US capital pays for its $4bn rescue

President Bill Clinton yesterday unveiled a $4bn (pounds 2.4bn) five- year rescue package for Washington DC, which at last offers a real prospect of recovery for the battered US capital - but effectively destroys any lingering hopes of it becoming the 51st state of the union.

The plan, to be submitted as part of the 1998 federal budget, fulfils Mr Clinton's promise of speedy aid for a city which has lurched from crisis to crisis over the past five years. It was quickly supported by Mayor Marion Barry and most municipal leaders, and is broadly in line with steps advocated by the Speaker, Newt Gingrich, which can only raise the chances of approval by the Republican Congress.

The scheme is essentially a trade-off. The federal government will end its $660m annual grant to the District of Columbia. In return it will take over the massively underfunded $5bn pension scheme for DC employees, as well as the city's prison system, and most of its health care responsibilities to the poor, and spend $1.4bn on Washington's decrepit roads and infrastructure. In all, say White House officials, a modest $339m will be added to the federal budget deficit between 1998 and 2003.

The announcement has been timed to coincide with Mr Clinton's second inauguration next Monday, when America and the world will see the familiar Washington of broad avenues, gleaming public buildings and some of the most handsome urban vistas on earth.

A few blocks away, however, lurks the other Washington, a case study in the problems of America's decaying, predominantly black, inner cities. Thus far this decade alone, 50,000 people - a tenth of its population - have fled to suburban Maryland and Virginia, further eroding a shrinking tax base.

A financial control board imposed by Congress to take over management of the city from Mr Barry is struggling to correct a 1996 budget deficit of $90m. In the first 13 days of 1997, 19 people were murdered in the District. A headline in yesterday's Washington Post proclaimed that DC's infant mortality rate had fallen to a record low of 16 per 1,000 live births. That is still double the national average.

If the plan works, the haemorrhage of people and businesses will be staunched and perhaps reversed. Meanwhile, the federal government's relationship to the capital will be placed on the same footing as a state's to a large city, of Illinois to Chicago, or of Colorado to Denver. In practice however, Washington's limited autonomy will be even more circumscribed.

Before financial difficulties became overwhelming in the early 1990s, the city had dreamed of extending the "home rule" it achieved in 1974 into full statehood as New Colombia, electing its own US senators and congressman. Then came economic downturn, the Barry drug debacle, his subsequent re-election as Mayor, and an ever-accelerating flight to the suburbs.

The White House plan would place many city services under direct control of federal agencies and still leave Congress with ultimate authority for the city budget - seen by many local residents as an injustice comparable to the "no taxation without representation" outcry that boiled over in the war for independence from Britain in 1776.

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