Urban aid to get a $5 billion pot

July 01, 1992|By New York Times News Service

WASHINGTON -- After more than five weeks of intense bargaining by congressional and White House negotiators, agreement is near on a $5 billion urban aid package.

The emerging pact would provide $500 million a year for five years for the nation's cities, including money for new social programs, and $2.5 billion in capital gains tax waivers for businesses to spur investment in impoverished neighborhoods.

A senior White House official said the administration was pleased with the arrangement, while Rep. Richard A. Gephardt, D-Mo., the majority leader, consulted other senior Democrats to work out remaining details.

"We both gave in order to reach an agreement," said the White House official, who spoke on the condition of anonymity.

Negotiators hoped the tentative compromise would reach the House floor today, although there still was the possibility of a delay. Congressional and White House aides said Rep. Dan Rostenkowski, D-Ill., chairman of the tax-writing Ways and Means Committee, wanted to have a hand in setting up the urban enterprise zones.

The compromise represents a victory for moderates in the administration as well as the Democratic congressional leadership, who said it was important to show the public that the two parties could quickly and ably respond to the rioting in Los Angeles this spring.

At various times during the negotiations, Democrats and Republicans told one another that if they did not compromise, Ross Perot would benefit from the perception that they were indulging in political posturing.

The proposal falls far short of the $35 billion program requested by the nation's mayors, but went far beyond the $1.3 billion aid bill the White House and congressional negotiators worked out two weeks ago.

That assistance came mostly in the form of loans and grants to businesses and homes damaged in the Los Angeles disturbances.

A successful negotiation would allow Mr. Bush and congressional Democrats the chance to declare a political victory. After three years, Mr. Bush was able to persuade Democrats to enact his plan for urban enterprise zones, with a major capital gains tax break.

In 50 such zones, half of which are in inner cities and the rest in distressed rural areas, businesses will be granted a five-year moratorium on capital gains, with a 50 percent reduction in capital gains taxes paid after the five years.

Democrats already had agreed to a bill that would create enterprise zones with various tax breaks for investors, but would now agree to a break on capital gains taxes that are heart of the administration concept.

"We would have preferred a zero-percent capital gains," the White House official said. "But as opposed to nothing, this is good."

In exchange for the capital gains compromise, Democrats received the president's acquiescence for the $2.5 billion in spending for job training, education and health care programs to be coordinated with law enforcement activities.

Known as Weed and Seed, specially trained detectives and SWAT teams would be assigned to clear neighborhoods of gangs and drug dealers before the social programs would be instituted.

Aides close to the negotiators said Richard G. Darman, director of the Office of Management and Budget, and staff members of the House Ways and Means Committee still needed to work out the accounting methods to be used to figure out financing of the measure.

A senior Gephardt aide said that Mr. Rostenkowski was not in full agreement with the capital gains provision, adding, "This could still blow up in our faces."

Passage of the compromise is not necessarily assured. Conservative Republicans are likely to contend that the program is too expensive,liberal Democrats may argue it was wrong to compromise on the capital gains taxes and the original $1.3 billion package received little Republican support two weeks ago.

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