Hey, Look It Over Before You Knock It : New urban aid program is a start at rebuilding

It took the Los Angeles riots to loosen the federal purse strings for urban America. President Bush is now inclined to help cities after years of paying scant attention to most domestic problems. Congressional leaders, Republicans and Democrats, are also engaged in a productive debate on how to help the cities.

The compromise urban aid package approved by the White House and the House of Representatives promises a little something to just about everybody, a concession to partisan politics that unfortunately stretches the benefits much too far. The Senate is expected to approve as well. Democrats get new spending on Head Start, anti-drug programs for pregnant women and teen-agers, child care and public housing improvements. Republicans get generous tax breaks. The combination is expected to cost the Treasury $5 billion over the next five years. That’s a stiff hit, given the huge U.S. deficit, but the expense could be eased if the legislation makes taxpayers out of more poor Americans.

INVESTORS’ BENEFITS: Central to the legislation are 25 urban enterprise zones that will offer attractive tax breaks to investors who risk money on businesses set up in riot zones and other blighted areas. These incentives include a 50% reduction on capital gains taxes and no taxes on profits reinvested in the zones. If enterprise zones work, poor men and women will get a shot at jobs that could pave their way out of poverty.

Poor rural areas will get 25 enterprise zones, to pacify lawmakers from those districts. Appropriately, most benefits go to inner cities, where the problems are the most severe.

Additional tax breaks are reserved for corporate investors willing to put money into affordable housing. The legislation permanently extends the highly successful low-income housing tax credit, which has been used by corporations to generate investment for thousands of new or rehabilitated apartments, a major antidote to homelessness. Tax exemptions are also extended for mortgage revenue bonds, which promote private-public partnerships for affordable housing; as a result, many marginally middle-class families who are priced out of expensive markets like Los Angeles will be able to own homes.

The legislation gives a $500-million boost each year for five years to the Administration’s “Weed and Seed” program, which supports local social programs and law enforcement efforts. Most of that money will go toward efforts that rightly focus on early prevention of crime.

WELFARE BENEFITS: Welfare recipients also will benefit from the legislation. They will get more schooling and job training and a tenfold boost in the level of assets they can accumulate; the new assets limit of $10,000 should encourage those who are able to work and save.

Reducing urban ills like welfare dependency, joblessness, illiteracy, homelessness, drug abuse and crime will take years, if not decades.

Big-city mayors blame the increase in domestic ills in large part on a huge drop in federal funds to cities between 1980 and 1990. Cities lost revenue sharing and urban development action grants and much of the community development block grants that went to rebuild housing and blighted neighborhoods. Cities also were given new responsibilities such as environmental oversight but no funds to pay for the services. The mayors’ pleas for aid went unheeded--until Los Angeles exploded.

The riots lit a political fire under President Bush and Congress. Suddenly, in June, the Administration and the lawmakers could work together, and in a timely fashion. Suddenly, they could find $1 billion in emergency spending to provide summer jobs and loans and grants to help riot-ravaged Los Angeles and flood-damaged Chicago. Suddenly, they could find a compromise on an urban policy that is a start toward rebuilding America’s much neglected cities.