Ground zero for big government: special interest politics and the porkbarrel were invented in New York City. (Cover Story).(Cover Story)

Over the last century, only one mayor of New York City--Rudy Giuliani--was opposed on principle to the growth of government. And after eight years in office even Giuliani left the city with 31,000 more workers than he came in with, plus a per capita debt twice as large as the average of other big American cities. New York City's 8 million people owe $42 billion in outstanding debt, while the entire state of California, with 35 million people, owes $25 billion.

There is an intimate connection between New York's bloated workforce, its colossal debt, and its mayoral politics. In a metropolis where no one group has ever been strong enough to dominate city hall, our mayors--whether dapper or dumpy, mild-mannered or menacing--have consistently used the city budget to paper over class, racial, and ethnic antagonisms. The result: a constantly expanding city government.

In the 1920s, "Gentleman" Mayor Jimmy Walker's solution to New York City's tensions was to legalize Sunday baseball, boxing, and movies. Promoted to mayor by Tammany Hall--the city's legendary Irish Catholic political machine--Walker was a snappy songwriter and Broadway Boulevardier who symbolized New York in the Jazz Age of the '20s. He rarely allowed his job to interfere with his social life, and he paid his personal bills with contributions from people who did business with the city.

Walker paid the city's bills by borrowing from the banks. By 1932, explains historian Martin Schefter, "one third of the entire city budget was devoted to debt service," and the municipality's total debt, conveniently financed by Wall Street just a few blocks from City Hall, "nearly equaled that of all the 48 states combined." The city, which had to borrow from banks just to pay the cops who were battling Communists in the streets in the '30s, was reduced to a ward of financier J. P. Morgan.

Driven from office by evidence of personal corruption, Walker left for Europe with his mistress. His temporary successor was John O'Brien, another loyal Tammany man. Asked who his police commissioner would be, O'Brien replied, "I don't know, they haven't told me yet."

In 1933, with the city suffering from 25 percent unemployment, Fiorello LaGuardia, who despised both the Tammany ethnic bosses and big businessmen, came in to clean up the mess. Elected with the backing of Republicans and anti-Tammany reformers, the 5'2" LaGuardia, who could curse in five languages, won with only 40 percent of the vote in a nasty three-way race. A tough campaigner who bragged "I invented the low blow," LaGuardia carried the day with an unlikely coalition of Italian plebeians, WASP patricians, and Jewish socialists. In the patronage-driven government he inherited, the surgeons hired for city hospitals by the ethnic bosses had to be tipped if you expected them to operate.

In the 1930s, it was joked that New York was the one part of the Soviet Union where open debate was possible. In the early 1940s, while the U.S. and USSR were allied against Hitler, a trade delegation from the Soviet Union came to visit New York's mayor dressed in diplomatic finery. LaGuardia, something of a socialist himself, looked at the Soviet diplomats and then at his own baggy pants and frayed shirt. "Gentlemen," he announced, "I represent the proletariat."