Can we stop the decline of our cities.

• Author: Moore, Stephen

Unless and until they start putting people first - by cutting costs and anti - growth tax rates - no amount of Federal aid can reverse the trend.

For More Than a quarter-century, Americans have been voting with their feet against the economic policies and social conditions of the inner cities. Fifteen of the largest 25 U.S. cities have lost 4,000,000 people since 1965, while the total U.S. population has risen by 60,000,000. The exodus no longer is just "white flight" - minorities also are leaving the cities in record numbers.

In recent years, the departure of businesses, jobs, and middle-income families from the old central cities has begun to resemble a stampede. For example, since the late 1970s, more than 50 Fortune 500 company headquarters have fled New York City, representing a loss of over 500,000 jobs. Cleveland, Detroit, Philadelphia, St. Louis, and other major cities also are suffering from severe out-migration of capital and people. Those once-mighty industrial centers are becoming, hollow cores of poverty and crime.

Ever since the Los Angeles riots and looting, urban lobbyists - including mayors, public employee unions, urban scholars, and many members of Congress - have been arguing that the inner cities were victims of Federal neglect under Presidents Ronald Reagan and George Bush. "There was, quite literally, a massive Federal disinvestment in the cities in the 1980s," according to Congressional delegate Eleanor Holmes Norton of Washington, D.C. To revive them, the U.S. Conference of Mayors is asking for $35,000,000,000 in new Federal funds - a "Marshall Plan for the cities."

The Federal government already has tried the equivalent of some 25 Marshall Plans to revive the cities. Since 1965, it has spent an estimated 2.5 trillion dollars on the War on Poverty and urban aid. (That figure includes welfare, Medicaid, housing, education, job training, and infrastructure and direct aid to cities.) Economist Walter Williams has calculated that this is enough money to purchase all the assets of the Fortune 500 companies plus all of the farmland in the U.S., but it has not spurred urban revival. In 1992 alone, Federal aid to states and cities rose to $150,000,000,000. Adjusted for inflation, that is the largest amount of Federal intergovernmental aid ever extended - hardly a massive disinvestment.

Central cities' budgets

on the rise

The budgets of Cleveland, Detroit, Philadelphia, New York, St. Louis, and other large central cities have not been shrinking; they have been rapidly expanding for decades. In constant 1990 dollars, local governments spent, on average, $435 per resident in 1950, $571 in 1965, and $1,004 in 1990. The largest cities saw an even faster budget rise. In real dollars, New York's budget nearly tripled from 13,000,000,000 in 1965 to $37,000,000,000 in 1990. Philadelphia, another nearly bankrupt city, allowed its budget to rise by 125% between 1965 and 1990 - from $1,600,000,000 to $3,500,000,000. During the same time period, the city lost 20% of its population. In short, 25 years of doubling and even tripling city budgets have not prevented urban bleeding.

Not all U.S. cities are in decline. Among the nation's largest urban areas, there are dozens - many on the West Coast, in the Sunbelt, and in the Southeast - that have been booming financially and economically for at least the past 20 years. Las Vegas, Nev.; Phoenix, Ariz.; Arlington and Austin, Tex.; Sacramento and San Diego, Calif.; Raleigh and Charlotte, N.C.; and Jacksonville, Fla., all have rapidly rising incomes, populations, and employment and low poverty and crime rates.

What do growth cities - Phoenix, Raleigh, and San Diego, for example - do differently from shrinking cities such as Buffalo, Cleveland, and Detroit? The answer is found, at least partially, in their fiscal policies. Bureau of the Census finance data from 1965, 1980, and 1990 for the 76 largest cities reveal significant and consistent patterns of higher spending and taxes in the low-growth cities than in the high-growth ones.

* For every dollar of per capita expenditures (excluding those spent on anti-poverty programs, education, and health care) in the highest-growth cities, the shrinking cities spend $1.71.

* In 1990, a typical family of four living in one of the shrinking cities paid 1,100 per year more in taxes than it would if it lived in one of the highest-growth cities.

* Shrinking cities' bureaucracies are twice as large as those of growth cities. In 1990, the latter had, on average, 99 city employees per 10,000 residents; the former, 235.

* Cities with high spending and taxes lost population in the 1980s; those with low spending and taxes gained. High spending and taxes are a cause, not just a consequence, of urban decline.

Expenditures are high and rising in large central cities primarily because their governments generally have above-average unit costs for educating children, collecting garbage, building roads, policing neighborhoods, and providing other basic services. In 1988, for example, the shrinking cities spent roughly $4,950 per pupil on education, whereas the high-growth cities spent $3,600. The $1,350 cost differential can not be explained by better schools in places such as Detroit and Newark.

The influence of municipal employee unions also contributes to higher costs in declining central cities. Compensation for unionized local employees tends to be roughly 30% above wages for comparably skilled private-sector workers. In New York, the average school janitor is paid $57,000 a year. In Philadelphia, the average municipal employee receives more than $50,000 a year in salary and benefits. According to the Census Bureau, cities with populations over 500,000 pay their mostly unionized workers more than 50% more than those with populations under 75,000, whose workforces are less likely to be unionized. In short, thriving cities are places where costs are lower, bureaucracies are smaller, and services are better.

Some city officials are beginning to recognize economic reality. Philadelphia Mayor Edward Rendell is challenging the entrenched municipal unions and other spending constituencies with a budget plan that calls for $1,100,000,000 in savings over five years. He has spurned more Federal aid as the poison that produced Philadelphia's near-insolvency in 1992. Chicago Mayor Richard M. Daley and Indianapolis Mayor Stephen Goldsmith have contracted out dozens of services to private providers and have slowed the growth of massive, bloated budgets to a crawl.

The decline of America's major cities is not inevitable. They can and should be saved. For generations, they have served as the nation's centers, not only of industrial might, but of culture, diversity, and intellect. Through an aggressive agenda of budget control, tax reduction, privatization, and deregulation, America's declining cites can rise again in prominence and prosperity.

The riots in Los Angeles in the spring of 1992 dramatized the social and economic deterioration of many central cities. At a rally held in Washington a month after the riots, then-New York Mayor David Dinkins aptly described the inner cities as places of "only grief and despair." Almost all...