AN URBAN RECONSTRUCTION CORPORATION

For many years now, our large urban areas have gone through a period of economic and social decline. America's cities, which once embodied the hopes of all our people for a better life, are now examples of neglect and decay. The syndrome of urban decay continues in an ever more vicious spiral. High taxes and a decline in the quality of municipal services causes those people who can afford it to move out. This exodus of taxpaying citizens causes even larger deficits, and it then becomes necessary either to further reduce services or further increase taxes which only increases the rate of people moving out. This is a formula for destruction of urban life in America.

Steps such as federalizing welfare and other income security costs will help by stabilizing the tax rate and freeing up state and local revenues for services that are more local in nature such as education. More is needed, however, if our cities are to be the centers of American life they once were. We call for the creation of an urban development corporation that will provide low-cost loans and financial assistance to needy domestic areas on the same basis that we have provided these loans and funds to friend and foe alike internationally.

The long-range solution to the problem is the re-establishment of a productive tax base that can ultimately generate the revenues for, and a stable climate that encourages, the services needed by residents of our cities and the creation of jobs and employment. Employers are leaving the cities and taking with them the jobs needed by our urban economy. This trend must be reversed. That is a long-term goal that can only be accomplished if we act now and take the following steps:

Creation of a fund to provide loans for cities and other units of local government to help them improve their capital plants such as, school buildings, mass transit, pollution control and public housing. These loans should be made at the 3 and 4 percent interest rates that are made available to communist-bloc countries through the various international development banks financed almost exclusively by the United States. High interest rates over the past few years have cost state and local governments, almost all of which have had to borrow, more than $3 billion annually in excess interest costs. This $3 billion saving could be usefully spent on rebuilding and maintaining vital services such as education. Currently state governments spend more than 50 percent of their budget on education. We could anticipate an additional $1.5 billion per year for education simply by stabilizing interest rates.

A system by which short-term borrowing can be provided at 3 to 4 percent to municipalities and school districts which have to borrow funds to meet their cash flow needs while waiting for normal revenue from whatever sources derived. Funds flow to and from federal and state governments at their own rate. Money does not arrive when necessary. It comes when released through various budget cycles. This short-term cash flow problem ought not be an opportunity for commercial lenders to finance seasonal borrowing needs at exorbitant rates.

While much has been made of the so-called recovery that is under way, these problems are again becoming acute. The Federal Reserve is again restricting the money supply, the effect of which will be felt in the debt burden of all government agencies that borrow.  The creation of this type of urban assistance program can allow a respite during which the cities can recreate their environments so that they will again be attractive, wholesome places for middle-income families to live in. The cities offer people an opportunity to take advantage of social and cultural benefits unmatched elsewhere. Creation of an urban reconstruction program can help them stop the decay currently afflicting our urban centers and allow them to once again become the showplaces of American life that they should be.