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The real issue: helping people, not places

THE federal government should help people rather than places. To help achieve this objective, Washington Sen. Daniel Evans and former Virginia Gov. Charles Robb, with the backing of a bipartisan group of legislators, have proposed a sweeping reform. It would phase out federal funds for local economic development and selected transportation, education, community service, and block grants to states and localities. The federal funds saved would be used to expand programs serving the poor, the sick, and the disadvantaged. These proposals constitute the most thoughtful, coherent reform of the federal system since the emergence of the modern system of federal grants. The national government would divest itself of numerous minor responsibilities and regulations better left to state and local officials. At the same time, the national government would relieve the states of a set of redistributive responsibilities which they are ill equipped to perform.

The reform proposals take into account the fact that states and localities increasingly find themselves in competition with one another for both businesses and prosperous taxpayers. Nearly every city and state seeks economic growth to build its revenue base, employment levels, and property values.

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The best way to get it is to provide high-quality community services, such as good schools, roads, parks, and police protection, needed by businesses and citizens alike. Some states and communities also find it to their advantage to design tax incentives, vocational training programs, and other policies in ways that entice particular companies and industries.

Since states and localities have such a strong economic and political interest in providing good services and in other ways promoting their own development, there is much to be said for keeping Washington out of the action.

The one kind of general assistance to states and localities desirable in principle is funds directed to the very poorest parts of the United States. This kind of federal aid could help equalize state and local revenues. The Evans-Robb measure contains such ``fiscal capacity'' grants that target federal funds to needy areas.

It will be difficult, however, to win political acceptance for this part of their proposal. When Congress hands out aid to states and localities, it comes under great political pressure from its membership to make sure that nearly every state and congressional district gets something close to its ``fair share.'' As a result, the money is dispersed so broadly that areas of genuine need get little more than prosperous communities do. Studies of both revenue sharing and of other federal grants consistently show that, up to now, these grants have done very little to shift resources from wealthier to poorer parts of the country.

If such grants cannot be restricted to the neediest areas, it might be better to eliminate these programs altogether. The federal funds that are saved can then be used to establish national welfare benefit and eligibility standards, national assumption of medicaid policies, and expanded medicaid eligiblity for children and pregnant women. All are major components of the Evans-Robb proposal.

There are several reasons to assign the national government major fiscal responsibility for social welfare programs.

First and foremost, the amount and quality of welfare help that one receives should depend on need, not location. Currently, California pays $698 per month to a family of four, while Mississippi pays only $144 per month to this same family. In an increasingly integrated economy and society in which differences in per capita personal income among states have steadily declined, this extreme disparity in welfare benefits is a national scandal.

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States and localities operate in an increasingly competitive context that makes aid to the poor ever more costly for them. It is not surprising, therefore, that the beneficiaries of the recent resurgence of state governments have not included poor families; between 1975 and 1986, welfare benefits for a family of four declined in real dollars by 27 percent.

Differences in services to the poor discourage low-income individuals and families from moving to where the jobs are. A generation ago welfare benefits were greater in the industrial belt where unskilled jobs in manufacturing were. Today the welfare benefits are still higher in these states, but most new jobs are now to be found in the Sunbelt. Hence our social welfare policies discourage those without work from relocating in places where work is most plentiful.

Evidence is accumulating that the national government is far more effective in managing intergovernmental programs aimed at needy groups than has been assumed. Our study of nine federal programs in education, health, and housing shows that the administration of these programs has improved substantially since the early days of the Great Society. Over time, state and local governments learned how to shift to national expectations, and federal agencies learned to be more reasonable in their requests to state and local governments. What once appeared a bureaucratic nightmare turned out to be only the usual difficulties of putting new ventures into operation.

That is one reason so many programs for the needy and disadvantaged have survived an era of fiscal crises and budgetary cutbacks. Even as Congress was sending revenue sharing to a well-deserved grave, social programs - though reduced in size - have maintained the necessarily institutional and grass-roots support to survive politically.

The Evans-Robb proposal carries the logic of recent trends to their natural conclusion. Turn back to the states and localities the developmental responsibility that is properly theirs. Concentrate in Washington the responsibility for designing and financing an equitable social welfare system that gives the poor the same freedom to choose where to live that other Americans enjoy.

Paul E. Peterson, Barry G. Rabe, and Kenneth K. Wong are authors of ``When Federalism Works,'' published by the Brookings Institution.

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