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