I came across this article in the Sheerpost blog. It contains a handy history of New York City's financial troubles in the '70s. Wall Street's refusal to market or buy its municipal bonds sunk many of the admirable programs it offered, including free college tuition at NYU. It's another case of the perverse "golden rule." (Whoever has the gold makes the rules.)
The city's administration also appealed to the federal government to give them bridge loans until they could finance their debt, The Ford administration refused, inspiring the famous "Ford to City: Drop Dead" headline.
To me this is yet another reminder that public financing and public banking is an absolute necessity, otherwise, even noble efforts like Mamdani's agenda will be impossible to implement. This impossibility would make progressive candidates into liars unless they construct a workaround like public banking.
One follow-up: Because City was strapped for cash, it had to sell land it had set aside for affordable housing to a developer eager to cash in on the distress: Donald Trump. Naturally he built high-end housing, not the affordable stuff. Gee, I wonder why real estate is so expensive in NYC!
The Biggest Threat to Mamdani’s Agenda Isn’t Hochul or Trump — It’s Wall Street
October 20, 2025
Zohran Mamdani at the Resist Fascism Rally in Bryant Park on Oct 27th 2024 (by Bingjiefu He) | Wikimedia Commons
By Michael Beyea Reagan / Truthout
If polls are to be believed, Zohran Mamdani is likely to win the mayoralty of New York City this November. An October 9 Quinnipiac University survey taken after Mayor Eric Adams dropped from the race shows Mamdani is up 13 points over his nearest competitor, disgraced former Gov. Andrew Cuomo.
Despite his youth and executive inexperience, Mamdani has all the advantages — a better ground game with tens of thousands of volunteers, a better social media campaign driven by young activists with an irreverent style, more favorable national and international media coverage, as much as four times more campaign cash on hand than Cuomo, a spate of high-profile endorsements (although not the leading officials of his own party), and other strengths.
Yet despite these electoral advantages, the deck is stacked against Mamdani’s administration. This is because the political coalition necessary to govern is quite different from that which can get him elected.
If Mamdani wins in November it will demonstrate that progressive Democrats, running within the party, can win elections based on popular working class reforms — that is, if they aren’t thwarted by their own party leadership.
In the post-World War II period, this was a winning strategy. New York had a highly developed social welfare state, once considered the closest U.S. example of Scandinavian-style social democracy.
Between 1945 and 1975, New York had free public higher education and a free municipal hospital system, spent billions on public and cooperative housing, initiated rent control and job training programs, expanded welfare payments, and, famously, subsidized the transit fare, which stayed at just five cents for the first 40 years of the MTA’s existence.
This “social welfare” economy of NYC came crashing down with a punch delivered by Wall Street in the 1970s. The 1975 fiscal crisis was the result of a collapsing municipal bond market and a severe economic depression. The city lost a whopping 500,000 manufacturing jobs between 1969 and 1975 as North American manufacturers moved plants out of cities and eventually out of the country. Both the depression and the market collapse were the result of actions by the “masters of the universe,” the Wall Street investors whose funds flowed to overseas investments rather than supporting domestic industry and the cities where they were rooted.
New York was caught in this neoliberal slurry. With a declining economy, it couldn’t pay its bills. And with the municipal bond market in free fall, it couldn’t get access to credit to help it bridge the down years.
This is where Wall Street’s punch came in. The punch was a “capital strike” in which major banks refused to issue New York City bonds until the municipal government cut social programs to the satisfaction of financiers. Welfare programs, public schools, drug treatment centers, senior centers, and even police and fire stations all got the axe. The City University of New York (CUNY) imposed tuition for the first time in its 130-year history. Sydenham hospital in Harlem was shuttered. By some estimates, as many as 60,000 municipal workers lost their jobs.
With NYC municipal bonds locked out of the credit markets, Gov. Hugh Carey and Mayor Abraham Beame turned to the federal government for short-term aid. But a new Republican president, Gerald Ford, and his phalanx of neoliberal economists — most prominently Alan Greenspan (chair of the Council of Economic Advisors) and others like Treasury Secretary William Simon and the infamous Donald Rumsfeld (then chief of staff) — refused the city bridge loans. In fact, at a closed-door White House meeting where the Ford administration debated funding New York, Rumsfeld urged the president to tell the city, “Not just ‘no,’ but ‘hell no.’”
That attitude, to let the people of New York City dangle, or “drop dead” as suggested by a headline in the New York Daily News, was shared by the banks and the federal administration. So-called fiscal responsibility has been the bugaboo of social reform ever since.
In 2025, for Zohran Mamdani, these conditions remain largely unchanged — especially one: Wall Street’s stranglehold on city finances. With private financing necessary for public programs, the private sector has the ultimate veto over social policy. It can simply close the purse.
For his part, Mamdani has promised to pay for these programs through tax increases at the state and city level. His programs will add an estimated $7 billion to the city’s $116 billion annual budget. And he says he will pay for them through a series of progressive taxes that would increase income tax rates for those earning over $1 million a year and increase the state’s corporate tax rate to match that of New Jersey — 11.5 percent.
Indeed, this is how city finances were managed through the golden age of post-war growth, imposing a municipal income tax in the late 1960s, as well as maintaining a stock transfer tax and other progressive business taxes.
To get his taxes, Mamdani will have to go through Albany. The Democratic governor of New York, Kathy Hochul, has promised to block any tax increase meant to fund social programs. New York businesses and bourgeoisie are also threatening not a capital strike, but capital flight — to leave the city if Mamdani is able to increase taxes.
In short, the economic and political structures that brought an end to New York’s experiments in social democracy in the 1970s are still in place. First, the structure of the federal system makes changes at the local level very difficult. With necessary changes to improve city finances having to pass through Albany or Washington, it can be virtually impossible to develop and finance the social welfare structures that working people desperately need in the city. This is even more difficult with neoliberal and far right politicians, Hochul and Trump, holding state and federal positions.
But there is a deeper problem. When public programs are financed through the private sector, banks hold the ultimate veto power. This is what happened in the fiscal crisis of 1975, when Wall Street locked the city out of the credit market and forced New York to make cuts to the satisfaction of the banking sector. And this had happened before, in 1933, at the height of the Great Depression, when the “bankers’ agreement” closed credit markets on the city and forced austerity on municipal spending. This is the structural veto that Wall Street holds over our very democracy.
This is not to say that these obstacles are insurmountable, or that the hope of progressive reforms can never be achieved in the U.S., or at least in New York City. Indeed, Mamdani may be savvy enough, may have the popular support he needs, may benefit from an organized working population that can force through these reforms and the financing necessary to pay for them.
It is to say, however, that in a capitalist democracy, capital holds all the cards. Electing a single, lone, progressive politician is not enough to discipline the rich to pay for what all we need. That necessitates power. We would need mass movements that can threaten much bigger disruptions unless the rich capitulate. As we’ve seen with the Obama, Sanders, and other campaigns, translating an electoral coalition into a political force with popular power to govern is not always possible.
To do so would require amassing power outside of elected office, a power that can overcome the structural power of the banks and the investment class. Indeed, popular movements are always necessary to force elected officials, even ones as earnest as Zohran Mamdani, not to compromise on their promises. And there is indication that Mamdani may already be planning to do exactly that.
This kind of popular power is possible. After all, during the New Deal, the business class was chastened enough to allow the passage of major, humane, social reforms — to the benefit of working people. With the Trump administration’s assaults on the New Deal “administrative state,” that cycle seems to have run its course.
What comes next is anyone’s guess, and if Mamdani is elected, his victory would bode well for what progressives can achieve. But his plans will get nowhere without disruptive popular movements forcing these changes on the rich. At best, this will get us a sort of new, new deal — but with an old deck. This is good, but not enough. Perhaps, with movement organization and institutions of popular power, we can get to a place where it’s possible to imagine a new deck entirely, not just a new deal. And one day, we may be able to flip the table and drive the moneychangers from the people’s temple altogether.
