Priority: Safer, Saner, Stronger Communities

LAST fall, I met Michelle Pinedo, a 17-year-old California girl striving to make her way in America. Four years ago, her older brother was killed in front of the family home, the victim of a drive-by shooting. Michelle attends high school with 5,000 other students and is supported by two parents struggling to find jobs above the minimum wage. Inspired by her brother's memory, she has pledged to get the best education she can and at the same time work to heal the East L.A. community where she was born and raised.

While the federal budget debate has occupied the nation's headlines, my thoughts have often returned to Michelle and her world. Balancing the budget is a national priority, but so too is the task of renewing America's communities - of ensuring that Michelle and those who follow her grow up in safer, saner, and stronger neighborhoods.

For too long we have sought to solve our most intractable community problems within the 60-year-old framework of the New Deal. That has meant top-heavy bureaucracies pushing made-in-Washington programs that often reward the wrong kinds of behavior and stifle local initiative. The social challenge of our time is to develop a post-New Deal model for governing, one that helps communities solve their specific local problems, while meeting our most cherished national objectives: good jobs, public safety, great schools, strong families.

Fortunately, as we head toward a new century, a confluence of forces is pushing elected officials to invent a fresh model to govern America: The public rightfully demands a government that is more responsive; neighborhoods, not Washington think tanks, have proven to be the best laboratories of social innovation; severe budget cuts require doing more with less; and many programs developed decades ago never worked as they were intended to.

We see the results of some of these failed social policies all around. Some 600,000 people, many of them children, are homeless each night. Families who live in public housing in major cities such as Chicago, New York, Detroit, and Washington are prey to drug dealers, rodents, and murderers. Vast urban wastelands dot our landscape. Too many youths graduate virtually illiterate.

A former national security adviser recently told me he sees our urban challenges as the nation's ''No. 1 national security problem.''

We can't afford to ignore these problems, for as goes the fate of America's poorer communities, so goes our national destiny. Nor should we tolerate the demonizing of the poor, most of whom are honest, decent Americans. These also are problems that have defied traditional New Deal solutions and must now be approached using a radically different paradigm. While we can't, as yet, see the final form of this new vision, three principles should guide our efforts over the coming decades - principles the Clinton administration has put vigorously to work.

First, think nationally, act locally. The federal government needs to do a better job of working in and through communities. Because federal bureaucrats can't hope to match the wisdom of local leaders, we must give communities more power over federal programs and grant them increased flexibility to tailor funds to meet local needs. As we decentralize, we need to make sure we don't substitute Washington with 50 state bureaucracies.

Second, reverse the incentives. An unintended consequence of many social programs has been to turn recipients of public benefits into passive clients, pushing people and entire communities into perpetual dependence. We need to dramatically alter these incentives, generating a different social dynamic that turns them toward lasting self-sufficiency. Welfare recipients should be rewarded, not penalized, for work. Public housing should not become taxpayer-subsidized, lifelong housing, but a step toward personal empowerment and financial independence.

Third, go beyond government. The answer to every problem can no longer be a federally run government program. We've got to broaden our concept of civic and social responsibility, using public resources and power, where necessary, to actively engage the private sector in tackling our greatest national challenges.

In many communities, such social seed capital can be leveraged to draw in billions of dollars in new jobs and new businesses. Public institutions must also capitalize on the same technology that is transforming many American companies - a move that will help to usher in an age of smaller, smarter government.

By following these pragmatic, even modest, core principles, public leaders at all levels of government can help steer this country from anger and pessimism to a new covenant of hope. They can help to make a real difference where people live - on our streets and in the communities, where our most intractable social problems take root.

Thinking and acting in new ways, we can ensure that the ''end of the era of big government'' need not mean abandoning shared aspirations for our communities - or Michelle's dreams for her future.