What's Really in the Budget

THE New Federalism has turned out to be a Trojan horse for America's cities, a hollow gift filled not with enemy troops as in ancient Troy, but with impoundments and program freezes, with lopsided funding formulas, with broken promises and cynical pretexts and with an Executive budget that will spell disaster for human services and community development in every city in the country." So Seattle's Democratic mayor, Wes Uhlman, complained last week, and it was by no means the harshest indictment, as one mayor after another poured out his budgetary woes to Senator Edmund Muskie's Subcommittee on Intergovernmental Relations.

The mayors thought they had been doublecrossed and shortchanged and by a federal budget that seems oblivious to the desperate needs of the cities. Many in Congress were just as angry. The Senate Agriculture Committee endorsed a bill passed by the House to force the President to spend funds for the Rural Environmental Assistance Program. The Senate passed a bill ordering Nixon to reinstate $456 million for loans to rural electric and telephone systems. The House voted to give the President $1.5 billion less than he wants for foreign aid and $1.1 billion more than he wants for the Department of Health, Education & Welfare.

Outside the Capitol, thousands of protesters arrived by bus from major Eastern cities to denounce cuts in the poverty program. "King Richard may as well get ready for a long hot summer," threatened Ralph Abernathy, President of the Southern Christian Leadership Conference. Added Coretta King, widow of Martin Luther King: "My husband's dream of a just society has been deferred, and it is now on the verge of being destroyed."

Attending a meeting of the executive council of the AFL-CIO in Miami, President Nixon was more cordially received by labor than a year ago, when he was virtually snubbed by George Meany (see THE ECONOMY). But his amiable relations with the unions did not prevent the AFL-CIO hierarchy from issuing a statement protesting his budget: "The Federal Government's commitment to help solve the nation's major domestic problems is seriously endangered. Essential programs to strengthen American society and improve the quality of life are in jeopardy."

As never before, the President's many enemies are gathering for combat --but not for the kill. If anything, the President has the upper hand. Unless Congress can override his vetoes, which is unlikely, many of his cuts will probably stick. But groups that never used to speak to one another are now raising their voices together in a chorus of protest. Farmers and bankers, tenants and landlords, poor blacks and blue-collar whites find that, at least temporarily, they share common grievances.

The President predicted the opposition he would arouse. In a radio address on the budget, he warned of "enormous pressure" from special interests trying to preserve "sacred cows." But he has done nothing to head it off; indeed, he seems to be spoiling for a fight, not prepared to give back a dime in cuts. More than any President in years, he plainly means business about reducing the role of Government. "It isn't just a matter of shrugging off responsibilities," says Gilbert Steiner, director of governmental studies at the Brookings Institution. "The President has a philosophy of nonintervention. I take it at face value. He believes that Government should not intervene unless the evidence to the contrary is overwhelming."

Juggling. With inflated rhetoric, Nixon himself declared: "In a real sense, the 1974 budget is the clear evidence of the kind of change in direction demanded by the great majority of the American people." To what extent has the President actually realized his philosophy? Is his budget as good and as "dramatic" as he thinks it is or as bad as his enemies charge? Alas for ideology, the budget for fiscal 1974, given a closer look, is not what its supporters or opponents say it is.

Despite all the talk of cutbacks, it provided a huge $269 billion in outlays, some $19 billion larger than the previous budget. (Its deficit is also sizable: $12.7 billion, as compared with $24.8 billion in fiscal 1973 and $2.8 billion in 1970, Lyndon Johnson's last budget.) Few economists or even politicians quarrel with the total figure. More would be inflationary, most experts say, while less would be too restrictive. Fully 75% of the budget is beyond anyone's control; the Government was committed to spending in past years --on such items as Social Security, Medicare and Medicaid--and cannot get out of it. The uproar is caused by the juggling that has been done with the remaining 25% of the budget.

Outlays for national-defense spending will increase from $76.4 billion to $81.1 billion, and many critics attack that boost. While it is arguable whether all of the military increases are necessary (some, of course, like manpower costs, are mandatory), military spending accounts for only 30.2% of the budget, its smallest share since 1950. A larger portion of the budget than ever before goes to spending on human needs --47%. In this category, despite talk of cutbacks, many of the figures will move upward. The bulk of the increases cannot, of course, be attributed to the President alone. Congress voted a huge 20% hike in Social Security benefits. It also voted to extend Medicare benefits. Because of population growth along with runaway costs, Medicare and Medicaid outlays will reach $17.3 billion in 1974, a $3.5 billion jump over 1973. In an attempt to reduce hospital stays, however, the Administration proposes to have Medicare patients pay a somewhat larger share of the bill. This and other economies will save $616 million.

Boost. Other increases embedded in the budget are the responsibility of the White House. By taking over welfare for the aged, blind and disabled, the Federal Government will establish minimum levels of payment and extend coverage from 3.3 to 6.3 million people. The budget will include a bit more for education: federal outlays for the education division of HEW totaled $5.1 billion for fiscal 1974 as compared with $4.9 billion for 1973. Given inflation, that is just about standing still. While aid to elementary and secondary schools has been reduced, higher education has been given a sizable boost. Training grants in specific disciplines have been cut back, but aid for college students will rise from $1 billion to $1.2 billion, with greater emphasis on needy students. Head Start, the controversial program for preschoolers, will be given a 9% increase, bringing its outlays to $378 million. Aid to the arts will be doubled to $80 million.

More funds are slated for civil rights enforcement: $521 million, as compared with $322 million in 1973. Included are increases for assistance in helping schools desegregate, and extra funds for the Justice Department to force compliance in cases of discrimination in housing, employment, public accommodations or polling places.

Though some people are bound to be hurt by any budget cuts, most of the reductions have won the approval of nonpartisan economists. Even the Democrats-in-exile who work for the Brookings Institution concede that 85% of the proposed program cuts are justified. The President is given high marks for pruning $2.1 billion from the bloated agriculture budget. Every President since Eisenhower has tried to get rid of impacted school aid, which pours millions into school districts where federal installations reduce the tax base. It often is a subsidy for the middle class.

Another applauded cut is the elimination of the Hill-Burton hospital-construction program; in most areas of the country, there is a surplus of hospital beds. The White House has also slashed the budget of the Army Corps of Engineers and its often unnecessary building programs by $471 million. It proposes to save another $223 million by reducing veterans' pensions to bring them more in line with financial need. And few people will sleep any less peacefully at night knowing that the Subversive Activities Control Board has been abolished, at a saving of $400,000.

Where the budget is most vulnerable to attack is in its cutback on urban spending. In one stroke, the President signed the death certificate for the Model Cities project, urban renewal and the Office of Economic Opportunity. He has sharply cut job-training programs. He has imposed an 18-month moratorium on all housing subsidies and public-housing construction (see BUSINESS).

Trickle. The White House argues that these urban programs, mostly designed to achieve Lyndon Johnson's Great Society, simply have not worked. They have not benefited the poor, while they have lined the pockets of middle-class entrepreneurs, fast-buck real estate operators and just plain crooks. Scandal after scandal has erupted in the poverty program; fortune hunters came from as far away as the Carolinas to loot the sloppily run program in New York City. Some cities are strewn with abandoned houses where occupants could not keep up payments. Community participation may have given inner-city people a taste and a talent for organization, but it also pitted one ethnic group against another in a scramble for limited funds. In his message on human resources last week, the President said: "The money which left Washington in a seemingly inexhaustible flood was reduced to a mere trickle by the time it had filtered through all the layers of bureaucrats, consultants and social workers and finally reached those whom it was supposed to help. Those who make a profession out of poverty got fat; the taxpayer got stuck with the bill, and the disadvantaged themselves got little but broken promises."

But in recent years, partly because of the prodding of the Nixon Administration, many of the urban programs have begun to tighten up and maintain at least a modest level of useful activity. They have not eliminated poverty; they have not rebuilt the cities. They have not, in other words, lived up to their extravagant advance billing. But they have--well, lived. Ordinarily it takes a long time for a reform program to amount to anything. Once Mayor Richard Daley got sufficient control of Chicago's Model Cities, he turned it into a model program of its kind. Watching over an incredible conglomerate of 245 separate activities, it supplies housing, health facilities, job counseling and training and day-care centers for the city's needy population.

First Push. Even where the urban programs have not worked very well, they have provided a limited, if expensive form of work relief: paying jobs. City observers fear the repercussions if they are disbanded: perhaps nothing so extreme as another wave of rioting but rather a deepening malaise among a portion of the population that can ill afford it. Sar Levitan, an economist at George Washington University, believes the programs have provided a degree of upward mobility. "Lots of blacks who are now in middle management or in politics got their first push in these programs. They are a modern Tammany Hall in a way." Asks Deton Brooks, commissioner of human resources in Chicago: "What will be the effect of dropping a mechanism for social stability without having a proved and tested replacement?"

This is a key point. If a program has failed, what is to replace it? In general, even if one agrees with Nixon's belief that states, localities--and individuals--should do more on their own, he has not made clear just how they are supposed to do it. The budget is implacably silent on the matter. This contrasts with Nixon's first term, when he pursued what he called an "income" strategy--i.e., a guaranteed minimum income--in contrast to the "services" approach of the Democrats. There is no indication that he is going to revive his family assistance plan, one of the most innovative programs advanced by his Administration.

What the White House offers instead is revenue sharing, a five-year program that will return $30.2 billion to the states and localities. It expresses Nixon's belief in local control, but to the mayors and Governors, it is no solution. They say they had been led to believe that revenue sharing would come on top of other federal payments. Most state and local governments have budgeted revenue sharing for pay and equipment for police and firemen or construction projects or tax reduction. Now they learn that it is supposed to make up for other federal cutbacks.

Even if all revenue sharing were diverted to social programs, it would not make up the losses in categorical grants from the Federal Government. Richard Hatcher, mayor of Gary, Ind., estimates roughly that revenue snaring will bring his city less than 40% of the federal funds received in 1972 for the poverty program, Model Cities and the like.

Chaos. The federal budget also provides for an additional "special" revenue sharing that will allow the cities to revive social programs if they choose. But it is not clear how much the cities will receive, and part of the funding will not begin until fiscal 1975. "The situation now is chaos," says Los Angeles Mayor Sam Yorty. "We have a strong indication that there will be no summer youth program, for example. But we're not sure. We don't know whether to plan for it or not." Adds a Yorty assistant: "Everyone is just kind of sitting around right now waiting for Congress to pick up the ball."

The President might have won more support for his objectives if he had not pursued them so ruthlessly. "It's arousing hard feelings," complains Georgia Governor Jimmy Carter. "It's pitting the states against the Federal Government." Carter objects to the secrecy with which the President has operated, his failure to give mayors and Governors any advance warning. Carter complains that he could not even get to see Domestic Counsellor John Ehrlichman. Instead he was told to talk to a lesser White House staffer, Kenneth Cole. When Carter showed up, not even Cole was on hand. "There's no way to communicate with the White House, no access," says Democrat Carter, trying to score a few political points of his own. Minnesota Governor Wendell Anderson, another Democrat, concurs. "While the President talks about a New Federalism, there's scarcely a partnership if one side doesn't keep to his bargain. Instead of a cooperation, it is an adversary relationship."

The President's actions would suggest that his attitude toward the cities no longer constitutes "benign neglect." The attitude of some of the White House staff smacks almost of vengefulness. There is an indication that some of Nixon's aides are relishing their role of executioner. When he fired the head of legal services for the poor, Acting OEO Director Howard Phillips expressed his philosophy: "Every country needs its Cato. Well, I'm going to be this country's Cato. Carthage was destroyed because it was rotten. I think legal services is rotten, and it will be destroyed." Says James Oliver, OEO Director in Detroit: "Phillips is nothing more than a massive ball on the end of a wrecking crane. He isn't thinking. He's destroying. And it's easier to destroy than it is to build."

Nixon's budget is finely crafted, revealing a coherent and largely consistent social and political strategy. With more deliberation than any of his predecessors, he has set out to strip the Government of some of its superfluous growths and to reconcile some of its conflicting tendencies.

He has not been given sufficient credit for this. But in the area of the cities, he is open to serious charges of prescribing and performing poorly. Since the cities encompass the country's major social problems, the results could be highly damaging to U.S. life--unless and until Nixon produces something more. It is hard to believe that a President so given to pragmatism--and to surprises--will let American cities go the way of Carthage.

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