Can Clinton's urban policies really work? B.E.'s economists weigh the value of empowerment zones and community banks in revitalizing America's cities - includes related article on prospects on jobs and increased incomes for African Americans - Black Enterprise Board of Economists - Cover Story

Black Enterprise, June, 1994 by Frank McCoy

U.S. BUSINESS AND ACADEMIC economists declared recently that the economy was expanding and jobs were being filled at such a healthy pace that we would soon achieve "full employment." Such economic artifice bears little resemblance to reality when you consider the fact that our unemployment rate still hovers around 6% and nearly 13% of blacks--more than 20% of the total number of unemployed Americans--remain jobless.

Ironically, those economists made their remarks the same month that Ralph Ellison turned 80. In 1952, Ellison captured white America's willful blindness to black life in his National Book Award winning novel, Invisible Man. Now, 42 years later, the great author is dead, and African-Americans--as well as other minority and poorly educated segments of America--are still invisible when the U.S. economy is calculated.

The BLACK ENTERPRISE Board of Economists gathered recently at the magazine's New York City headquarters to take a close look at how well President Clinton's urban economic policy is likely to address the needs of invisible Americans. To prepare for the one-and-a-half-day meeting, each board member studied the Clinton plan's key components: the creation of urban empowerment zones (EZs) and enterprise communities (ECs), a strengthening of the Community Reinvestment Act (CRA), and the proposed creation of a national network of community development banks.

Their conclusion: All were underwhelmed. The group agreed that:

* While the Clinton administration's EZ and EC plans are sincere attempts to do something, their actual application will be limited in scope and impact.

* Although EZs were devised to boost employment, in reality most will be more of a boon for small entrepreneurs who can benefit from the EZs' tax incentives.

* The EZ and EC plans should not be allowed to serve as a sop to minorities without addressing the legacy of systemic and institutional racism in America.

* Instead of creating a new network of community development banks with limited capital, the federal government could broaden minority business opportunities by providing guarantees against lending or investment risks to minority banks.

* The CRA's success should encourage blacks to use existing antidiscrimination laws to press for economic change.

* In 1994, based on forecasts by board member Andrew F. Brimmer, the African-American percentage of the labor force will grow faster than the black share of employment and income. This will lead to wider job and income deficits.

These sorts of concerns about Clinton's plan are nothing new, the board members agreed. "In recent years critics have attacked the validity and success of [urban] economic development programs in general," said BE Publisher Earl G. Graves--who is intimately familiar with Brooklyn's successful Bedford-Stuyvesant redevelopment project because of his work with Robert Kennedy during the 1960s.

He pointed out that for 30 years government officials and their critics have actually learned a lot about what does work in correcting urban America's ills. "I ask them and you to consider the consequences of not having made those limited, but constructive, steps," said Graves. "[Now,] after 12 years of a mixture of GOP hostility and benign neglect toward urban problems, what can African-Americans expect from President Clinton's urban economic policy?"

Discussants at the session, which was chaired by Graves, included guest economist Cecilia A. Conrad, professor of economics at Barnard College, as well as board members Gerald Jaynes, professor of economics and African and African-American studies at Yale University; Marcus Alexis, professor of economics at Northwestern University; Brimmer, president of Brimmer & Co., a Washington, D.C.-based economic consulting firm; Courtney N. Blackman, an international business consultant; Edward D. Irons, dean of the Clark Atlanta University School of Business; and David H. Swinton, president of Benedict College. Margaret C. Simms, research director at the Joint Center for Political and Economic Studies, led the discussion.

HOW POTABLE IS CLINTON'S PLAN?

A major public policy challenge in the 1990s is devising urban economic plans that create jobs and boost income. Earlier this year, John E. Jacob, president of the National Urban League, in the group's annual State of Black America address, challenged President Clinton to make "job training and job creation for the disadvantaged a top priority. The President [should] press as hard for jobs as he did for NAFTA."

Unfortunately, while open trade borders have been established to the north and south of the United States, America's inner cities still seem as far from new industry and increased income as the moon, according to the board. In an attempt to redress this isolation, the Clinton administration will spend $3.8 billion in six urban and three rural empowerment zones over the next four years (see Economic Perspectives, Dec. 1993). Each EZ will receive block grants of up to $100 million, tax incentives for worker training expenses and tax write-offs for various investments--such as a 50% exclusion of capital gains for investments in certain businesses. Grants of $3 million apiece will be allocated for 95 enterprise communities.