Newsweek The Big Apple's Big Problem

New York City

When Michael Bloomberg stood on the steps of City Hall last week to be sworn in for a third term as New York City's mayor, he spoke in upbeat terms about the challenges ahead. The situation, however, is far more difficult than he portrays it. American financial power has shifted from New York to Washington, while global clout moves toward Singapore, Hong Kong, and Shanghai. Even if the local economy rebounds, the traditional media industries that employ many of Bloomberg's influential constituents likely will continue to decline. New Yorkers have long had an outsize view of their city; historically, its mayors have touted mottos that encouraged that view, from Rudy Giuliani's "capital of the world" to Mike Bloomberg's "luxury city." But as Bloomberg begins his new term, New York needs to reexamine its core economic strategy.

A good first step would be to recognize that the world owes New York nothing. The city cannot simply rely on inertia and the disbursements of Wall Street megabonuses to save its economy. Instead, it needs to rebuild its middle-class neighborhoods and diversify toward a wide range of industries that can capitalize on the city's unique advantages—including its appeal to immigrants; the port; and its leadership in design, culture, and high-end professional services.

It's also time to get rid of the Sex and the City image and start making New York a city where people can have both sex and children. This will become more important as the millennial generation enters its late 20s and early 30s later this decade. This is when many young migrants to the city, including upwardly mobile immigrants, typically become ex–New Yorkers.

Despite all the "back to the city" hype, New York over the past decade suffered one of the highest rates of out-migration of any region in the country. Young singles may come to New York, but many leave as they get older and have families. An analysis by the city controller's office in 2005 found that people leaving the city were three times more likely to have children than those arriving.

If New York is to thrive, it will need to keep more of these largely middle-class families. To do that, it needs to diversify its economy beyond Wall Street, which in 2007 provided roughly 35 percent of all income earned in the city. Since the recession, the city has lost 40,000 financial-service jobs, but the industry has been quietly downsizing for years: over the past two decades, more than 100,000 financial-services jobs have disappeared from New York. In good years, financial services provided an enormous cash engine, but it can no longer provide enough jobs. According to an analysis by the Praxis Strategy Group, finance now accounts for barely one in eight jobs in New York City. Most job growth has come instead in lower-paying professions like health care and tourism.

To become economically sustainable, New York needs to create policies that help encourage development in areas where its less wealthy citizens live. Most outsiders identify New York almost exclusively with Manhattan, yet roughly three out of four New Yorkers actually live in the outer boroughs: Queens, Brooklyn, Staten Island, and the Bronx. Neighborhoods like Bay Ridge, Whitestone, Flatbush, Howard Beach, and Middle Village are really New York's middle-class bastions.

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Bloomberg begins 3rd term in NYC

NYC

NEW YORK - Mayor Michael Bloomberg sought to strike a humble tone Friday as he began his third term by promising "to listen and to lead" and to take a fresh look at the challenges facing the city.

The 67-year-old billionaire acknowledged the unusual circumstances that landed him on the steps of City Hall to take the oath of office for another four years. A city term-limit law had barred officeholders from seeking a third, consecutive term, but he orchestrated a last-minute law change that let him run again in 2009.

"This term is a special opportunity, one that comes with extraordinary responsibilities," Bloomberg said. "I realize, too, that the building behind me is yours, and the job in front of me is to listen and to lead."

The former CEO first took office as a Republican in 2002 and was re-elected by a landslide in 2005. Now an independent, his most recent re-election was more difficult as he faced voter resentment for the way he went about changing term-limits law. His margin of victory over his Democratic challenger was far narrower than predicted — he won by slightly less than five percentage points.

Bloomberg heads into a third term with a little less political capital and a changed City Hall landscape. Twelve of the City Council's 51 members are new and two citywide officials who took office Friday, Comptroller John Liu and Public Advocate Bill de Blasio, have warned they are not afraid to stand up to the mayor.

About 2,000 invited guests, given mugs of hot cider to stay warm during the outdoor program, watched Bloomberg, Liu and de Blasio take the oath of office.

Bloomberg said he would take on the national issue of immigration reform similar to the way he focused on gun control in his second term. The mayor established the group Mayors Against Illegal Guns, which has pushed its agenda on Capitol Hill and in local political races throughout the nation.

Bloomberg did not give specifics on what he was planning to do, but said he would seek a bipartisan coalition to "support President Obama's call for comprehensive immigration reform."

In the past, Bloomberg has called for giving all undocumented immigrants the opportunity for citizenship. He also has advocated the idea of a DNA or fingerprint database to track and verify legal immigrant workers.

He said the city's future depends on honoring "the ideals that have lit the lamp of liberty in our harbor for more than a century."

Liu, the new comptroller, noted in his speech that "economic misery cuts ever deeper into families across the city."

The first Asian-American in citywide office also thanked his parents, who he said "could have had a lot in Taiwan but they gave everything up so their kids could grow up American."

The mayor, whose fortune is estimated at $17.5 billion by Forbes magazine, spent more than $102 million on his re-election campaign. But he clamped down on lavish spending for the inauguration, foregoing a traditional party and instead spending the day visiting people doing volunteer work throughout the city.