The root cause of almost all the social, economic and fiscal problems of America's depressed cities is the steady flight of businesses and of middle- and upper income families from the inner cities. Since 1965, 15 of the largest 25 U.S. cities have lost 4 million people, while the total U.S. population has risen by 60 million. The urban crisis is clearly not shared by all cities, however. The declines in the most depressed cities are matched by impressive gains in cities that are growing in terms of population, jobs and per capita income.

What do growth cities do differently from stagnating cities? Many of the answers are found in their fiscal policies. Census Bureau data on finances show that higher spending and taxes are the main reasons the low-growth cities have low growth.

• Low-growth cities spend, on the average, $1.71 per person for every $1.00 spent in high-growth cities.

• Even though low-growth cities get a higher percentage of federal aid, they still have tax burdens about 50 percent above those of high-growth cities, and in many cases the tax burden per family is about $1,000 higher.

• Low-growth cities, on average, have more than twice as many municipal employees per capita as high-growth cities.

• Low-growth cities are much more likely to impose a local income tax.

• Low-growth cities tend to rely heavily on income and property taxes for revenues, whereas high-growth cities rely heavily on sales taxes.

• Low-growth cities spend $1,400 more per student on education than high-growth cities.

Source: Stephen Moore and Dean Stansel, "The Myth of America's Underfunded Cities," Policy Analysis No. 188, February 22, 1993, Cato Institute, 1000 Massachusetts Ave., NW, Washington, DC 20001, (202) 842-0200.

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