The new New Federalism - will cities do better on their own?

Can American cities survive in an age of self-reliance?

A flurry of activity in the last few days has once again brought the nation's urban problems - physical, fiscal, racial, and social - to the fore. And it has focused attention on the proper role of the federal government in solving them.

On July 13:

* President Reagan, in a speech in Baltimore, unveiled an outline of a revised New Federalism plan that would return more responsibility to state and local governments.

* Congressional hearings began before the Joint Economic Committee on the administration's urban policy report, which asserts that cities experience only ''the illusion of progress'' by relying too heavily on federal funds.

* The 15,000 municipalities in the National League of Cities, responding to the New Federalism plan and the urban policy report, issued a statement rejecting ''the premise that the federal government should now disengage from all assistance to cities, leaving local communities to the vicissitudes of general economic forces.''

Behind the details of these various arguments lies a fundamental question: Can the job of revitalizing American cities best be done at the local or the federal level?

Few doubt that the job needs doing. ''I would think that 90 percent of the cities in states other than energy-producing states are going to face some kind of (financial) crisis,'' Felix G. Rowatyn said in a recent Monitor interview. Mr. Rowatyn is chairman of the Municipal Assistance Corporation, which helped resolve New York's bankruptcy threat in 1975.

The most visible signs of urban decay show up in the infrastructure of roads, bridges, water and sewer systems, and mass transit systems. The Urban Institute puts the bill for repairing America's infrastructure at $572 billion. So serious are the financial ramifications of this problem, says a detailed report in last October's Business Week, that ''many sophisticated businessmen and economists believe the US is entering a period of severe crisis for state and local government.''

Equally significant are the nation's rapidly changing racial and ethnic patterns. Census Bureau figures show urban non-white populations increasing over the last decade - from 23 percent to 39 percent in both New York and Los Angeles , for example, and from 34 percent to 50 percent in Chicago. Because unemployment for nonwhites is significantly higher than for whites, these changes directly affect the municipalities, lowering tax revenues and increasing unemployment compensation.

How, then, should an urban revitalization be accomplished?

The administration is pushing for a lower federal profile - hewing to what Reagan describes as the ''very heart'' of his philosophy of returning government to the people.

His New Federalism proposals, although scaled down from his original plan after discussions during the last six months with the nation's governors, call for a return of some $40 billion worth of responsibility and some 35 programs (including Aid to Families with Dependent Children, the basic welfare program) to state and local levels.

These, he said, would be ''accompanied by the resources to pay for them.'' In return, the federal government would assume the costs of medicaid.

Behind his proposals, the president told the 5,000 delegates at the National Association of Counties convention in Baltimore, lies a desire to turn away from a Washington-based ''big brother government.''

''In the recent past, as the federal government has pushed each city, county, and state to be more like every other, we have began to loose one of our greatest strength: our diversity as a people,'' the president said. ''If we are to renew our country, we must stop trying to homogenize America,'' he added.

The new proposal, he said, would go to Congress by the end of the month. Unlike earlier proposals, it calls for the federal government to retain responsibility for the food stamp program and to fund the changes through general tax revenues rather than through a windfall profits tax.

The administration's urban policy report, sent to Congress July 9 by Housing and Urban Development Secretary Samuel R. Pierce Jr., sets the same tone. ''It is the policy of this administration to return maximum authority and discretion over the use of resources to state and local governments,'' says the report, since ''they will make better decisions than the federal government acting for them.''

The report, stressing the need for decentralization to meet the needs of differing cities, nevertheless calls for a greater federal role in rebuilding the infrastructure and in combating crime. It also notes that ''ultimately, the key to healthy cities is a healthy economy'' - a contention disputed by some observers, who note that inner cities have continued to decay even during boom years.

It backs away, however, from the language of its original draft, which said that federal aid to cities had changed local officials from ''bold leaders of self-reliant cities to wily stalkers of federal funds.''

But a number of city officials still object to what they see as the abandonment of cities by the federal government. They argue that only the presence of the federal government, untouched by the swirls of local politics, can ensure adequate housing, educational, and welfare policies - especially in states where poor, nonwhite cities compete for state funds with affluent white suburbs.

Testifying for the US Conference of Mayors at the congressional hearing, Detroit Mayor Coleman Young told the committee July 13, ''Most states still do little or nothing to target assistance to their distressed cities.'' Instead, he said, ''state dollars are spread around to all communities, regardless of wealth , often on a per capita basis.''

And Mayor Charles Royer of Seattle, first vice-president of the National League of Cities, told the lawmakers that ''with this document (the urban policy report), the federal government admits it is incapable of winning the battle for the cities, and announces its intention to go AWOL.''

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