Moody’s Warns on New York City’s Debt

Consider it an early warning from the credit markets over Mayor Zohran Mamdani’s fiscal recklessness. That’s the latest from debt rating agency Moody’s. The agency, echoing the bad old days of the 1970s, is rebuking Hizzoner with a downward revision on the city’s credit outlook. It’s not a downgrade — yet. Moody’s, though, points to “sizable and persistent projected budget gaps” that suggest “underlying structural imbalance and reduced financial flexibility.”The warning, Moody’s says, comes “despite New York City’s still favorable economic conditions.” That’s cold comfort. The Marxist mayor is just weeks into the job, and it will take time for his high-tax, soft-on-crime, rent-freezing, hyper-regulatory policies to wreak havoc on the city’s business climate. The fiscal watchdogs at the Citizens Budget Commission are already warning that Mr. Mamdani’s tax hikes “would make New York less competitive.”Mr. Mamdani today condemned Moody’s move as “premature.” He points to the efforts at Albany by his far-left allies, who are pushing to bail out New York City by raising taxes on high-earners across the state. That would bridge the city’s projected budget gap of some $5.4 billion, enabling the new mayor to advance his agenda of “free” government giveaways without confronting the need to trim the city’s bloated budget and overstaffed bureaucracy.The problem with the mayor’s plan, though, is that Governor Kathy Hochul is not on board with the high-tax agenda of the ascendant left wing of her party. Mrs. Hochul, after all, is up for re-election in November and hardly seems keen to run on a platform of higher taxes. Mr. Mamdani’s refusal to acknowledge the warning from Moody’s, which the city comptroller, Mark Levine, calls “a sobering wake-up call,” suggests a denial of fiscal reality. The darkening budget outlook is marked by Moody’s in its announcement, which points to Mr. Mamdani’s spending plans. The schemes, the agency asserts, “give rise to larger multi-year budget gaps than previously forecast.” That New York is forecasting “large and persistent imbalances,” despite the city’s “still-favorable economic and revenue conditions,” Moody’s adds, “highlights the extent of its underlying structural budget challenges.” The debt rating agency warns, too, against using any budgetary gimmicks as a quick fix. “Gap-closing strategies that rely on non-recurring measures, including the use of reserves, would limit financial flexibility,” Moody’s marks, “especially if economic growth slows sharply or an outright downturn materializes.” By contrast, the city’s debt rating could be upgraded were New York to adopt what it calls “sustainable, structurally balanced budgets.”The credit warning calls to mind the fiscal crisis that followed the tenure of another fresh-faced liberal mayor, John Lindsay. In 1975, the budget commission recalled, “New York nearly collapsed under the weight of its own ambitions.” Leftist leaders “tried to lift up all people by funding an expansive array of programs” that the city “could not afford with money it did not have” and “became untethered to fiscal reality.” The city came close to bankruptcy.Today’s pressure on the city’s credit rating, Moody’s cautions, “underscores the importance of sustained policy discipline.” That tracks with the advice from the nonpartisan budget commission for Mr. Mamdani and his camarilla to “restrain spending and protect reserves” and to “drill into agency budgets to eliminate wasteful spending.” Is Mr. Mamdani willing to steer a course to fiscal responsibility to stave off a costly debt downgrade — or worse?

Moody’s Warns on New York City’s Debt

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