Academic journal article Federal Reserve Bank of New York Economic Policy Review

From John Lindsay to Rudy Giuliani: The Decline of the Local Safety Net?

Academic journal article Federal Reserve Bank of New York Economic Policy Review

From John Lindsay to Rudy Giuliani: The Decline of the Local Safety Net?

Article excerpt

Bell & Howell Information and Learning: Formulae omitted.

I. INTRODUCTION

The archetypal mayors of the 1990s act like city managers, not social levelers. New York's Rudy Giuliani, Chicago's Richard M. Daley, Philadelphia's Edward Rendell, and Los Angeles' Richard Riordan emphasize their skills at providing safety and attracting business. While many of these leaders enact policies that are aimed at the poor, their political appeal is based primarily on their ability to provide basic public services and to attract businesses. The change from taking care of the poor to providing basic urban services is not just rhetoric. New York City's public assistance rolls have dropped by almost 400,000 during Giuliani's tenure (see Citizens Budget Commission [various years).

This current phenomenon would not be unusual if it were not for the mayors that these men replaced. In the 1960s, 1970s, and even as late as the 1980s, big-city government often defined itself by its attempts at redistribution. Mayors such as John Lindsay, Coleman Young, and Marion Barry were supported by electoral coalitions whose leaders counted on significant redistribution to the less advantaged, both formally through official programs and informally through patronage. Local redistribution started long before the 1960s. James Michael Curley was just as much of a redistributionary mayor as Coleman Young.

Big cities are still unusually oriented toward providing services to the poor, even controlling for the level of poverty. Cities with more than one million inhabitants spend 2.5 percent of their budget, or $88 per inhabitant, on local welfare expenditures. By comparison, cities with populations between 2,500 and 10,000 spend 0.7 percent of their budget, or less than S3 per inhabitant, on local welfare expenditures. Cities with more than one million inhabitants spend 7.4 percent of their budgets on public housing and public health. Small towns spend 3.6 percent of their budget on these categories. Thus, despite the massive decline in big-city redistribution over the past decade, big cities are still unusual in their tendency to allocate expenditures to the poor.

These expenditure differences result in real differences over space in the amount of income received from the government by the poor. Poorer residents of big cities are more likely to receive public housing and receive larger amounts of public assistance (despite supposedly uniform statewide policies). We believe that the greater abundance of transfers in cities (relative to suburbs and small towns) contributes to the segregation of the poor into large cities, which we believe is a policy issue of first magnitude.

We consider two puzzles about the local safety net and New York City. First, why do big cities, and particularly New York, engage in so much more redistribution than small towns? The broad question (the connection between cities and redistribution) is the topic of the companion paper to this one (Glaeser, Kahn, and Rappaport 1999). Our second puzzle is to understand why the level of redistribution in New York City (and to a certain extent elsewhere) has declined so substantially over the past three decades. We use results from our companion paper to explain the level and the trend of New York City's redistribution policies. We need to understand why New York City provides local redistribution to seriously evaluate whether this redistribution will continue to be a feature of New York City life.

Changes in local generosity have both positive and negative aspects. Obviously, we may find it undesirable for the poor to receive less from local government. Such trends might exacerbate income inequality. However, differences in the availability of transfers over space create spatial distortions that encourage the poor to disproportionately live in big cities. Our goal here is not to evaluate the effects of the local safety net, but rather to understand its causes and particularly the causes of its decline in New York City. …

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