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Nation must confront economy on local fronts.

In the last decade of the 20th century, with the end of the Cold War, the United States confronts the economic challenges of peace. With the projected reduction in defense spending in the proposed FY 1993 budget, the nation has the opportunity and, potentially, the resources to address domestic priorities.

As the recession lingers, there appears to be a growing consensus that the nation must address these domestic priorities, particularly those of the economy.

But debate in the federal government over the shift to domestic priorities has been limited. First, the federal discussion has centered around the assumption that tax cuts are the appropriate policy measures to address the needs of the economy. Second, it has virtually ignored the need to invest locally to promote the productivity of urban regions to move the United States to a renewed path of economic growth.

A national growth package of tax cuts will not address the underlying structural problems of the economy. The United States must turn to making long-term investments in its economic future that build the human and economic infrastructure of the nation's urban economic regions and their constituent local governments. In particular, we must find ways to reduce the three critical "hidden deficits" in human investment, infrastructure, and technology. These are the investments whose payoffs will determine the long-term competitiveness of the U.S. in the international economy.

The United States is a nation of urban economic regions. These "engines of growth" in the national economy are being impaired by the ongoing fiscal crises of many of their cities and towns. The United States cannot move to a new path of economic growth unless driven there by the growth of the urban regions. It is essential, therefore, to the economic future of the nation that the shift to domestic priorities be more than simply a "national growth package." The federal government must create a federal "local growth package" to effectively address the long-term needs of urban economic regions and, therefore, the U.S. economy.

Ongoing NLC research documents one immediate consequence of the fiscal crisis on cities and suburbs, as well as the growing fiscal disparities among them. [12] Cities, attempting to respond to their fiscal crises, are increasingly unable to invest in the economic foundations of their economies.

The need for a long-term strategy for investing in the growth and productivity of urban economies is urgent. [13] The federal deficit and the trade deficit are highly visible and a vigorous national debate is in progress about the consequences of mounting a public debt. The hidden deficits in human capital, technology and public infrastructure are no less important to the future of the U.S. economy, but their consequences are not part of the national debate.

Education and training may be one of the most critical investments undergirding the productivity and competitiveness of the U.S. economy. Almost 50 percent of all jobs created between 1983 and 1986 were in positions requiring college experience, and 27 percent required at least four years of post-secondary education.

A report by the Committee for Economic Development argued that "investment in human capital is among the most important contributions government can make to assure continued growth in this nation's standard of living and its leadership in a global economy." [14]

The training and retraining problem is staggering. As many as 50 million workers will need to be trained or retrained in the next decade, 21 million new entrants to the workforce and 30 million workers requiring retraining. In the face of this challenge, federal training programs have been hit hard by budget cuts.

The seeds of future problems with the quality of the nation's workforce are being sown with our children.

The plight of children in center cities grew worse between 1980 and 1990. These very high rates of central city poverty of children are clear and unequivocal predictors of future problems for which our society will dearly pay.

The incidence of poverty for youth in metropolitan suburbs is significantly less than in the nation as a whole and in central cities. This is true for black and Hispanic children. Their poverty rates, although lower in suburbs than in the nation as a whole and in central cities, are alarming. In 1990, roughly one-third of these children in metropolitan suburbs lived in poverty.

New technology and its commercial innovation are key to competitiveness in international markets. Yet the nation's technology advantage is eroding. As presented in previous NLC Economic Reports, warning signals of the decline of technological competitiveness are abundant:

[section] The U.S. registered its first trade deficit in high technology products in 1986.

[section] The U.S. share of the domestic consumer electronics market has dipped from almost 100 percent in 1970 to less than five percent today.

[section] Core industries--from semiconductors to pharmaceuticals-are being strongly challenged by foreign competitors.

[section] Foreign investors captured 46.6 percent of U.S. patents in 1987, up from 35 percent in 1975.

[section] The United States faces a projected shortfall of over 500,000 scientists and engineers by the year 2010.

The report of the National Council on Public Works Improvement, Fragile Foundation: A Report on America's Public Works, includes disquieting conclusions for the productivity of the U.S. economy and the capacity of our public works to support economic growth. This major study found that the quality of the nation's infrastructure--its highways, bridges, waste facilities, water systems, etc.

To meet the infrastructure requirements of the economy, the council states that the United States must double its capital spending on public works projects to $90 billion a year by the end of the century.

These investments will be necessary to undergird the productivity and future growth of the U.S. economy. Yet the federal role in meeting infrastructure requirements has been diminishing in order to meet other federal priorities and hold down the deficit. Continued under-investment in the nation's public works may have serious consequences for industrial productivity and economic competitiveness of the nation and its system of cities.

Infrastructure investments are made in geographical places. With these investments in the productivity of places, national policy comes to ground.

There is a striking absence of any real debate, or even discussion, about the form of the shift to domestic priorities.

Almost by default, a decision appears to have been made that the savings from reductions in defense expenditures should be exhausted through tax reductions. The recession, the rhetoric of the need for a tax cut for the "middle class," and the anticipated political capital accompanying tax reductions have created a political juggernaut driving Congress and the Executive toward tax reductions.

The capacity of the federal government to make investments in the future economic welfare and productivity of the nation is limited to only 22 percent of the new budget proposed by the President. Social Security, Medicare, interest on the national debt, and costs of the S&L bailout represent the current costs of past obligations rather than investments in the nation's future. These prior obligations represent almost half of the federal budget (47 percent). Nondomestic priorities (defense and international affairs) will take away an additional 20 percent. These two clusters of programs, plus entitlements and Medicaid, account for slightly less than 80 percent of the proposed budget.

Because of the unrelenting demands of these other national obligations and priorities, the federal government is handicapped in its efforts to shift to domestic priorities.

A dramatic recording of national priorities will be required to effectively address the essential national need for a "local growth package. But it is not simply a reordering of national priorities to address domestic needs that is required. The form or composition of this shift to domestic priorities is critical. A shift driven by short-term political expediencies during an election year, such as tax cuts, will not address the need for investments in the long-term productivity of the nation. The shift to national priorities must be in the form of investments in the "engines of growth" of the national economy, the urban centered regional economies of the United States.

[1] Larry C. Ledebur, City Fiscal Distress: Structural, Demographic and Institutional Causes, National League of Cities, March 1991. [2] Advisory Commission on Intergovernmental Relations, Trends in Metropolitan America (Washington, D.C.: ACIR, February 1977), p. 40. [3] This figure is based on a sample of the 85 largest cities in 1980. See Advisory Commission on Intergovernmental Relations, Fiscal Disparities: Central Cities and Suburbs, 1981 (Washington, D. C.: U.S. Government Printing Office, 1984). [4] This is the average ratio for the sample of 62 cities and their suburbs. This sample is a majority of large cities for which 1990 Census data initially became available. [5] Larry C. Ledebur, Poverty in America (Washington, D.C.: National League of Cities, 1988). [6] See Janet M. Kelly, State Mandates (Washington, D.C.: National League of Cities, January 1992). [7] H.V. Savitch, Daniel Sanders and David Collins, "The Regional City and Public Partnerships," in Ronald Berkman, et al., In the National Interest: The 1990 Urban Summit (New York: The Twentieth Century Fund Press, 1992), pp. 65-77. [8] This section is the outgrowth of an NLC research project on The U.S. Common Market supported by the Ford Foundation and conducted by William Barnes, NLC research director and Larry C. Ledebur. [9] Larry C. Ledebur and William Barnes, "Toward a New Political Economy of Metropolitan Regions," in Government and Policy, 1991. [10] The U.S. Bureau of Economic Analysis has identified 183 metropolitan-centered regional economics in the United States. [11] Data for individual metropolitan areas are presented in the appendix. [12] Michael A. Pagano, City Fiscal Conditions in 1991, National League of Cities, July 1991 and The State of America's Cities: The Eighth Annual Opinion Survey of Municipal Elected Officials, National League of Cities, January 1992. [13] Previous NLC reports have documented these deficits in greater detail. [14] Investing in America's Future: Challenges and Opportunities for Public Sector Economic Policies, Committee for Economic Development, 1988, p. 20.
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Title Annotation:Special Report: Mutual Economic Health Needed by Cities, Suburbs
Author:Ledebur, Larry C.; Barnes, William
Publication:Nation's Cities Weekly
Date:Mar 9, 1992
Previous Article:Suburbs and cities depend on each other economically.
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