The Magazine


Jan 26, 1998, Vol. 3, No. 19 • By FRED SIEGEL
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The problem, as Goldsmith shows, is that the old municipally run bus system would not recognize the changing patterns of work in Indianapolis. Refusing to rearrange routes when faced with sharply declining ridership and increasingly dispersed jobs, the Metro transportation authority simply kept raising local taxes to support the status quo.

Here again the feds only made the problem worse. One way to get inner-city residents to the new jobs was to sell off the old forty-foot buses and replace them with vans and minibuses cheaper to run along lightly traveled routes. Congress, however, requires local transportation authorities to repay the feds (at well above the market value) every time a bus is sold. Eventually Goldsmith found a way to outflank the regulations. But, he explained, "as is all too often the case for local governments, improving service in Indianapolis required us to find a way around a series of obstacles imposed by the federal government."

The perverse effects of federal policy are not a problem only in Indianapolis. A study by the Los Angeles Metropolitan Transportation Authority found that federal mandates cost the system $ 100 million annually, while federal aid adds up to only $ 80 million. Similarly, Goldsmith points out, the Fair Labor Standards Act orders cities to pay a 50-percent bonus for the overtime that police officers often used to work at their regular payrate -- with the result of removing "more street hours than federal grants to local departments produce."

In part, the problem is that federal legislation rarely considers local impact. Regardless of the government's intention, cities are disproportionately hurt by regulations regarding asbestos removal, environmental cleanup, and access for the handicapped. The Small Business Administration, for instance, was supposed to create new work by serving as lender of last resort for struggling start-up businesses. But its loans in New York, reports Crain's: New York Business, are directed much too often to medallion taxis -- which creates no new jobs, since the number of medallions is fixed by a law unchanged since 1937. The sole effect of such loans has been to drive up the price of a medallion franchise and thus the cost to the taxi rider.

Goldsmith proposes the experiment that for two years a major city be allowed to forgo all federal aid in return for relief from federal regulations and taxes. It is a bold idea, but packaged properly it might garner some support.

The seniority of congressmen from urban districts used to mean that the cities had chairmanships of some key congressional committees. But the Democrats' loss of the House of Representatives in 1994 meant that the cities were deprived of their last federal stronghold, and the next census will only confirm their declining electoral clout. What better time, then, to give up the old game? I suspect all city leaders will eventually do what Mayor Goldsmith has done: look less at how to bring in money from Washington and more at how to get the feds off their backs.

Fred Siegel is the author of The Future Once Happened Here: New York, D.C., L.A. and the Fate of America's Big Cities (Free Press).