Urban Policy in a Changing Federal System Proceedings of a Symposium (1985) / Chapter Skim
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5. The Distributive Politics of the New Federal System: Who Wins? Who Loses
5. The Distributive Politics of the New Federal System: Who Wins? Who Loses
Pages 127-162
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From page 127... ...
Dale Rogers Marshall and John I Kirlin INTRODUCTION President Reagan's domestic policies seek to promote economic growth, to cut federal domestic expenditures, especially on welfare, and to reduce the policymaking role of the national government while increasing that of states.
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From page 128... ...
Recipients of schooling and users of renewed physical structures and owners of adjacent property benefit individually, but general or public benefits are also accrued in the form of a better-educated citizenry and labor force and in increased economic activity and government revenues. Government action, thus, almost always has distributive impacts: Some individuals are assisted more than others.
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From page 129... ...
In this paper we examine distributive impacts of Reagan's domestic policies, particularly the effects on affluent and less affluent people and places and on changes in the dominant theory of domestic policies. To provide a baseline and context for comparison, we first review the distributive impacts and dominant theory of national policies in the 20 years prior to Reagan's presidency.
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From page 130... ...
An expansive public sector is attacked as diverting for investment and reducing incentives ation. This represents an important shift in the dominant theory underlying domestic policy in the Reagan administration.
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Operating grants for state and local governments constituted a much smaller proportion of federal domestic spending than entitlement grants. Distributive impacts were mixed, depending on the type of program and characteristics of the entities implementing federal initiatives.
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Despite a few explicitly distributive policies for poor people and places, the distributive impacts of the other policies, which were not pro-poor, were rarely acknowledged. Support for the redistributive policies was quite fragile because they were often instituted Won the cheap.
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Operating Grants In the highly decentralized U.S. federal system, the central government attempts to achieve some of its goals by providing operating grants to state and local governments for many services, including employment, economic development, health, education, housing and community development, transportation, and social services.
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. A major consequence of general revenue sharing and formula-allocated block grants was that virtually all local governments received federal aid and became subject to both program-specific and cross-cutting federal regulations.
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They also engender various kinds of citizen-participation structures and procedures that, however weak, contribute to subtle but not insignificant shifts in local political dynamics. The programs are seen as qualified successes because they promoted political change, stimulating local governments to provide new services for the poor and increasing the ability of the poor to organize and to promote local government responsiveness (Levitan, 1969; Haveman, 1977)
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From page 136... ...
Taxes have little if any effect on income redistribution: While federal taxes are somewhat progressive with a regressive social security payroll tax diluting the moderately progressive individual income tax (effective rates as contrasted with the nominal scheduled rate) , this progressivity is nullified by regressive state and local taxes (Page, 1983:22-34)
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From page 137... ...
Financing came from increased revenues obtained not through a direct tax increase, but through an inflation-induced creep of personal income tax brackets, reductions in defense spending, or increased Social Security taxes. Political support was also weak because the full costs of social programs were not recognized, and because the programs' initiation preceded development of interest groups powerful enough to defend them.
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From page 138... ...
The foundation of President Reagan's domestic program was economic recovery based on tax cuts, reductions in domestic spending, regulatory relief, and monetary restraint (USHUD, 1982)
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From page 139... ...
Program cuts and a reduced national role are defended not simply on financial grounds but also on grounds that federal efforts to promote social change are harmful. Theory in this era, as in the earlier era, continues to ignore the distributive impacts of the broad range of federal activities, except in tax policy; some justify tax cuts to provide incentives for work, savings, and investment.
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Congress, Joint Economic Committee, 1983:445-446)
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Preliminary estimates indicate that only a few states replaced lost federal funds (Nathan and Doolittle, 1983:30-32)
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advocated to protect truly needy citizens worked better for the middle class than for those with low incomes. Operating Grants Reagan's largest percentage cuts were in operating grants for state and local government services.
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Initial evaluations of the distributive impacts of changes in operating grants suggest that effects have been modest. As demonstrated in the pre-Reagan period, changes take ~ long time to work their way through the system.
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, forward funding meant that the effects were not generally felt in 1982, except in those districts that had been receiving large desegregation grants, which were lost in the shift to block grants (Seattle, Rochester, and Boston, for example)
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. Two other block grants, Community Services Block Grants tCSBG)
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Impact on People and Places President Reagan's position is that the immediate sacrifices entailed by his domestic programs will be offset in the long run by the resulting economic gains (Bawden and Levy, 1982:459)
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A 1982 Urban Institute study (Palmer and Sawhill, 1982:21; Bawden and Levy, 1982:478-480) of the tax and entitlement policy changes suggests the following: The middle class will have a small increase in their aftertax real incomes (2-3 percent)
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From page 148... ...
This change reflects demographic and economic trends that started before Reagan; however, Reagan's policies contributed to the increases in income inequality (U.S. Congress, Joint Economic Committee, 1983:449; San Francisco Chronicle, 1983)
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From page 149... ...
The language or ideology, even when not fully realized, can be very powerful. It is responsive to the new political constituency that brought the Reagan administration to power -- a more conservative, middle class, white constituency located in suburbs, newer metropolitan areas, the South, and the West.
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; · the amount of fiscal pressure (the more fiscal strain the less replacement) ; and · political ideology (liberal officials were more likely to replace cuts for social programs and protest redistributive programs)
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· Even in block grants, state and local discretion is limited and subnational governments see the programs a national rather than as their own. · Federal dollars arrive off cycle for many state and local governments, making them hard to incorporate in routine decision processes.
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In the pre-Reagan period, expansion of operating grants to state and local governments created public sector employment for many blacks. This was important for their mobility, moving them into the middle class.
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The study finds that in the pre-Reagan period social programs facilitated the electoral success of minorities and that minority elected officials made a difference for policy (Browning et al., 1984)
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Early in the Reagan administration supporters said that his domestic policies would quickly improve the
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The national government should be a partner in efforts to promote economic performance, redistribution, and the socialization of major risks. Recognizing the deleterious effects of centralizing all issues, it should promote state and local capacity to undertake political, service delivery, and economic development activity.
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From page 156... ...
Sawhill, eds., The Reagan Experiment. Washington, D.C.: Urban Institute Press.
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1980 Implementation and political change: sources of local variations in federal social programs.
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New York Times Glazer, N 1984 The social policy of the Reagan administration: a review.
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Washington, D.C.: The Brookings Institution. Nathan, R., Dommel, P., Liebshutz, S., Morris, M., and Associates 1977 Block Grants for Community Development.
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1983 Older Americans in the Reagan Era: Impacts of Federal Policy Chances. Urban Institute Press.
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U.S. Advisory Commission on Intergovernmental Relations 1977 Block Grants: A Comparative Analysis.
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1978 Fiscal Impact of Revenue Sharing in Comparison with Other Federal Aid. Washington, D.C.: Urban Institute Press.
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