Stephen Goldsmith

The Twenty-First Century City

Resurrecting Urban America

Regnery, 250 pp., $ 24.95

Some things just aren't supposed to happen. The crime rate, according to the experts, will not drop until narcotics have been decriminalized. Of course, crime in America has fallen dramatically in recent years, despite the illegality of drugs, but the legalizers carry on as though nothing had changed.

Similarly, according to the urban experts who passionately believe in centralized authority, the possibility of reviving America's cities depends entirely on financial aid from the federal government. The last few years have seen some urban rebirth despite the decline of federal aid, but the fact remains invisible: the Ford Foundation consultant Karen Paget, for instance, began a recent article in the American Prospect with the assumption that such cities as Detroit and Cleveland are still sliding sharply downhill.

Paget isn't alone, for many politicians seem to share her views. About a decision by the Clinton administration to eliminate cost-of-living adjustments for Medicaid reimbursements, Westchester congresswoman Nita Lowey declared, "Once again, New York is taking it on the chin." And she is right about that particular decision hitting the cities hard. Like most conventional politicians, however, even while complaining about Washington, she can't seem to shed her shop-worn assumption that the cities have a friend in the federal government.

There has been some acknowledgement of the failures of federal policy. Henry Cisneros, President Clinton's former secretary of Housing and Urban Development, admitted to Congress in 1993 that his agency has "in many cases exacerbated the declining quality of life in urban America." Or, in the more forceful words of the Chicago Tribune, "No natural disaster on record has caused destruction on the scale of the government's housing programs."

But in fact, faith in the powers of big government remains so strong that even while analysts and politicians rattle off the long list of ways Washington has undermined urban America -- from its role in redlining inner cities and subverting stable neighborhoods, to the highway and mortgage subsidies that draw off population to suburbia -- they always somehow manage to conclude with the necessity for further federal intervention. Citing such occasional successes as the Community Reinvestment Act (which forced banks to increase profitably their inner-city investments), they always come back to drink again from that federal well they know is poisoned.

What seems to drive this irrational outlook is a dated sense of the city as a swamp of unmet "social needs." It all started in the 1960s, when everyone -- social workers, advocates for low-income housing, and race-relations leaders -- saw the city as a tangle of pathologies rather than an economic engine. Cities, in the memorable words of Milwaukee mayor John Norquist, were reduced to "the tin-cup strategy" of peddling for pity in Washington.

The great virtue of Stephen Goldsmith's new book, The Twenty-First Century City: Resurrecting Urban America (written for the Manhattan Institute) is that it explains why declining federal support for the cities may be a blessing in disguise. "The natural draw of a big city, the diversity, culture, amenities, architecture," Goldsmith explains, "is today outweighed by an enormous artificial cost that has been placed on urban economies by bad government policy."

A highly successful mayor of Indianapolis who reduced taxes while increasing infrastructure investments, Goldsmith is renowned for introducing market competition to city services. His widely praised managerial accomplishments were chronicled in such books as William Eggers's Revolution at the Roots. What makes Goldsmith's own book invaluable is his account of the perverse effects of federal policy -- regardless of whether Democrats or Republicans occupy the White House.

The book opens with an amusing account of New York's racial racketeer, the Reverend Al Sharpton, leading a rally protesting the takeover of some Indianapolis bus routes by private companies. Sharpton had federal policy on his side. The Urban Mass Transit Act not only limits competition from private providers, but entitles any transit worker "negatively impacted" by competition to six years' salary as compensation. Like the federal government, writes Goldsmith, Sharpton was fighting "to head off a nationwide epidemic of improved bus service" for inner-city residents.

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).

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