil exports, causing a sharp rise in oil prices and widespread shortages. The stress of this oil embargo combined with the strain of the Vietnam war caused a phenomenon known as stagflation: when both the rate of unemployment and inflation are high.
The crisis was so bad that before the National Press Club on October 29, 1975, President Ford mentioned in his speech that Mayor Beame testified in Washington that “the financial resources of the city and the state of New York were exhausted. [New York] Governor Carey agreed. They said, it’s now up to Washington, and unless the federal government intervenes, New York City within a short time will no longer be able to pay its bills” In fact, his speech became so famous that the Daily News headline, “Ford to City: Drop Dead” marked his presidency and sparked outrage. This lack of confidence by these important local, state, and government officials indicated just how bad of a situation that universities were in.