Emergency State Power and Austerity

This paper explores the legal origins of the austerity regime in New York City’s 1975 fiscal crisis. At the height of the crisis, novel state instruments were created to facilitate city entry to the credit markets by disciplining social spending in city budgets. First through the Municipal Assistance Corporation and then through the Emergency Financial Control Board these oversight committees had veto power over city spending combined with the ability to arrest and criminally charge city officials who refused to comply with EFCB mandates. These bodies represented a dramatic expansion of state power in the name of eroding state supports for social welfare. The legal standard for emergency state action in the economy of this type came from the precedents under the New Deal, in which the economy was invoked for the first time to enable state expansion in new ways. Previous emergency actions had been reserved for domestic unrest, in particular labor action, and in a sense the austerity regimes emergency powers represent a continuation of this tradition.