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Article Summary

Katz, Michael 2001. Urban Social Welfare in an Age of Austerity, Chapter 5 in The Price of Citizenship: Redefining the American Welfare State. New York: Metropolitan Books.

In this chapter, Katz chronicles funding changes that have affected Americas largest urban areas. In the 1980s and 1990s, Federal cutbacks forced mayors to look for alternate ways to manage their cities finances. The new wave of mayors in the 1990s slashed programs and froze wages to balance city budgets. They also initiated market-driven approaches to address the needs of their cities. In the cases of both Mayor Rendell in Philadelphia and Mayor Goldsmith in Indianapolis, these measures were successful in privatizing municipal functions, but did not deal with the larger problems of homelessness and poverty. The Federal government took this marketization to heart and used it to promote an urban agenda of housing vouchers, Empowerment Zones, and an attempt to privatize federal housing projects.

Urban Fiscal Crisis
During the 1980s, cities began a slow slide into fiscal crisis. There were five contributing factors: cuts in federal funding, heightened poverty, increased homelessness, the emergence of AIDS, and rising costs associated with hard drug use. These factors pushed some cities to the edge of bankruptcy and many considered drastic measures to maintain solvency. These measures were modeled after those used by New York City during its near bankruptcy in the mid-1970s: cutting services, freezing or cutting wages and general pork cutting. Two mayors, Rendell and Goldsmith, were heralded as the vanguard of a new group of city leaders equipped and willing to make the hard choices necessary to steer their cities through tough times.


A Tale of Two Mayors

Ed Rendell in Philadelphia, after stabilizing city finances, promoted a new economic agenda that balanced budgets but did not directly deal with the standard social welfare and public health issues. Instead, he hoped that his plan would bring back jobs that would have a dramatic effect on everything-crime, drugs, housing, all of the ills of the cities. Unfortunately, Rendells $2.2 billion Economic Stimulus Program was not enough to overcome the serious problems of urban flight, job loss, and homelessness.

Stephen Goldsmith, the Indianapolis mayor and privatization booster, took a similar tack, relying on fiscal austerity to strengthen his city while hoping that social welfare would follow. His goal was to marketize city services and inject competition into public services. His political detractors brushed the successes aside, claiming favoritism and non-competitive bidding.


Proof of success for these mayors will only be seen in the long run. Katz implies that the supermayors of the 1990s reached the limits of their abilities when it came to meeting the needs of their poorest citizens.

Urban Policy Returns
The Federal government slowly accepted the marketization strategy. The Clinton administration saw the role of government as a complement to, not competitor with, the market. Ideas such as vouchers and enterprise zones that were discussed in the 1980s became reality. HUD continued to focus on rent vouchers, homeownership, and reinvesting in inner-city markets. HUD also increased funds available for development in neglected areas as well as creating networks of CDCs. All of these attempts cost little and were very hands-off for the Federal Government.


Affordable Housing
Similar to suggestions made by Reagan in 1982, Clintons plans for housing included devolution of authority, deregulation, strict oversight, and businesslike practices. Clintons plan, however, was put into action through block grants, vouchers, mixed income housing projects, and tenant purchase plans, paired with tough crime policies.


Unfortunately, all of these practices were emergency responses to a nationwide housing crisis and did little to address the underlying causes of the lack of affordable housing. This was also the case with regard to homelessness. Leveraged funds increased 3,000 percent to $1.1 billion, but were spent on the immediate problems of the homeless and not on causes of homelessness. Consequently, homelessness continued to increase. Cities were also at a loss as to how to alleviate the problem of homelessness within the vague paradigm of market solutions. Katz notes this as an example of the limitations of markets as a universal solution to public problems.


By the late 1990s, the cities and the national economy had turned around. Thanks to their fiscal austerity, many cities were in the black and complaining of being unable to fill the needs of their growing class of affluent citizens. Yet the duality of cities remained; both rich and poor citizens were left with unmet needs.