7 - The Other Green Revolution

ucla | HIST 12B | 2023-10-26 21:40

Table of Contents

continues from previous lecture

NYC Fiscal Crisis

  • deindustrialization & suburbization dec NYC econ
  • loss of pop, tax, jobs, good homes, underfunded schools -> social unrest
  • used municipal bonds and expanded public employment, provisions, and federal funding
  • Nixon determined crisis over in early 1970s and cut back federal funding
  • introduced opportunity for fin institutions
  • Citibank refused to rollover debt -> instead agreed to buyout after city bankruptcy on the condition of restructuring city budget (austerity)
  • introduced fees for public services to pay off bond holders first (like tuition at CUNY, fees at MTA)
  • required municipal unions to invest pensions in city managed bonds
  • NYC appeals to fed -> fed sec says NO to bail out suggesting it is a punishment for free public services and high wages?!?
  • -> infra deteriorated, unemployment rose, wages declined, schools closed
  • finance capital makes NYC business friendly
    • public funds for tele infra
    • biz subsidies and tax incentives
    • econ redirected to finance
  • NYC did not bankrupt but crisis was from years of crisis and suburbanization not overpaid unions or welfare

    Neolib Dem: Carter 1976-80

  • Carter and Ford supported reduced taxes, cut spending, backed strict measures to pull out of recession
  • cut welfare funding like aid to families and dependent children, food stamps under guise of cutting fraud/abuse
  • reduced taxes on wealthy, launched first efforts of deregulation of airline, transport, and financial
  • appointed Paul Volcker as Fed Chair 1979

    Paul Volcker Shock Therapy

  • attacked inflation by contracting money supply and raising interest rates by 2x in 1981
  • tighter credit -> reduced consumer spending -> fewer loans -> corps cut back on investment -> firms go under -> mass unemployment -> manufacturing throughput falls -> unemployment > 11%

    Tax Revolt (California)

  • home prices in 1973 are below average then 1979 are 42k higher, then 1988 143k higher
  • property taxes are rising during stagflation
  • Jarvis-Gann initiative/Proposition 13 1978 - reduced state’s property tax rev from 12 bil to 5 bil
  • set max real estate tax, reduced property tax rate by 80%

    Impact of Prop 13

  • loss of revenue -> cuts in basic services (police, fire, hospital, water, maintenance, sewer)
  • anti-immigrant sentiment, Californians down voting bonds to support public schools (xenophobia)

    Regulatory Capture

  • suggests state can help maintain free markets and promote business
  • Stigler’s thesis is that the regulators should be the regulated: finance firms should regulate finance industry, etc.
  • state should be used to provide public subsidy for industries, bailouts, manage entry of new competitors, adjust prices (against von Mises args), and laws to regulate labor

    Lobbyists

  • chamber of commerce, NAM, etc. and think tanks like American Enterprise Institute, Heritage Foundation pushed for neolib policy
  • 1971 Federal Election Campaign Act - authorized PACs (init for labor to have a greater say) but created many many more corp PACs
  • e.g. deregulation of banks -> no credit limits, relocation to slip past usary rights, invest in risky instruments -> many bank mergers

    Reaganomics

  • break air traffic controllers strike 1981 -> threat to unionization
  • “supply side econ.” - tax cuts, deregulation would stimulate biz and reduce govt power/size -> suggests govt is the problem
  • tax cuts subsidized corp mvmt to sunbelt non unionized states
  • corp taxes reduced from 70% to 28%
  • drastically cut welfare spending
  • raised military spending from 4.9% GDP to 5.8% (military inc by 46% -> housing and education slashed by 70-77%)