While America Aged

But this time, there was a catch. Koch warned he was going to lay off city employees—cops, parks people, and so on—in the district of every legislator from the city who voted for the pension package. Then he would go public, very noisily, in each community, and announce, “Your legislator— Assemblyman Smith—is responsible for this. I had to lay off a cop on your street because Smith [or Jones or whoever] voted to raise costs.”

“But I’ve been asked by the leaders of the legislature to see if I can satisfy you and get you to stop yelling,” Feinstein said. The leaders of the legislature were Warren Anderson and Stanley Fink. They did not like Koch publicly embarrassing legislators, including Anderson and Fink. They wanted to deal with the pension quietly.

Feinstein offered to delay the increases by a month. Koch, for once, didn’t say anything. Then Feinstein upped the offer to two months. Finally, the union leader said he could live with waiting an extra four months. The delay would save the city some money—but after that, of course, it would be on the hook to make higher contributions forever.

When Feinstein finished, Koch was still irate. Listening to Feinstein, the very same man who had once opened the drawbridges to protest a pension veto but now, having matured, had learned to work behind the scenes, and specifically to get the legislature on his side, made Koch want to scream all the louder. “I was so f——ing angry I wanted to kill him,” he would recall. “I could have choked Barry Feinstein and sent his body in a box to the others.” But Koch knew that if he did that, or rather, if he continued to squawk, Feinstein would withdraw his offer and the city would lose anyway. Koch made the deal.¹⁸ ²

The truth was that, new law or not, unions were slowly reasserting their muscle—a development that would have grave implications for the city’s pension burden as well as for ordinary subway riders. Not surprisingly, the TWU led the charge. Soon after Koch took office, in 1978, transit workers began to agitate for a big raise (their first since the fiscal crisis). From the MTA’s point of view, the timing was terrible. Subway service had reached an all-time low: trains were frequently delayed, the equipment was obsolete, and the stations were filthy. Then, in 1979, the MTA’s chairman resigned. Facing the daunting challenge of rebuilding the system, and now the troubling prospect of labor unrest as well, Governor Carey looked around for a savior.

Ravitch, who had rescued the state’s Urban Development Corporation and played a useful role during the fiscal crisis, was a natural choice. When Carey asked if he would like to run the MTA, the cautious builder made inquiries and discovered that morale among the workers was terrible and, what’s more, whoever took the job might have to deal with a transit strike the following year. He told Carey he would do it anyway. Then he went to lunch with former mayor Wagner, who gave him a piece of advice. “This will be hard for you to follow,” Wagner said, “but when you negotiate, make the union leader look good.”³

Heeding Wagner’s advice, Ravitch reached out to John Lawe, the Irish immigrant and onetime bus cleaner who had risen to become head of the union. Lawe was of a younger generation than Quill and inclined to be reasonable. However, the local’s membership was more fractious than ever. A nucleus of African American workers had been trying to unseat the leadership since the early 1970s, and Lawe’s position within the local was tenuous at best. By 1979, the executive board was in the hands of a group of self-proclaimed black Maoists.⁴

With the latter controlling the agenda, and the union demanding a 30 percent wage hike (over two years) as well as pension improvements, Ravitch said nix. Privately, he asked Lawe, with whom he had established a good rapport, to meet him in secret at the banker’s luxury apartment. The two worked out the terms of a deal—on the order of a 15 percent wage hike. (Given the high inflation of the era, this was reasonable but not extreme.) They agreed that neither would make it public, nor would Lawe disclose it to his colleagues.⁵Instead, they concocted an elaborate script for getting it past the local’s executive board. Here was the plan:

Ravitch would present an offer to the board at 10 p.m. on March 31, 1980, the day the contract expired. He would emphasize that this was the MTA’s “final offer” and, in a theatrical flourish, slam his hand on the table. Lawe would reject the offer and throw him out.

Then Lawe would turn to his board and say, “There will be a strike. But we shouldn’t do it without putting an offer on the table. So we’ll make one last proposal that the MTA will never accept.” At this point, Ravitch would reappear, listen to Lawe’s terms—the very same the two had worked out in private—hang his head as if in abject surrender, and agree.

That was the script. March 31 was Passover, and Governor Carey had catered a Seder meal for Koch and Ravitch (which the governor attended) at the St. Regis Hotel. Ravitch nervously played his part, sipping kosher wine while he waited for word from the Sheraton Centre hotel, the site of the negotiations. At 9:30 he got the call. When he arrived at the Sheraton, the scene was unruly. The board members had been drinking and were in a foul mood. Ravitch presented his “final offer” and was duly rejected.

But when Lawe suggested that they make a counteroffer, the board members angrily shouted him down. Some of them were drunk and the group was in no mood for a gesture of conciliation. At 2 a.m., without bothering to see if the MTA was truly done talking, the board declared a strike. Once again, millions of New Yorkers awoke to an immobilized city.

With the buses and trains ground to a halt, Koch paraded across the Brooklyn Bridge (it was an unwritten law that the mayor had to walk during a transit strike), denouncing the TWU as “unreasonable,” lending moral support to footbound New Yorkers and urging them to support a hard line against the union. Though Koch was not a party to the contract, the city faced a series of negotiations with other public unions, and the mayor feared that if transit scored big gains it would have a ripple effect on the rest.

Governor Carey and Ravitch both worried that Koch’s nonstop commentary was making it worse. The strike dragged on for eleven days. It ended when the MTA offered a 17 percent raise plus a cost-of-living increase—more than in the original, secret agreement. Koch fired an emotional parting shot, charging that though the city had won the battle in the “streets,” the MTA had “lost it at the bargaining table.”⁶

Actually, neither the union nor the MTA emerged from the strike feeling like a winner. The strikers were dealt a stiff penalty—two days’ pay for each day of the strike, as well as a $1 million fine levied against the union. The net result was a deepening of mistrust on both sides. The agency tried to recoup its losses by getting the TWU to increase productivity (by eliminating work-rule restrictions, for example). Also, seeking to quell tardiness, absenteeism, and other morale-related problems, the MTA cracked down on discipline.⁷Union members seethed with resentment.

Even more worrisome, subway performance dipped to an all-time low. Cars were breaking down every 6,200 miles (the equivalent of only five trips around the system).⁸Aside from the effect on commuters, who suffered excruciating delays and were squeezed like cattle into the cars that were functioning, the breakdowns made life miserable for the workers in numerous small ways, as they navigated trains with sticky doors or malfunctioning intercoms and trod along catwalks with rotted or missing planks. Employees and passengers alike feared for their lives as incidents of crime in the subways soared to well above fifty a day.⁹

Ravitch proposed to fix the system with a massive infusion of capital. He adroitly maneuvered for a tax break in Washington and reached out to Albany for financing. Governor Carey, nearing the end of his tenure, was strangely aloof, so Ravitch courted the legislature. At one point, when his request for taxes seemed all but dead, he arranged for police cars to escort David Rockefeller, chairman of the Chase Manhattan Bank, to a predawn tour of the subways. The patrician banker gazed in disbelief at the decrepit underground rail network, in which workers were still routing some trains with ancient hand switches. Hurrying back to his office, Rockefeller called Warren Anderson, the state Senate leader, and told him, “You got to pass Ravitch’s tax package.”¹⁰

The MTA launched an $8.5 billion spending program, which centered on buying new cars and refurbishing stations. It also ditched its prior policy of deferring maintenance; from now on, Kremlin-style five-year investment plans would be the rule. But of course, the MTA’s capital commitments created huge future obligations, just as its pension did.

Inevitably, the fare was raised. (From 1980 to 1995, the fare tripled, from 50 cents to $1.50, while the cost of living merely doubled.) Nonetheless, fare revenues typically covered no more than 60 percent of costs.¹¹To cover the gap, the MTA relied on federal and local subsidies, and on monies dedicated by the state, such as a portion of the revenue collected from tolls and various taxes and fees. Transit was thus knit ever more closely to the local economy.

In the latter part of the 1980s, the city’s economy boomed. However, the recovery was distinctly unequal. Investment bankers in red suspenders, the new princes of the city, amassed fabulous sums without, seemingly, making a commitment to the city’s industrial base. LBO artists such as Henry Kravis hollowed out companies and garnered stupendous fortunes, and even ordinary bond traders began to boast of seven-figure incomes and pricey second homes. Meanwhile, bus drivers got by on $30,000 a year.¹²

With the exception of retired police and firemen, who received Christmas pension bonuses courtesy of the rising stock market, public-sector unions had little to crow about. With the fiscal crisis over, they naturally wanted a share of the spoils. In strict financial terms, such workers had not fared as poorly as many believed. Their salaries had more than kept pace with inflation, for instance.¹³However, public employees, who constituted a sizable portion of the city’s middle class, did not share in the general feeling of prosperity, especially as once affordable neighborhoods were steadily priced out of reach by white-collar types. By the late ’80s, civil servants were smarting to make up lost ground, and the 1989 mayoral campaign provided a showcase for their frustrations. Mayor Koch (the unions’ frequent tormentor) was challenged in the Democratic primary by David Dinkins, the Manhattan borough president. As an African American, Dinkins had a natural affinity with the swelling population of black civil servants. Though the campaign had a racial overlay, Dinkins got a strong boost from public employees of all colors who were tired of being made to feel like the scapegoat for the city’s problems. His triumph signaled that public employees were on the way back.

The union unrest brimmed over, as it always seemed to, at transit. A group of radicals with roots in the Black Power and New Left movements had been agitating for higher benefits. They were winning a following through their lively newsletter, Hell on Wheels, which spoke to employees in a more personal voice than the mainline TWU. It focused on benefits and workplace issues, such as child care and separate toilets for female workers, that resonated with the rank and file.¹⁴

By the early ’90s, Local 100, which was feeling intense pressure from Hell on Wheels, began to fixate on restoring the “20/50” pension—that is, retirement after twenty years at age fifty. For all their radicalism, transit employees cared about the same issues as more moderate autoworkers: fringe benefits, health care, pensions. No union leader could ignore them.

Sonny Hall, the president of the local, learned this the hard way. In 1992, he secured a decent wage gain but gave a little ground on benefits by agreeing to a modest $10 copay for doctors’ visits. Outraged members voted the contract down—humiliating their leader.¹⁵

Hall tried to retake the offensive on pensions. Since direct negotiation of pensions was prohibited, he had to go through the legislature. This worked to the union’s advantage. In the difficult budget climate of the early ’90s, employers such as the MTA proved to be hard bargainers, while politically sensitive legislators were a bit more pliant.

As Local 100 was preparing to go to Albany, two powerful unions—the corrections officers and the sanitation workers—each won pensions equal to half of salary after twenty years’ service, similar to what they had enjoyed in the Lindsay era. Neither could claim a total victory, because employees would have to make additional contributions. Still, it was a big step, one that reestablished the notion of a pension after only a half-career.¹⁶

To buttress its case for a 20/50 pension, the TWU hired Jonathan Schwartz, formerly the chief actuary of New York City, to lobby the legislature. Schwartz, who in his former position had skillfully documented the heavy cost of pension benefits, sang a rosier tune as a union consultant, arguing that they would not be much of a burden after all. (“What people call actuarial science,” Schwartz explained, “has elements of art.”) The Republican-controlled Senate readily consented to the pension increase— perhaps because, if it was passed, the Democratic governor, Mario Cuomo, could be painted as a spendthrift. To save Cuomo the embarrassment of a veto, the Democratic-controlled Assembly refused to pass it.¹⁷

Hall proposed a more modest pension increase in 1994, when he argued that transit workers be allowed to retire at fifty-five (down from sixty-two) after twenty-five years on the job. This time, the legislature assented. As in the case of the sanitation workers, employees who opted to retire early would have to cough up higher contributions (5.3 percent of salary, instead of 3 percent). But for the second time since the fiscal crisis, the pension had been liberalized. Other municipal workers quickly demanded—and got—equal treatment.

At transit, the seesaw battle over benefits continued. Negotiating with Hall’s successor, the MTA won a round in 1994, when the union agreed to a 1 percent deduction for retiree health care. This concession, too, was bitterly unpopular (and was soon rescinded). The new head of Local 100 was forced to resign. He was replaced by Willie James, a former bus driver and the local’s first African American president. Given that two-thirds of the members were nonwhite, James’s ascension was a significant milestone.¹⁸Nonetheless, he faced an immediate threat from the Hell on Wheels vanguard, whose adherents had upped the ante by organizing a political faction within the union known as “New Directions.”

Dissident groups in American unions have rarely succeeded. Labor unions are not exactly beacons of representative democracy (many are corrupt), and even in honest ones ruling cliques have been able to work the system to remain in power. However, New Directions was unusually tenacious. In 1997, it came within a hair of unseating the local’s president. James now realized that he had to win a big increase—preferably in benefits—to prevent the radicals from taking over.

THE CAST was also changing at the MTA, thanks to the election of George Pataki, a little-known state senator, as governor. MTA-watchers feared that Pataki, who was committed to lowering taxes, would cut back on its budget. However, subway improvements are politically popular (even if the taxes to pay for them are not). Pataki appointed E. Virgil Conway, a banker and close Pataki confidant, as MTA chairman, and Conway came up with a time-honored method of advancing Pataki’s agenda without relying on taxes. That is to say, the MTA went on a borrowing spree.¹⁹

While this pushed the ultimate financing (that is, the debt repayment) into the future, the MTA had to make interest payments out of its ordinary operating budget. The combined effect of rising interest and rising pensions soon was to overload the portion of the MTA budget that was fixed. Both the pension and the debt saddled the authority with long-term commitments.

Pataki, however, could afford to be sanguine, as almost from the day of his election, in 1994, the stock market began an inspired climb. As pension assets soared, long-underfunded retirement systems were suddenly in balance. The bull market eroded the caution of pension actuaries (as it did that of many Americans). The actuaries began to take for granted that the market would continue to increase, giving rise to ever rosier forecasts and a consequent liberalization of plans.

This game was played all over the country. In many cases the “extra” money from stock market gains was spent on higher benefits. In California, for instance, state troopers were raised to “three percent @ 50”—a pension at age fifty equal to 3 percent of salary times the number of years served. Thus, after thirty years on the job, a trooper got essentially his full salary. When Social Security kicked in, he would be earning well above it. The fallacy behind such largesse, of course, was that the stock market could reverse course at any time. The higher pensions were forever.

Some jurisdictions chose to “spend” the surplus by reducing their pension contributions. California did both; at the same time that promised benefits were rising, cities and towns were putting less into state retirement funds. Illinois cut back on contributions with virtually no regard to actuarial need. In New Jersey, Christine Whitman, a Republican governor elected in 1993, relied on buoyant stock market predictions to finance hefty tax cuts, which were the centerpiece of her administration. Thus, on the eve of her reelection bid, in 1997, New Jersey borrowed $2.8 billion and advanced the funds to its pension system, on the convenient theory that its pension managers would make more in the market than the state paid out in interest. New Jersey even raised benefits. Meanwhile, Trenton achieved a sort of transitory budget balance by drastically cutting pension contributions. For three consecutive years, New Jersey’s contribution to the Police and Firemen’s Retirement System was zero.²⁰

Similarly buoyed by the bubbly stock market, New York City’s pension assets soared from $59 billion to $106 billion over the years 1995-2000.²¹ There is a well-known principle in pension economics known as “smoothing.” The idea is that, since the stock market fluctuates, pension plans should not assume that a rapid rise (or a sudden drop) will necessarily persist. Therefore, plans book only a small portion of their gains at the outset, and the rest (depending on whether the gains do in fact last) over a period of years. However, by 1999, the gains were pretty tempting. The city’s brassy mayor, Rudolph Giuliani, who had defeated Dinkins in 1993, had managed tight budgets during most of his tenure. But now he was gearing up for a U.S. Senate bid and loosening up on the budgetary reins.²² As spending increased, it was becoming evident that whoever succeeded Giuliani would have to deal with a deficit.

So Giuliani turned to the pension system for some extra cash. He did this by restarting the clock on “smoothing”—an accounting maneuver that allowed the city’s retirement system to record all of its recent stock market gains, which naturally made the system look more flush. To his credit, Robert North Jr., the city actuary, insisted on a dollop of conservatism, and scaled back his estimate of future asset growth. But the net effect of these changes was anything but prudent: they permitted the city to halve its customary pension investment.²³

In 2000, New York contributed only $700 million to the various city funds, down from $1.4 billion the previous year. Thus, in the short run, each city agency and employer—the fire department, sanitation, hospitals, and so on—reaped a tremendous saving. Transit’s pension expense was pared to a mere $16 million, which was less than 1 percent of its payroll.²⁴ From a longer-term perspective, this was patently reckless.

A similar dynamic played out at the state level. The state pension fund (which manages assets for state employees and for those of localities other than New York City) is managed by the state comptroller, then the Democrat H. Carl McCall. He was preparing to run for governor, against Pataki, in 2002. McCall had enormous political leverage, as he determined how much various employers were required to contribute. With the state’s fund brimming over, he dished out political chits, reducing contributions from school districts, cities, state agencies, and so forth to practically zero. Some districts were cut precisely to zero.²⁵

As the highest financial officer in the state, McCall might have paused to at least consider whether the stock market, on which the system’s present overfunding was based, was entirely dependable. He might have noted that the market had risen at an unprecedented rate, and that stocks now traded at a sky-high multiple of earnings—with the exception of many of the newly minted dot-com stocks, which had no earnings at all. There was no shortage of prophets forecasting a market correction or even a crash. If McCall, who was the sole trustee for a million workers and retirees, was not to temper his exuberance, and to conduct his office with at least a modicum of prudence, who was?

Certainly not the unions. Organized labor supported the move to reduce contributions. Though it might have seemed a selfless gesture for the unions to have excused employers from contributing to “their” funds, in fact it was cynical in the extreme. Since pension benefits were an inviolable obligation of the state, the financial condition of the funds was of no concern to the unions. One way or another the state would have to make good on their benefits.

And now, with employers enjoying a pension holiday, the unions demanded that the bounty be shared with the employees—that is, that they also be spared from contributing. This argument was deeply flawed. The principle of a defined benefit is that the employer promises a stated (thus “defined”) pension and assumes the full risk of paying it. The very reason such plans exist is to relieve the employee of any responsibility for what happens in the market, or with other contingent factors—life expectancies, for example—that would affect the plan’s cost. Since the employer assumes the full downside risk, it should also reap the savings.

New York City had already learned that straying from this principle could be costly. In the late ’60s, it had promised retired cops and firemen the so-called Christmas bonus—a variable benefit tied to the return in the stock market. Eventually, this was converted into a straight bonus—paid regardless of what the city earned in the market.¹⁹

Now, not only was the city stuck, but other unions were agitating for the same plum. Early in 1999, Norman Seabrook, head of the corrections officers union, demanded that his members get the pension supplement. Seabrook was a buddy of Pataki’s and regularly went to the races with the governor and with Senate leader Joseph Bruno. Though that surely helped, it was Pataki’s looming election battle against McCall that truly loosened Albany’s purse strings. For political reasons, neither party could afford to say no.

Seabrook not only got the supplement, he went after “heart bill” protection (as in the case of cops, this would entitle members with heart ailments to the presumption of a job-related disability, and thus a pension equal to three-quarters of salary). Mayor Giuliani—who would have to pay for the higher benefit, rightly objected: “There is no valid medical study that has confirmed that a police, fire or correction officer’s heart disease is a direct result of performance of duty.”²⁶No matter: the legislature approved, and Pataki signed, the increase. Subsequently, it extended heart bill status to sanitation workers and emergency medical technicians.

For good measure, corrections workers argued that employees with hepatitis, HIV, or tuberculosis should be entitled to a presumption that their conditions were, similarly, job-related. The city protested: “It will be virtually impossible to disprove the presumption and assert that the condition was not contracted in the line of duty.”²⁷It also warned that if the measure was enacted, firemen and cops would demand similar treatment. But Albany approved the bill. Then, as predicted, the firemen and cops got an HIV bill too. They also won back a cherished perk, as the legislature agreed to redefine their “final average salary” as their last year’s pay.²⁰

Most of these pension bills were passed by unanimous votes in the legislature. Consultants such as Schwartz were able to certify that, given the present surplus, increases would not require an appropriation from the budget. The prospect of a “free” entitlement made the legislators giddy. Pataki vetoed more of these bills than he approved, but the temptation to sign at least some was enormous. The unions contributed heavily to gubernatorial and legislative campaigns and simply could not be ignored. Transit’s Local 100 spent $1.2 million on political donations and related expenses in 1999-2000 alone.²⁸

New York State was hardly unique in such matters. Every statehouse in the country had been brought to heel, to a greater or lesser extent, by public-sector unions. However, New York’s system was especially corrupt. Instead of bargaining for benefits with the agencies responsible for paying them, unions merely had to gain the endorsement of legislators and officials whose motives were patently political.

McCall made a pension cost-of-living increase a central part of his campaign. Older retirees, who had retired on small salaries, were living on pensions of less than $15,000, and for them an increase was justified. The city favored a one-time raise only for those who were most in need. McCall, however, was pushing for an across-the-board, annual adjustment for everyone.²⁹

Not to be outdone, in 1999 Pataki threw a bouquet to the Civil Service Employees’ Association, which represented 70,000 state employees. The state had offered a hefty wage hike but the contract remained unsigned. The union was fed up with its members’ paying 3 percent of wages into the pension fund when the state was paying so little. So the governor proposed a sweetener: eliminate the contribution for anyone who had served ten years. The union snapped it up. Legally, of course, the parties weren’t allowed to negotiate pensions, so they settled for a little artifice: a side memo in which they agreed to jointly seek the necessary legislation.³⁰ Pataki had to know that every other union negotiating with the state would demand the same, and they did.

The city unions came next. The first contract to expire, in December of 1999, was transit. In 1998, the union had managed to get the legislature to approve the 50/20 pension, but Pataki had vetoed it. The MTA was not having difficulty either hiring or retaining workers; thus, from its standpoint, sweetening the pension was unnecessary.³¹Nonetheless, Willie James, the head of Local 100, was under intense pressure from his members, including those in the rival New Directions caucus, to reclaim their lost benefits.

Seeking to exploit the precedent set by Pataki and the state employees, James held out for a rich settlement. “You’re overfunded,” the union chief kept saying. “What are you saving it for?” North, the city actuary, did not totally disagree. Given the pension system’s flush condition, he advised the MTA that it could afford to lower member contributions.³²

James snagged a 12 percent wage hike over three years, a very steep rise in an era of low inflation. But his big prize was in pensions. The MTA agreed to recommend to the legislature that it reduce the employees’ contribution of 5.3 percent to a mere 2 percent—a significant saving. Thus, early retirement, which had been awarded to transit in 1994 on the condition that the workers pay for it, would—pending legislative approval—be theirs for free. Posthaste, James sped to Albany. Pataki had vetoed a pension bill the previous year, but now the climate was changing. As a Pataki aide recalled, “McCall was running. Stocks were doing well. The legislature was going to get credit; I figured: ‘Why shouldn’t we get some credit?’ ”

Pataki did take credit. In July 2000, the governor signed a package of legislation that amounted to the biggest pension hike since the Lindsay era. (Appropriately enough, the governor held a pen in one hand and a union T-shirt in the other.) The legislation cut contributions for state, transit, and city employees,²¹ and, what’s more, it partially indexed pension benefits to inflation—an unusual and costly plum. The cost of these changes over the ensuing decade was estimated at $36.5 billion. Pataki, McCall, and various legislators gushed that they had wrought an “historic” change, a “milestone,” and so forth.³³

None seemed to notice that the stock market had also hit a milestone, or, more aptly, a breaking point. In March, the bull market had finally snapped. In the subsequent three months, investors furiously unloaded tech stocks. By the time the legislature acted on pensions, shares in Amazon.com had plunged from 107 to 34 and the tech-laden Nasdaq index had tumbled 20 percent. The pension surplus that was the basis of the legislation was vanishing by the week, the day, the hour. But it was too late; the promises had been made. Giuliani abruptly canceled plans to cut the city’s personal income tax and announced a hiring freeze.³⁴The chill was on.

LOCAL 100 staged a disorganized election in November 2000 (while an equally disorganized contest was being held for U.S. president). In the prelude to the balloting, evidence surfaced that various union officers had cheated on their expenses. With the union in disarray, the members elected the New Directions slate, now headed by Roger Toussaint, a burly, stern-spoken native of Trinidad.³⁵

The transit workers’ new leader bore some superficial resemblance to Quill. Raised in a one-room house in a family of nine, Toussaint grew up amid a populace still seething at their former colonial overlords in Britain, which had relinquished the reins when Toussaint was a boy. As a youth, he was active in student protests and, on one occasion, arrested.³⁶He emigrated to the United States and attended Brooklyn College, where he again became immersed in left-wing politics. Then he quit school to become a welder. In 1984, Toussaint joined the Transit Authority as a subway car cleaner—a poorly paid job that stoked his working-class consciousness. Within a year, he was promoted; however, he became incensed by what he deemed the MTA’s arbitrary approach to discipline, as well as its insensitivity to the workers, and quickly became active in the TWU.³⁷

By the mid-’90s, Toussaint was aligned with New Directions, and getting release time to do union work—investigating complaints, filing grievances, and publishing a newsletter that, in his words, was “extremely critical” of the Transit Authority. There is little doubt he was a thorn in the authority’s side. In July 1998, a transit worker slipped and fell on a third rail, and was instantly electrocuted. Toussaint sped to the scene and made a videotape that he provided to the family’s lawyer. Three months later the Transit Authority fired him. The case was convoluted, and involved whether Toussaint had faked a back injury (the TA spent long hours tailing him, without getting the goods). The MTA ultimately reinstated him but Toussaint’s battle with the Authority raised his standing among the members, who instinctively favored rebels. However, Toussaint was less fiery than his image. In a comment that is also evocative of Quill, a union lawyer remarked, “It was always the rock throwers versus the cautious ones; Roger was cautious.”³⁸

Once in power, Toussaint sought to move New Directions toward the center. But he lacked his distant predecessor’s talent for mockery, including self-mockery—a certain moral pliancy that had enabled Quill to sail with the current. Toussaint was righteous and grave; his sense of grievance was too acute. Full of high purpose, he proclaimed in his victory speech, “We have to be as accountable to the public as we are to members.”³⁹

Kalikow was the scion to a real estate fortune started in Queens, just across the East River from Manhattan. H. J. Kalikow & Co. had been founded by his grandfather, a Russian immigrant who had scraped together the money to buy farmland in the years before World War II.⁴⁰The Kalikows put apartments where the farms had been and struck it rich.

Peter attended Hofstra University on Long Island in the mid-1960s, where he got a degree in business administration and studied General Motors. After college, he went to work for his father, though in his spare time he opened a factory in Italy to produce a sports car he called the Momo Mirage. Alas, though Kalikow could sell it for $13,000, the cars cost him $20,000 to make. Kalikow went home.

Not unlike Donald Trump, another heir to a Queens developer, Kalikow had a yen to build sexier stuff than apartments in the boroughs. He convinced his father they should take a little risk, and in the late 1960s and early ’70s the Kalikows started buying property in Manhattan. Peter went on to build luxury apartments, office buildings—even a hotel next to the World Trade Center. Some of it was highly speculative, but in the booming market of the 1980s everything he tried seemed to work.

With success, Kalikow grew increasingly brassy. He got buildings that stood in his way condemned, he evicted tenants, he beat back lawsuits. He was smart, but in an intuitive way as opposed to being analytical. He did not prepare for the possibility of a market downturn, or for failure of any sort. In 1990, the market did turn, and Kalikow was suddenly overextended. In 1991, at age forty-eight, he paid the speculator’s price and was forced to file for bankruptcy. This was due to a truly reckless gamble— buying the city’s afternoon tabloid, the New York Post.

Kalikow had become intensely interested in public service, and the failed investment in the Post exposed him to a fair amount of ridicule. Other papers gleefully reported that the bankrupt millionaire’s assets included a trio of mansions and estates, as well an $8.5 million yacht and a collection of vintage Rolls-Royces, Maseratis, Ferraris, and other cars.⁴¹He owed his banks $1 billion and his public life seemed over.⁴²

Kalikow, though, had the formidable advantage of a man who is too cocky to ever believe he is beaten. Also, the banks were quick to extend him new credit. Although he lost the Post and his hotel, he kept some of his real estate, including the Park Avenue skyscraper that was his signature building. As the economy recovered, he was soon riding high again.

Both before and after his bankruptcy, Kalikow sprinkled donations around to politicians, mostly Republican ones. In 1979, he and another developer had met over breakfast with Alfonse D’Amato, an officeholder and Republican Party stalwart in Nassau County. D’Amato told them he was going to run for U.S. Senate. “From which state?” Kalikow joked. But he agreed to serve as finance chairman for the campaign. D’Amato won, and after that the two became nearly inseparable.⁴³

Ironically, given Kalikow’s Republican ties, it was a Democrat, Governor Mario Cuomo, who launched his public career, naming him to the MTA board. In 1994, Kalikow backed Cuomo’s opponent, the then obscure Pataki, who was a protégé of his friend D’Amato. Pataki won, and rewarded Kalikow by naming him a commissioner of the New York and New Jersey Port Authority, the agency that ran the airports, the bridge and tunnel crossings in the metropolitan area and, among other assets, the World Trade Center. It was an important post but (prior to the attack on the Trade Center, anyway) not especially visible. In 1999, Pataki returned him to the MTA, this time as vice chairman. Two years later, he was moved up to chairman. This agency, which ran the transportation system he had ridden as a boy, was more to his taste. The subways and buses were highly visible. Kalikow would be responsible for moving eight million people a day. The political writers, remembering his adventure with the Post, were skeptical, to say the least. Kalikow was seen as a political novice, probably a dilettante. Worse, he was viewed as beholden to Pataki, and too close to D’Amato, who had a questionable record on ethics²² and who, since losing his Senate seat, had become a high-priced lobbyist on MTA-related business.

The system that Kalikow inherited was physically much improved. Some $50 billion had been reinvested in the subways since the Ravitch era, and train cars now ran an average of 175,000 miles (145 trips around the circuit) between breakdowns. Dozens of stations had been rebuilt.⁴⁴Also, subway ridership had resoundingly rebounded to its level of the early ’60s.⁴⁵

However, the financial picture was darkening. Pataki had eliminated the state’s former practice of subsidizing the MTA’s capital projects, forcing the agency to borrow ever more.²³ ⁴⁶The MTA’s costs were also inflated by high-level influence peddling. In one notorious incident, D’Amato collected $500,000 for placing a single telephone call to Conway on behalf of a client hoping to remodel space for the MTA. The project ended up running hundreds of millions above budget.⁴⁷

The full extent of ethics problems under Conway was not yet known (two MTA executives would later be fired when evidence surfaced that they had taken bribes).⁴⁸But the MTA’s image had been tarnished by the whiff of cronyism. Hopeful subway contractors contributed to Pataki campaigns as a matter of course, and the MTA’s board was thick with the governor’s pals. The appointment of Kalikow fit the pattern: a rich benefactor claiming his reward.⁴⁹

But the pundits had underestimated Kalikow. He was determined to be a forceful, independent chairman—not a crony.⁵⁰And he brought considerable political talents to the job. The secret of his charm was that he didn’t hide his ego or apologize for his wealth. (“I don’t take a salary,” he noted a few years after becoming MTA chairman. “I paid $70 million in taxes in three years. Who the hell do I have to apologize to?”)⁵¹His bankruptcy, which was born of his characteristic cockiness, had softened his roughest edges. “I thought I could do no wrong,” he admitted later. “I was a victim of my own success—of my hubris.”⁵² Failure had given the new MTA chief a heightened awareness, a sense of financial risk.

By the time Kalikow took over, in early 2001, the MTA had more debt on its books than all but a few states. He was just settling into the job when, on September 11, the Trade Center towers were attacked and the world, for a moment, stopped. New York had an exceedingly difficult recovery. Business activity, including tourism, was greatly slowed. Moreover, the stock market’s losses significantly deepened. The city’s pension funds collapsed, from $106 billion to $78 billion.⁵³

All this was devastating news for the MTA as well as for every department of the city, as they were all hit with steadily (and sharply) rising pension bills. Simply restoring the prior level of assets was no longer enough. The retirement system had in effect been thrice burned. Funds were depleted due to the low level of contributions during the late ’90s. They had suffered drastic losses in the market. And their liabilities had been swollen by the hefty increases in benefits approved in Albany.

Michael Bloomberg, the new mayor, put the city on an austerity diet, but he was powerless to do anything about pensions, or about health care expenses that rose automatically with medical bills.⁵⁴Bloomberg thus raised taxes on ordinary New Yorkers to pay for pensions. He served up an incredibly steep 18½ percent hike in the property tax. Within the year, every penny of the increase had been absorbed by the rise in pension costs.⁵⁵

Meanwhile, Bloomberg asked North, the actuary, for ideas on overhauling the pension system.⁵⁶North explored various alternatives, including switching the city from a traditional, defined benefit system to 401(k)s, which was the path being followed by many private employers. A few states around the country were contemplating such a switch, as a means of freeing themselves from pensions. North thought it was a bad idea. The original justification for public pensions—that they would deter employees from leaving—still made sense. Unlike employers in the private sector, who thrive on mobility, government employers such as schools, mass transit, and fire departments still depended upon stable workforces.

What North favored was retaining the present system but trimming its cost. Benefits should be lower; contributions higher. Also, given that people were living longer, it made no sense to be lowering the retirement age. Bloomberg agreed that cuts were warranted. However, such a step would, of course, require Albany to go along—unthinkable in the aftermath of the Trade Center attack, in which firemen and cops had died heroes’ deaths. For the moment, Bloomberg did nothing.

Kalikow was not so timid. The MTA was still reeling from 9/11 and in 2002 the authority offered a bare-bones contract. Among other terms, it demanded that employees contribute an extra $1,000 each toward their pensions. The prickly Toussaint regarded the entire offer as insulting. Relations between him and Gary Dellaverson, the MTA’s labor negotiator, turned chilly. Toussaint could not afford to disappoint his supporters (particularly those in New Directions), and the union prepared for a strike. With a shutdown looming, the mayor bought a bicycle as a sign to New Yorkers that they could pedal their way through a work stoppage. But Kalikow, for whom this was a first negotiation, was anxious to avoid a strike. Hours before the deadline, he got personally involved and sweetened the pot. He dropped the pension demand and improved support for health care. Toussaint, for his part, accepted a quite meager wage increase and agreed to productivity improvements. Thus a strike was averted.⁵⁷

Kalikow decided that Toussaint was more reasonable than his troublemaker’s image—a man he could work with. However, he was worried about the employees’ rising fringe benefits. So was Dellaverson. The two began to think about ways of trimming costs in the next contract. In the meantime, Kalikow tried to fix his budget. The year after the labor settlement, in 2003, he bumped the fare from $1.50 to $2.00. Even with the increase, the MTA was anticipating huge deficits.⁵⁸

Pataki, resisting calls for subsidies, said the MTA should simply get by with less.⁵⁹However, its biggest expenses could not be trimmed. Pension costs were exploding, and so was interest. (The MTA’s debt had doubled during Pataki’s tenure to $21 billion.) And the MTA’s continuing capital needs were huge—roughly $3 billion a year just for maintenance and upkeep. Within a few years, the agency projected, debt service, pensions, and other fringes would eat up 40 percent of its budget.⁶⁰

As the MTA’s fiscal trouble deepened, Kalikow began to prowl the corridors of Washington for increased subsidies—sloughing off criticism that a Republican should not be foisting such burdens on government. The MTA chairman would explain that mass transit was necessary for business, and therefore transit subsidies were good Republican policies. He would suck on a Tootsie Roll as he made this pitch, which made him seem boyishly earnest. Surprisingly, Kalikow managed to get nearly twice as much federal aid out of a reluctant Bush administration as the MTA had received during the Clinton years.⁶¹

He also began to pressure his patron, Governor Pataki, for a larger capital authorization than the governor, or the legislature, wanted. Then he implored the governor to raise the mortgage recording tax, the motor vehicle fee, and other state levies, and to earmark the extra money for the MTA. Appointed as Pataki’s man at the MTA, Kalikow was becoming the system’s advocate in Albany. Astonishingly, he got the new taxes he wanted. Next, after a bit of waffling, he opposed a plan, promoted eagerly by Pataki, to sell railyards owned by the MTA to the New York Jets for a football stadium. Kalikow declared that the Jets’ offer was an “insult.”

Though still a Pataki supporter, Kalikow had become more concerned with his own legacy. He wanted to leave the hundred-year-old subway system in better shape than he had found it—as he had not been able to do with the Post. Also, he had fallen a little in love with the subways: with the system’s vastness and its centrality to the average New Yorker—and, naturally, with his role as its protector. Even the New York Times, which early in Kalikow’s tenure had criticized the chairman for being a carbon copy of Pataki,⁶²changed its mind about him. Seeming surprised that Kalikow, unlike his predecessor, was willing to challenge the governor, the Times observed that he had been “better known as a Republican donor and heir to a real estate business than as a forceful voice in civic affairs. . . . But in recent months, Mr. Kalikow has become a far more forceful advocate for the system than Mr. Conway was.”⁶³

In 2004 and early 2005, Kalikow made some painful decisions. He deferred the plan to build a new subway line on Second Avenue (a dream of subway architects for decades), as well as other expansion projects. Also, he proposed eliminating bus routes, cutting back on late-night subway service, and other service cuts.

Kalikow, therefore, approached the 2005 contract talks with a feeling that he had already made some sacrifices. He had raised the fare, he had pressed for new taxes, he had given up, at least for now, on expanding the system. The TWU would also have to give. And the workers, he maintained, had little to complain about. A typical bus operator earned $63,000 (those close to retirement earned in the neighborhood of $75,000, and sometimes more, depending on their overtime). Even a low-ranking cleaner was paid $51,000.⁶⁴Kalikow thought of his workforce as among the privileged—blue-collar workers with middle-class incomes.

Although this could sound patronizing from someone who tinkered with Ferraris for a hobby, Kalikow’s analysis was basically correct. The average high school-educated worker in the New York area earned $29,000; a motorman earned more than twice as much.⁶⁵Thanks to its high wages and benefits, transit perennially had a long list of job applicants and razor-thin turnover (only 4 percent a year). Subway jobs were good jobs.

Since the MTA was beating its budget projections, thanks to the resurgent city economy and a real estate boom, Kalikow was prepared to offer what he considered a decent wage improvement. But the benefit structure was out of line. In particular, he wanted to cut back on pensions.

The pension obligation was simply staggering. Transit contributed $381 million, or 14 percent of the payroll, to the city pension funds. By 2009, the bill was expected to nearly double, to $620 million—more than four times the total of a decade earlier. Health care cost the authority an additional $410 million, and it too was rising at double-digit rates. And transit workers contributed only 2 percent of their salaries for pensions and nothing for health care. Meanwhile, they as well as spouses and dependents got full medical coverage including vision and dental—for life—with free generic drugs and a minimal $15 copay on doctors’ visits.⁶⁶

To Kalikow, this plush coverage inescapably evoked the example of GM, whose precarious condition and ever deeper losses had become front-page news. Kalikow repeatedly told a fellow board member that the automaker’s troubles derived from its pension and health care obligations. “It scares the s—— out of me,” the developer said.⁶⁷

What Kalikow didn’t understand was why nobody else in the city was doing anything about it. The MTA’s predicament was hardly unique. The fire department shelled out $490 million for pensions just in 2005. Within a few years, its pension expense was projected to rise to an astounding $760 million—78 percent of its payroll.⁶⁸Health care for retired firefighters would raise the total to more than 100 percent. Incredibly, taxpayers would be paying as much for retired firemen as for active ones.

Overall, the city’s pension bill had soared from $695 million in 2000 to $3.67 billion in 2005. This figure was projected to nearly double again by 2009.⁶⁹(Other cities in the state were also dealing with alarming increases.) And while cities were paying more, the employees were paying considerably less.⁷⁰

To Bloomberg’s immense frustration, soaring pensions and other fringes undercut his efforts to control the budget. Though he had kept wage growth to the rate of inflation, the total budget, thanks to pensions and health care, was growing far more quickly. By 2005, fringes accounted for a third of the city’s labor costs. Within a few years they would amount to two-thirds.⁷¹

Just as the United States could not escape ever higher Social Security and Medicare bills, the city was becoming hostage to pensions and health care. It’s true that neither New York State nor the city had a budget crisis. What they had was a budget precariously balanced thanks to the highest tax rates in the country,⁷²and to a booming real estate sector. It was unlikely, and presumably undesirable, that the city could keep raising taxes. And sooner or later, the real estate market would cool (or so economists kept saying).

In 2005, political and civic leaders began to talk up the case for pension reform. The city’s Independent Budget Office warned of a growing danger from pensions, and the Citizens Budget Commission, a private group, called for an end to traditional pensions and for sharp cuts in the city’s lavish health care package.⁷³The CBC concluded that New York’s pensions were far more generous then they needed to be; once again, many public employees were earning (including Social Security) more in retirement than on the job. No one in the private sector enjoyed such a pension. New York’s pensions were rich even compared with those at General Motors, the gold standard of private benefits. In 2004, a freshly retired municipal employee with thirty years’ experience drew a pension of, on average, $42,000—20 percent more than his counterpart at GM.⁷⁴And unlike the case with the retired autoworker, when the city clerk or subway maintenance man began to collect Social Security, his pension would not be reduced.

Statehouses around the country, which once had followed New York’s lead, were, in a tentative way, beginning to retreat from such costly guarantees. California governor Arnold Schwarzenegger was pushing a referendum to move the state from pensions to 401(k)s, and Alaska and Michigan had already closed their pensions to new employees. Other states were letting employees choose between defined contribution plans and traditional pensions. On the other hand, some states were so far behind in their pension bills that they had yet to propose a remedy at all. In New Jersey, the reckless Whitman gamble had backfired due to the market crash, leaving the state’s pension system $25 billion in the red.⁷⁵

As for the legislature, it seemed not to have noticed that the stock market had fallen. It continued to pass dozens of pension sweeteners (most of which were duly vetoed) every year. In 2003, it approved (by votes of 148-0 in the Democratic-controlled Assembly and 62-0 in the Republican-led Senate) a 20/50 pension for transit. The MTA asked Pataki to veto it, and he did. His main objection, as stated in his veto message, was that the MTA, as well as the mayor, “contend that this type of enhanced benefit should be the subject of mutual agreement through collective bargaining.” This patent attempt at passing the buck ran counter to the spirit of the law that restricted pension amendments to the legislative process. In 2004, the legislature reapproved the transit bill, which Pataki, in identical language, again vetoed.⁷⁷This subtly encouraged Toussaint to press ahead. He reckoned that if he and the authority could reach a pension deal, the governor would sign it.

For internal reasons, Toussaint needed a fat settlement. The scantiness of the gains in 2002 had left members with a sour aftertaste, especially as the MTA’s revenues rebounded. Also, Toussaint’s high-handed management style had alienated many of his supporters. Rather than empower the rank and file, as the purists in New Directions had hoped, their goateed leader had micromanaged Local 100 and concentrated power in the president’s office. He was suspicious of his members and incapable of taking advice. He fired his most able lieutenant, a Yale grad named Marc Kagan, merely for expressing discontent with a provision of the 2002 contract.⁷⁸Meanwhile, Toussaint resisted peace overtures from the union’s old guard, who still dominated the TWU (the parent organization). Mistrusted on both left and right, Toussaint was dangerously isolated within his own union.

While Kalikow approached the negotiations as a chance to rein in pensions, Toussaint, in view of his weak political position, needed to seal the pension enhancement that had eluded him in Albany.⁷⁹The pressure for a big settlement increased considerably in the fall, when the MTA (which received a portion of the taxes on commercial property transfers as well as on mortgages) disclosed rather sheepishly that it would reap a huge, unexpected surplus, approaching $1 billion, thanks to the continuing boom in real estate. Kalikow had to explain that the bull market in property was temporary, and that once it cooled, the agency still expected very large deficits. This did not go over well with the union, especially when the MTA earmarked a small portion of the surplus for holiday-season fare cuts—giving riders (but not employees) a Christmas gift. Toussaint hit the roof. If previously the forty-nine-year-old union chief had been suspicious, now he was apoplectic. His troops were ready to strike then and there.

The contract expired a minute after midnight on the morning of Friday, December 16. In mid-October, Dellaverson sent Toussaint a new contract. The terms called for future transit workers to get a pension only after thirty years’ service, and only at age sixty-two, instead of the present 25/55 arrangement. Also, they would have to contribute 3 percent of their salary, instead of 2 percent, to pensions, and make a small contribution to health care as well.⁸⁰Since no present employees would be affected, Kalikow figured that the concession would be no big deal. He could not have been more wrong.

Toussaint replied that both the pension and the health care benefit would have to increase. As to future employees, he snapped that he would not sell out “the unborn.” In the next few weeks, he proclaimed, repeatedly, that defending the unborn was a matter of “principle.”

As strained as that sounded to Kalikow, it accurately reflected the feelings of Toussaint’s members. Benefits were the ticket to, and a symbol of, a middle-class lifestyle they had never quite obtained. Transit workers still did dirty jobs, and they still bristled from the tight supervision of their MTA overseers. Indeed, the tension between bosses and workers had not greatly subsided since Quill’s day. Employees called in sick an average of thirteen days a year, a number that suggested a high degree of passive resistance or shirking (or both). Also, the authority issued 17,000 disciplinary notices (one for every two workers) a year. To many nonwhite employees, these frequent reprimands reeked of plantation justice. Retirement and medical benefits not only made the job tolerable, they made it halfway respectable. To give them up would be to retreat to a darker era.

By early December, Dellaverson was seriously worried about the lack of progress in the negotiations. His biggest concern was that Toussaint was not in command of his executive board, and thus wasn’t in a position to deal. When Dellaverson proposed that they submit to arbitration, Toussaint balked. The labor leader was painting himself into a corner, publicly insisting he would not make concessions on the pension.

Basil Paterson, Toussaint’s cool-eyed lawyer, also was worried. Paterson, a former deputy mayor and state senator from Harlem, had advised or negotiated with just about all of the city’s unions at one time or another, and was known for his dogged willingness to keep talking until, somehow, he got to an agreement. What concerned Paterson was that he did not have a clear sense of Toussaint’s goals. The fraternity of New York labor leaders was similarly mystified. Toussaint was demanding richer benefits in addition to annual 8 percent wage hikes—clearly, the other leaders felt, an unrealistic target.

On December 7, Dellaverson sweetened his offer on wages to 5 percent over two years. He repeated that the retirement age had to be lifted to sixty-two. Toussaint once again insisted that he would not sell out the unborn— a charged phrase that seemed to link pensions to the abortion issue. Three days later, on the Saturday before the deadline, transit workers jammed the Jacob K. Javits Convention Center, where they voted to give the board of Local 100 authority to strike. The Reverend Jesse Jackson was on hand, implying a civil rights connection to the union’s grievances. Toussaint, barking through a megaphone, rallied his members with a cry of “No contract, no work!” They erupted in cheers and waived red bandanas.⁸¹

Though he seemed to be egging them on, Toussaint was actually stalling for time—trying to satisfy the rabble while desperately searching for an alternative to striking. His secret wish was that Kalikow would come to the rescue again. There was a well-honed myth within the union that the steely Dellaverson was to blame for their troubles. Paterson tried to get Kalikow involved in the talks, but the developer, who was wise to the union’s strategy, curtly said, “No back channels. Gary is doing this.”

The talks were held in the MTA’s suite, on the thirty-third floor of the Grand Hyatt hotel. The MTA usually had several bargainers at the table; the union six or seven. A coterie of the union’s board members was often milling around the halls, putting added pressure on Toussaint. Periodically he would go outside and greet supporters and say a few words to the press. Kalikow, who was camped in a separate suite, fought off boredom as he waited for reports from Dellaverson, munching on club sandwiches and staring at the television. When the sessions ended, often late in the evening, Kalikow would sneak through secret exits and slip past waiting reporters to his chauffeured Lincoln Continental.

Local businesses—retailers in particular—were terrified by the prospect of a strike over Christmas. The Partnership for New York City, an organization of local CEOs, reached out to Paterson and suggested that he bring his client around. Thus, on the Monday before the deadline, Toussaint met with a delegation of pinstriped executives. Terry Lundgren, the $3.5 million a year chief executive of Federated Department Stores, was in the uncharacteristic position of having to plead with a onetime track maintenance worker from Trinidad. Lundgren, whose own pension was worth a minimum of $738,000 a year, told Toussaint that transit pensions were not worth striking over.

Stores such as Macy’s and Bloomingdale’s, which Federated owned, realized a large portion of their annual sales over the Christmas season, Lundgren noted. Their employees as well as their customers depended on mass transit. A strike would cost them—and the city—dearly.

Toussaint graciously conceded the point. However, he noted, his primary concern was Local 100. He talked about the union’s desire for respect, and went over the contractual issues, emphasizing that the MTA’s pension and health care terms were unacceptable. The businessmen came away disheartened, especially when Toussaint brought up the touchy subject of Dellaverson, whom he accused of lying and of ruining any chance of meaningful bargaining.

Actually, Kalikow was just as adamant on the pension issue as his negotiator was. Kalikow was fixated on pensions. Dellaverson, if anything, was more flexible, because he understood the subtleties of managing a workforce. Unlike some would-be reformers, he did not want to abolish the pension, which he recognized was vital for hanging on to employees. He simply thought fifty-five was an unaffordable, and unjustifiable, age at which to grant retirement.

Toussaint suspected that transit was being used as a stalking horse for the mayor or possibly the governor, as part of a grand attack on government pensions. A true child of labor, Toussaint detested the thought of giving in on pensions, which he equated with surrender to the ruling class. He told an interviewer, “There is a certain drumbeat and bias to roll back the gains of the middle class and the working-class people. That’s part of the agenda of the right wing of this country, which we intend to fight tooth and nail.”⁸²

The power structure had failed to convince him with Monday’s genteel business meeting. On Tuesday, a Brooklyn judge, granting a request of the state attorney general, Eliot Spitzer, formally enjoined the 33,700 subway and bus workers from going on strike. The Bloomberg administration joined the fray with a suit seeking punitive fines against Local 100 and its members. The mayor kept the heat on in private, getting word to Dellaverson that he did not want the MTA to pay too dearly for peace.

The union countered with rallies in all five boroughs. Toussaint, along with the ubiquitous Reverend Jackson, the Reverend Al Sharpton, and various nontransit labor leaders, gathered outside the Grand Hyatt on East 42nd Street. Waving a copy of the city’s suit, Toussaint thundered in his best imitation of Quill yet, “If Mayor Bloomberg wants to know what we think about this lawsuit, I’ll show you,” and tore it to shreds. For a moment, it was possible to hear in his lilting cadence an echo of the real Mike Quill gleefully exhorting, “An injoonction can’t run a subway.”⁸³

On Wednesday, negotiators met for four and a half hours. The MTA upped its wage offer to 6 percent over twenty-seven months. Otherwise, they made no progress. Toussaint continued to plead for Kalikow to make an appearance. Bloomberg warned that a strike would cost the city’s economy upwards of $600 million a day and issued emergency instructions for a walkout. Governor Pataki chimed in, warning of “dire consequences” for strikers. Though the threatened strike was little more than twenty-four hours away, the governor was nowhere near the city and, indeed, was en route to New Hampshire to test the presidential waters. The Wall Street Journal called on Pataki to prove his mettle by “stand[ing] up to the transit workers union that is threatening to ruin New York City’s Christmas.”⁸⁴ But as far as the governor was concerned, it was Kalikow’s ball game. The local press generally sided with the MTA. According to polls, most New Yorkers opposed a strike, but transit workers were solidly in favor.⁸⁵

Thursday was foggy and cold. New Yorkers made last-minute arrangements: contingency plans for getting to—or skipping—work. TWU members gathered outside the Grand Hyatt, less in anticipation of a settlement, it seemed, than to celebrate the expected cessation of service. Toussaint, his close-cropped beard showing a dapper streak of gray, sauntered outside and, leading the crowd in a rehearsed chant, asked for guidance should the MTA fail to make a “fair” offer—to which the multitude gleefully shouted, “Shut it down!”⁸⁶

Inside, the bargaining was going slowly.⁸⁷As the afternoon wore on, Paterson, who was painfully aware of the legal penalties that would befall his client, kept urging the parties (on both sides) to keep at it. Dellaverson gave a little ground; the union stood pat. Toussaint was increasingly argumentative; Dellaverson, peering from behind his wire-rimmed glasses, thought he was under enormous pressure. In the evening, as if afraid to abandon his constituency, Toussaint ducked out to give a press conference. Some militants led by John Mooney, the union vice president for station workers, tried to storm the podium. Toussaint’s security guards bodily shoved him aside while Toussaint kept talking and tried to appear calm. He returned to the conference room in an agitated state. Then Dellaverson saw Toussaint on television, ripping into the MTA. Dropping his customary detachment, Dellaverson bolted downstairs to give the media his version.⁸⁸It was now well after 10 p.m.; the deadline was less than two hours away. At 11 p.m., Kalikow joined the bargaining and faced Toussaint for the first time.

With the sixty-three-year-old chairman at the table the pace quickened. The MTA upped its wage offer to 9 percent over three years. Kalikow noticed as midnight struck that Toussaint did not leave the table: an encouraging sign. At 2 a.m., they were still thrashing out the MTA’s demands for concessions on benefits. Kalikow conferred with Dellaverson in private and then cut the health care demand in half. That left the pension.

Kalikow sensed that the moment for reaching a deal, so long elusive, had perhaps arrived. He made a final concession: employees could continue to retire after twenty-five years’ service. However, he insisted on raising the minimum age to sixty-two, which had been his main goal all along. “It’s only for the future,” he noted. “Nobody working now will lose a penny.”

The invitation to punish the next generation made Toussaint bristle. He would never sell out the unborn. He and his aides, their patience exhausted, made ready to leave. Kalikow’s spirits sagged; he had thought they were close. Trying to rekindle the momentum, he made a patronizing speech, telling Toussaint that a strike wouldn’t hurt him or the rest of the brass at the MTA; it would hurt the “little people”: “the shoeshine boys and the guys who work in the luncheonettes, the chambermaids, the small business guys.” Trying to disarm him with a dose of humility, Kalikow added, “I’m begging you; don’t walk out.” Toussaint barely replied. Exasperated, Kalikow said, “Roger, if you strike you go to jail.”⁸⁹

Toussaint said Rosa Parks had gone to jail; he could too. Kalikow got a little hot. He had a cherished memory of Martin Luther King Jr., who had spoken at his graduation at Hofstra, and he did not like Toussaint trying to claim the moral high ground. At 4 a.m., the union delegates left. They did not say whether the strike was on or off.⁹⁰

In the predawn light, Toussaint and his entourage groggily made their way to union headquarters, on West End Avenue. Rousing the members of the executive board, who were sleeping on cots or draped over chairs, Toussaint gave them the details of the MTA’s offer. Members were angry and shouted that Toussaint should not have let the deadline pass. The chance to strike was gone; the morning trains were rumbling. After a raucous meeting, they voted to reject the authority’s offer and set a new strike deadline, for a minute after midnight Tuesday.⁹¹

To the city, it felt like the briefest stay of execution. Department stores on Friday were empty; shoppers had taken no chances. Bloomberg, who had spent the night in the city’s crisis bunker in Brooklyn, darkly observed that the MTA’s offer was more generous than it could afford.⁹²Toussaint and Kalikow kept up the flow of rhetoric. Each invoked the larger struggle. Kalikow said the MTA was like “every business and government in this country . . . seriously clouded by the extraordinary growth in pensions and health-care costs.” Toussaint, drawing an opposite moral, said, “Working people and people of good faith will look at what’s going on with General Motors and the stripping of health care for tens of millions of Americans, and the taking away of the hard-earned pensions of retirees, as an outrage.”⁹³Eighty-four years after the IRT’s first, threadbare pension, subway benefits had become a national metaphor.

On Saturday the parties held a light bargaining session. Union shop stewards, taking no chances, circulated instructions on how to safely shut down the subways.⁹⁴Monday morning, the union began a limited strike against two private bus companies in Queens. This sent an SOS to the seven million New Yorkers who daily relied on the subways and city bus lines. At 10:45 a.m., the bargaining teams reassembled at the Grand Hyatt. They were down to their final day—again.

Dellaverson was feeling pressure from the city (which was thinking about its own upcoming labor negotiations) to hold the line. For Toussaint, the pressure was unceasing. He was already being ridiculed by members for having kept the talks going. One longtime employee, airing her thoughts on the Internet, declared that postponing the deadline had been an “embarrassment.” Another opined that there was no point in talking to the MTA, which stood accused of cooking its books to hide its surplus.⁹⁵ Toussaint doubted that any agreement would satisfy such members.

The MTA offered yet a steeper wage hike—3½ percent a year. That would lift a bus operator to $70,000 in the contract’s third year. The authority threw in a twelfth paid holiday, for MLK Day. The union failed to counter. It occurred to a labor observer that there was no give-and-take to the discussions; no flow. With time slipping away, Toussaint ordered everyone in the union’s suite out except for a labor movement official who was there as a sympathetic observer. With the official expecting a high-level strategy session, Toussaint inexplicably accused him of befriending a former TWU rep with whom Toussaint had quarreled. The astonished laborite said, “Roger, I’m here to work for you.” It struck him as a dark portent: the sky was falling and Toussaint was focusing on internal politics.

By early evening, representatives from the other New York unions, including the umbrella AFL-CIO, had converged on the Grand Hyatt. Publicly, they offered support for Local 100. Privately, they were desperate to ward off a strike. Seeing Kalikow in the halls, Randi Weingarten, the teachers union president, declared, “It’s important that we settle this.” The developer shot back, “I made them a good offer.”

At the bargaining table, Dellaverson suddenly dropped the MTA’s demand, which was at the crux of the dispute, that new workers not retire until sixty-two. Instead, he had a new condition: workers could go out at fifty-five, but they would have to contribute 6 percent of their salary to pay for it.

Paterson decided that if anyone was going to cut through the impasse it would have to be the union’s chief adversary: Dellaverson. No one else had his encyclopedic knowledge of the contract (or his brilliance). Paterson took Dellaverson into a private room. He said, “Gary, nobody is going to make this deal but you.”⁹⁶

Dellaverson had a brainstorm. He began to thrash it out: normal retirement would be at sixty-two, as the MTA wanted. But the employees would also get a 401(k) account. The authority would throw in 1 percent a year; the employees could invest the same or—if they chose—more. When they reached fifty-five, they could use the 401(k) money to buy extra years on their pension, enough to retire by their late fifties or possibly even at fifty-five. The MTA wouldn’t guarantee the outcome, nor would it shoulder all of the burden. But transit employees still could plan on a youthful retirement.

Paterson smiled. He had to admit the idea had merit. Dellaverson thought he had found the sweet spot: a guaranteed pension but with some sharing of the risk. It was not turning the clock back to the days of Santo and the Reds, when the transit workers got essentially nothing, nor would it expose the authority to the open-ended hazards that had crippled GM. It was the sort of deal that each side could live with, and (though Dellaverson wasn’t thinking about this) possibly other employers in America as well. He and Paterson went back to the conference room and Dellaverson’s idea was vented. The MTA made another concession. They were fingertips apart, but the “unborn” would still get nicked and Toussaint wouldn’t allow it. He began to shut down, like a man who knew his fate.

A little after midnight the union delegation caucused; then it left for headquarters. Toussaint, giving a summary of the talks, weighed in in favor of a strike, though he acknowledged that it would entail serious risks. Others pleaded for time. Michael O’Brien, the president of the parent TWU, noted that each negotiation had produced a better offer, so the sensible thing to do was to keep talking. “Talking is cheap,” he noted. “Strikes are costly.”

The vote was tabulated at 1:15 a.m.: plenty of time for the trains to finish their runs and drop off passengers (though most New Yorkers had taken care to arrive at their destinations much earlier). By 3 a.m., the trains were safely in the yards. At just that hour, Toussaint announced that the union had voted “overwhelmingly [though not unanimously] to extend strike actions to all MTA properties.” For the third time in forty years, the famous New York City subways had been silenced.

Toussaint could take momentary solace from having placated some of his more strident members, such as the train operator Harry Harrington, who was “overjoyed to be striking against this miserable management,” and who voiced the hope they would all get fired.⁹⁷But soon Toussaint’s organization would be hit with a contempt citation and $1 million a day fines. He also faced the opprobrium of much of the city. The New York Daily News, unsatisfied with mere court citations, editorialized with its trademark New York bluntness, “Throw Roger from the Train!”⁹⁸Kalikow also was furious at Toussaint, who he felt had betrayed him. Later he would reckon that fixing the pension system was more difficult than he had imagined.

Mayor Bloomberg, as to be expected, walked or rather bounded across the Brooklyn Bridge. Attired for his trip in a leather bomber jacket and stone-washed Levi’s, the mayor lashed out at the union leadership for having “thuggishly turned their backs on New York City and disgraced the noble concept of public service.” The first part of his comment was to be much rehashed by those who took offense at Bloomberg’s use of the modifier “thuggishly”; little was said about the other part, “the noble concept of public service.” It had been a long time, of course, since the phrase “public service” carried the clarity of purpose, much less the dignity, that it had in LaGuardia’s day. It was the sort of phrase that rolled off the tongue, an unobjectionable cliché; most listeners barely paused over it. But it was there, in the meaning of public service, its rights and its responsibilities, where the meat of the pension dispute was to be found.

New York, at very least, had dealt with the issue openly. The city had raised taxes to pay for pensions and then, finally, it had said enough. There were governments in many other jurisdictions that utterly lacked such courage. For them, pensions would truly be a recipe for disaster.