Nicole Gelinas of the Manhattan Institute has written an alarming and all-too-convincing post on the economic future of New York city:

In 1996, at the beginning of the tech boom, financial-industry jobs accounted for one quarter of New York’s private-sector wages. By 2007, they were a full third. From 2000 to 2007, the city’s tax revenues grew by 45 percent above inflation. New York grew accustomed to spending every dime of this easy money. In four years’ time, absent another bubble, New York will spend $4.8 billion more than it takes in annually – a permanent deficit representing more than 10 percent of revenues.
Because Wall Street remains propped up thanks to federal taxpayers and savers, New York is avoiding the question that the rest of the nation has had to confront: how do we live within our means? In New York, that entails addressing our projected public-sector benefits bills, which are just as fantastical as 2005-era home prices.

TARP and the rescues of A.I.G. and Citigroup pumped vast sums into the financial sector, but it’s safe to say that the public has little appetite for further subsidizing Wall Street. Mayor Bloomberg has been a skilled chief executive in many respects, yet his concessions to public sector unions have, despite recent efforts at restraint, set the stage for serious problems ahead.