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OCR for page 127
5
The Distributive Politics of the
New Federal System:
Who Wins? Who Loses?
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. In Reagan's view: Government is not the
solution to our problems. Government is the problem.
(Reeves, 1984:26-29). Reagan argues that the Taxing
power of government must . . . not be used to regulate
the economy or bring about social change. (U.S. Congres-
sional Record, 1981:H510-H514). This traditional con-
servative view suggests that Reagan's goal is not just
to trim expenditures, but to redefine the role of the
national government. Among those policies being revised
are urban policies adopted in the past two decades to
help disadvantaged places and persons. Some would argue
that the objective is to dismantle the Welfare state,.
an attack encompassing not only specific programs but
the premises (theories) that have dominated recent
policymaking.
While definitions of the welfare state differ, a com-
mon element is redistribution of society's resources
through public policy. For example, Janowitz (1966:10)
argues that The welfare state rests on the availability
of some form of economic surplus . . . that can be real-
located in terms of a set of principles.. Perceptions
of both economic surplus and principles by which it
should be reallocated are not immutable laws of nature.
They are instead theories, social constructions contain-
ing both descriptions of what is occurring and valua-
tions. For example, does an economic surplus exist
after subsistence needs are met or after investment in
127
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128
capital goods for future production? Similarly, should
reallocation of any surplus be on the basis of income,
class, merit, or some other criterion? Policy choice
requires closure that is inevitably political, although
empirical evidence and analyses may intrude.
While most discussions of the welfare state focus on
redistribution, the concept of Distributive goods. is
also useful. An activity of government provides dis-
tributive goods whenever benefits of the activity are
received by some individuals to the exclusion of oth-
ers. Some theorists call these ~private. goods, noting
that such goods can be produced by governments as well
as by private firms. This is in distinction to goods
whose benefits may not be appropriated by any individ-
ual, but are instead ~public. goods. Among examples of
the latter are legal systems or national defense: All
members of society benefit from expectations of the
security of contractual arrangements and from physical
security and no one can be excluded.
Few governmentally produced goods or services are
pure public goods; most are distributive or private
goods or ~mixed. goods with elements of general and
individual benefits. Two examples of mixed goods are
publicly funded education and urban redevelopment.
Recipients of schooling and users of renewed physical
structures and owners of adjacent property benefit in-
dividually, but general or public benefits are also ac-
crued in the form of a better-educated citizenry and
labor force and in increased economic activity and gov-
ernment revenues.
Government action, thus, almost always has distribu-
tive impacts: Some individuals are assisted more than
others. While the total of benefits received from all
governmental activities may balance out among individ-
uals, it is more likely to be the case that some indi-
viduals come out comparative winners and others compara-
tive losers as a result of government's activities.
This is ~redistribution. in the technical sense. How-
ever, in common language and in most policy debates and
policy evaluations, the term redistribution is defined
more narrowly as the incidence of benefits received ver-
sus costs borne in terms of an individual's income.
One of the anomalies of politics in this nation is
that income-related redistribution has come to be iden-
tified almost exclusively with transfers to those of
lower incomes. In the dominant theory, redistribution
is equated with welfare. Governmental activities pro-
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129
viding net benefits to individuals of higher than aver-
age incomes are not perceived as Redistribution and
certainly do not carry the negative label of ~welfare..
The dominant language of politics and policymaking em-
phasizes two types of programs: welfare and public
goods. If a program is targeted on the poor, it is wel-
fare; if not, it is discussed as if it were a public
good. This limitation of language is powerful polit-
ically. It masks the reality that almost all govern-
mental activities are distributive; they affect individ-
uals differentially because they are mixed or private
goods. Moreover, it blinds citizens and policymakers
alike to the substantial redistribution to individuals
of higher incomes that occurs as a result of many gov-
ernmental activities.
These limitations on common perceptions of govern-
mental activities, joined with demographic factors (the
poor are a minority) and differential rates of political
participation and organization (which favor the better
off), make it difficult to adopt and maintain programs
that benefit the poor. This was true both before and
after the election of Ronald Reagan.
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. This review reveals that economic growth
made the major contribution to rising standards of liv-
ing. Expanding social programs also contributed to a
modest redistribution of society's resources toward the
poor. However, the largest and most rapidly growing
federal domestic programs were not pro-poor in opera-
tion. In the same two decades, federal tax and expen-
diture patterns encouraged equalization of incomes among
cities, states, and regions. In that period, social
policies were justified both as benefiting the general
public and promoting redistribution to the poor, but
there was little recognition that virtually all policies
are mixed goods with major distributive effects, few of
which help the poor.
With the context established, we turn to an examina-
tion of changes made during the Reagan presidency. We
review current evidence on the distributive impacts of
Reagan's cuts in entitlement and operating grants, and
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130
the net effects of those plus changes in defense spend-
ing and in taxes. Overall, the evidence confirms ex-
pectations that Reagan has somewhat decreased redistri-
bution from affluent to less affluent people and places
(Palmer and Sawhill, 1982). Moreover, improving per-
formance in the economy may not pull up the bottom of
the income distribution. In part this is because the
cuts that have been made have focused on pro-poor, re-
distributive, welfare programs, while leaving relatively
unscathed those programs whose distributive effects
favor the more affluent. The political power of those
with middle-class and better incomes has protected their
programs. Reagan's policies have been pursued in the
name of protecting a general interest in a public good,
namely economic performance. Redistribution to the poor
is attacked as undermining the work ethic. An expansive
public sector is attacked as diverting
for investment and reducing incentives
ation. This represents an important shift in the domi-
nant theory underlying domestic policy in the Reagan
administration. We argue that the theory base of social
policy has shifted more than the distributive impacts.
Next, we consider variations in state and local re-
sponses to Reagan's programs. They depended on the type
of program, amount of fiscal pressure, and political
ideology. Finally, we examine special problems of mi-
norities and cities and close with a discussion of key
issues that emerge from the analysis.
The evidence of policy effects considered in this
paper is limited to that which is available in previous
analyses, a not uncommon limitation. But we have also
sought self-consciously to include available evidence on
the impacts of the full range of governmental activi-
ties, not just ~urban. policies. Some of the conflict
over the design and effects of redistributive policy
results from varying definitions of the relevant poli-
cies. If the focus is simply on pro-poor or urban pro-
grams, much of the richness of policymaking in the Amer-
ican political system is missed. Pro-poor programs make
a modest contribution to improving life situations of
the poor, so this focus is not sufficient if that is
one's goal. To understand the effects of the Reagan
policies, a broader net is mandatory, as those policies
have emphasized the contributions that general economic
growth, subnational policies, and nongovernmental
efforts can make to reducing poverty and to improving
the quality of life in cities.
. . .
,
_
resources needed
for income gener-
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131
DISTRIBUTIVE POLITICS IN THE PRE-REAGAN PERIOD
In the 20 years prior to the Reagan administration,
federal expenditures increased rapidly. How much redis-
tribution from the affluent to the nonaffluent took
place in this era of growth?
Distributive impacts are complex and controversial,
varying by program and over time under different admin-
istrations. Assessments also change, as illustrated by
the fact that some of those who were most critical of
the earlier programs now criticize the Reagan adminis-
tration for attempting to change them (Piven and
Cloward, 1982; Auletta, 1983:296). Yet retrospective
evaluations of the domestic programs from the Kennedy-
Johnson administrations through Carter reveal some gen-
eral patterns.
This pre-Reagan period was a time of expanding fed-
eral benefits for individuals and cities. The largest
entitlement programs, Social Security and Medicare, were
not means-tested and benefited the middle class without
much of a downward tilt. But some of the smaller enti-
tlement programs, such as Aid to Families with Dependent
Children (AFDC) and Medicaid, were redistributive. Op-
erating grants for state and local governments consti-
tuted a much smaller proportion of federal domestic
spending than entitlement grants. Distributive impacts
were mixed, depending on the type of program and char-
acteristics of the entities implementing federal initia-
tives. Operating programs as well as entitlement pro-
grams that provide services, such as Medicare and Medi-
caid, provide benefits to provider groups and not just
to the eventual recipients of services.
Yet, modest levels of redistribution did occur and
social programs contributed to those trends. There was
a decline in absolute poverty and a move toward more
equality of income (Plotnick and Skidmore, 1975). The
federal government also played an income-equalizing role
among cities, states, and regions and stimulated local
jurisdictions to assume responsibilities for new pro-
grams, some of which were oriented to disadvantaged
groups. In this era, redistribution gained prominence
on the political agenda. But the amount of redistribu-
tion that actually occurred was more modest than com-
monly recognized because the biggest programs were not
pro-poor.
The underlying theory in this era justified policies
in terms of promoting both general public interests and
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132
redistribution to the poor. The thrust was toward an
expansion of the public sector without much knowledge
of, nor concern for, the long-term costs. 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. Sup-
port for the redistributive policies was quite fragile
because they were often instituted Won the cheap. polit-
ically and fiscally.
Entitlement Grants
Many people believe that most government spending has
been for programs that benefit the poor, but they are
wrong. The largest and fastest-growing portions of the
domestic budget in the pre-Reagan era were entitlement
grants providing cash or in-kind transfers to families
and individuals. They constituted approximately 48
percent of federal budget outlays in 1976 (Palmer and
Mills, 1982:65). The largest of these programs--Social
Security and Medicare--represented 38 percent of the
federal budget in 1978 and chiefly benefited the middle
class (Page, 1983:88). Means-tested transfers--AFDC,
Supplemental Security Income (SSI), Medicaid, and Food
Stamps--were a much smaller share (10 percent in 1976)
of the federal budget (Palmer and Mills, 1982:65). So,
low-income assistance with a downward tilt was not the
largest proportion of government spending on transfers;
expenditures for the other programs were almost four
times larger.
Social Security involves regressive taxes and pro-
poor benefits, but overall it Gives back to each income
class roughly the same amount it takes away . . . there
is not much net redistribution of lifetime incomes.
(Page, 1983:29). Medicare, like Social Security, covers
the elderly population and is directed mainly at the
middle class.
Like Social Security, it is financed by a
regressive payroll tax, and the value of the insurance
the average person receives from the program is roughly
equivalent to the money paid in during his or her work-
ing years (Page, 1983:75).
Means-tested assistance programs expanded more rap-
idly than did Social Security in the 1971-1979 period
(232 percent versus 192 percent), though by the late
1970s their growth had slowed and benefit levels were
not keeping up with inflation (Page, 1983:70). To-
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133
gether, AFDC and SSI constitute only about one-tenth of
federal expenditures on retirement and disability pro-
grams or about 3 percent of federal expenditures (Page,
1983:70). Food Stamps, Medicaid, and housing assis-
tance, being in-kind transfers, help provider groups as
well as recipients. Medicaid, which provides a large
transfer from high-income people to low-income people,
may not have helped the poor as much as its costs would
indicate because the rising fees went to doctors and
hospitals (Page, 1983:76). Rent supplements, like AFDC
and Food Stamps, helped mostly those with the lowest
incomes, but they constituted a very small program and
most of those who were eligible could not get supple-
ments. The largest program of housing assistance,
namely, homeowners' deductions of mortgage interest and
property taxes (estimated at $33 billion in 1982), con-
stitutes a subsidy to higher income individuals.
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 govern-
ments for many services, including employment, economic
development, health, education, housing and community
development, transportation, and social services. These
grants are a much smaller proportion of the federal bud-
get than entitlements (10 percent compared with 48 per-
cent in 1976; Palmer and Mills, 1982:65). Each admin-
istration in this period had its own version of New Fed-
eralism, using different types of grants that varied the
targeting on national goals versus discretion for local
officials (Wright, 1982).
Johnson's New Federalism spurred a rapid expansion of
categoric grants for poverty and depressed areas, in-
cluding cities. These grants involved high federal con-
trol and a dual strategy of funding both city govern-
ments and special entities, such as community-based
organizations. The grants were oriented not just toward
reducing poverty but also toward redistributing politi-
cal resources and improving local capacity to plan,
coordinate, and deliver services to the poor, goals that
often were in conflict (Marris and Rein, 1967). Over-
all, the grants did stimulate local spending and re-
sulted in some redistribution of resources to needy
people within cities and some redirection of federal
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134
money to the poorer cities and regions of the country
(U.S. Advisory Commission on Intergovernmental Rela-
tions, 1978a, 1978b; hereinafter USACIR; Whitman and
Cline, 1978).
Block grants and general revenue sharing instituted
in the Nixon and Ford era of ~decentralist. New Federal-
ism decreased federal control and relied on formulas
rather than project applications to determine the dis-
tribution of funds. Block grants placed fewer restric-
tions on local discretion than general revenue sharing,
but more than categorical grants. Both kinds of grants
spread resources to less needy people and cities
(USACIR, 1977; Nathan and Adams, 1977; Nathan et al.,
1977). 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.
Carter's ~economic. New Federalism continued the
tripartite mix of grants, but emphasized programs to
counteract structural and cyclical economic distress,
including Urban Development Action Grants and Public
Service Employment (Kirlin, 1982). Federal controls
over Community Development Block Grants (CDBG) and the
Comprehensive Employment and Training Act (CETA) were
gradually increased in response to criticism for fraud
and waste and resulted in more social and geographic
targeting (Nathan et al., 1977; Dommel, 1982).
Even though operating grants to state and local
governments were a much smaller portion of the federal
budget than transfer payments in the pre-Reagan era,
interest groups (including program constituencies)
focused intense political controversy on these discre-
tionary funds. Evaluations of the programs continue to
reflect those controversies.
Proponents argue that operating grants supplement
benefits from entitlement grants and help raise living
standards of low-income groups. In this view, health
(Davis and Schoen, 1978), education (Mazmanian and
Sabatier, 1983), and community development (Dommel,
1982) programs have all benefited the poor. Even em-
ployment programs, which have been harshly criticized,
are seen as providing some assistance to low-income par-
ticipants (Baumer and Van Horn, 1984).
Critics hold that operating grants are an inefficient
method of redistributing resources, i.e., that the costs
are too large for the benefits received. They argue
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135
that provider groups, which constitute the political
base for the programs, benefit more than the actual
clients.
Defenders of operating grants point out that such
grants also increase the capacity of local jurisdictions
to respond to low-resource groups and redistribute po-
litical resources to the poor. They add new services
for the poor in education, health, housing, social ser-
vices, and so on (Browning et al., 1984), though in many
cases those services are kept separate from a jurisdic-
tion's core activities, not supported by general funds,
and not viewed as local programs. 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). Local governments became strong part-
ners with the national government in an intergovern-
mental system characterized by mutual dependence, an
Uneasy partnership,. but one in which both the national
and local governments were both individually strong and
interdependent (Reagan and Sanzone, 1980; Williams,
1980; Leonard and Marshall, 1982; Fossett, 1983).
The impacts of grants depend partly on the character-
istics of the local entities implementing them. It is
extremely difficult to force local entities to target
their programs on the poor when their leaders oppose
such redistr ibution . Grants facilitate changes in local
organizations willing to move in the direction desired
by the national government, but they cannot directly
force that change on resistant recipients (Ingram, 1977;
Browning et al., 1980; Williams, 1980; Mazmanian and
Sabatier, 1981). The grants, however, do provide addi-
tional resources to some local groups favoring redis-
tributive programs, thereby helping them gain more poli-
tical influence (Peterson and Greenstone, 1977; Browning
et al., 1984).
Impact on People and Places
In the pre-Reagan period, economic growth was a major
factor in the rising standard of living, the decline in
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136
absolute poverty, and the overall movement toward rela-
tive equality of income, but social programs, especially
entitlements, also contributed to these results (Bawden
and Levy, 1982:460). Thus. those who sav the ore-
Reagan programs did
~ ~ not work are judging them too
harshly; they did promote redistribution toward the
poor.
The economy grew steadily in the early 1960s to the
early 1970s, the living standard of the average family
improved, and the percentage of the population below the
poverty level declined by almost half. During the
1970s, the standard of living increased only slightly,
while the percentage of the population below the poverty
line stayed rather stable, due particularly to growth of
female-headed households (Bawden and Levy, 1982:461).
Studies show that at the end of the 1970s government
income transfers reduced the number of poor people below
the official poverty line from about 20 percent in 1965
to 11 percent, or to 4.1 percent if income underreport-
ing, taxes, and the value of in-kind benefits are con-
sidered. However, relative poverty was the same as it
was in 1965 (Page, 1983:89).
Depending on their values, analysts reach conflicting
conclusions about these impacts. Wilensky (1983) sees
the achievements as substantial. Page does not. He
says that the large sums spent on entitlement grants
have contributed to redistribution, but have done Much
less than most people imagine to increase the equality
of incomes ~ . . they raised many people out of misery
and guaranteed a minimum level of food, money and medi-
cal care for most of the population. But . . . [they]
have not brought about substantial increase in income
equality. (Page, 1983:91).
This picture of the distributive impact of programs
on individuals is not changed by a consideration of
taxes. Taxes have little if any effect on income redis-
tribution: While federal taxes are somewhat progressive
with a regressive social security payroll tax diluting
the moderately progressive individual income tax (effec-
tive rates as contrasted with the nominal scheduled
rate), this progressivity is nullified by regressive
state and local taxes (Page, 1983:22-34).
The impact of pre-Reagan programs on regions, cities,
and states was more clearly redistributive. Until 1980,
federal tax collections were somewhat higher in the
North than in the West and South. Nondefense federal
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137
outlays during the 1970s were above the national average
in the Northeast and the West. Defense outlays were
highest in the South and West. Muller (1982:444) con-
cludes that The combined effect of large tax contribu-
tions by northern industrial states, the more regionally
equal distribution of nondefense federal funds, and the
concentration of defense outlays in the South and West
resulted in a steady flow of federal dollars from north-
ern regions to other areas.. Federal tax and expend)
ture patterns helped to equalize incomes between the
higher income industrial states and low-income states
with large rural populations (Anton, 1980:33-35: U.S.
Department of Housing and Urban Development, 1982:26;
hereinafter USHUD; Muller, 1982:446). Federal operating
grants also contributed to redistribution by targeting
needy jurisdictions (Anton, 1980:100; Owens and Wade,
1984).
In sum, the dominant theory of the pre-Reagan era
emphasized centrally initiated social policy, which was
justified primarily in terms of providing generalized
benefits but also in terms of promoting redistribution,
with the latter being equated with pro-poor activities.
Program expansion was seen as good and little attention
was given to the long-term program costs. Some policies
were discussed in explicitly redistributive language
(e.g., policies for needy cities and
populations), but
there was little recognition that virtually all programs
and policies were mixed goods with major distributive
effects, few of which helped the poor.
Redistributive policies were often initiated by a few
key individuals, which when combined with a weak fiscal
base, made the policies very fragile. 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 pow-
erful enough to defend them. Goals were vague, con-
flicting, and changing (for example, CETA-Public Service
Employment was launched as an anticyclical economic
stimulus program, but it was redefined as an income
redistribution-training program). When economic perfor-
mance faltered and fiscal strain increased, the politi-
cal coalitions that had supported the policies and domi-
nant theory of the pre-Reagan era were defeated.
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152
received by black clientele. Even small cuts in big
programs for the poor, like AFDC, can have substantial
impact on minorities. The people who lose benefits,
receive reduced benefits, or are out of work put new
demands on city services and pressure on city officials
whether the services in question are provided by the
city or not. Mayor Schaeffer of Baltimore reports that
soup kitchens in his city used to serve 70 meals a day
and now serve 700 a day. He says that even though he
tells people to complain to the federal government or
the state, they come right to his office (U.S. Congress,
Joint Economic Committee, 1983:402 and 408).
Worries about a permanent underclass are particularly
acute in cities. Opinions differ on the size of the
problem, but even if there is more movement into and out
of the ranks of the poor than commonly believed, a seg-
ment of the population is persistently poor. And this
phenomenon is particularly acute among blacks and among
families headed by black women (Gershman, 1980; Auletta,
1983; Hanson, 1983:16; Duncan, 1984:50). If you also
consider those who have recently become poor due to loss
of jobs and add the overlay of race, gender, and age,
the situation in cities can be explosive. It may be
true that a rising tide lifts all boats, but many ser-
vice providers point out that not everyone has a boat,
not all boats are afloat, and more boats are sinking all
the time.
A second impact of Reagan's programs on minorities
results from changes in public sector employment, which
have a disproportionate impact on minorities, particu-
larly blacks. In the pre-Reagan period, expansion of
operating grants to state and local governments created
public sector employment for many blacks. This was im-
portant for their mobility, moving them into the middle
class. Between 1960 and 1976 black employment in the
public sector increased from 15 to 27 percent compared
with an increase for whites of from 13 to 16 percent.
While 55 percent of the net employment increase for
blacks since 1960 occurred in the public sector, for
whites it was only 26 percent. And the figures undoubt-
edly underestimate the employment effects of programs
because they exclude indirectly generated employment in
community-based organizations receiving public funds
thrown and Erie, 1981:305-306).
The exact impact of Reagan's programs on public sec-
tor employment are hard to determine, but since 1980 the
cuts and the recession have led to modest declines
_
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1S3
at the federal, state, and local levels (total public
sector employment declined 1.7 percent between 1980 and
1982). Employment cutbacks in social programs have a
heavy impact on blacks because they often were the last
hired and thus are the first to be fired. At the fed-
eral level in 1981, minorities were laid off at a rate
that was 50 percent higher than for nonminorities
(Brown, 1982:21-22).
A third aspect of minority experience with the public
sector has been in electoral politics. During the past
20 years, the number of minority council members and
mayors (and women as well) has grown dramatically (Bu-
reau of the Census, 1984). Blacks and, to a lesser
extent, Hispanics have been winning city elections in
increasing numbers (Joint Center for Political Studies,
1981). Cynics would note that the new groups entered
the governing elite just when city problems were becom-
ing more acute, but the question remains as to what dif-
ference Reagan's policies have made for minority offi-
cials and vice versa.
Minority elected officials are typically Democrats
who support redistribution to the less affluent (Conyer
and Wallace, 1976). And since political ideology has
been important in shaping local responses to Reagan's
programs, it seems likely that local black elected of-
ficials will attempt to mitigate negative effects on
low-income groups by maintaining targeted services even
if that requires increased revenues (Peterson, 1982:196;
Glazer, 1984).
A recent study of 10 large northern California cities
allows some inferences about the impacts of Reagan's
cuts even though it does not directly examine them. The
study finds that in the pre-Reagan period social pro-
grams facilitated the electoral success of minorities
and that minority elected officials made a difference
for policy (Browning et al., 1984). National programs
generated demand-protest activity and electoral mobili-
zation, which helped liberal coalitions of minorities
and whites successfully challenge more conservative,
white-dominant coalitions on councils. Dominant liberal
coalitions used the programs to promote policy respon-
siveness to minorities, commonly defined as redistribu-
tion. As an example, they tended to target federal pro-
grams even when targeting was not required by the fed-
eral government. It appears that despite external eco-
nomic and political limits on cities, minority officials
make a difference for policy and that cities with high
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154
minority control will be more likely to continue redis-
tributive policies when it is feasible. Since increases
in minority influence were partly stimulated by federal
programs, it is interesting to speculate whether minor-
ity control has been sufficiently institutionalized to
withstand the shift in federal policy. The growing pro-
portion of minorities in cities suggests that there will
not be a complete reversal of minority influence in
local politics, but the absence of supportive federal
activities certainly makes the environment more hostile,
as do other contemporary political and economic develop-
ments (Brown and Erie, 1981:323).
In addition to the three impacts on minorities,
Reagan's programs have diminished the position of cities
in the intergovernmental system. While urban policy had
been a high national priority in the 1960s and 1970s,
that is not the case in the Reagan administration.
Cities become, in effect, a residual category; urban
policy is, even more, the inadvertent result of a vari-
ety of other policies not primarily concerned with cit-
ies. Distressed cities can no longer expect compensa-
In addi-
tion, New Federalism, by funneling aid to cities through
states, increased the cities' dependence on states, thus
accelerating the trend resulting from tax-limitation
measures (Kirlin, 1982; Gold, 1983). City officials do
not believe that savings due to efficiency will compen-
sate for the cuts, that the private sector can provide
the best services, nor that states will pursue redis-
tributive policies responsive to the mismatch between
problems and resources in cities (U.S. Congress, Joint
Economic Committee, 1983:404; USACIR, 1984b:10-13;
Marshall, 1984).
tory attention from the federal government.
KEY ISSUES
This review of distributive politics serves to under-
score the difficulty of redistributing resources to the
poor even in periods of economic growth. Reagan's New
Federalism has, in a period of economic stress, somewhat
decreased this kind of redistribution while protecting
programs that redistribute upwards, reflecting both
Reagan's ideology and the realities of American politics
in the l980s.
Early in the Reagan administration supporters said
that his domestic policies would quickly improve the
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155
economic position of citizens, including those with low
incomes. Opponents said that Reagan would dismantle all
the gains of the welfare state. The extreme predictions
of both sides--overstated for understandable political
reasons--have been proven wrong.
What lessons can be learned from this review of dis-
tributive politics? What issues emerge from the analy-
sis? We suggest three:
e The need for variegated policy objectives. Dis-
tributive programs benefiting the middle class will con-
tinue, but the middle class, along with other affluent
groups, should be willing to bear a fairer share of the
sacrifices. Perhaps distributive programs for these
groups should be limited to socializing risk (e.g.,
major medical or minimal retirement incomes) rather than
major subsidies (e.g., homeownership). Some pro-poor
redistribution should, and probably will, continue. The
importance of economic growth and expenditure limita-
tions should be recognized and balanced against distrib-
utive goals.
o The need for variegated policy means and strat-
egies. 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. Similarly, it should explicitly provide for
the use of private (individual, group, firm) energies in
achieving public ob jectives. However, the federal gov-
ernment has responsibilities that cannot be abdicated.
If the pre-Reagan dominant theory went too far in seeing
the national government as the solution, the Reagan the-
ory has gone too far in seeing the federal government as
the problem. It is neither the solution nor the prob-
lem, but it is one partner in the enterprise.
· The need to straighten out the language used to
discuss distributive impacts. More explicit language
concerning the distributive effects of public policies,
redistribution, and the value of diverse objectives and
strategies would serve to educate the public and dimin-
ish the political risk in discussing the beneficiaries
of public policy. The old, narrow ways of talking about
redistribution have just led to frustration and danger-
ous dichotomies--redistribution versus growth, affluent
versus nonaffluent, national versus subnational govern-
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156
meets. Distributive issues must be thought about in
more comprehensive, sophisticated ways that increase
awareness of the multiple direct and indirect benefits
and costs associated with all government activities over
time and that promote a willingness to explore various
mixes of objectives and strategies.
Addressing such issues will be difficult and the
temptation to be narrowly partisan may be irresistible,
but 20 years of experience should enable the country to
see the strengths and limitations of policies in both
the pre-Reagan and Reagan eras. Different theories of
social policy have been pursued, however incompletely,
and the impacts are there to be examined. Just as the
pre-Reagan social pa licies were judged against their
lofty goals, Reagan's initiatives must be subjected to
similar analysis. The challenge is to learn from these
experiences and adjust goals, strategies, and language
so as to make better policy choices and translate them
into practices that help or at least do not harm disad-
vantaged persons and places.
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Representative terms from entire chapter:
distributive impacts
