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THE UNIVERSITY OF VIRGINIA VOL. 57, NO.8

THE FROSTBELT-SUNBELT CONTROVERSY By Timothy G. O'Rourke

Mr. O'Rourke is a research associate on the staffo/the of newer Sunbelt cities was part of a natural "Frostbelt" will embrace the District of Institute of Government. and irreversible dynamic. Therefore, the Columbia and the sixteen states in the New I n the mid-1970s, a spate of articles in federal government should eschew massive England, Mideast, and Great Lakes , newspapers and magazines such as the New expenditures to revitalize declining areas as displayed on the map. and instead should assist unemployed or York Times, Time, and Business Week PATTERNS OF REGIONAL GROWTH signaled the nation's seemingly instanta­ underemployed persons in those areas in neous recognition of the "Sunbelt acquiring new skills and in moving to places The dramatic economic expansion that phenomenon"-the dramatic growth in the where jobs are available. The Commission's has occurred in the Sunbelt states in recent economies of southern and southwestern stated strategy of substituting "people­ decades is easily documented. 2 The Sunbelt's states during the 1960s and early 1970s. The oriented" progranls for "place-oriented" share of the nation's nonagricultural em­ apparent prospects of continued economic ones carried the clear implication that ployment rose from less than 23 percent in boom in the Sunbelt and economic retrench­ federal policies should accommodate-not 1950 to about 27 percent in 1970 to nearly 31 ment in the states of the Northeast and resist-the decline of the economies of percent in 1980. In absolute terms, nonagri­ Midwest-or Frostbelt-touched off debate Frostbelt cities. cultural employment in the Sunbelt-and in over the inevitability ofthese projections and Not surprisingly, Frostbelt politicians Virginia in particular-doubled between the proper response of governmental policy, reacted harshly to these recommendations. 1960 and 1980. The Sunbelt accounted for especially at the federal level, to uneven They have been equally critical of the two-fifths of the national growth in nonagri­ regional growth. Reagan Administration's plans to trim cultural employment during that twenty­ Events of the past few months have federal spending for programs such as mass year period. Similarly, the 's propor­ served to intensify public discussion of transit and urban development that particu­ tion of manufacturing employment trends in regional growth and their policy larly benefit older Frostbelt cities and, at the increased from 18 percent in 1950 to over 25 implications. Recent release of the 1980 same time, greatly to expand defense percent in 1970 and to 29 percent in 1980. Census data that will govern apportionment expenditures that flow disproportionately to From 1950 to 1970 the Sunbelt's share ofthe of the U.S. House of Representatives after southern and western states. nation's hovered around 30 1982 provided formal confirmation of the In light of the renewed attention being percent, but by 1980 it had approached 33 given to regional issues, this news letter sharp increases in population that had taken percent. Net migration alone added over 4.8 I place in many southern and western states reviews current trends in economic growth in million people to the population of the since 1970, alongside negligible gains of various regions of the nation, briefly Sunbelt from 1970 to 1979. Per capita population in northeastern and midwestern considers the factors accounting for those income in the Sunbelt, historically the states. For instance, the Sunbelt states of trends, and examines the role of federal nation's poorest region, has risen in conjunc­ and , from 1970 to 1980, grew policy in influencing growth within regions. tion with the gains in employment. Per in population by 43.4 percent and 27.1 The analysis then considers the question of capita income in the Southeast increased percent and will gain four and three House whether regional differences in political and from 68 percent of the national average in seats, respectively. The combined popula­ social culture, rather than federal policy, 1950 to 87 percent in 1978; in the Southwest, tion of the Frostbelt states of New York, account more for the prosperity of the per capita income expanded from 87 percent Pennsylvania, Ohio, and Illinois, on the Sunbelt and the decline ofthe Frostbelt. The of the national average in 1950 to 96 percent other hand, declined by about .3 percent, news letter concludes with a discussion of in 1978. Virginia's per capita income, 82 and these states will lose a total of eleven future developments in the politics of percent of the national average in 1950, seats in the House. l regional growth and the possible directions reached 98 percent in 1978. A second development fanning the of federal policy with regard to regions. Frostbelt-Sunbelt controversy was the De­ Although this account does not ignore cember 1980 release of the Report of the population and economic trends in the states 2 Data in this section were taken from U.S. Advisory Commis­ sion on Intergovernmental Relations (hereafter ACIR), Regional President's Commission for a National of the Plains, Rocky Mountain, and Far West regions-as shown on the accompany­ Growth: Historic Perspective (1980); Jacqueline Mazza and Bill Agenda for the Eighties. In the Commis­ Hogan, The State of the Region 1981: Economic Trends in the sion's view, the "relative decline" of older ing map-the focus of the analysis is the Northeast and Midwest (Washington, D.C.: Northeast-Midwest Frostbelt cities and the concomitant growth disparity in patterns of growth between the Institute, 1981); U.S. Department of Commerce, Bureau of Sunbelt and Frostbelt regions. In this Economic Analysis, "Regional and State Projections of Incoille, context, "Sunbelt" will refer to the sixteen Employment, and Population to the Year 2000," 60 Survey of I Census data for 1980 are reported in Andy Murray, "Redistrict­ Current Business 44-55 (November 1980); and various publications ing Still Plagued by Confusion," 39 Congressional Quarterly states, including Virginia, in the Southeast of the U.S. Bureau of the Census, U.S. Bureau of Public Roads Weekly Report 71 (January 10, 1981). and Southwest regions depicted on the map. and Federal Highway Administration.

INSTITUTE OF GOVERNMENT / UNIVERSITY OF VIRGINIA / CHARLOTTESVILLE / APRIL 1981 Economic and population trends in the Frostbelt, on the other hand, have been far less positive than those in the Sunbelt. The Frostbelt's share of the nation's nonagricul­ tural employment declined from more than 57 percent in 1950 to less than 44 percent in 1980. Manufacturing employment in the Frostbelt, as a proportion of the national total, dropped from 68 percent in 1950 to less than 50 percent in 1980. In addition, the number of manufacturing jobs in the Frostbelt actually declined by more than 960,000 during the 1970s. The Frostbelt's share of the nation's population fell from 49 percent in 1950 to less than 43 percent in 1980; net migration out of the region amounted to nearly 3.5 million from 1970 to 1979. Per capita income in the Frostbelt, even though rising in terms ofactual dollars U.S. Department of Commerce. declined as a percent of the national averag~ Bureau of Economic Analysis from 1950 to 1978: in the New England states, from 107 percent in 1950 to 101 percent in 1978; in the Mideast region, from 117 to 105 percent; and in the Great Lakes FROSTBELT region, from III to 105 percent. The relative SUNBELT stagnation of the Frostbelt d and the -. crisp growth of the Sunbelt with respect to related to national defense but also in less than one. Indeed, the Northeast­ population, income, and employment are programs intended to create an infrastruc­ Midwest Institute, the research arm of the likely to continue over the next two decades ture for southern economic growth-water Frostbelt coalitions in Congress, has esti­ according to projections of the Bureau of projects, rural electricification, and highway mated that the eighteen coalition states "sent Economic Analysis of the U.S. Department construction. In 1960, for instance, the $165 billion more in taxes to Washington of Commerce. Sunbelt had 7,052 miles ofdivided four-lane than they got back in Federal spending" While all of these data clearly confirm the highways under the Federal Primary System 5 widely publicized contrast between Sunbelt from 1975 to 1979 alone. In contrast, the (which includes the Interstate System); by prosperity and Frostbelt atrophy, they do Sunbelt states, including Virginia, long have 1970 the number of miles had grown to not by themselves explain the causes of this enjoyed a favorable balance of funds, or a 21,607. The increase represented 44 percent ratio greater than one. From 1952 to 1979 divergence in regional fortunes. In a cogent of the national expansion of divided four­ however, the size of regional imbalance~ explanation of Sunbelt growth, Charles D. lane roads over the decade of the sixties and, tended to decline (though it should be noted Liner noted that the American economy in improving accessibility to markets within that data for 1979 and figures for prior years until well into the twentieth century was and outside the Sunbelt, contributed to the are only roughly comparable). The ratio for dominated by heavy industries, such as steel, accelerated pace of southern growth in the the Southeast dropped from 1.51 to 1.18 and that were dependent on close proximity to 1960s and 1970s. the ratio for the Mideast, excluding the raw materials and to rail and water outlets. District of Columbia, rose from .74 to .92. The requirements of these industries led to THE FEDERAL ROLE IN SUNBELT The Plains, Rocky Mountain, and Far West the concentration of economic activity and EXPANSION regions, while generally showing a favorable people in the urban centers ofthe Frostbelt. flow of funds since 1952, registered ratios Growth in the American economy, however, The impact of federal policies on the between expenditures and taxes of 1.0 I, shifted away from heavy industry toward economic health of the nation's regions has 1.12, and 1.00, respectively, in 1979. A new technologies such as electronics and become the central point ofcontention in the 4 ~otable exception to the pattern ofdeclining services that were not wedded to centralized Frostbelt-Sunbelt debate. The conviction Imbalances was the , for transportation facilities. With expansion of that the federal government, both wittingly which the ratio gradually worsened from .87 the national highway system, enterprises and unwittingly, has subsidized the expan­ in 1952 to .71 in 1979. thus could move away from the -cities and, sion of. the Sunbelt at. the expense of the Much of the imbalance in·inter-regional indeed, out of the region to other areas North has brought together widely disparate "flows of funds" is attributable to the offering inexpensive land and surplus labor interests in the Frostbelt in collective efforts distribution offederal defense expenditures, willing to work for lower wages than those to monitor and modify the effects offederal which encompass not only spending for the prevailing in the Frostbelt. Apart from policies on regional economics. At the operation of military installations but also cheap land and low wage labor, the South­ national level, the Northeast-Midwest Con­ the awarding of prime defense contracts. In east and Southwest offered a variety ofother gressional Coalition, established in 1976, 1979 the New England, Mideast, and Great attractions: favorable climate (at least after includes 213 Democratic and Republican Lakes regions, excluding the District of the introduction of ), low House members from eighteen northeastern Columbia, together held about 43 percent of state and local taxes (discussed later), rising and midwestern states (the sixteen states in the nation's population but received less energy costs and the presence of large the Frostbelt as defined herein, along with than 31 percent of federal defense expendi­ reserves of oil and natural gas in the Iowa and Minnesota); the Northeast­ tures and contained only about 18 percent of Southwest, and swelling local markets for Midwest Senate Coalition, set up in 1978, employment under the Department of goods created by the phenomenon ofgrowth encompasses the same states. Defense. The Southeast and Southwest itself. 3 The civil rights revolution ofthe 1960s Historical data reveal that Frostbelt states regions, with 32 percent of the population, removed from the Sunbelt the racist label for at least several decades have suffered a persistent balance offunds deficit, indicated received almost 34 percent of defense long attached to the region and thus made spending and accounted for 44 percent ofthe migration to the region more palatable for by a ratio between expenditures and taxes of employment under the Department of Frostbelt firms and individuals. 4 Data in this section, except as noted, were taken orderived from Defense. alone, however, is the A final influence on southern growth has ACIR, Regional Growth: Flows ofFederal Funds 1952-76 (1980); ACIR, Regional Growth: Historic Perspective; Lillian Rymaro­ principal beneficiary ofso-called imbalances been the massive infusion of federal funds wicz, "Tabulations: Estimated Federal Tax Payments by Residents in the flow ofdefense funds; with 10 percent into the region from the Depression era to of Individual States, Compared to Estimated Outlays in the States, the present, most prominently in programs Fiscal Year 1979," (Washington, D.C.: Library of Congress, S Mala and Hogan, The State of the Region 1981, p. 37 Congressional Research Service, July 9, 1980); U.S. Community (emphasis omitted). On this point see also Joel Havemann and 3 Charles D. Liner, "The Sun Belt Phenomenon-A Second War Services Administration, Geographic Distribution of Federal Rochelle L. Stanfield, .. 'Neutral' Federal Policies Are Reducing Between the States," 43 Popular Government 16-24 (Summer Funds in Summary, Fiscal Year 1979 (1980); and Mazza and FrOltbelt-Sunbelt Spending Imbalances," National Journal 223 1977). Hogan, The State ofthe Region 1981. (February 7, 1981). of the population, the state received over 17 variations in the cost of living would have and property taxes on businesses have in ,percent of defense expenditures in 1979 and lowered per capita income in New England attracting firms to particular states. Business held nearly 15 percent of total defense from 103 percent of the national average to taxes probably do not figure heavily in personnel. Among other states, Texas with 89 percent of the average. By the same diffei4 ential rates of regional growth, for a 7.9 percent of defense spending and Virginia measure, per capita income in the Mideast variety of reasons, including, first, the with 6.1 percent ranked a distant second and would have dropped from 109 percent to 100 likelihood that firms will give greater weight third behind California. percent; in the Great Lakes, from 104 to 102 to the quality of a site, its access to markets, Frostbelt interests in Congress have percent; and in the Far West, from 111 to 106 and the availability of labor than to tax devoted much energy to the task of redirect­ percent. Per capita income in the Southeast, concessions and, second, the fact that most ing a larger portion of defense spending to on the other hand, would have risen from 86 states offer some package of tax induce­ the Northeast and Midwest while at the same to 93 percent of the national average and, in ments.7 time preserving existing military bases the Southwest, from 93 to 99 percent. Available evidence does indicate, howev­ already in the Frostbelt. Decisions ofdefense er, that overall levels of state and local policy, therefore, have become matters to be taxation differ significantly enough among REGIONAL POLITICAL SYSTEMS AND states to influence locational choices both of resolved according to regional accommoda­ ECONOMIC GROWTH tion. (Should the U.S.S. Saratoga and three firms concerned with the amenities available other aircraft carriers be overhauled in While Frostbelt politicians and a number to its employees and of individuals. A study Newport News or in Philadelphia?) The of scholars advance the notion that the of regional variation in state and local tax Northeast-Midwest coalitions also have decline of the Northeast and Midwest can be levels by Deborah S. Ecker and Richard F. sought to modify other budget priorities laid at the feet of federal policy, other Syron (New England Economic Review, such as the distribution of federal water observers have suggested that the distinctive September/ October, 1979) found that in projects and the formulas by which federal political outlooks of the Frostbelt and 1977 the combined burden of federal, state, grants-in-aid to state and local governments Sunbelt, more than federal policy, explain and local taxes on an income of $50,000 in are allocated. the divergent fortunes in the economies of Buffalo, New York, exceeded the taxes on Interestingly, data for fiscal year 1980 the two regions. Sunbelt expansion and the same income in , Texas, by nearly published in u.s. News and World Report Frostbelt contraction represent the results of $3,400; likewise, the total tax liability on (February 23, 1981) show that many Frost­ an ongoing referendum that shows, accord­ $50,000 income in Weston, Massachusetts, belt states currently are faring well in the ing to James Ring Adams, "that Americans exceeded that of Winston-Salem, North distribution of federal grants-in-aid. Nine of prefer to migrate from states with high Carolina, by more than $1,800. the sixteen Frostbelt states ranked above the service levels and to states with low service Although states with higher levels of average, for all fifty states of$398 per capita; levels."6 The appeal of Sunbelt states, then, taxation undoubtedly provide a broader and, in contrast, ten of the sixteen Sunbelt encompasses more than good weather and spectrum of public services than states with states, including Virginia at $329 per capita, the promise of non-union labor and low lower levels of taxation, extensive public fell below the national average. It should be corporate taxes; the appeal embraces a wider services do not necessarily make a state more noted, however, that these data do not reveal notion of what might be labeled the "limited attractive to potential industries or residents. how much state and local governments had state"-low taxes, limited services, and The expenditures of Frostbelt states and to spend from their own revenues in order to minimal regulation of business and environ­ their local governments not only exceed attract the federal monies that they received. ment. Similarly, the unattractiveness of those of Sunbelt states on a per capita basis, Since grant formulas often require that Frostbelt states is tied to that region's but they also reflect a different set of wealthier states provide a larger share of pattern of the "expansive state" or "welfare priorities. Data derived from ACIR's Signif­ matching funds than poorer states, Frostbelt state"-high taxes, extensive services, and icant Features ofFiscal Federalism 1979-80 states with generally higher per capita massive regulation of business and environ­ Edition show that Frostbelt state and local incomes must spend more than typically ment. governments devoted 15 percent of general lower-income Sunbelt states in order to In terms of public sector activity, the expenditures in 1977-78 to welfare and 7 attract the same amount of money. Sunbelt states impose lower taxes and percent to highways. For the Sunbelt states, In this regard, the Advisory Commission provide a more limited array ofservices than welfare accounted for 9 percent ofspending on Intergovernmental Relations (ACIR) their counterparts in the Frostbelt. Accord­ and highways, for 11 percent. The data hint set out a revealing comparison of federal ing to the Tax Foundation's Monthly Tax at the dimensions of the welfare burden of welfare spending in and New Features (November-December 1980), all many Frostbelt states, which typically York in fiscal year 1976. In New York, the southeastern and southwestern states, with provide larger benefits to a greater percen­ combined welfare spending of federal, the exception of , ranked in the tage of the poor than do Sunbelt states. state, and local governments amounted to bottom half of all fifty states with respect to The divergence in welfare spending lev~ $2,859 per poor person, with federal funds per capita state and local taxes in fiscal year of Frostbelt and Sunbelt states may contrib- "­ accounting for 51 percent of the $6.3 1979. (Virginia stood twenty-eighth in per ute to apparent differences in the character­ billion in total expenditures. Welfare capita taxes.) In contrast, twelve of the istics of the work force in the two regions. spending in Mississippi averaged $530 per sixteen states in the New England, Mideast, Bernard L. Weinstein offers this impression: poor person, but federal funds provided and Great Lakes regions placed in the top The labor force in Texas seems 88 percent of the roughly $400 million half of all states in per capita taxes. When to have more positive attitudes expended. Mississippi spent about $47 interstate differences in wealth are taken into toward work than is the case in million to attract $353 million in federal account, tax levels in Frostbelt states are still New York. Whether these funds, while New York expended nearly significantly higher than those in the attitudes stem from a strong $3.1 billion of state and local funds to get Sunbelt. In 1979, eleven of sixteen Frostbelt fundamentalist tradition or the $3.2 billion in federal monies. states ranked in the top half of all states in absence of viable alternatives to Frostbelt interests in Congress have been terms of state and local taxes per $1,000 of work-such as welfare or un­ urging, with little evident success apart from personal income, while thirteen of sixteen employment insurance-is un­ a change in the Community Development Sunbelt states placed in the bottom half. clear.8 Block Grant Program in 1977, that formulas (Virginia ranked thirty-ninth by this mea­ One of several studies that seem to support for various federal grants-in-aid, including sure.) Weinstein's contention was done by David Medicaid and Aid to Families with Depend­ Too little attention perhaps has been given C. Perry and Alfred J. Watkins and reported ent Children, be modified to reflect current to the impact of overall levels of state and economic trends in northeastern and mid­ local taxes-including personal income,

western states. In part, Frostbelt politicians sales, and property taxes-on migration 7 See Benuud L. Weinstein and Robert E. Firestine, Regional contend that basing formulas on per capita from and to states. On the other hand, Growth and Decline in the : The Rise ofthe Sunbelt income unduly penalizes northeastern and perhaps too much emphasis has been and the Decline of the Northeast (New York: Praeger Special midwestern states in which per capita devoted to the role that low corporate taxes Studies, 1978), pp. 134-39. income is grossly overstated. The ACIR, for :I Quoted in George Sternlieb and James W. Hughes, "Prologue: Prelude to an Agenda," in Sternlieb and Hughes, eds., Revitalizing example, estimates that adjusting per capita 6 James Ring Adams, "The Decadence of Federalism," The Ih~ Northeast: Prelude to an Agenda, (New Brunswick: Center for income in 1975 to account for regional Public Interest 164 (Fall 1978). Urban Policy Research, Rutgers Univ., 1978), p. 48. in a collection of articles they edited, The welfare costs and, in evening out benefit Some major uncertainties plague the tasks Rise ofthe Sunbelt Cities (1977). That study levels among states, could remove whatever of predicting the ecomonic futures of the compared rates of subemployment in low incentives no\v exist for the jobless poor to various regions and of making policy income neighborhoods in nine Frostbelt and remain in the Frostbelt. These same results recommendations. One uncertainty is the nine Sunbelt cities. The analysis found levels might be achieved, however, if high welfare future performance of the general economy. of subemployment-the sum of unem­ states simply were to allow inflation to erode A second is the status of energy resources in ployed, discouraged, involuntary parttime, the value of present benefits; to some extent the coming years, and on this issue many and low-wage workers-to be comparable this process is already occurring. A second Frostbelt and Sunbelt states may have more for the two regions. A much larger propor­ approach, one rejected as counterproductive common concerns than differences. A tion of the Sunbelt subemployed, however, by the Commission, would be a massive number of southeastern states, along with were low-wage workers; the Frostbelt federal investment in the rebuilding of the virtually all of the Frostbelt states, are major subemployed were more likely to be unem­ Frostbelt's infrastructure, along the lines of importers of energy; the economies of these ployed or discouraged workers and, presum­ the national policy that fostered economic states will be sensitive to changes in energy ably, more likely to be receiving unemploy­ development in the South. prices. The southwestern and Rocky Moun­ ment compensation or welfare. In any event, the next several years are not tain states, rich in oil, natural gas, and coal, These findings suggest that, with regard to likely to bring significant expansion of the face the promise of sustained economic welfare spending or public services in scope of federal intervention in regional growth in coming years, though scarce water general, the Frostbelt states are to some development. Market forces, however, supplies, particularly in the Southwest, may extent victims of their own policies; high already are working to mitigate the Sunbelt's undercut this promise. Since the southwest­ taxes, extensive public services, and liberal competitive advantage over the northern ern and Rocky levy sever­ welfare policies discourage growth. (These states. On one hand, the Frostbelt states ance taxes on energy extraction, they stand findings, when viewed from a different have taken stringent measures to trim the to gain from what some regard as "windfall" perspective, also might indicate that un­ costs of government, particularly in the area tax revenues as energy prices and production skilled workers in the Sunbelt, notwith­ of welfare. These states also are recruiting increase. For instance, by 1985 severance tax standing the region's economic boom, are industries more vigorously, and, relative to revenues in Texas will amount to about $3 not necessarily better off materially than the Sunbelt, enjoy the advantage of a large billion annually and in , to $1.3 their northern counterparts.) While the supply of skilled labor. On the other hand, billion. to Since federal policies aimed at pattern in the Sunbelt states of low taxes, the Sunbelt states may confront in coming stimulating energy production clearly have limited services, and meager welfare spend­ years the prospects of rapidly rising public contributed to the expansion of severance ing may not be ideal public policy, it is expenditures to accommodate growing tax revenues, the case for federal action to conducive to economic growth. and incomes. In addition, rising restrict the flow of dollars out of energy­ wages and expanding unionization-given importing states into the tax coffers of the PUBLIC POLICY AND REGIONAL new impetus by the October 1980 agreement producing states is a strong one. (A challenge GROWTH between J.P. Stevens and the Amalgamated to Montana's 30 percent tax on coal Differences in the levels of public sector Clothing and Textile Workers Union-will production is now before the U.S. Supreme activity in Frostbelt and Sunbelt states have reduce the southern advantage of low-wage Court.) contributed to the separate economic for­ labor. Southern and southwestern states If nothing else, uncertainties in the area of tunes of the two regions, according to most since 1975 have recorded a net immigration energy policy suggest that political align­ analysts ofregional growth. Many 0 bservers of poor persons, while Frostbelt states, over ments predicated on shared regional inter­ also appear to share the notion that some the same period, have had a net loss ofpoor; ests may be a bit less stable in the future than leveling of the regional gap in public sector this trend, if continued, will reverse a the experience of the past five or six years activity is either necessary or inevitable. decades-long pattern and benefit the Frost­ might have led us to expect. Indeed, as the Some plainly see federal intervention as the belt.9 Wall Street Journal noted in a February 17, vehicle for carrying out this leveling. For "The observations in this paragraph are set out in the following 1981 editorial, "the Sunbelt-Frostbelt fight instance, nationalization of the welfare articles in The Wall Street Journal: "Sunbelt and Surburbia Still has become a rhetorical staple just as it is system, a proposal endorsed by the Presi­ Strong Magnets for Migtating Americans During Decade," July 2, being superseded by a new economic reali­ 19HO. p. 17; and Sam Allis, "Energy to Foster Boom in West; Sun ty." dent's Commission for a National Agenda Bell Investment Will Slow," Oct. 28, 1980, p. 37. Also see John

mentioned earlier, could relieve Frostbelt Hanly Adams, "Is the Bloom Shifting To The Frost Belt?" 68 10 Neal R. Peirce, "Offing the Frost Belt: A Stupid Idea Whose states of the immense fiscal burden of ,vation's Bwiness 84-88 (November 1980). Time Has Come," The Washington Post, Jan. 18, 1981, p. C5.

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