ABSTRACT
In his excellent 1976 comprehensive study of big city finances, George Peterson of the Urban Institute asserted that 1975 would be remembered "for its rediscovery of the budget constraint". During the following decade, spending by big cities slowed down both absolutely and relative to that of all state and local governments as cities faced new impediments to financing public services. These impediments took the form of cutbacks in federal aid and the demise of the federal-local partnership, and the increased difficulty of raising funds through the municipal bond market. Cutbacks in federal aid and the tax revolt also affected state governments and thereby diminished their ability to assist big cities. Overall, the fiscal outlook for many of America's big cities is not rosy. Although more conservative financial management has helped them to avoid the financial problems faced by New York City in 1975, the new 1980s brand of federalism has not been kind to them.
