So I answer your question, Mr. Representative, by saying hold us accountable for the results, tell us what it is you want in terms of the results, and move forward that way, as contrasted to saying "Here is a rent subsidy, here is an operating budget, and then we are going to impose these rules on you in the way you manage your subsidy.

Mr. GUTIERREZ. I think probably we could sit down and work that out, but under the Home Rule Flexible Grant Program, if you eliminate income-targeting provisions, let's say you said 35 percent, or 30 percent, of your public housing residents have to be under the 30 percent of median income, well, I know what public housing authorities are going to do. They are going to say, "You know what, Congress? We already have 50-, 60-, 70-, 80-percent of those people. So from now on, we are going to take people at the higher scale, we are not going to take the very poor because we have already met that criterion."

We say to people, you know, as I think we should, "You will pay no more than 30 percent of your income for rent." When you look at substandard housing, people think of plumbing, roaches, rats, broken windows, lack of security, a whole host of things, including too many people living in too small a space.

But another issue obviously is, if, which is not unusual in many inner-city poor neighborhoods, 50- or 60-percent of all your dollars go to paying your rent, you are actually living in substandard housing, because now you don't have any money for food and other necessities.

So we want to give you the flexibility, but if we write a blank check, say, "I understand your point, we are going to provide so many housing units, but to whom are we going to provide the housing units?" Because you have people who really need it.

Mr. GOLDSMITH. Absolutely. The last sentence, or question, I think is absolutely a critical one for the subcommittee. See, I think you are in the wrong business. I think the business I would encourage you to be in is providing financial assistance to the poorest so that they can have decent housing, as contrasted to being in the public housing business.

So once you say I am going to run public housing, we are going to argue about percentage and incomes inside those buildings, when what we ought to say is, the Federal Government accepts the responsibility for providing shelter care. You can do that through vouchers or a number of different ways, and that is why I would be interested in accepting responsibility, whether it is measured by income or any other way for providing shelter care, and then I would manage it across a continuum.

So ironically, you trust me with your home income dollars, your CDBG dollars, your Section 8 dollars, I am managing all of those, but public housing is over here all isolated because I am running these buildings. I don't want to run the buildings, I want to provide shelter care.

Mr. GUTIERREZ. You know, I think the problem here is, see, it is like in the State of Illinois. The State legislature and the governor, in their wisdom, said: "We don't want to deal with the Chicago public school system, so we will tell you what we are going do, Mayor Daley. We are going to let you run it. We are not going to

provide you one cent to truly run it and fund it, but here it is. You are the mayor. Why don't you run the Chicago Board of Education and the State will withdraw?", when actually the State has a responsibility to help provide funds for that.

So, you see, I think you can come here in the best of hopes and spirit for us to work collaboratively. The problem is, we may indeed give you everything you are asking for, and then this Congress, as it has done in recent years, will cut the funding. Mr. Goldsmith, just be careful you don't get what you ask for, because we may say, "Here it is, you have got plenty of flexibility. But guess what? The well has dried up in terms of the dollars necessary for you to be effective in reaching the goals, which obviously, given your past history and your success, you have been able to do. We want you to be able to compete." Thank you, Mr. Mayor, for being here with

us.

As a former Chicago City Council member, I am from Chicago, I always have to take one last bow to any mayor. Thank you for being here.

The CHAIRMAN. Thank you.
Mrs. Kelly.

Mrs. KELLY. Thank you.

Mr. Mayor, I listened to you talk about what you were and I had read your testimony that you delivered here to us, and you are talking about an integrated community, and that is a great concept. You live in Indianapolis.

I live near New York City, and I have a real problem with a whole bunch of people who have an NIMBY attitude. You know what I mean? Not in my backyard. I have a question about how that is going to work in ordinary small communities, which is what I represent, a whole lot of small communities around a big city, and they will be hard hit if we pass legislation that has a broad stroke that allows mayors to push and shove and change communities around.

So I am asking you two things. How do you deal with the people who don't want project people in their neighborhood? And I am going to ask you a follow-up question on that when you get finished with that first one.

Mr. GOLDSMITH. Well, I can't get finished with the first one.

Well, first of all, I don't propose a "one-size-fits-all" response, and it may very well be that this subcommittee would authorize HUD to do local projects, giving a department or area of HUD the authority to enter into these agreements. I could make a proposal to figure out how much they are spending in my city now, and I could suggest how we would undertake to provide those services outside the structure, because what works in Indiana may not work in Chicago and may not work in New York City.

Mrs. KELLY. If we do that, are you talking about doing it on an amount of money basis or the number of people?

Mr. GOLDSMITH. The amount of money now spent for the number of people now housed.

Mrs. KELLY. OK.

Mr. GOLDSMITH. But I think the more fundamental question is whether we trust the marketplace and whether we trust people to make decisions that are in their best interest.

Mrs. KELLY. That is my follow-up, sir. Are we sending moneyis it like sending money-putting the fox in the hen-house here? Mr. Fox. I object.

Mrs. KELLY. Sorry, Mr. Fox.

Mr. GOLDSMITH. Let's see, I don't think I agree. It seems like I should agree on the "fox in the hen house," but I appreciate your disagreeing.

Well, cities, the mayors are going to be responsible. We are responsible now, you are just financing a small part of the total shelter issue, and what government policy does today is assume that a government socialist monopoly is better than the private marketplace.

And I would suggest that if we some of our worst facilities are those with site-based Section 8 vouchers. The landlord gets the money, the residents have no choice, can't move away, and it takes away all the driving force of American innovation is based on competition and customers, and we are taking that away in the sitebased vouchers. I think the best way to produce these services is to use the existing financial resources of HUD in a way that appreciates the market rather than displaces the market.

Mrs. KELLY. As I understand it, your site-based Section 8 vouchers are things you would eliminate?

Mr. GOLDSMITH. I am sorry, would eliminate?

Mrs. KELLY. The site-based Section 8 vouchers are things you would eliminate.

Mr. GOLDSMITH. I would change them to vouchers that travel with the person who is in need of services.

Mrs. KELLY. So you simply let that person go out and pick their housing wherever they could find it?

Mr. GOLDSMITH. Right.

Mrs. KELLY. Then support them. Would you make up the difference in the cost of the rent? Because that is sort of what you described your Indianapolis plan as doing.

Mr. GOLDSMITH. Yes, but sometimes your subsidies are below the rent level, sometimes they provide moderate income to landlords who are investing, but basically they are displacing the marketplace with the HUD program.

Mrs. KELLY. Would you suggest we do that on a sliding basis so that we reach-we allow people to pull themselves up? Because we are, as you know, talking about doing something similar to allowing people to get themselves up out of poverty.

Mr. GOLDSMITH. Yes, ma'am, I would.

Mrs. KELLY. Thank you very much.

Chairman LAZIO. Mrs. Carson.

Mrs. CARSON. Mr. Mayor, realistically, could we believe that mayors who have political aspirations-and I am sure you don't, so I wouldn't be directing this at you-realistically, would a mayor take on the challenge of intermingling low-income people with high-income people in Indianapolis and Indiana?

Mr. GOLDSMITH. Only with the utmost of caution. It is a serious issue, and your two questions go together, absolutely. Mrs. CARSON. Is it going to happen, really?

Mr. GOLDSMITH. It is not going to happen soon. It would happen a little bit, but public housing of course concentrates poor folks in those neighborhoods, traps them there now anyway.

Mrs. CARSON. Let me ask you the difference now and when Lockefield Gardens was built. You remember, one of the ones that were put on the historical landmark with the European design and all that? What was the difference between public housing then that everybody wanted to get into, and public housing now, and even people who exceeded income guidelines did not want to move?

Mr. GOLDSMITH. Well, that is a fascinating question. Of course, as you know, early years public housing wasn't designed to trap the very poorest people in dense housing. So we have economic segregation, not necessarily racial, but we have economic segregation in public housing and we have a great density. And I think moving from a mix of incomes to the poorest in the most dense situations is a predictable recipe for disaster, especially when you combine that with the peculiar rules of management that HUD forces on a situation.

I am not sure that with a voucher situation you would disperse races, but you would give those who are poor more choice about where they are going to live.

Mrs. CARSON. Thank you.

Chairman LAZIO. Thank you, gentlelady.

Mr. Fox.

Mr. Fox. Mr. Chairman, thank you. Mr. Chairman, Ranking Member, I am very pleased to note we have the esteemed mayor of Indianapolis here.

Your record is nationally-known, and we appreciate your testimony and involvement in this national effort.

According to the Inspector General's report on the consolidation of HUD programs, the Inspector General said the following: "Public housing has become so Federalized over the years that localities have come to view it as a Federal Government responsibility and not theirs. Rather than assuming a supporting role for public housing, the Federal Government, through HUD, has taken a lead role. This is the result of the economic isolation of public housing in most communities."

Can you comment on this supposed-or alleged-isolation and where you would agree with it or not? And if you think it is a problem, how do you think we could address that problem?

Mr. GOLDSMITH. Well, I think it is clearly a problem. The way we handle public housing today does isolate the poorest people in often inferior conditions, and I would say, and I kind of sense this from the subcommittee, most mayors are quite pleased to have that situation occur. It is not their problem; they don't have to worry about the quality of housing. We now have a problem with public housing, and since we have an outside agency, it is not my problem where it was my problem before.

So you not only isolate individuals, you isolate the management problems. I think the political process, although it obviously has some of the dangers that everyone is concerned about, the local city council and mayor are responsible to the voters, and that ensures some degree of accountability.

I think to the extent that the Federal Government acknowledges that it has a responsibility for funding shelter for the poorest citizens in our country and does that in a much more flexible way, outside of the traditional projects, that would be better for the individuals and better for the cities involved.

Mr. Fox. Thank you very much.

Chairman LAZIO. The gentleman from Massachusetts, Mr. Kennedy.

Mr. KENNEDY. Thank you very much, Mr. Chairman. I want to again thank you for carrying on the aggressive set of hearings that we have established so far. I think it is an important demonstration of the renewed energy that you are showing this year that this subcommittee is going to be active.

I hope it is active not only in the writing of a new housing bill which I am hopeful this Congress can pass, but I also hope active in the defense of these issues on the Appropriations Committee.

I also think that even you must feel that the way the Appropriations Committee has dealt with the housing issue in general has been much more devastating than any particular housing policy that has been enacted. When we are talking about 16 million people being eligible for some type of housing assistance in the United States, yet only 4 million people receive any kind of housing assistance, there has to be a recognition across the board that we have got to do more to provide people with shelter.

The fact is that the housing budget last year was cut by over 20 percent, the homeless budget by over 25 percent. I don't think anybody talked to the American people about whether we expected that kind of policymaking to end up in any way reducing the amount of homelessness or the kind of problems that people face in terms of public housing issues, whether these problems are going to be solved by simply going out and cutting the budget.

Nobody-and I apologize for missing your testimony, Mr. Mayor-nobody in their right mind approves the kind of public housing monstrosities that we see so often on the news at night, where so many crime problems have existed. So much difficulty has been placed upon the poorest of the poor, due in some measure to some of the policies that we even as Democrats ended up pursuing, largely as a hope that we could get further appropriations and get the kind of funding for the operating budget in public housing that was necessary in order to allow these people to actually be served in a way that was anticipated. While the policies could have been upheld if the funding came through, the funding didn't come through. The public housing suffered, and now we love to run out in front of public housing, condemn it, and then, as a result of that condemnation, we end up cutting the budget.

It is a self-fulfilling prophecy that ends up undercutting the most poor and vulnerable people in this country. And what I am concerned about-and the Chairman knows my concerns-in terms of the policies that we are pursuing at this time. It will end up providing perhaps a better mix in terms of the kinds of people who end up living in public housing. And certainly if you eliminate the Fourth Amendment, if you eliminate targeting, you can do that much more quickly.