Businessweek Archives

Situation Critical But Not Hopeless


Cover Story

SITUATION CRITICAL BUT NOT HOPELESS

First came L.A. Lawless. The plot elements: a vicious beating, an inexplicable verdict, a made-for-TV orgy of mob violence and racial hatred. Now America must brace for Capitol Offenses, the sequel. It's an empty spectacle of hand-wringing, blame-shifting, and partisan Washington bombast that, far from providing aid to the nation's seething urban cores, may make Los Angeles' howl of rage seem all the more futile.

Indeed, the echoes of gunfire had scarcely died down in the L.A. war zone when the partisan sniping began in Washington. The White House insisted that misguided Great Society programs of the 1960s created the dependency that lay at the root of the L.A. uprising. Democrats fired back, charging that Republican "malign neglect" of the inner cities--and President Bush's conscious manipulation of the symbols of racial resentment--were to blame.

OVERDUE DEBATE. The bitter recriminations, just a preview of the jockeying that's to come, don't bode well for a rational debate over the urban underclass. In an election year dominated by the economic concerns of middle-income suburbanites, President Bush won't see much payoff from launching costly new aid plans (page 61). For their part, Democrats will gum the problem to death in a furious round of hearings and speeches aimed at linking the underclass' woes to a broader, Bush-inspired economic decline bedeviling all classes and colors.

The ensuing debate won't be terribly edifying, and most of the "action plans" dusted off by both the Administration and its critics will be modest proposals that have been moldering on the shelf for years. But the policy picture is not as bleak as it first appears. By its very scale and searing impact, the L.A. rebellion has touched off a long-overdue debate on racism and economic injustice. And once you look past the partisan volleys, a few areas of consensus offer a flicker of hope.

For instance, it's widely acknowledged that the cities' myriad ills are multifaceted and that any solutions will have to take this complexity into account. Most urbanologists believe that neither the traditional Democratic nostrum of greater government intervention nor the GOP's reliance on market forces and the quasi-mystical allure of property ownership offer a complete cure.

There's even bipartisan agreement on some programs. Welfare, for instance, should be converted from an end in itself into a temporary help in a faltering job market. Early childhood intervention, through programs such as Head Start and prenatal care, has produced long-term gains and should be expanded.

Republicans and Democrats also want to use tax breaks to reward the working poor and devote far more government energy to helping the unskilled find work. On this, everyone agrees: The private sector has a bigger role to play. "I think what we learned from the War on Poverty is that you can't run things from the top down," notes House Majority Leader Richard A. Gephardt (D-Mo.). "You must give people the tools to help themselves."

There's a stark reality underlying such talk. The huge federal deficit and the equally precarious finances of many states mean government will be able to offer precious little in the way of new money for programs to revive blighted neighborhoods. So politicians will be searching for ideas to leverage big results out of small up-front investments. And states, cities, and even neighborhood groups will become laboratories for new antipoverty approaches.

A CATALYST. The 1988 overhaul of the much-maligned federal welfare system indicates the tack politicians are likely to take. The idea then was to use the government as a catalyst rather than as a heavy-handed overseer. With bipartisan support, Congress passed groundbreaking legislation that required states to set up education, job training, and job placement programs for welfare mothers. That satisfied the GOP's demand for more government-imposed responsibilities and the Democrats' belief that the poor need help to enter the job market.

The Bush Administration continues to press for market-oriented solutions. Using the smoldering wreckage of L.A. as a backdrop, the White House intends to apply strong new pressure on Congress to pass Administration proposals already in the hopper. President Bush has pointed to initiatives offered by Housing & Urban Development Secretary Jack F. Kemp, such as expanding the Reagan-era idea of enterprise zones, which offer tax incentives to businesses that locate in depressed inner cities. Kemp also advocates expansion of the earned-income tax credit for low-wage workers and the low-income housing tax credit. And he supports efforts to enable low- and moderate-income families to buy or manage public-housing units. "When people lack jobs, opportunity, and ownership of property, they have little or no stake in their communities," Kemp says. Democrats quarrel with some, but not all, of Kemp's ideas.

There's no shortage of critics for his programs to turn public-housing units over to tenants. They complain that the plans do nothing to expand the housing stock and that few tenants would be able to or would like to buy their apartments. "These tenants aren't dumb," says William C. Apgar, executive director of Harvard's Joint Center for Housing Studies. "They don't want to buy these units."

There's more of a consensus building around Kemp's tax ideas. Democrats may back more enterprise zones as a way to attract jobs to ravaged neighborhoods, though a General Accounting Office study found that infrastructure, low crime rates, and access to labor markets were more important factors in site selection than tax rates. The low-income housing tax credit also may get new support. Analysts say the credit is behind some 90% of the low-income housing built or renovated since its enactment in 1986. But the preference is due to expire in June, the victim of partisan gridlock over broader tax legislation.

Expansion of the earned-income tax credit, which rebates money to low-wage workers, also may garner support. Currently, as wages rise, reductions in the credit and benefits from other programs effectively give low-wage workers a marginal tax rate of more than 100%.

The Democrats have their own set of proposals. Senator David L. Boren of Oklahoma offers an old-fashioned public-works spending bill. His proposal, modeled after the New Deal's Works Progress Administration, would require some aid recipients to take public-works jobs for up to 32 hours a week. Boren argues that this would give the poor the dignity of meaningful work while helping the nation rebuild its deteriorating bridges, highways, and sewers. But critics call the idea a boondoggle that wouldn't lead to stable private-sector employment.

ABSENT FATHERS. Representative Thomas J. Downey (D-N.Y.) has a plan that is less traditionally Democratic. He intends to introduce legislation that would require the government to provide a single parent with minimum support and then go after deadbeat dads for the cash. The GOP may back the search for absent fathers, but it's likely to balk at providing financial support.

Arkansas Governor Bill Clinton's approach sounds even more Republican. The likely Democratic Presidential nominee's prescriptions include enterprise zones, as well as proposals to grant tax breaks to low-income families for contributing to college savings accounts, home ownership, or starting a business. And he would set up government-financed organizations to lend money and give advice to budding entrepreneurs--the sort of public-private cooperation the Bush Administration will be pushing as well. The poor, Clinton says, "want opportunity and empowerment," not "top-down government programs."

It's unclear whether any of these programs--some of which may be expensive--could end the stalemate in Washington. But even as the gridlock continues, small community projects around the country have flowered to fill the vacuum left by government.

Consider the Nehemiah Plan, a program of more than 2,300 low- and moderate-income homes built in two of the worst neighborhoods in New York City. Churches raised $6 million to subsidize construction. With a stake in their community, the homeowners have started to turn around their neighborhoods. "It's a gift God gave us," says housekeeper Carmine Perez, whose family moved to their home more than two years ago.

Housing is just one facet of the problem, of course. Critical to any recovery of the cities is work. Tens of thousands of jobs have fled the inner city and moved to the suburbs in recent years, leaving legions of unemployed youths behind. William Julius Wilson, an urban-affairs specialist at the University of Chicago, suggests creation of job-information banks in inner cities to provide the kind of word-of-mouth networks about jobs that the middle-class already has. He also advocates van-pooling so youths can get to where the jobs are. Congress is mulling a demonstration project along those lines.

Others contend that what's needed is to create jobs where the workers are. That, they argue, is the only way the cities themselves will revive. In Chicago, for instance, South Shore Bank has spurred the development of a shopping center in a South Side neighborhood once dominated by flophouses. "You don't lose your shirt if you do it right and if you're there to stay," says Joan Shapiro, a bank official.

Such projects may help put some unemployed young men into the labor force. But few of the jobs that are available are seen as true opportunities: The pay is low and prospects for promotion virtually nil. With no payoff in sight, members of lost generations often drop out of school and drift into the drug culture. "They don't see a meaningful connection between school and post-school employment," Wilson says.

One popular strategy for strengthening the link is youth apprenticeships. Numerous proposals floating around Washington, including an ambitious Clinton plan modeled on one he used in Arkansas, would encourage companies to provide on-the-job training in skilled jobs to high school students. And the National Academy Foundation, funded by American Express Co., teaches 4,200 students in 80 urban high schools basic skills in finance, tourism, and other sought-after services. Many go on to college. "We're trying to teach them life skills, the value of education, and self-esteem," says J. Christopher Mrazek, the NAF's information systems manager.

TRAPS. Cigna Corp. is one sponsor of a program in Philadelphia that takes a more personal approach to bringing ghetto youths into the mainstream. In five schools, 35 black professionals help inner-city kids with school and take them on outings. Bank lending officer Nicole Vance, 25, meets regularly with eighth-grade black girls and talks to them about school, boyfriends, drugs, and their future. Vance, who grew up in a tidy suburb far from the travails of inner-city life, says she's preventing these girls from falling prey to traps that abound for the urban poor. "Though I haven't grown up in their neighborhood, I can relate to them just because I'm black," she says.

Even those hardest hit by poverty can be reached, research indicates. A study by New York's Manpower Demonstration Research Corp. shows that a number of state programs that aim to get welfare moms ready for the labor force have produced modest improvements in earnings and employment rates. The programs that work are comprehensive--and carry a high price. Hard-core welfare mothers need extensive remedial education, job placement, and child care to enter the work force. But the investment does have a payoff.

To some hardened cynics, these modest state and local experiments smack of Bush's "Points-of-Light" fatuousness. But in fact, steps to aid the nation's urban underclass are far more likely to spring from these community-based approaches than from the sterile debate in Washington. Will any of it be enough to help the hardest of the hard cases trapped in America's urban jungles? Maybe not. But as the L.A. explosion has starkly demonstrated, inaction and growing callousness could be far more costly in the long run.BREAKING POVERTY'S GRASP: A FEW MODEST PROPOSALS

-- Expand Head Start to cover all eligible preschoolers

This Great Society initiative improves school performance

-- Provide welfare recipients with education and job training

New skills and learning could help steer welfare recipients into the work force

-- Help inner-city dwellers find suburban jobs--and get to them

A way to trim the unemployment rate among young black men

-- Use tax breaks to encourage investment in the inner city

Tax abatements or seed money for entrepreneurs could create inner-city jobs

-- Encourage corporations to train inner-city high school students

Youth apprenticeships help students get jobs when they graduate

-- Provide the working poor with expanded tax credits for earned income

Income support would eliminate job disincentives and raise income levels

-- Help tenants find ways to own or manage public housing units

People with a stake in their community don't let it deteriorate--or burn

Susan B. Garland, with Christina Del Valle in Washington and bureau reports


Too Cool for Crisis Management
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus