Special of the week; Issue 23-69

NDE are the national educational radio network presents special of the week from Yale University from its series called Yale reports city budgets like family budgets often show deficits but factors influencing how cities spend and receive money are more complicated than a simple lack of funds discussing cities and their budgets. Our John R. Meyer professor of economics and president of the National Bureau of Economic Research James Tobin sterling professor of economics and John King associate professor of economics at Harvard. Mr. Meyer it's often asserted the day that the key to our urban problems resides in matters of money and in particular that tax real estate education welfare question and the monetary aspects are shaping the structure of the modern city. John Kane would you care to comment on this. Well I think we really need to think about these problems in two respects. First I think we really have to ask the question In what way the

levels of taxation and the nature of taxation in local jurisdictions influence the location of firms and certain kinds of households particularly households with different sorts of services. And the I think we also have to consider the converse the way in which the particular patterns of location within a particular Metropolis affect the revenues they're available for local governments in particular I think we have to focus in on some of the poverty related services. The way in which the aggregations of population by income groups within the city make it difficult for communities and particularly core cities that accumulate in large low income populations to deal with the very substantial and difficult problems that those low income populations engender. I think some of the ideas that Jim Tobin has set forth with Mamie can provide us with some ideas about how we

could get out of this particular problem. Well it seems to me really the city's happened to be the locale of many problems which are national in scope and origin. That is because of migration from elsewhere to the cities and now the natural increase from previous migration. The cities are bearing the burdens of a number of nationwide developments or developments elsewhere in the nation. Poor education in the south that occurred for generations and the general levels of inadequate preparation for urban industrial life that many of the low income migrants into the cities cities hand out and you can expect the cities to meet these problems with their with their conventional local financial fiscal resources and their nationwide in origin and they're going to have to

have state and national systems to meet the problems. Certainly true in the areas of education where the problem of educating the kind of school population the central cities are now going to have is beyond the normal fiscal capacity the cities and the center and welfare and we're not going to really be able to solve these things on a city by city basis their national solutions at least in the first. Son. Well there been many suggestions may you have for solving this problem. That is for escaping from what one might call the vicious cycle of escalating demands for certain classes the social welfare services in cities and declining tax bases for supporting the services as you well know they range all the way from block grants from higher levels of government say the state or the federal government directly to the cities to various schemes

for income maintenance which in turn range over quite a spectrum from family allowances to negative income tax. Would you care to comment on the comparative efficiency or desirability of these different schemes. Well I myself am a strong proponent of what is called negative income tax essentially that's a plan which would be a doctor on a national basis and federally financed administered probably in conjunction and close synchronization with the regular income tax plan for putting a floor under the. Disposable income and standard of living of all families in the country and then taxing their other income. And you know in a way that recoups part of the these guaranteed benefits but which doesn't

penalize them dollar for dollar for their own efforts or for their own earnings. The idea there is to provide adequate benefits to people who have no possibility of earning income at the same time holding out the carrot of incentive for people can earn it on their own. Now this is done on a nationwide basis. It would alleviate the problems of the cities in a couple of respects on the one hand it would mean that it was necessary to migrate to particular jurisdictions like New York or the richer northern states or the more generous northern states in order to receive adequate public assistance is to be available everywhere in the country including the south. It would also. You mean a considerable relief of state and local budgets insofar as they were completely federally financed. The substitute for that part of the welfare burden which now falls on state and local budgets.

Would you have the the benefits ever everywhere in the US the same under this kind of a proposal. And I didn't even know you actually were getting contacts. At least you already have a national uniform minimum that would be this. No local jurisdiction or state would go below that and you might have variations above that which could be related to differences in cost of living Hardy and other areas too. Allow states to supplement the national minimum from by their own legislation provided they mesh their their assistance in with the general scheme and to offer sort of federal participation on a matching basis for the cost of some supplementation. When this lead you to much the same situation as we have now only at some of the higher level it is when you expect that the more generous and richer states would

supplement the basic minimum again at a higher level you have the same kinds of differentials and level of payments between Chicago and Mississippi that you have today. As a consequence you have the same incentives for migration may be somewhat reduced. As we have in today's system why that could be considerably reduced because the present differentials far exceed the cost of living differences and they also I think beyond the differentials which the politics of the richer states would want to support. Once there was a national minimum in and moreover if you can find the federal matching provision of the supplements to something that could be justified by cost of living difference then that would limit the incentive in fact and really should lead fairly neutral as far as incentives to migration. Let's go back to this question of migration. John I know you spent a

good deal of time with associates investigating patterns and the determinants of migration from rural Southern Poverty to northern cities on the basis of the work you've got up to date would you care to speculate on the extent to which differential welfare payments is really a cause of this migration or is it really job opportunities that people are seeking and they may miss south of the north Well of course as you know there's a pretty strong link between those two considerations job opportunities and poverty not at the extent of the well higher paid of course those are also correlate right I mean I think that there are a couple things that are worth noting about the power of the migration from the south and that is for its very selective character the patterns particularly of low income blacks a proportion of low income blacks that migrate from places like Mississippi and Alabama and Georgia are very different than the proportions of say similar white populations that

migrate from those states. In addition. Much larger numbers and proportions of blacks that leave the South have a very very different migratory pattern than say the comparable white populations the blacks tend to migrate to the largest metropolitan areas in something like 80 percent black migration from the south is to the say 10 15 metropolitan areas of over a million. As I say it's a pattern both in terms of it's the tendency to leave the south and also that one is very different than whites I think you have to begin or interpret this result in a couple lights. First that there seems to be a very very different pattern of opportunity for Southern whites and southern blacks within the South and that any kinds of programs that are in some sense going to try and deal with this problem

migration make it more neutral halfs has to really recognize this differential pattern of opportunity differential pattern of incentives. The other aspect I think that's important is to recognize what a great extent the large concentrations of low income population in our cities today are really traceable or attributable to these patterns of migration. Something like half of the known of the black population the 1060 were migrants from the south so it's been a harmful force in changing the character of our of our cities in the north. Changing the character of the populations I also think it's worthwhile to speculate a little bit on the consequences of a national program of income maintenance similar to the negative income tax that Jim has proposed. The consequences of programs like this for the South. I think that

the problem of sort of economic imbalance you might say between the sow's and the rest of the country is just not the source of certain. Patterns of migration certain problems of our cities today but it's really a more fundamental imbalance in our society and helps to explain a lot of the strains and so on in our political system. And I think that policies that have the effect of really accelerating the rate of growth of income in the low income states are worthwhile in their own right. And I think it's worth really speculating looking into the the impact programs of this kind on the level of income in the southern states I made a rough calculation that one of the gyms that negative income tax schedules would have the effect of increasing personal income in Mississippi by 40 percent even without taking account of any of the so-called

multiplier effects that is the fact that this these people then spend this income in this southern economy and produce jobs and so on just the first round effects of that kind of income redistribution represents something like 40 percent. And I think that if you start again thinking about political feasibility. And start thinking of where you might find support for programs of this kind. These sorts of magnitude start becoming very important. You know getting back to the to the northern city do you suppose we could buy one of these income maintenance plants negative income tax for example solve or begin to solve in some degree this this income assistance problem on a national scale. Now certainly thats not going to solve all the problems of the city as we as we understand them because there are some problems of that are sort of intrinsic to the fact that we get a lot of people crowded together in one year

in one particular locations and weve got to educate them weve got to house them weve got to provide public services for them so that even if even if they have higher incomes some may still be very segregated or limited in some of their opportunities particularly their housing choices. Right. And that in turn will raise problems about their educational opportunities and their work opportunities. In fact thus far we treated the urban problem as sort of a subscript of other problems the poverty and. The problems of the rural south and in this area to John P. began by saying by asking How about too much these problems for a monetary in nature. I have a feeling that although we could solve the income support problem with money pretty easily because that's what the money is really good for. These other provide some of these other problem was much more difficult just intellectually intrinsically.

And even though we had all the money we wanted it was still very difficult to know what the solutions are. Well I think that's right but I also think that a considerable increase in the sums of money available for certain kinds of educational programs community programs. What I would call inside out transportation systems for getting people from segregated housing opportunities in the core city to new job opportunities that are opening up in the suburbs and so forth money could do an awful lot on some of these other problems. Seems to me though that there is another priority that in addition to getting from some higher levels of government either federal or state income to both low income groups and to communities that have concentrations of low income group. The other imperative really is to operate strongly and forcefully in opening up the housing market to begin to really release the pressure on. The central city ghetto in the central city itself and to begin to change the dynamics of the

situation the expectation that 10 of the 12 central cities will likely be all black in 10 years really has an enormous effect on the psychology of investors. It has an enormous effect on the whole pattern and problems of providing services and I think that the least unequal imperative really has to be to find ways not just in a kind of passive way to provide opportunities for blacks to the suburbs but probably go beyond that and to provide some some incentives both for suburban communities to to accept them not to resist their entry and to encourage those sort of Black Pioneers to enter these these summits because I think as long as we have this pattern of segregation and the continued growth there which even if we manage to slow down the rates of migration is going to become very very large unless we begin to change this kind of spatial pattern this

pattern of racial segregation our cities a lot of these monetary solutions will be some useful cosmetics. But they're not going to really begin to change the real structural problems of our. We're going to go. Well I agree with this but again I think it's easy to underestimate the power of money in solving some of these problems for example as you know we've done some back of the envelope calculations and there seems to be nothing that's quite so efficient in opening up new housing opportunities for Negroes as having a surplus or a surfeit of housing on the local housing market. So if you artificially stimulate a housing boom by various means which range all the way from some aspects of our recent tax laws to special provisions of the FHA program and one does create a surplus housing in a community then one begins to see some erosion of the barriers to the negroes moving outward into new

housing. It may not break up the ghetto and it may not really solve the segregation problem but it does relieve some of the pressure of too much demand on a limited supply of housing for a minority group said in the core city. In our calculations that's far been back of the envelope and needs a closer more detailed checking. But there does seem to be some superficial evidence to support this point of view. You have of course that's a pretty fundamental and radical change from the way we look at the problems in the past and approached him. We've tended to try and in some sense solve the low income housing problem or at least the problems created by low income housing. By all sorts of grants and subsidies for renewal the central city is I think fair to say that we haven't pursued a policy in the past that aims at creating a large base

of middle and lower income housing in well cleared lands. But this is of course a matter to use an infamous phrase trickle down to some extent. Thanks tended to create a surplus of housing units for upper middle income groups and the outskirts of the city and as long as the supply of housing expands more quickly then your number of households as you well know that you release housing in the core city at least to the extent that you don't tear it down by building too many public housing developments or having too much urban renewal or building too many highways through the core city. Now to some considerable extent as you know we offset. This expansion in the total supply of housing by ripping out a lot of ostensibly older housing to make way for these new public developments. So we have sort of a a strange policy whereby with one hand we tempt to solve the housing problem to a certain extent with the other hand we tend to cancel these efforts when strange

an unfortunate part of it is as we all know is the incidence of the undoing or the subtraction of housing Tanzer has tended in the past to reside unfortunately heavily on minority groups. There seem to be two contesting philosophies about this whole matter. One is his emphasis on non segregation as essential looking toward integrated society. As against that there are those both both black and white very those who are religious or very liberal very conservative who seem to welcome the segregated pattern on the wall. I welcome a very different resort their very best bet they put all the emphasis in improving their conditions essentially in the ghetto Service taking the ghettos for granted as God has praised and I call that the God of the old. They go to a ghetto Yes. I think there are at least several objections that need to be raised to the so-called ghetto gilding strategy

the first one is that it's just a terribly inefficient way of doing things that many of the kinds of proposals job creation housing and the like turn out to be far more expensive if you want to put yourself into the position of having to solve these problems just within the confines and geography of the ghetto. I think the more major objection though is that I just don't think that this is a viable kind of institution for the long run in the long run. We will have to find another solution a solution in which we do have some kind of society in which all Americans have opportunity and if you want to grant that position. In addition to the the inefficiency that in some kind of narrow sense of fact it cost more to create jobs that way the fact cost more to create housing that way and the like addition of that then you have to add the fact that any moves we make in

terms of in some sense making the ghetto a more tolerable kind of place have the effect of making the achievement of this kind of open society in the long run just that much more difficult and the effort to somehow make things better today we may find ourselves creating the problem that is far more serious in the long run and the solutions are much much more difficult. I think the basic principle of Vance is that in almost any of these areas is a social improvement or public policy where you might want to operate income distribution employment education. It turns out that there always are a variety of ways of doing these things. Oh sure and that that we should choose the one that was the least to lock in that regard that's right and that I believe we really ought to have is a very very high priority a choice those which tend to weaken the ties of the ghetto rather than strength them and the irony I think is that the that the thrust of much

policy and policy suggestions in recent months and has been to in fact choose just the opposite set of programs has been to choose programs that are most expensive even some kind of narrow benefit cost considerations and at the same time will tend to perpetuate in these are the kinds of programs which which I would call go gilding you know in this instance all we've been asked to clear is by posing to ourselves that very difficult question Is there a future for the American society. I'm afraid that we don't have much choice about that really. We are going to live in cities in this country probably at least as much as we do now probably increasingly so for the for very good reasons namely that there are considerable economies of scale and people living close together and working near where they live and in a certain concentrations of function in particular localities and cities

are an essential part of that. Modern economy modern technology industry rather than agriculture all the world. We don't really have any choice about whether we have cities or not but we do have a choice about. How we guide their evolution in the future. Well I think that also gets another key question in so much whether we're going to have cities or not but what kind of cities and to some extent I think that some of the problem arises from several different sources for several Moti some good knots some not so good. The people want to perpetuate the city of the 19th century. I mean some people want yes some people want to do it. And of course technology has changed a great deal from the 19th century and therefore what constitutes a and efficient or reasonable or comfortable city in the middle of the second half the 20th century may very well be very different from what was

a comfortable efficient city in the first part of the 20th century or the 19th century. And of course moving from the earlier state of affairs because of the durability of urban assets to a more modern state of affairs is often a very uncomfortable and disquieting experience. It gets complicated I said by many different motives there are many people whose property values may be altered by these changes and so their disquieted especially if they're not participating as effectively and they are positive changes in the property values. There are other people who are getting back to this tax base problem see these changes are roading the tax base of the city at the very time the demands for its for city services are going up due to the welfare and other problems we discussed previously. And they therefore feel very unhappy about these changes quite understandably. Finally there are people as we always have in our society who just

prefer things the way they were. Perhaps we could call a man Aquarians if you wish but that's I think a bit strong they just have a different set of values a set of values where they felt their style of life was best served by that older form of city. I think there's really no doubt that we're going to have cities of by that we mean large numbers of people in a relatively urbanized regions. I think it's really clear that the cities are going to be different than they were in the past and that I think it's fairly clear that most people don't mind that. But in fact the baby like it and that's reason why some of the cities are coming like to look like that. But that much of the problem of the city especially the physical problems I think really do arise from the fact that there are people who do have a certain image of the city and that may not be the city to the merges.

What are these differences between the 19th and early 20th century in the city and the late 20s are the major difference is that the 19th century cities had a highly concentrated employment structure a very dense pattern of residence and I think it's fairly clear that much of the kinds of employment activity is located in the central parts of cities in the 18th 19th century won't locate in. In cities in the in the 20th century that's going to be much more dispersed kind of activity. There aren't as dependent anymore on being near the port or the railroad yard because they use the truck as their main mode of inner city manufacturing enterprises and other. Well I think transportation Canada has the airport has replaced the railroad station just to give you another example. There tends to be some confusion about all of this that a lot of people associate the certain aspects of the

city with the 1903 city and I think that we can get some of the market imperfections that you mentioned out of the way if we can begin to handle this problem of housing market segregation. The hope is the development centers and corps and so on that have a much more attractive but yet don't have this huge sort of appendage of other kinds of activity that really don't contribute to the kinds of things that people who are concerned about that those aspects of the city would like. Factors influencing how cities spend their funds discussed by John R. Meyer professor of economics and president of the National Bureau of Economic Research James Tobin sterling professor of economics and John King associate professor of economics at Harvard scripts for these programs are available without charge by writing to Yale reports 1773 Yale station New Haven Connecticut 0 6 5 2 0. This is Charles Dillingham for Yale reports which

originates in the audio visual center of Yale University. Any ARS special of the week. Thanks Yale University for this edition of Yale reports. This is an E.R. of the national educational radio network.