Congress Set to Take Over D.C. and Turn It Into Lab : Government: GOP sees chance to prove social vision. Welfare, schools and taxes could change drastically.

The District of Columbia, technically insolvent and now such a bad credit risk that Wall Street has downgraded its bonds to junk status, is about to be taken over by Congress, effectively ringing down the curtain on a 20-year experiment with home rule.

But the conservative Republicans who control Congress say they envision a federal role that goes far beyond guarding the capital’s purse strings. “The District represents a great opportunity for the Republican Party . . . a second chance,” said former Housing and Urban Development Secretary Jack Kemp, who is helping to draft an action plan for House Speaker Newt Gingrich (R-Ga.). After sitting out the civil rights struggle of the 1960s, Kemp said, rehabilitating the nation’s capital offers a chance “to prove that the party cares about people.”

What Gingrich and his fellow conservatives have in mind is turning the District into a proving ground for their ideas on downsizing government, revitalizing the economy and dealing with such problems as drugs, gang violence, welfare dependency and teen-age pregnancy--all of which exist here in abundance.

Some of the ideas enjoy bipartisan support, such as one advocated by Kemp and Democratic D.C. Delegate Eleanor Holmes Norton to transform the capital into a special enterprise zone. There would be no federal income tax. Instead, there would be a flat 16% tax rate, with the proceeds all flowing to the District’s government. Under Kemp’s version of the plan, corporate taxes would be set at a flat 10%, while capital gains taxes would be eliminated altogether on assets within the city’s borders.

Other ideas, such as welfare reform and privatization of the public school system, are more controversial. But GOP lawmakers argue that merely balancing the District’s budget will not be enough to ensure its viability over the long haul.

“It’s a little bit like an emergency room,” Gingrich said in an interview. He likened the District to a grievously wounded patient, with the GOP lawmakers who control its oversight committees compared to the medical team assembled to save it.

“Initially, you have an obligation to stop the hemorrhaging. But in the long run, keeping the patient bedridden with federal government intravenous feeding is hardly an adequate vision of the future,” he said.

But can the District of Columbia, which jails more young black men every year than it graduates from high school, really move into some future Republican vision of Utopia in which its dilapidated schools would be cleansed of drugs, its potholed streets rid of crime and the quality of its overburdened city services improved--even as its bloated municipal bureaucracy is slashed by thousands of jobs and its taxes are reduced?

And can the underlying cause of the capital’s collapse--the flight of its once-burgeoning middle class to the safer suburbs in Maryland and Virginia--be reversed by a Republican (and in the eyes of many D.C. residents, rich white man’s) answer to the problems of a city that is basically black, increasingly poor and overwhelmingly Democratic?

In short, will Gingrich and Kemp prove to be skillful social surgeons or mad scientists whose radical prescription for an unwilling patient only hastens its demise?

One thing is clear: The status quo will not continue.

The District can no longer be trusted to manage its own finances because it “has failed utterly to come to grips with its problems,” said Rep. Julian C. Dixon (D-Los Angeles), long one of the District government’s staunchest allies on Capitol Hill.

But along with other critics of the D.C. government, Dixon said that he shudders at some of the more radical talk about “using this city as a laboratory for the (GOP) ‘contract with America.’ ”

While local leaders find Gingrich’s interest in their problems encouraging, the Republicans “have to ground their ideas in realities that they have not begun to take into account yet,” warned Alvin Thornton, a professor of political science at Howard University.

Kemp allowed that there will be resistance from “liberals who fear that somebody might get rich” but maintained that the rewards--for both the District and the GOP--far outweigh the risks. “This city is in a Dickens-like conundrum; it is the best and worst of times. But Republicans can use that to send a message to the country that they really stand for something.”

The District has “enormous political value for Republicans,” agreed University of Virginia political scientist Larry Sabato. “If they can turn the District around, they will have trumped the Democrats in their own territory. But their problem is that they’ve picked the toughest nut to crack. The District is a mess.”

Behind its facade of manicured embassy mansions and marble monuments, the District is such a mess that even three-term Mayor Marion Barry--back at the helm after a one-term absence forced upon him by a 1990 drug sentence--admitted that home rule has failed.

Two decades after Congress granted the city limited autonomy, Washington exists in a bureaucratic limbo that Barry described as “half-slave and half-free.” Nearly a third of its 600,000 residents are on some form of public assistance; the number of people with jobs has dropped by 70,000 over the last three years, to less than half of the population today.

And estimates of its current cash shortfall stand at $722 million--although no one is sure because record-keeping is so poor that city officials can’t tell federal auditors what checks are outstanding or even how many people the city employs (somewhere between 42,000 and 50,000).

But even accurate numbers could not begin to describe the extent of the social, moral and fiscal crises facing the city, its supporters and critics agree.

If Washington is the capital of the Free World, it is also--in some neighborhoods--beginning to look like the Third World, a place where garbage is left uncollected and streets go unrepaired, where the infant mortality rate is the highest in the nation and some schools lack drinking water.

“Gingrich talks about distributing laptops to the poor. But in D.C., he could start by giving them telephones,” griped a congressional aide, noting that 12% of the District’s households still lack such basic service.

Barry, who earlier appeared to be accommodating toward Congress as talks began on the city’s problems, lately has adopted a more combative tone. “We can come up with loan guarantees to Mexico,” he said here Monday in demanding more money from the federal government. “We even give the Russians money. Now here are people we’ve been fighting against for 50 years. Why can’t we help our nation’s capital?”

The harsh reality grates against the world of cherry blossoms and monuments, producing headlines of drug-dealing in the park across the street from the White House; of Capitol Hill aides raped and murdered just steps from the halls of Congress; of a young mother dragged to her death as she clung to her speeding car, pleading with its hijackers to spare her baby in the back seat.

The city’s black middle-class began rubbing up against these problems years ago and did what the middle class in other cities has done: leave. Fully 60% of the salaries now paid within the District are earned by people who live outside it, their salaries protected by law from District taxation.

At the same time, the city’s welfare services--benefits are higher in the District than they are in Maryland or Virginia--have drawn an increasing number of people dependent on public assistance even as the taxable wealth to support that aid is evaporating.

To reverse those flows, Republican lawmakers believe it will be necessary to radically reduce the District’s welfare rolls and reform its school system.

“The first stage will be to get the spending plans in place . . . but the school system needs to be dealt with very quickly, because education is the key to retaining the middle class,” said Rep. James T. Walsh (R-N.Y.), chairman of the House Appropriations subcommittee that oversees the District.

Walsh refused to be more specific at this stage, saying that “a lot of things are still not wired yet.”

But Gingrich is determined to test drive his social agenda in the District now that Republicans are in control of Congress for the first time in 40 years. “Even the liberals who live here know that this is a city in despair,” he said, adding that Republicans can “insist on a coherent approach to our vision” because finally “we are in a position to have our chairmen mark up our bills . . . and we are negotiating from a position of strength.”