February 4, 2013 8:52AM

Rearranging the Park Benches

Our cities are in trouble. Most have huge unfunded pension and health-care obligations. Their infrastructure is old and so poorly maintained that it can't power a football stadium for the full length of a game. Their schools have significantly lower high-school graduation rates than the suburbs, even after accounting for differences in incomes. Housing in many cities is unaffordable, roads are congested, and jobs are fleeing, even in supposedly urban industries such as high tech and finance.

Urban planner Richard Florida has a solution: President Obama should create a new federal Department of Cities. That's right up there with rearranging the benches at Battery Park before Superstorm Sandy hits.

Like many planners, Florida believes problems can be solved from the top down. He is famous for urging cities to adopt policies that make housing unaffordable, forcing poor and moderate-income people out, thus increasing average incomes and making it look like the cities have attracted high-income "creative" people.

Now, relying on pre-recession data, Florida argues that "cities and metros are the engines of our economy," and thus deserve their own cabinet-level department. By the same logic, maybe we should create a Department of Texas and North Dakota, as those two states seem to have been the engines of our economy since 2008. I am sure a federal DoT&ND could do much to muck up the growth of those states that is partly taking place because the state legislatures have so far kept their hands off.

"A new cabinet-level department would see to it that public policy is aligned to cities’ best interests, not stacked against them," argues Florida. And we know that's true because Obama's programs in the energy sector, such as battery and cellulosic ethanol production, have worked so well.

Florida admits we already "have the Department of Housing and Urban Development," but says it is out of date because it was "created to mitigate poverty"--and look how well it did that! Thanks to the department's hard work, the nation's poverty rate declined increased from 14.7 percent in 1966 to 15.1 percent in 2011 (see table A-1, pp. 41-42). Just think what a Department of Cities could do!

Seriously, instead of thinking like central planners, people who care about cities need to understand that change comes from the bottom, not the top. Still, there are some federal policies that could nudge the changes in the right direction.

First, Congress should stop giving cities incentives to build new infrastructure when they can't afford to maintain the infrastructure they have. I am thinking of rail transit, but I am sure other kinds of infrastructure suffer from the same problem: "free" federal money for capital improvements with no stipulations that grant recipients can afford to maintain and operate whatever the grants build. In the long run, the federal government should phase out funding of local infrastructure; during a transition period, federal funding should come in the form of formula grants rather than competitive (read: political) grants.

Second, Congress should encourage cities to get their fiscal houses in order. To prevent cities of the future from demanding federal bailouts, federal funding to cities today should be conditional on cities negotiating new public-employee contracts that are sustainable based on reasonable expectations of future local revenues and investment income. Pension and health-care funds that are either unfunded or depend on unrealistically high rates of investment returns should be renegotiated.

Third, Congress should make federal educational funding conditional upon performance standards. In the long run, the feds should get out of the business of funding local education, but in the meantime, school districts that can't achieve 80 percent high-school graduation rates should be required to create voucher systems that would allow families of all incomes to select alternative schools for their children, whether those alternatives are public schools in other districts (or other parts of the same district) or urban private schools.

Finally, Congress or the Supreme Court should remind state and regional governments that private property rights trump the rights of government planners to control aesthetic values such as historic architecture or scenic views. This would allow the opening of land outside cities in California, Hawaii, Massachusetts, Washington, and other unaffordable states to development so that median housing prices can return to their natural values (see p. 6) of about twice median family incomes, and the costs of commercial, retail, industrial, and other kinds of development will similarly drop.

Florida's idea that cities are so important that they deserve their own department is, on one hand, wishful thinking (note that his data about the importance of cities include "cities and metros," meaning suburbs). On the other hand, if cities truly have a comparative advantage over suburbs and rural areas, as so many urbanophiles claim, why should the federal government unfairly increase (or, more likely, decrease) that advantage by slanting its services to the cities?

Government should provide a level playing ground and let cities, suburbs, and exurbs be what they want to be. This will allow the economy to grow without being undermined by futile and self-defeating attempts to pick winners and losers.