Clinton Renews His Challenge to Spread Wealth
President Clinton visited a cabinet warehouse hard by the cotton and soybean fields of the Mississippi Delta on Tuesday. And he toured the Walgreen’s drugstore in this blighted city across the Mississippi River from the beckoning arch of St. Louis--but a world away economically.
On the second day of a four-day tour of the nation’s pockets of poverty, the president repeated his mantra of the week, that the economic boom of the 1990s has yet to reach the most depressed areas.
“I want everybody in America to know that, while our country has been blessed with this economic recovery, not all Americans have been blessed by it, that it hasn’t reached every place,” he said.
To be sure, even in some of the communities Clinton is visiting this week as he travels from one downtrodden community to the next, there have been signs of improvement.
Here in East St. Louis, for example, a local supermarket was opened several years ago, and a bond fund is financing a new public library, the first public construction in a quarter-century.
And then there’s the Walgreen’s.
But the last time a national chain opened a store here, there were no computer cash register scanners. Indeed, there were no electronic cash registers. That was 40 years ago.
Clinton and the Bank of America used the recent opening of the drugstore to tout a $500-million fund that the bank said it would invest in these kinds of inner-city--and comparable rural--projects.
“That’s real money,” Clinton said.
The Bank of America plan, announced by Cathy Bessant, the bank’s president of community development, is seen by the Clinton administration as symbolic seed money for the investment community: It tells potential investors that a major financial institution is willing to put large sums into previously ignored communities.
Behind the investment is a conviction that money can be made even in some of the nation’s poorest communities, Bessant said.
“There’s real money to be made in these markets,” Bessant said. “Booming markets are what it’s about, regardless of geography.”
Bessant, along with other executives, joined Clinton on Tuesday in the northwest Mississippi town of Clarksdale and flew with him aboard Air Force One to East St. Louis.
Clinton is touring the nation’s most blighted communities to promote legislation that would provide tax-reducing incentives to companies doing business in impoverished areas. It is intended to provide as much as $15 billion in incentives for domestic investment.
But even some of the most devoted adherents to Clinton’s approach--Bessant among them--readily acknowledge the uphill road the plan faces.
“It’s costly business, it’s tough to generate,” Bessant said of the start-up work involved in building business in distressed cities and rural towns.
And Richard Huber, chief executive officer of Aetna, the insurance giant, who joined Clinton in Mississippi, said that business will not go where it cannot make a profit.
“If there isn’t economic reality, it’s not going to happen,” he said.
The Bank of America likens its investment to venture capital funds, rather than loans. It would pump money into such projects as real estate development and into community development ventures and perhaps assisted-living residences for the elderly in rural areas, Bessant said.
How Clinton’s so-called “new markets” tax credit would work is not yet clear. But organizations struggling to raise capital to invest in poverty-stricken areas say that the tax break would give them a much-needed boost.
“I have to go to [my] investors today and say there is no tax relief for you,” said Shari Berenbach, executive director of the Calvert Foundation, based in Bethesda, Md. “What this tax credit would do is . . . really help to broaden what is now only a trickle of capital.”
The nonprofit foundation acts as a bridge between capital markets and disadvantaged communities, and has raised nearly $10 million in private capital.
“If this tax package comes through, [investors] would get the benefit of a 6% return,” saving the Calvert fund money it now pays out in interest, Berenbach said. “It would completely translate into cheaper funds.” East St. Louis and Clarksdale, the urban and rural sides of the same coin depicting seemingly intractable pockets of poverty, provide a tough test.
Consider East St. Louis: In the last 25 years, the population--38,595 in 1996--has declined 45%. In the 1990 census, the population was 98% African American. In 1998, the unemployment rate was 9.6%, more than twice the national average, while the rate in the nearby suburbs was 3.5%.
In the city, 44.3% of the population was living below the poverty line, 16% of the residences were vacant in 1990, and housing stock had decreased 39% in the previous 20 years.
Clarksdale’s statistics are similarly bleak: The poverty rate, although declining, was 37.4% in 1995, the most recent year for which U.S. Census Bureau data is available, and the unemployment rate was 10.4% in 1998.
The challenges posed by such conditions notwithstanding, the federal Department of Housing and Urban Development issued an economic report Tuesday that found that many retailers were “missing major profit-making opportunities” by failing to invest in the poorest communities that are, like East St. Louis, dramatically underserved by supermarkets, department stores and drugstores.
It argued, for example, that in Watts in Los Angeles, retail sales fall $445.5 million short of the residents’ estimated purchasing power. In more prosperous Long Beach, Calif., it found, this gap--measuring the difference between its estimate of potential and actual sales--was $112.1 million.
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Times staff writer Lee Romney in Los Angeles contributed to this story.
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Clinton’s Schedule
Today
1. Speaks to Pine Ridge Indians in South Dakota.
2. Tours food factory in Phoenix.
Thursday
3. Speaks at Southwest College in L.A.; Addresses National Academy in Anaheim.
Source: Times Washington Bureau
