Warning of the need to avoid "economic disaster," the chairman of New York City's Municipal Assistance Corp. predicted today that if current economic trends continue, the nation could face urban violence as soon as this summer.
Felix G. Rohatyn, a municipal finance expert and a key Democratic policy strategist, was sharply critical of Reagan administration policy and the timing of its efforts to shift federal programs to state governments. The remarks came in a speech prepared for delivery at a meeting of The Conference Board.
"Behind the dry statistics so beloved of the economists, one finds growing misery and despair among millions who cannot find work and untold others who have given up trying," he said, charging that the nation's falling inflation rate was achieved "at the price of high and rising unemployment and dangerously deteriorating financial structures."
"Violence is the handmaiden of despair," he said. "It does not take a soothsayer or an alarmist to predict that, if this process continues into the summer, it may be a very hot summer indeed."
Rohatyn urged the administration to convene a summit meeting of President Reagan, congressional leaders and Federal Reserve Chairman Paul Volcker to grapple with national economic problems, which he said must be solved before national and state officials can begin serious debate on the admininstration's "new federalism."
"Such a resolution is needed to avoid economic disaster," Rohatyn said. "Only then can we take up the issue of federalism along with our many other problems.
"Until the economy stabilizes, the president has written a symphony for a deaf audience; local officials will only hear the day-to-day problems of their own constituents and argue, with some logic, that in order to solve tomorrow's problems we have to survive today."
Unless the economic picture brightens, states might use the prospect of increased revenues promised by the Reagan program to avoid making difficult financial decisions, he said. The administration has proposed shifting key social welfare, health care and economic development programs to state levels.
While acknowledging the need to re-evaluate the relationship between the state and federal governments, Rohatyn also was critical of the structure of the administration's proposals. The major problems will come between 1987 and 1991 when a temporary federal trust fund is phased out, Rohatyn said. States then could drop the programs or reinstate excise taxes to fund them.
"This is not a viable proposal for any but the country's energy-producing states," he said. "This is bad medicine not only for the states, but for the country."
Instead, Rohatyn proposed that a different "new federalism" maintain at the federal level income-transfer programs directed at the poor while shifting other federal efforts to the states. These programs could be funded by a gasoline tax sufficient to raise $50 billion annually.
Rohatyn called the Reagan administration budget "not only a high-risk economic program, but a radical reordering of our social structures" and said it does not meet "the most elemental tests of fairness."