Harry Moroz

Turning Our Backs On Benign Neglect

Although questions persist about whether the Obama administration will be able to translate its commitment to cities into public policy that reflects the importance - and challenges - of urban areas, every once in a while a reminder surfaces of just how much of a shift even this commitment represents.

After President Carter's failed attempt to articulate a national urban agenda, federal urban policy was essentially composed of a series of grant programs and tax breaks for struggling communities labeled Empowerment Zones (EZ), Enterprise Communities (EC), and Renewal Communities (RC). These reflected the "benign neglect" theory of federal urban governance that viewed government interference as a cause of urban "problems." Though President Clinton oversaw enactment of the first of these zones, their biggest champion was GHW Bush's HUD Secretary, Jack Kemp, who was accused of having "HUD on an autopilot with Heritage Foundation software..." For Kemp, enterprise zones were Bush II's "complete urban agenda."

The GAO has just completed its third and final review of the EZ/EC/RC programs, which are awaiting reauthorization. The results are underwhelming. As the programs aged, they came to be dominated by tax incentives rather than grants and financing decreased. Summarizing past results, the GAO notes:

• An econometric analysis of the eight urban Round I EZs [there were three program rounds] could not determine whether the [improvements in poverty, unemployment, and economic growth] were a response to the program or to other economic conditions.

• Similarly, interviews and surveys of EZ and EC stakeholders revealed that respondents credited the programs for certain improvements but also noted that external factors, such as changes in the national economy and in welfare policy, may have been associated with the economic changes in designated communities.

The EZ/EC/RC programs are not only modest, but encourage the type of regulatory arbitrage that makes growth at any cost the goal of economic development, rather than a sustainable economic base and the creation of good jobs. If merely providing some tax breaks and subsidies were enough to reduce poverty and unemployment, perhaps the EZ/EC/RC programs would be worth supporting. But their benefits are meager and unclear. The programs are part of an economic development structure that rewards firms with taxpayer dollars without evidence that such rewards improve economic conditions.

The more ambitious neighborhood-oriented policies of the Obama administration - Promise Neighborhoods, for instance - represent a holistic approach to poverty and unemployment reduction that seeks to coordinate, rather than deconstruct, services. Let's hope this approach becomes the norm.

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Posted at 5:11 PM, Mar 15, 2010 in Cities
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