Enterprise Zones Again

May 11, 1993

Enterprise zones mean different things to different people. The Clinton administration has now weighed in with its version. It is not dramatically different from its predecessors but it has promise of better things to come -- maybe.

Essentially, enterprise zones are an attempt to give depressed neighborhoods or regions an economic shot in the arm. By attracting business investment through tax breaks or other incentives, jobs would be created and blight eradicated. It's a neat theory, much beloved by conservatives.

But the Bush and Reagan administrations did little about enterprise zones. An urban aid bill which included some funds for enterprise zones -- half of them diverted to rural areas by congressional logrolling -- was vetoed last year by President Bush because of other features he disliked.

The big dispute over enterprise zones as a means of reversing urban blight revolves around the old liberal-conservative schism: how much government control? Conservatives insist fiscal stimulus alone can do the job. Many liberals believe that incentives like tax breaks alone don't work. They point to companies that set up shop in enterprise zones, then hire workers with the requisite skills from outside the targeted neighborhood.

President Clinton's program would tie tax credits for businesses locating in 10 (of a total of 110) enterprise zones to the hiring and training of workers from the same neighborhood. That would greatly enhance the probability the project would do more than rearrange the landscape in an area. And the administration has offered to cut red tape to permit cities to combine federal programs into a single project aimed at residents of a neighborhood. But the Clinton plan also creates a super-board that would pass on the projects proposed by local officials. That carries the threat of adding another layer of stifling bureaucracy to programs that are already choking on red tape.

It's too early to tell how effective Mr. Clinton's proposal would be, even in the unlikely event it passes Congress unscathed. There is not much money in it, compared with the desperate needs of so many cities. Half of the $8.1 billion is tax credits, and most of the rest is reshuffled funds already appropriated. Given the overriding need to reduce the budget deficit, that is probably as much as can be expected this year. Like any federal program, the administration's plan will stand or fall on the fine print of the regulations issued to implement it when it is ultimately enacted. But Mr. Clinton, after virtually ignoring the plight of older cities during the election campaign, seems somewhat refocused.

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