WASHINGTON -- President Clinton this week dramatized his vision for how to help impoverished areas left out of the current prosperity by taking a handful of high-powered corporate executives to East St. Louis, Ill., one of America's most degraded urban landscapes.

His message? The inner city is a fine place to set up shop, and with a little government assistance, big business can help turn the rubble-strewn lots of forgotten cities into the next emerging market.

The president rolled out his New Markets Initiative, which includes a 25-percent tax credit for new investment in the worst sections of the nation's cities.

Meanwhile, Vice President Al Gore is scrambling to come up with something to offer the inner city's poorest inhabitants, who remain an important Democratic Party constituency.

What could be better suited to the times than urging business to invest in the undiscovered competitiveness of inner cities? Just give business a few tax breaks and get needless government regulation out of the way, and watch the big firms, housing developers and long-frustrated local entrepreneurs make the rubble bloom. It's already starting to happen in many cities.

But if cities are truly ready for a rebirth, what explains this decade's dramatic flight from most older Midwestern and Northeastern cities? Census figures show that between 1990 and 1998, Philadelphia lost 149,300 residents, or 9.4 percent of its population; Baltimore lost 90,400 residents, or 12.3 percent of its people; Detroit saw its population decline by 57,800, or 5.6 percent.

Losing ground

While big city mayors have enthusiastically embraced developers who build upscale housing units near downtown, they've been less quick to trumpet a recent report from the Department of Housing and Urban Development, noting that cities lost 950,000 units of affordable housing between 1996 and 1998.

That's a bureaucratic way of saying rents are rising faster than the incomes of renters. As a result, the nation's 40 largest cities have waiting lists for public housing that have soared anywhere from 10 to 25 percent in the past year. Those 40 lists contain nearly 1 million families, according to HUD.

What's going on? Two things, according to David Rusk, former mayor of Albuquerque and now a traveling salesman for metropolitan solutions to urban problems. First, he says, there is endless suburban sprawl to accommodate the suburbs' newly formed households and those fleeing cities. Second, there is the continuing concentration of hard-core poverty families inside central cities.

Mr. Rusk, whose new book is called "Inside Game, Outside Game: Winning strategies for saving urban America," is a relentless demographer of the urban landscape. That makes him, unlike Mr. Clinton, a pessimist about contemporary trends.

Yet the broad outlines, if not the substance of his message, have been embraced by Mr. Gore. Having already jumped on the growing anti-sprawl bandwagon, Mr. Gore needs something to appeal to the urban poor without alienating the swing voters of the suburbs.

The answer? In what sounds like a policy cooked up by a jaded campaign consultant, Mr. Gore wants to save cities by making life better for soccer moms in the suburbs. Mr. Clinton's New Markets Initiative is just a piece of that larger puzzle.

As it turns out, the idea that the key to rejuvenating the nation's ailing cities lies in curbing suburban sprawl makes a lot of sense. It is winning adherents among a growing number of urban activists and metropolitan planners around the country.

Headaches of sprawl

In their view, most metropolitan areas are rapidly becoming "The Blob that Ate the Corn Field." Developers and their political handmaidens gobble up the landscape for malls, housing and offices. The result for suburbanites is lost hours spent on jammed freeways while family life atrophies.

So with cities depopulated and hungry for investment, why not channel investment back into the core by buying up farmland to preserve open space? This is the essence of Mr. Gore's outside game. This can be coupled with state and regional laws encouraging "smart growth," which is adroit political packaging for controversial development curbs.

Meanwhile, the inside games consist of giving a few extra tax breaks and financial "incentives" for businesses that invest in cities. All cities have to do is reduce regulation, eliminate the capital gains tax or give a few tax breaks and watch businesses seize the natural advantage of the urban core, which includes pent-up consumer demand, an underutilized workforce and proximity to those rejuvenated downtowns.

To help Mr. Gore champion these complementary strands of thought on the campaign trail, the Clinton administration's budget proposal dribbled out a few goodies that will probably go nowhere in the GOP Congress. They offered almost a billion dollars to municipalities to sell nearly $10 billion of bonds to preserve farmland. The administration also put up a paltry $50 million for smart growth planning.

For cities, the administration proposed a billion dollars in tax credits over five years to lure new businesses to the cities. The New Markets Initiatives adds a few more goodies to the pot.

Critical view

Hogwash, critics say. These half-measures do not even begin to take on the real drivers of endless suburban sprawl and urban disinvestment -- the massive government subsidies that are available to suburban developers. More importantly, they fail to address the central issue plaguing cities -- the vast majority of every metropolitan region's poor are concentrated inside cities, which makes large parts of those cities undesirable places to live because their schools have been overwhelmed with poor kids.

Let's take these issues one at a time. If this, or any, administration wants to curb sprawl, why not cut off federal subsidies for sewer plants in exurban housing developments? Or why not limit the amount of federal gas tax money returned to states that use the funds to build highways whose sole purpose is to open up land for development?

Cities don't need new tax breaks to attract development. This strategy has been pursued without success for more than 20 years. Why would a tax break work for the city when developers can get the same goodies in the suburbs or in exurban areas?

Eliminating suburban subsidies would only begin to level the playing field between cities and exurban greenfield developments. Cities also need a hefty new federal program to redevelop brownfields, the residue of corporate deindustrialization that took place during the 1970s and 1980s.

But even if the government came in and prepared sites for development, the lynch pin issue of concentrated poverty would remain: Cities will never become acceptable places to live for middle-class families as long as the local schools remain disproportionately poor and minority. Getting poor children into suburban schools makes sense for their parents, too. That's where the entry-level jobs are that can eventually lead to further training and higher incomes.

But spreading the poverty population around metropolitan areas has always been the third rail of local politics. Proponents of moving poor families into suburbs had hoped that substituting housing vouchers for public housing units would give local officials a tool for getting the job done.

So far, that hasn't turned out to be the case. A recent study of 1,000 Chicago families kicked out of public housing because it was being demolished found that most of the families used their vouchers to move into adjoining neighborhoods, which already were overwhelmingly poor and minority.

It's results like those that make Mr. Rusk pessimistic about the odds of more politicians championing the "Inside Game, Outside Game" approach.

"What's fueling anti-sprawl sentiment is that life out in paradise is feeling less convenient and more harried," he said. "Linking that to urban problems isn't going to be a winning argument for anyone in the 2000 election."

Merrill Goozner is a Chicago Tribune economic correspondent based in Washington.

Pub Date: 7/08/99