Financial crises are a perennial and perhaps endemic feature of democratic government, in part because so few public officials want to make this connection between money and the policies they advocate. Lois Scott, Chicago’s chief financial officer and the leader of the Municipal CFO Forum, echoes this theme. When a public official says, for example, “I’m for job creation,” Scott wonders, “Who’s opposed to job creation?” Anyone can talk about what government should do. The critical issue is how we will find the money to get these things done. That issue is the central theme of a new memoir by Richard Ravitch, former lieutenant governor of New York and co-chair, with Paul Volcker, of the State
Budget Crisis Task Force. Ravitch’s book, So Much To Do: A Full Life of Business, Politics, and Confronting Fiscal Crises, is an engaging set of interlocking stories shaped by an understanding of politics and democracy. There are real lessons in it illustrating the fusion of financial expertise and political acumen.
Ravitch had a central role in three major governmental financial crises. One of these, the near fiscal meltdown of New York City in the mid-1970s, is well known. The other two, involving New York state’s Urban Development
Corporation and the city’s Metropolitan Transportation Authority, will be less familiar to many, but I was struck by two similar themes. First, politicians hugely overreach in terms of policy objectives with little attention to the associated costs. In the case of New York City, Ravitch writes that in Mayor John Lindsay’s first term the city’s labor force grew from 250,000 workers to 350,000 and that as a result, city spending grew by almost 50 percent.
Second, when the crisis comes and it is clear that debts cannot be paid, the intervention typically involves the creation of a new agency that takes control of the revenue stream of the entity in trouble. In the case of New York City, the new agency was the Municipal Assistance Corporation. Wresting the revenue stream away from someone else and wringing money and concessions from the players who created the crisis while using the media to help engineer the votes to get it all done -- Ravitch tells the whole story with names, dates and places, and a deeply human touch.
A lot of people get into public life because they want to save the world. Back in the 1980s I went back to school to get an MBA in accounting and finance because I figured out that to save the world, or at least the parts of it I wanted to save, I needed to know how the money worked. For a guy who’s still learning, Ravitch’s book is filled with useful lessons.
