At the same time, it was clear which one was the senior partner in the American federal system. States were in good fiscal shape and more innovative than they had been in years. Governors of both parties, led by Jim Blanchard in Michigan and Dick Thornburgh in Pennsylvania, were dreaming up all sorts of economic development schemes to keep their states healthy in a post-industrial world. Bill Clinton in Arkansas and Tommy Thompson in Wisconsin were experimenting with changes in welfare law that paved the way for federal welfare reform enacted a decade later.
In 1988, journalist David Osborne wrote a book detailing the many varieties of state entrepreneurship and called it Laboratories of Democracy, echoing the phrase coined by Justice Louis Brandeis more than 50 years earlier. President Ronald Reagan's promise to devolve power to the states may have gone largely unrealized during his two terms in office, but states treated it as a license for seeking solutions to the myriad domestic policy problems that weren't being addressed at the federal level. As anybody who was around state government in those days will recall, it was a heady time.
And it lasted quite a while. Notwithstanding a pair of moderately severe recessions, states remained the fulcrum of public policy experiment in America for the better part of two decades. When it came to health, energy policy and a wide variety of other subjects, there was far more innovation at the state level in the 1990s and 2000s than in the federal government.
The contrast between the vitality of states and cities circa 1987 couldn't have been greater. Urban America was experiencing the twin ravages of AIDS and crack cocaine. Rates of violent crime were reaching levels never before seen in the nation's history.
There were more than 2,000 homicides in New York City in 1987, nearly three times as many as a quarter-century before, and the rate was continuing to increase. Whole city sections had become bywords for physical and social degradation; Paul Newman's movie, Fort Apache, the Bronx, characterized one of New York's boroughs as a hellhole more reminiscent of Third World chaos than of the largest metropolis in the United States.
While crime was shooting up, urban population was plunging. Cities such as Cleveland, Detroit and St. Louis were half the size they had been a generation earlier, and their downtowns were pockmarked with empty storefronts and underused office buildings, the streets lonely and dangerous anytime after dark. New York's psyche was still damaged by the painful memory of the near-bankruptcy of the previous decade; Cleveland still had not recovered from the humiliating bond default of 1978.
This was the balance that prevailed between states and localities when Governing published its first issue. To call it a balance at all is to underestimate what things were like. Many states were feisty and eager to take on new challenges. Cities were struggling just to survive.
To say that the balance has shifted in 22 years would be to make an even greater understatement. In 2010, the states aren't laboratories of democracy; they aren't laboratories of anything, unless it's insolvency. The numbers are familiar enough that there's no need to spend whole paragraphs repeating them: Suffice it to say that states as a whole are facing, by reliable estimates, a combined fiscal shortfall of up to $170 billion this year and $120 billion next year; that some are looking at budget holes equal to a quarter of their general fund or even more; that they are laying off thousands of workers and furloughing many thousands more; and that this still leaves them far short of the revenue they need to meet constitutional balanced-budget requirements.
The recession may be about over, but the fiscal crisis is not. The majority of states are looking at long-term pension and retiree health-care costs that must be addressed before they can be fiscally comfortable again. So far, none of the states with the most serious long-term problems has shown much resolve in addressing them.
The bottom line is that it may be unrealistic to consider states major innovators in public policy anytime in this decade. There are creative things they can do that don't cost a lot - they can pass new laws dealing with highway safety or cable TV regulation - but since most genuine innovation requires spending, it's fair to say that the laboratories of democracy will be closed, or at least inactive, for quite a while.
If life has changed dramatically in the state capitols over the past two decades, it has changed just as much in the cities. And on the whole, it has changed for the better. To start with, there is safety. The number of homicides in New York City last year was 466, a level reached in 1987 before the end of March. Population is growing again as well, not just in New York, but also in Chicago, Washington, D.C., and numerous other cities that used to dread each decade's census for its inevitable documentation of continuing decline.
To say cities are doing better is not to minimize the perilous fiscal shape that many of them are in right now. Even as it becomes safer and more attractive to new residents, New York is having to raise taxes, lay off workers and cut back on social programs. That is a common predicament. But on the whole, urban fiscal problems are more recession-based and less structural than those of the states. Cities don't have Medicaid to worry about. Some have locked themselves into dangerous long-term pension commitments - Vallejo, Calif., went bankrupt over pension costs and San Diego nearly did a few years ago - but on the whole, cities have done better than states at avoiding this trap. And they have been more creative at finding ways to raise the revenues they need to render the services citizens demand of them. Raising taxes and fees hasn't always been the best economic development strategy, but it has helped keep budgets under control.
In any case, the renewal of cities is not primarily a fiscal matter. It is shown more clearly in the revival of residential life and street vitality all across the country; in the light rail systems taking shape in places one would never even associate with public transportation, such as Phoenix, Dallas and Charlotte, N.C.; and in the nodes of urban density that have begun to spring up along the transit lines once they are built. Most of all, urban revival is linked with changing demographics, as increasing numbers of people in their teens, 20s and early 30s, the vast majority of them singles or childless couples, express a preference for some form of urbanized life as a change from the cul-de-sac suburbia in which many of them grew up.
The urban comeback has stalled in the recession, as lending for central-city residential and commercial development has dried up. Some experts insist the comeback hasn't only stalled but ended: They believe once the economy recovers, suburban sprawl will simply resume. I think the evidence, from demographics, surveys and simple on-the-ground realities of the past few years, is clearly against them.
Whatever the future of urban revival may be, its recent past reflects a record of impressive innovation by many mayors. From the downtown development strategies of Richard M. Daley in Chicago, to the environmental activism of Greg Nickels in Seattle, the transportation planning initiatives of Michael Bloomberg in New York, and the housing reforms under Shirley Franklin in Atlanta, the past decade has seen a budding of new ideas in urban policy far more interesting than anything that preceded it for a long time.
Some may be tempted to say that the laboratories of democracy haven't closed; they simply have moved from state capitols to city halls. But I would be wary of taking the argument too far. If we have learned anything at Governing over the past 22 years, it is that power and creativity in the American federal system ebb and flow in cycles. The states have a huge task of restructuring ahead of them in the next decade. It will be excruciating, but once they accomplish it - and they really have no choice but to accomplish it, if they want to survive as legitimate political entities - there is reason to hope that they can eventually regain the spirit of optimism and innovation they displayed two decades ago.
If my arithmetic is right, this is the 215th Assessments column I have written as editor of Governing. It is also the last. I'm moving on to try my hand at some new research on the states and to finish a book I'm writing on the future of American cities. I've heard from many of you personally in the past 19 years, and have appreciated every letter and e-mail, even (or perhaps especially) the many that took issue with things I've said. I expect to pop up in print in quite a few places in the coming months and years; I hope you'll continue to let me know what you think.
