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04/26/2009

Counter-cyclical Urban Policy

Matt Yglesias contrasts the fates of the Flint, Michigan and Baltimore, Maryland and the respective policies those fates imply. Where Flint is a declining city in a declining region, which needs help managing its decline, Baltimore is a struggling city in a prosperous region, which needs a little boost to help it take better advantage of the prosperity around it. Yglesias writes:

To me, those different circumstances imply very different policies. Flint needs help executing a plan of managed shrinkage to turn it from a city of 200,000 to a city of 100,000 thousand without being full of rotting, vacant structures. Baltimore needs help executing a plan to build better transportation links between Baltimore neighborhoods and the rest of the region, and to improving policing and schools, so as to rebuild its population to something closer to its historical levels.
I think he's right that different circumstances call for different interventions, but I think there's more in common in these two cases than it may seem. Both Flint and Baltimore found themselves falling victim to the negative feedback loops of places in decline -- vicious spirals that afflicted practically every central city in the nation during the great era of suburbanization. You have municipalities with fixed infrastructure and service expenses who then find their tax base eroding. This leads to a decline in the quality of city services, which encourages further migration. Cities are increasingly occupied by those who can't afford to leave, and those who can't afford to leave also can't afford to invest in the upkeep of private property or generate new economic growth.

You then have center cities that are deteriorating from disinvestment in public and private property, and that suffer from failing schools and crime. It's much harder to rehabilitate such a place than it is a city which has suffered economic loss but hasn't seen a deterioration in services and private investment. Just as it's difficult for states with tight budget constraints to provide their own fiscal stimulus, it's difficult for cities with tight budget constraints to borrow sufficiently through the bust times to keep themselves going into new boom times. For cities in declining regional economies, it's basically impossible.

It's a serious problem for the country that despite having struggled with urban decline for decades, the government has no clear view on how to address the problem, or on whether it ought to have a comprehensive plan for city support and rehabilitation. This is an embarrassingly large omission. There should be established procedures for understanding cities in decline and providing support to them. It's damaging to the local and national economy to allow schools, public safety and health services, and infrastructure to decline in such a fashion.

I actually think it would be helpful to have a process of economic health reviews in place, which could then lead to temporary federal government receivership of failing cities, in which institutional barriers to reform are addressed and budgets supported while the broader economic potential of the place was considered.

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