This is a city where politics has failed, where the normal give-and-take of compromise has turned into a theater of the absurd.

Almost every week there's a new outrage, a fresh municipal embarrassment. Cleveland, almost everyone agrees, has become a bad joke. "Default's not mine, I just live here," apologizes one T-shirt slogan.

On the surface, the political failure occurred when maverick 32-year-old Mayor Dennis J. Kucinich was unable to cut a deal with his City Council and six big banks to save the city from the financial default that seems to be leading inexorably to the wholesale firing of police and firefighters next week.

In most American cities, politics and good sense would have dictated some solution. In the grand tradition of backroom politics, a dozen movers and shakers would have gotten together and batted heads.

Economic and political interests would coalesce. The politics of money and the politics of votes would again prove they worked.

But that didn't happen here. Politics didn't work. Everyone seemed to act against his own self-interests. The system went haywire.

Why?

The easy answer is to blame it on personalities. To be sure, almost all the principals in the fray hate one another's guts. It's impossible to exaggerate the hostility in the city's business community toward Kucinich, a self-styled urban populist. Or the mayor's mistrust of businessmen.

But beneath that is a gradual breakdown of the political process, fanned by winds of distrust, demographic change and racial politics.

The traditional players and power bases remain in place: the political parties, the business community, the unions, the blacks. It's just the way they play the game that has changed. No one wants to take the middle ground anymore.

"Compromise and political civility have disappeared," says Tim Hagan, Cuyahoga County Democratic Party chairman. "It's been replaced by confrontation and the demogoguery of racial politics. There simply are no ground rules anymore."

The city itself has changed drastically, losing 250,000 of its residents since 1960 and more than one-third of its business establishments. It has become ethnic lines.

The middleclass whites, who once gave the city stability, have packed up for the suburbs. They've been joined, in recent years, by increasing numbers of middle-class blacks. The resultra political mismatch between Cleveland's corporate business structure and an increasingly poor and alienated city voting public.

Most of the city's power brokers, and many of those who complain about its current condition, simply don't live there. "We can react. We can finance. We can negotiate. But we can't vote," says Art Modell, president of the Cleveland Browns football team.

The old families-the Hannas, the Rockefellers, the Humphreys-with the corporate empires have scattered or disappeared; replaced by a generation of technocrats at the corporate helms, the city business community is fractured. "There simply aren't four or five heavyweights in town who could settle all this at the Union Club like there used to be," said one influential businessman.

A few numbers are instructive here: 36 percent of the whites in Cleveland, the third largest center of Fortune 500 company headquarters in the United States, are either foreign-born or have forrign-born parents; one-third of the city's school children come from families on welfare; 63 per cent of the adults over 25 haven't finished high school; and the median family income is $9,107, about $3,000 less than in the average U.S. city.

Politicians have survived not by promising to spend too much, as in New York, which faced a more severe financial crisis a few years ago, but by promising to tax too little. And three times in the last decade voters have rejected modest tax increases.

"It is failure of leadership," states Democratic chairman Hagan. "The electorate of the city of Cleveland has been misled for at least a decade. No one has ever bit the bullet in this town. No one has ever told people there's no free lunch."

Racially the city is polarized, split almost in half by the Cuyahoga River. The city west of the river is almost all white; the city east of it predominately black.

Politically, it is divided into 33 wards, each with its own City Council member. Each stands for election every two years. All, like Kucinich, are Democrats. But there's no effective party machine to maintain control. The system puts a premium on constant electioneering and provincialism.

Economically, the city has been on thin ice for years, held together by financial gimmickry. Funds have been juggled from one account to another to pay its bills. The city has sold off to pay its bills. The city has sold off its parks, zoo, sewer and transit systems, and stadium operations to stay in the black.

As early as 1974, a study by Cleveland State University warned of financial catastrophe by 1978. The city's books, it said, were so complex it was almost impossible to tell the exact shape the city was in at any one time.

It also found that Cleveland is the lowest taxed major city in the United States. For every $1 paid in taxes in Cleveland, citizens of an average city paid $1.50.

"In brief, the city of Cleveland has gotten the government its voters want," says Edric A. Weld, one of the study's authors. "The long run is dismal, given a political leadership that has taught the voters they are going to get what they want free or on the cheap."

Kucinich, now halfway through his first two-year term, is both the product and the exploiter of the system. His great success has been to tap the deep-seated resentment and frustrations of the city's elderly whites and ethnics.

"He appeals to the embattled urbanite," says Tom Campbell, a Cleveland State professor who worked on the unsuccessful effort to recall the mayor last summer. "They think he's one of them. He expresses their frustrations. You look at the cars with his bumper stickers and they all look like they've been in seven wrecks. The trouble is he's a reckless demigod."

Race has a large part to do with it. Kucinich has been the spokesman for the urban whites, City Council President George Forbes the spokesman for blacks. They've been at one another's throats almost constantly.

One leaflet distributed by Kucinich forces during the recall campaign on the predominately white West Side warned that the recall "is designed to put George Forbes or his handpicked puppet in the mayor's seat."

There's been a certain wacky quality to his administration, better captured by a Woody Allen comedy than political analysis. Not only has he become the first mayor to lead a major city into default since the Depression, his brother has been arrested for robbing a bank that held city notes, his work crews have paved over manhole covers, his aides have pillaged one another's offices, and his top assistant was caught pulling the plug last week on a local radio station broadcasting one of the mayor's press conferences.

The standard joke here for months has been: What's the difference between the Titanic and Cleveland? Answer: Cleveland has a better orchestra. Last week, as the city teetered at the brink of yet another crisis, a new line was added: Yeah, but the Titanic had a better purser.

Kucinich's rhetoric has been anti-business, anti-bank, anti-utility company-the same sort of populism that has permeated the politics of the Deep South since the days of Huey Long.

The mayor maintains the current crisis is caused by a conspiracy between the Cleveland Electric Illuminating Co., the private firm that supplies electricity to the low-rate municipal company, Muny Light, and Cleveland Trust Co., the largest of the banks that hold city notes.

"The issue is not black or white-it's green," he said in an interview. "Cleveland Trust and CEI have surfaced as a hydra-headed economic Loch Ness monster ready to destroy anyone in its path."

His argument has a certain appeals. CEI has been trying to buy Muny Light for years, thus giving it a local monopoly. And there are ties between the utility and the bank, the most resistant of any of the six banks to pressure to refinance the city's debt.

Two of the bank's directors and one of its acting directors are directors of CEI. Cleveland Trust is also one of the largest stockholders in CEI.Cleveland Trust, in turn, is one of three banks where CEI pension funds are deposited, according to bank spokesmen who insist any talk of conspiracy is baloney.