President Carter has made lofty promises about revitalizing Downtown America. But this would take a massive financial transfusion, which some Treasury officials are quietly resisting.
The president has prodded Treasury Secretary W. Michael Blumenthal into preparing a multibillion-dollar injection for foundering New York City. But the Treasury secretary balked over a White House request that he draft legislation for the proposed Urban Development Bank.
Treasury officials simply "refused to help develop the legislation," confided an insider. "They didn't think it was an area we should be involved in." The White House had to hire an outside consultant to write the bill.
That caused an awkward delay in submitting the legislation to Congress. Fumed a White House aide: "Politically, the president needs the cities, and it irrates the hell out of us that Mike is refusing to help."
Officially, a Treasury spokesman explained: "The secretary felt we shouldn't play the lead role on this because it isn't the primary responsibility of the Treasury." But officially, several top Treasury officials don't want to start pouring general revenues down the urban drain.
Housing and Urban Development Secretary Patricia Harris, the gadfly of the Cabinet, raised a huff behind closed doors. "It would be helpful," she suggested, "if the White House helped promote the development-bank proposal." She reported that the proposal "is in serious trouble" on Capitol Hill. "There are rumors on the Hill," she snapped, "that the White House is not really interested in the project."
If Carter responded to her jab, the confidential minutes don't record it. They quote him only as acknowledging that "we did not do very well in our first test in budget committee on urban policy." He was careful to add "We need to redouble our efforts."
But at an earlier Cabinet meeting on Feb. 13, the president made it clear that the federal government has no intention of bailing out the beleaguered cities. "A successful urban policy," he said, "will have to rely, in large part, on the active participation and support of state and local governments and the private sector."
Carter's most urgent urban problem, meanwhile, is saving New York City from bankruptcy. Some Treasury experts believe that crowded, clamorous, city is simply ungovernable.
New York's City Hall has a payroll that is larger than the entire population of most U.S. cities. The 225,000 policeman, fireman, sanitation men, subway workers and other municipal workers are demanding higher salaries. Yet there is no money to pay them, without help from all the American taxpayers.
For years, the city has borrowed money to meet its operating costs until it has finally run out of credit. the problem has been aggravated by wide-spread mismanagement, overspending and fraud. Some city agencies, such as the Board of Education and the Health and Hospital Corporation, are so independent that no one seems to have the authority to compel them to operate efficiently.
In 1975, Congress came to the rescue with $2.3 billion in emergency loans to the city. The city, in return, trimmed its payroll and brought in outside auditors to examine its finances. But the federal loan program will expire on June 30 - the same day that many of the union contracts also run out. They are demanding pay increases that will more than cancel the savings the city has achieved.
Carter, emphasizing "the complexity and sensitivity of the situation," called upon his Cabinet behind closed doors to cooperate in a new rescue effort.
Health, Education and Welfare Secretary Joseph A. Califano Jr. worked with New York's Mayor Edward Koch to make changes in the city's welfare program that would reduce fraud. Califano reported gloomily to the Cabinet on Feb. 6 that "the mayor wants to cooperate" but that "the welfare bureaucracy continually objects to making the necessary changes." But a week later, Califano told the Cabinet: "Mayor Koch appears to be willing to take on the encrusted bureaucracy in his city and predicts that fraud will be reduced substantially there."
The president, however, gave the main chore of restoring financial order in New York City to his Treasury secretary. At first, the frustrated Blumenthal couldn't get city officials to agree even on the size of the city's deficit. "The real problem," he reported to the Cabinet, "is getting all of the parties involved to do something about the situation."
Blumenthal hammered out an agreement, in return for promised reforms, to give the city $2 billion in federal loan guarantee over the next 15 years. Now the problem is to get the agreement past a skeptical Sen. William Proxmire (D-Wis.), who heads the Senate Banking, Housing and Urban Affairs Committee.
Koch is pressing for at least another $225 million. But Blumenthal warned the Cabinet that any increase "will only hurt, its chances of passage." He reported that the "Treasury is working intensively with every member of Sen. Proxmire's committee" but that "favorable action there will be difficult to achieve.