RESOLUTION ON THE PLIGHT OF THE CITIES

Many cities in the United States are now facing or could soon face a crisis that threatens our most basic right¾that of self-government. The source of the crisis is financial: the prospect of our greatest city defaulting on its obligations continues to grow more likely while other cities edge toward the brink as well. In New York City, the threat to self-government already has become a reality as total control of that city's budget now rests in the hands of a group of non-elected businessmen whose decisions will affect the quality of life for all New Yorkers.

It should be remembered how we arrived at the straits we are now in. Many commentators purvey the notion that decades of public spending on social welfare programs are at the root of the crisis. However, this popular but simplistic view is not supported by the facts. Rather, the disorder in municipal finance is the direct result of the economic policies of the Nixon and Ford administrations.

In 1974, the Federal Reserve System under the direction of its chairman, Arthur Burns, tightened the screws on the money supply in order to check a bout of double-digit inflation. The result was a massive increase in unemployment as business expansion ground to a halt and consumer spending fell off-with no real relief from inflation. The official rate of unemployment rose to over 9 percent during 1975 and remains at the highest level in 40 years. This increase in unemployment resulted in a sharp decline in local tax revenues and forced drastic cutbacks in public services and employment.

Along with unemployment, a second disastrous consequence of the Federal Reserve's credit restrictions has been a staggering rise in interest costs. The added debt burdens have further eroded public services as more and more local tax revenues are handed over to the banks and other bondholders.

A final factor in the cities' plight is the sharp rise in energy costs due to the policies of the OPEC cartel abroad and the Nixon/Ford administrations domestically. The President is determined to save us from foreign oil dependency even if it means the price of our domestic supply will equal or exceed the prices charged by OPEC countries.

The roots of the cities' predicament, then, lie primarily in the federal government's economic policies and in the actions of the oil producers. Public spending and investment are hardly to blame for the financial crisis.

Now that solutions are needed, however, all that is forthcoming from the federal government is rhetoric about how the cities spent themselves into trouble and should not expect relief from federal sources. This is hypocritical nonsense coming from the architects of the economic disaster.

Without expecting it to change its ways, the government pumped billions into the bankrupt Penn Central railway; likewise, hundreds of millions of federally guaranteed dollars were used to prop up the Lockheed Corporation and the tottering Franklin National Bank. Until recently, the Federal Reserve took great pains to keep W.T. Grant afloat by persuading member banks to de­lay collecting their loans to Grant. Thus the refusal of Arthur Burns, William Simon, and President Ford to aid our urban centers exhibits the grossest cynicism in view of their efforts on behalf of private-sector interests.

What our cities need is action, not rhetoric. The emergency steps that should be taken include:

• A program of emergency revenue divided equally between local education agencies and general units of local government: Designed to prevent layoffs and local tax increases, the aid should be pegged to the national and local unemployment rate and should continue as long as persistent high unemployment continues.

• Municipal debt management: City budgets have suffered greatly as a result of the astronomical interest rates cities have been forced to pay for long-term and short-term borrowing. Cities pay rates of 8 and 9 percent while, at the same time, the government is lending funds to the Soviet Union and Arab states at rates of 6 and 3 percent, respectively. Part of the monies cities now spend on debt service could be used for schools and other essential services if the federal government provided credit allocation or direct loans at lower rates.

• Public-service jobs: The Comprehensive Employment Training Act should be funded at a level of at least $5 billion instead of the level now proposed by the Administration. The CETA monies should be available for the continued employment of workers threatened with layoffs and dismissal before new jobs can be created.

• Emergency welfare aid: The current economic situation has caused heavy increases in welfare caseloads. Cities are forced to cannibalize so-called controllable portions of their budgets such as education in order to fund the uncontrollable portions such as welfare.

• Increases in current federal grant programs such as aid to education, mass transit, and health services. (Executive Council)