Time for L.A. Not to Get Mad But Even With Feds

This holiday season, it was not a Gingrich who stole Los Angeles’ Christmas, but the federal system so beloved by many urban politicians. Losing out in its bid to be designated an “empowerment zone,” Los Angeles received yet another lesson in why turning to Washington is almost never the best policy. And this time around, the lesson should be especially poignant. Having inspired the idea of empowerment zones, and having been assured throughout the application process that the city’s bid was a good one, Los Angeles was, in the end, jilted by the Clinton Administration.

Ever since the 1992 riots, a spate of natural disasters and defense cutbacks sent the regional economy into a tailspin, California’s politicians have looked for new ways to feed at the Washington trough, whether through fanciful “defense conversion,” traditional disaster relief or federal aid for distressed urban areas. Yet, as the empowerment-zone setback reveals, this strategy can be frustrating and counterproductive.

Ironically, among those who most need to heed this message is the ostensibly Republican-led administration at City Hall. Denied the economically potent empowerment-zone package after months of seeking to win it, and left holding $350 million in urban aid, to be disbursed over 10 years--if the GOP Congress appropriates the money--the Riordan Administration now finds itself without a fully developed and comprehensive economic-development strategy.

Consequently, Riordan has barely begun the transformation of the city’s bureaucracy, which, though more responsive to business needs, hardly encourages economic growth. Annual city water charges, for example, remain nearly twice those of other cities in Los Angeles County. (One disturbing statistic: the vast majority of new tenants in Orange County industrial real estate come from Los Angeles.) In addition, many of Riordan’s proposals--privatization of public services and reductions in business fees--languish, in part because of City Council opposition.

To a large extent, this failure stems from the Riordan Administration’s miscalculation about who should run the city’s economic-development efforts. Instead of tapping people with strong business-community connections--someone like Mayor Richard Riordan himself--the Administration has mostly turned to political people to make economic strategy.

Neither Deputy Mayor Mary Leslie nor Assistant Mayor Doug Boxer, Riordan’s principal economic-development aides, came into office with any great understanding of, or influence in, the city’s entrepreneurial and corporate world. Leslie has superb Washington connections as a result of her previous job with the Clinton Administration, while Boxer’s mother is the senator and the Boxer family enjoys a direct tie to the Clinton family.

“Leslie was in the SBA (Small Business Administration), which has a lot of money for economic development, and her value is still there,” says Deputy Mayor Michael F. Keeley. “You could get a CEO who knows the business community but couldn’t find the bathroom in Washington.”

Yet, apparently, having a key to the washroom was not enough to make Los Angeles an empowerment zone. Part of the problem, acknowledges RLA’s Linda Griego, who participated in the process, lay with the city’s weak and vague application, but more of it stems from the “one size fits all” nature of the empowerment-zone concept. Los Angeles, with its large immigrant and working-poor population, “did not fit the mold” of the traditional inner city--welfare driven, highly concentrated--at the heart of the proposal. The cities that won the empowerment-zone designation, all in the Northeast or South, satisfied these criteria easily.

Southern California’s demographics and economic structure are not its only negatives in the federal sweepstakes. Keeley points out that Eastern cities, such as Chicago and New York, boast far larger lobbying staffs, as well as advantages that come with being an hour or two from the imperial seat. To Eastern-oriented federal officials, California, whatever its riches in electoral votes, is a distant province.

Rather than grouse about Washington’s fickle ways, both the city and state should redouble their efforts closer to home that would make the region more attractive to growing businesses. These would include reviewing utility rates, business taxes and rationalizing a host of confusing and often conflicting regulatory regimes. Dealing with these local impediments to growth, as well as declining schools and aging infrastructure, would be more economically important than any conceivable federal handout.

To this end, the new Republican Congress, led by Rep. Newt Gingrich of Georgia, could prove more helpful in the longer term than many now may think. Although an overwhelmingly white, anti-urban, Southern-dominated Congress can hardly be expected to keep the region’s best interests uppermost in mind, its passionate desire to truncate Washington’s reach could serve California’s future far better than has the traditional “Washington knows best” approach plied by the city’s political leaders.

For this to work, Californians in Congress, Sacramento and in the cities must press for enactment of those parts of the GOP agenda that tend to favor sophisticated, urban economies: devolution of federal oversight responsibility, regulatory relief and a gradual shift of taxing authority to the local level, which would help reverse the state’s multibillion-dollar negative cash flow to Washington.

On tax policy, the across-the-board cuts proposed by some Republicans would be better for Californians than the more limited slashes, tied to income levels, advocated by President Bill Clinton and Rep. Richard A. Gephardt, the soon-to-be House minority leader. Since California is home to 17% of the nation’s affluent income earners, it loses billions to other states with lower living costs every time Washington seeks to define the middle class in terms more suitable to Little Rock than Los Angeles.

But California Republicans should spurn the temptation to embrace budget-busting defense spending as a potential economic spur to the state. With Southerners controlling key congressional military committees, any increase in Pentagon expenditures will likely only accelerate the flight of defense-related industries from California to the South and intermountain West.

On these issues, Californians of both political parties should find some common ground. If differences remain on how to then divide the state’s resources, and on the best economic strategy, let those debates unwind among people who have a direct stake in the state’s future.

A “California first” approach is the surest course toward developing a broad consensus that the state so desperately needs. If it helps us drop our habit of looking to Washington, the loss of the empowerment-zone designation--bitter as it was for a city that deserved it--may be a Christmas gift in disguise. Only then can the state attain a “global regionalist” perspective that holds out the best promise for California’s economic growth.