NEW YORK: Last-Minute Bailout Of a City on the Brink

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Eventually, cracks appeared in the Administration's monolithic resistance. Federal Reserve Chairman Arthur Burns expressed growing anxiety; Vice President Nelson Rockefeller broke with the President and urged aid to the city. Even hard-line Treasury Secretary William Simon quietly began to ponder a plan for assistance. Some give was also apparent on the other side. Carey and his financial advisers, who gained great power over the city, ordered deeper cuts in the city budget and girded for an epic battle over a tax increase. The Governor had to overcome the opposition of upstate Republicans in the legislature as well as the Democratic minority caucus — blacks and Puerto Ricans — who protested reductions in social services and demanded a larger voice in city management. When he finally won his tax package, Carey took full responsibility for the unpopular action. Ford praised his "very courageous stand."

Even with the long-sought federal aid, New York has not completely shed its troubles. Scarcely is one insolvent agency rescued than another pops up. Largely because it has lent so much to the city, New York State has a tough time borrowing money. Four state agencies, financed by the dubious "moral obligation" bonds, are in danger of default. If they cannot repay the $1.5 billion they owe over the next three months, they will become another financial drain on the hard-pressed state. To avert default, David Rockefeller, chairman of Chase Manhattan Bank, said federal aid might have to be given to the agencies.

In many ways, New York City's long-term prospects remain bleak. More austerity lies ahead for a city whose services and safety have been declining alarmingly for the past few years. Schools and libraries, parks and tennis courts, hospitals and day care centers will be more crowded and less well maintained. Last week the city halted 46 construction projects.

The city's largely free universities are about to restrict their costly open admissions program, which admits every high school graduate. Now it is probable that students who have less than a C average or who rank in the lower third of their class will have to take a test to show that they have an eighth-grade level in reading and math.

Job Stampede. Last week all 338,000 welfare check recipients were mailed new eligibility forms; they must return satisfactory answers within ten days or face elimination from the rolls. Similarly, a state report last week urged that welfare benefits be reduced because an average family of four on relief gets — in cash, rent subsidies, Medicaid, food stamps and other benefits — nearly as much as an average working family of four. As programs and benefits are reduced, the underprivileged — largely blacks and Hispanic Americans — may choose to move to areas where it costs less to live. Thus, while minorities will continue to grow in proportion to the rest of the population, the trend eventually could taper off.

More immediately, higher taxes will drive middle-class people and businesses out of New York. "This migration has been going on a long time," says George Sternlieb, an urbanologist at Rutgers University. "Now the flow is a stampede." In the first nine months of 1975, the city has lost 193,000 jobs.