Pres Clinton’s plan to help business development through Empowerment Zones will begin with $3.5 billion in funding for nine of them. The problem is that his plan is nothing more than another government subsidized spending package that will not help these communities develop economic independence.
WHEN Congress recently passed, and President Clinton signed, the budget-reconciliation bill, it was little noted that they also enacted the nation’s first enterprise-zone legislation. The bill allocated $3.5 billion to fund nine “Empowerment Zones” (six urban and three rural) and another hundred “Enterprise Communities” with lesser benefits. But most leading enterprisezone advocates weren’t celebrating.
Barry Sanders, co-chairman of RLA (Rebuild Los Angeles), called the Clinton plan “thin gruel for our poorest areas.” No one, Sanders said, “establishes a new business . . . [in] a U.S. inner city to take advantage of ‘inducements’ like these.” Senator Joseph Lieberman (D., Conn.), one of Clinton’s earliest political supporters, complained that the President’s program “guarantees that the vast majority of distressed areas in this nation will have no chance of being designated an enterprise zone.” Former HUD Secretary Jack Kemp actually lobbied against the plan, calling it “a weak imitation of the enterprise-zone concept… [which] reveals an Administration with the most anti-capitalist mentality in this century…”
The enterprise-zone saga illustrates a consistent pattern in the Clinton Administration: the President has rhetorically embraced a wide range of empowerment proposals, including homeownership for residents of public housing, enterprise zones, and welfare reform. But the programs he has thus far proposed reveal not a bold, “new Democrat” agenda to help poor Americans, but what Kemp describes as “a throwback to the top-down, paternalistic policies which have dominated liberals’ thinking on poverty since the Great Society.”
Clinton named his zones “empowerment zones,” while removing all the empowerment provisions from them. He touted his plan as the first real federal effort to help the inner cities since the Los Angeles riots. But the legislation he signed creates just nine zones that will receive any measurable benefits, only six of which are in urban areas. The one hundred “enterprise communities” are not enterprise zones at all; what they get is some $280 million in federal spending. “There are too few real zones and too many quasi zones,” Senator Lieberman argued; he pointed out that with the same funding the Administration could have created “real zones” in 50 to 75 desperate communities.
Further, the tax incentives in the nine “super zones” will do nothing at all to help them attract scarce capital. Instead of eliminating the capital-gains tax on anyone who works, saves, or invests in the zones, the Clinton plan provides $2.5 billion in wage credits to employers operating there to encourage the hiring of local workers, and $720 million in social-service grants. But the wage credits will benefit only existing businesses–they do nothing to attract new investment in order to create new businesses in the impoverished areas and to help young businesses grow. As John Boyd, owner of a furniture-manufacturing company in South Los Angeles, recently told the L.A. Times, inner-city businesses have little use for the Clinton wage credits. “Right now, I can’t grow and bring in a new product line because I can’t afford it … businesses [here] do not have the capital to work with.”
Far from empowering local communities, the Clinton plan dramatically expands Washington’s role in the inner cities by creating a federal “Enterprise Board” to micro-manage the zones. To get benefits, local officials will be forced to present comprehensive community-development proposals to the board in Washington (made up of Cabinet secretaries and relevant agency heads). This flies in the face of the basic philosophy behind enterprise zones: empowering individuals and local communities by getting bureaucrats out of their way.
In addition to creating zones devoid of job-creating incentives, the Administration now seems to be turning to another old-style liberal jobs policy: increasing the minimum wage. Labor Secretary Robert B. Reich is leading the charge here. In a July 22 memo to the White House, which was leaked to the media, Reich argued that the minimum wage should be increased from $4.25 to $4.50 an hour and recommended that it be indexed to inflation. This is apparently being taken quite seriously in the West Wing.
In housing as well, Clinton has promised empowerment and delivered more government. In his campaign manifesto, Putting People First, he promised to “make homeownership possible for more Americans through federal support for low-income long-term housing buyout programs.” But his HUD Secretary, Henry Cisneros, has begun to dismantle programs which encourage homeownership for the poor, in favor of increased spending on new construction of low- and moderate-income housing and subsidies for low-income renters.
Cisneros has proposed dramatically increasing funding for HOME, a blockgrant program which funds the construction and rehabilitation of public housing, to $1.6 billion–an increase of one-third. How is he paying for this? By gutting project HOPE (Homeownership and Opportunity for People Everywhere), the empowerment program championed by Jack Kemp. In the Bush Administration’s last budget, HOPE’s 1993 appropriation was $351 million. The Clinton Administration has cut this to $300 million. For 1994, the Administration has requested a paltry $109.9 million. Essentially, the Clinton Administration is phasing out HOPE, barely funding existing commitments, and cutting off all new homeownership programs.
And now, as the President prepares to unveil his welfare-reform plan, it looks as if the same cycle could repeat itself. During the campaign, Clinton promised to “end welfare as we know it.” Since taking office he has repeated his support for a two-year time limit on welfare recipients. His HHS Secretary, Donna Shalala, recently stated that “the tragedy of our welfare system is that it penalizes work, stigmatizes recipients, and often locks families into vicious cycles of dependency. The President and I are committed to reversing this inequity and helping people live productive lives.” Those are encouraging words.
To his credit, the President recently backed them up by persuading Congress to pass an expansion of the Earned Income Tax Credit–a credit that supplements the wages of working families with children, rewarding personal initiative. But Secretary Shalala has recently tempered her support for limiting welfare benefits by stating that limits will come only after the Administration has put into place a plethora of new programs such as “job training, child care, and other support to help poor women.” Miss Shalala has also talked of creating a “work support agency” to oversee these new programs, thus expanding the already massive welfare bureaucracy. And Administration officials have stressed that no reform will be possible until Congress passes the President’s health-care plan, arguing that universal access to health care is an essential element of his welfare-reform program.
Secretary Shalala is right in one sense–placing time limits on welfare in a vacuum will do little to help move people off the welfare rolls. But instead of lifting the barriers to opportunity that face poor Americans, the Clinton Administration seems to be filling that vacuum with more and more government programs. President Clinton continues to speak of empowerment–but so far the only thing he is empowering is government.
Mr. Weber, the former congressman from Minnesota, is co-founder of the new conservative group Empower America.