Legal Commentary

New Yorkers, I have gradually learned, refer to the Recession of 1973-75 in hushed tones of fear as the time that NYC nearly became Cleveland. Will this recession be just as bad? Since last spring, the Independent Budget Office has been predicting dire tax losses from rising unemployment, falling property values, and a frozen credit market. The fiscal effects are masked by the limited recession-elasticity of the City's taxes. (Distress sales, for instance, temporarily boost revenue from the transaction tax). But everyone's bracing for disaster over the next two years.

All of which leads one to ask whether the public employees -- especially, the uniformed services -- will be re-negotiating their extraordinarily generous deals. In particular, Bloomberg and Patterson have been trying to put the "20 and out" benefit (retirement at full pension after 20 years) on the table. Back in the bad old days of 1973-1975, Felix Rohatyn was able to induce Victor Gotbaum, head of District Council 37 to accept wage and benefit concessions to save the City. Will we see a repeat of history a quarter-century later?

Don't count on it. Bloomberg has been notoriously ineffective at reining in the public employees' power. District Council 37 and the uniformed services have won wage increases that far outstrip inflation and private-sector pay. Under the Obama Administration, they have far greater hopes than they did in the 1970s of getting the Feds to foot the bill of the City's largesse. Recent history seems to confirm the old Wellington-Winter hypothesis that public sector unions are the ultimate Olsonian group, enjoying both the insiders' power of political organization and the power of an economic cartel.

I suspend judgment on the normative question of whether public sector unions' power is a good or a bad thing. Perhaps this power should be treated as a welcome vestige of genuine working class power in an increasing inegalitarian society. As a pure matter of positive prediction, however, there is less room to debate: The wage and benefits package that the public sector has managed to extract will, if left unaltered, bankrupt the City.