The leadership of Mayor Michael Bloomberg earned high praise from Rose, who nonetheless blasted municipal government for contributing to a high cost of living that is driving away the middle class. "The overwhelming majority of young people want to come here," he said. "But as soon as they grow up and have children, they leave." The city has the smallest percentage of middle-income residents out of any major metro area, said Rose, citing a Brookings Institution study.

Rose singled out high taxes and the wage structure of municipal unions, among other factors that make the cost of living in New York more than twice as high as, say, Houston. A standard of living that would require an annual income of $50,000 in Houston would cost $95,000 per year in San Francisco--widely perceived as the most expensive city in the US--and $123,000 here. "We have to ask ourselves why," he said.

Although he said it was essential to deal with quality of life issues and keep the middle class from eroding further, these were only two of five major challenges Rose said the city must confront, especially in view of Deutsche Bank's recent forecast that New York commercial real estate would not fully recover until 2017. For starters, he said, the city needs to think of itself as comprising five boroughs, and not only Manhattan. "The growth in New York City will continue to be more active in the outer boroughs than in Manhattan." According to the Center for an Urban Future, the borough of Wall Street and Rockefeller Center has steadily declined in share of the city's total private-sector employment base each year since 1958.

In common with Lieber, Rose identified "occupational diversity" as a top priority and as another challenge the city must overcome. He said the issue wasn't how much of the financial services sector would leave the city--by and large, it will stay put--but how much of the industry will simply evaporate. At its peak, Rose said, financial services comprised 8.3% of the country's GDP, but its share has shrunk to 7%.

"Where the warm bodies will come from to fill the millions of square feet of proposed office space in Lower Manhattan and the West Side is not clear," said Rose. The key, he said, is other business sectors, which create jobs and excitement. "New York has a very high urban metabolism, which is one of our secret weapons." In the fourth of his series of challenges, Rose called on the city to think of its intellectual capital as an engine of growth, and to attract and retain brain power.

Some of Rose's proposed solutions straddled two challenges at once. For example, "a new, re-thought version of the Mitchell-Lama program" would create high-density housing and good schools near transit hubs outside Manhattan, thus attracting the middle class while giving the outer boroughs their due. And both the outer boroughs and quality of life could be served by a new push for congestion pricing, with the proviso that revenues should be dedicated to bolstering mass transit options for non-Manhattanites.

Bruce Kasman, managing director and head of economic research for JPMorgan Chase, charted the macroeconomic landscape against which these changes would occur. "I do think we're building a pretty strong foundation for the economy to rebound," he said. However, he added, "a return to growth is not a return to health," and both the city and nation will be living with elevated deficits and unemployment for some time to come.

One thing that won't be on the increase is interest rates, Kasman predicted. "We don't expect the Federal Reserve to raise interest rates any time in the next year from what are now historic lows," he said. Moderating the 90-minute panel discussion was Ken Hubbard, EVP at Hines Interests.