If we seize the opportunity to build a stronger country, we will ultimately prevail in the challenges ahead, at home and abroad. But we cannot win this new struggle by military might alone. We will prevail only if we lead by example, as a democracy committed to the rule of law and the spirit of fairness whose corporate and political elites recognize that it isn't only firefighters and police who are called upon to sacrifice.
Editor in chief of Public Affairs
Television The Nation
November 19, 2001
Based on the Foundation's vision, recent trends, what doesn't work and what works, we propose here a common-sense national policy for the truly disadvantaged and the inner city. The policy is comprehensive and interdependent. It begins to replicate what works to a scale equal to the dimensions of the problem. More details can be found in Chapter 6 of The Millennium Breach -- see Publications. Also see Citations, as well as Links to other organizations with visions and missions that complement our policy. For more information, contact the Eisenhower Foundation, at 202-234-8104 or toll-free at 800-981-3410.
In terms of resources, there rarely has been a better time for the nation to carry out a practical policy of replicating what works for the truly disadvantaged. If we don't do it now, when we have a robust economy (for some -- see Trends) and when large federal budget surpluses are projected into the future, will we ever replicate what works to scale?
A national policy can be based on scientifically evaluated successes. (See: How Do We Decide What Works And What Doesn't?) To a considerable extent, national policy should be replicated by the indigenous inner-city nonprofit organizations that are responsible for much of what works. Such organizations also are neighborhood centers of moral influence. They should partner with local government. Federal funds should not pass through the states, but should be distributed directly to the local and grassroots level. (For the limitations of the states, see Devolution under What Doesn't Work.) Policy must better utilize the new technical knowledge about how to replicate what works and about how to build nonprofit institutional capacity at the grassroots that we have acquired over the last thirty years. (See Lessons from the Street: Capacity Building and Replication.)
Specifically, national policy needs to :
- Fully fund a well-managed Head Start.
- Create a quasi-governmental National Corporation for Youth Investment.
- Replicate successful urban public school reform through a quasi-governmental Safe Passage Commission.
- Legislate a national employment "training-first" policy.
- Generate 2,250,000 new jobs for the structurally unemployed in the inner city.
- Create a more supportive macroeconomic policy.
- Replicate complementary investments in racial and criminal justice.
After this policy is set forth, we conclude with the following:
- What is the Cost of Replicating What Works to Scale And How Can It Be Financed?
Also see our Links to a comprehensive array of organizations that share this policy and the Foundation's Vision.
Dramatic new biological and chemical research findings have demonstrated that attention to children in their earliest years determines the way their brains are wired, which provides the basis for social, emotional, and intellectual development.1 Such attention underscores the importance of preschool.
Head Start is the federal preschool initiative. The father of Head Start, Dr. Edward Zigler, Sterling Professor of Psychology at Yale University, has concluded: 2
The biggest accomplishment of quality preschool programs is that they prepare children for school. School readiness is the first of the national education goals and a condition seriously absent in districts serving high-risk populations. Preparing children for school entails more than preacademic and social skills. Children must be in good health and have parents who are involved in their educational progress. This is why I support the notion of universal preschool only when there is comprehensive, two generation programming....
Attention to physical and mental health, preliteracy and other cognitive-development skills, social and emotional adjustment and parental involvement are hallmarks of Head Start that together contribute to preparing children for school. These effects can be attained only when quality is good, however, and Head Start has had uneven quality over its 35 years. In the 1990s strong efforts to improve quality were undertaken. Evaluation shows that today Head Start is the best it has ever been. Further support is needed to assist those centers that are still below performance standards and to secure better salaries and curriculum.
Child development does not begin and end at the ages of three and four. Early Head Start is now delivering services to at-risk families and children ages zero to three. The results are not in yet, but there is reason to believe that family support and child development services provided early in life will enhance healthy growth and establish desirable patterns of parent interaction and involvement. I believe the program will merit expansion. After the preschool age, there is strong evidence that comprehensive, two-generation programming helps children do better in later grades (which, after all, is the point of school readiness). This finding comes from the Chicago Child-Parent Centers, which use a model closely aligned to Head Start but one that lasts for two years of preschool and several years into grade school. The project is very large and evaluation has been going on for five years, yielding strong support for the value of serving children for more than a year of preschool and during the critical years of transition to school.
To complement these views, a recent state-by-state analysis by the Rand Corporation found that access to preschool increased student achievement, especially in impoverished communities, based on standardized tests.3
Yet today, only about one-third of all eligible lower-income children aged three to five are served by Head Start, and most eligible children are in Head Start for only a year. The enrollment rates for three-year-olds are especially low. We recommend full funding for all eligible poor children, following the principles set forth by Professor Zigler. All Head Start centers must meet established performance standards and be funded to allow acceptable salaries and the development of a quality curriculum. (Also see the Children's Defense Fund and the National Center for Children in Poverty.)
Naysayers assert that the effects of Head Start diminish over time. Of course. As Professor Zigler implies, today, after inner-city kids leave Head Start at age five or six, they are back on the mean streets. Evaluations by Columbia University, the Eisenhower Foundation, and others have shown that after-school safe havens for kids six to sixteen work, as logical continuations of Head Start, to provide help with homework, direction by responsible adults, and safe passage through adolescence in a risky society. Some nonprofit grassroots successes -- like Koban, Inc., in Columbia, South Carolina and Centro Sister Isolina Ferr?in San Juan, Puerto Rico -- combine paid civilian staff with police mentors, who also stabilize neighborhoods through problem-oriented, community-equity policing. For teenagers, a Brandeis University evaluation has shown that the Ford Foundation's Quantum Opportunities adult mentoring program keeps high-risk high schoolers out of trouble and on track to jobs and college.4 (See also Opportunities Industrialization Centers, which have replicated this success.)
There are many local nonprofit programs that claim to be models. But the ones just illustrated can show scientific proof of success based on control group or comparison group designs. Some of the evaluated successes are secular, while others are part of the outreach of religious organizations. Just to focus on "faith-based" groups misses our primary criterion for identifying a model to be replicated: Statistically significant pre-post evaluation outcomes using valid comparison or control groups. (See: How Do We Decide What Works And What Doesn't?) Although "faith-based" currently is a fashionable term, there is no scientific proof that "faith-based" nonprofits perform better than secular nonprofits. (See What Doesn't Work.) Success appears to be more related to solid institutional capacity, regardless of whether a nonprofit organization is "faith based" or secular. (See Lessons from the Street: Capacity Building and Replication.) However, all the evaluated youth development successes identified here also are centers of positive moral influence.
A new quasi-governmental Corporation for Youth Investment needs to be created to assist such proven nonprofit youth development organizations in replicating themselves, supply technical assistance, and finance replications with federal funds, while side-stepping much of a federal bureaucracy that often has impeded youth development. (See Chapter 6 in The Millennium Breach under Publications.)
When President Eisenhower returned from World War II, he realized that our transportation financing left America without an adequate road system. So he launched the federal highway infrastructure program. Similarly, given the failure of states and localities to finance education fairly, we need a federal education infrastructure financing system.
As Jonathan Kozol observes:5
[T]he children in poor rural schools in Mississippi and Ohio will continue to get education funded at less than $4,000 yearly and children in the South Bronx will get less than $7,000, while children in the richest suburbs will continue to receive up to $18,000 yearly. But they'll be told they must be held to the same standards and they'll all be judged, of course, by their performance on the same exams.
Slogans, standards and exams do not teach reading. Only well-paid and proficient teachers do, and only if they work under conditions that do not degrade their spirits and demean their students.... Money, as the rich and powerful repeatedly remind us, may not be "the only way" to upgrade education, but it seems to be the way that they have chosen for their own kids, and if it is good for them ... it is not clear why it is not of equal worth to children of poor people.
We must invest our school dollars wisely. Evaluations of the School Development Plan created and replicated widely by Dr. James Comer at the Child Study Center of Yale University6, full-service community schools 7(see Coalition for Community Schools and Children's Aid Society), and other school reforms documented comprehensively by Joy Dryfoos8 (see Publications) show what we need to do to improve public elementary, middle school and high school education:
- Reduce classroom size (a reform validated by the Rand Corporation's recent state-by-state analysis, above9).
- Restructure academic programs to focus on a core of common knowledge and skills.
- Place policy for each inner-city school in the hands of a local management team, led by the principal and including teachers, parents, counselors, and other school staff.
- Dramatically increase the involvement of and assistance to inner-city parents.
- Provide focused intervention by a mental health team for children with emotional, behavioral, or academic problems.
- Create safe environments during the school day and supportive nonprofit safe havens after school.
- Locate nonprofit organizations in public school buildings to provide health, family, community, cultural, and recreational initiatives and to ensure security.
An example of a public school that is implementing most of these principles is the Salome Arena Middle Academy, operated jointly by the Children's Aid Society and Community School District 6 in New York City. Located in a new building in Washington Heights, it offers students a choice of four self-contained "academies": Business, Community Service, Expressive Arts, and Mathematics, Science, and Technology. The school opens at 7:00 a.m. each morning, year-round, and stays open after school into the evening.10
To replicate such models, we need to establish the kind of quasi-governmental Safe Passage Corporation recommended by Joy Dryfoos 11(see Publications). It would target federal funds and matching grants to schools and nonprofit organization partners in high-poverty inner-city neighborhoods.
Based on existing scientific evaluation evidence, one of the most promising job training models for both out-of-school youth and for the reform of "welfare reform" is the Argus Community in the South Bronx. Argus is based on an understanding that there can be no political quick fixes and simplistic solutions (like "work first") in the inner city. Argus gives priority to development of character and a moral value system in participants; socialization and counseling in a drug- and violence-free environment; a life skills curriculum to prepare youth to be functioning adults who can handle conflicts and manage themselves well on the job; on-site education and remedial education (including general educational diploma high school courses in an alternative educational setting); job training on site and before job placement; job placement for jobs in demand with upward mobility, not dead-ended jobs; and follow-up to ensure better job retention.12
Sufficient funds need to be appropriated to replace the present Workforce Investment Act with a model more along the lines of Argus and other training first successes, like STRIVE in New York, Capital Commitment in Washington, DC and Job Corps nationally; computerized training like Competing Competencies should be utilized.13 Such a training-first model is equally needed for the reform of "welfare reform." All of the truly disadvantaged who need training should get it.
Former Secretary of Labor Ray Marshall estimates that the real rate of unemployment (as opposed to the federal government's rate ) is around 15% when one takes into account official statistics, the number of people who have stopped trying to find jobs and who therefore are not counted, and the unemployed equivalent of the great amount of underemployment in our economy. (Much of this underemployment is associated with temporary jobs that offer few, if any, benefits.) The Center for Community Change in Washington, DC has estimated that the "jobs gap" is about 4.4 million jobs nationally. Of that, perhaps half of the jobs needed are in the inner city.14 Accordingly, our job creation policy for the structurally unemployed in the inner city will target 2,250,000 jobs. Of these, our goal is 1,000,000 private sector jobs and 1,250,000 public sector jobs, as follows:
One Million Private Sector Inner-City Jobs. We will require that new private sector jobs be filled by inner-city residents who have had Argus, STRIVE, Capital Commitment and Job Corps-like training. How will the jobs be created? The regulations for HUD Community Development Block Grants, HUD housing grants, Commerce Department Economic Development Administration grants, Transportation Department Urban Mass Transit grants and other federal, state and local economic development grants need to be revised to require much more priority than at present on the reduction of poverty and the generation of private jobs for inner-city unemployment. The present lack of such priority is a mismanagement of federal funds, in our view. A much more efficient federal interagency coordinating mechanism than now exists is needed to co-target these reformed grants to places of greatest need. Federal regulations need to require that localities employ the truly disadvantaged in local growth industries, following the model of the Target Industries and Employment Program of the Portland (Oregon) Development Commission.15 See Chapter 6 in The Millennium Breach under Publications. There we propose a new quasi-governmental Corporation for Training and Development to co-target resources to localities.
Match funds generated from local tax bases need to be encouraged. Given the loss of tax bases from the central city to the suburbs in many places, the federal government needs to condition grants to states and localities on local agreements to share across the entire metropolitan area (including suburbs) the value of commercial property, as well as to share other elements of the area-wide tax base, following the successful policy implemented, for example, in Minneapolis/St. Paul.16
Modeled on the successes of the South Shore Bank in Chicago, which already has been replicated elsewhere, a semi-independent National Community Development Bank, removed from federal bureaucracy, needs to be capitalized as part of a comprehensive plan to generate more private jobs in the inner city. The South Shore Bank has pioneered in reinvesting the savings of inner-city residents back into their own neighborhoods, for example, to help capitalize new inner-city businesses.17
The capitalization of community development banks and businesses should be linked to tougher enforcement by HUD of the Community Reinvestment Act of 1977, which requires banks to invest in their communities. Over the last two decades, supply siders and well-paid lobbyists for the rich have tried to decimate the Act.18 (See the National Neighborhood Coalition.)
One Million Two Hundred Fifty Thousand Public Sector Inner-City Jobs. Past experience suggests that, given traditional private sector resistance to employing the truly disadvantaged, and given the failure of enterprise zones in South Central Los Angeles after the 1992 riots there, the one million new private inner-city jobs we have are an ambitious goal. And they still fall far short of the two million-plus jobs needed for a full employment policy in the inner city.
Public jobs therefore need to be generated by federal dollars. The jobs should be implemented locally by groups like the nonprofit Youth Build USA (created by Dorothy Stoneman to teach construction to inner-city youth)19, non-profit community development corporations (like the New Community Corporation model created after the 1967 Newark riots by Father William Linder)20, nonprofit youth development and youth employment organizations (like the Dorchester Youth Collaborative, Koban, Inc., Argus, STRIVE and Capital Commitment), for-profit entities with a social conscience (like the Washington, DC-based Telesis Corporation21) and local government.
Our plan creates 250,000 public urban construction and infrastructure repair jobs and one million public service jobs.
Public infrastructure investment has shaped America's future. Early on, public investments built canals and subsidized the railroads to settle the West. Government financed the first assembly lines. The federal Interstate highway system was built in the 1950s and 1960s. Federal investments developed the jet engine, began the exploration of space, and helped develop the computer and the Internet.22 Yet public infrastructure investment declined precipitously in the 1980s as a result of supply-side economics and its associated urban disinvestment. (See What Doesn't Work.) The 1990s did not reverse this public disinvestment. In 1980, more than four percent of all federal outlays were for infrastructure. By 1990, that share had fallen to under three percent. As of 1997, public investment in infrastructure was 36 percent of its 1970s levels, and on our current budget trajectory it will drop another 37 percent. The United States is the only major industrial society that is not currently renewing and expanding its public infrastructure. Nowhere is it more in need of repair and reinvestment than in our cities and inner cities.23
Similarly, there is an enormous need for public service employment. As part of the reform of "welfare reform," we need a great many qualified childcare workers. With Argus, STRIVE, Capital Commitment and Job Corps-type training first, childcare potentially can be a major employment sector for persons coming off welfare. Drivers and support staff workers are needed to create a transportation system that will allow former welfare recipients and other unemployed people to get to jobs in the suburbs. Teachers in inner-city schools desperately need adequately trained support staff. Community-based nonprofit youth development and community development organizations need paid staff to work with supervisors. Housing shelters are in great need of staff. There is a great demand for drug abuse counselors. Major cities no longer have enough telephone operators to answer 911 emergency calls in a timely way. Because there are so many unmet jobs, it will be easy enough to create safeguards that ensure that existing employees are not displaced. In many cases, qualified existing employees should become supervisors.
In support of these job investments, the nation needs a macroeconomic policy that more honestly recognizes how trickle down economic growth does not eliminate structural unemployment and poverty in specific locations; a fiscal policy that separates long-term investments from short-term operating expenses; and a trade policy that raises labor and human rights standards.24 See A.F.S.C.M.E., the Campaign for America's Future, the Center for Community Change, the Economic Policy Institute, the National Center on Budget and Policy Priorities, the National Priorities Project, and United for a Fair Economy.
We also need a monetary policy that reforms the Federal Reserve (the Fed, which controls interest rates) and gives first priority not to Wall Street but to full employment. In the words of Jeff Faux, president of the Economic Policy Institute, today the Fed "protects the value of financial assets over the value of jobs by consistently overestimating the level of unemployment necessary to retain price stability. No one knows what the right level is, but we do know that the opinion of the financial punditry on this question has been consistently wrong." Faux argues that the Fed must better "live up to its mandate to pursue both high employment and price stability by probing much more forcefully the limits of the economy's capacity to produce without inflation."25
We endorse these recommendations, as well as the conclusions of William Drayton:26
America's constraint is not too few workers. It is job creation, which the government depresses in many ways. The Fed typically raises rates and slows growth just when business starts pulling in "mothballed" workers.
As long as so many unemployeds remain unseen and uninvited to the table, [the Fed's] logic will, sooner or later, indeed push us back to a 2% growth creep. However, that is not necessary. We could extend and, in fact, greatly strengthen the recent economic acceleration by giving everyone the choice to work.
How can the Fed be reformed to better return monetary policy to the New Deal priority on full employment and higher standards for workers and the poor? Professor James K. Galbraith of the University of Texas concludes that the key to reform is the Federal Open Market Committee (F.O.M.C.) The F.O.M.C. is the body within the Fed that actually sets monetary policy. F.O.M.C. voting members include (1) federal officers appointed by the President and (2) the presidents of the nation's regional reserve banks. The regional presidents typically follow supply-side thinking. They are responsible to regional boards dominated by bankers. The meetings of the F.O.M.C. are highly secretive.27
Professor Galbraith argues that the Fed would be more democratic if the only voting members are the federal officers appointed by the President, because the President is accountable to the people. "Legislation to do this has been pending in Congress for years. It should be enacted now." As for the secrecy, Galbraith proposes that the F.O.M.C.'s regular meetings on interest rates be held on camera and broadcast in real time, as a kind of Fed-Span:28
To prevent markets from speculating, F.O.M.C. meetings could be held on weekends. Public meetings would have a powerful effect. The Fed would be far less likely to raise rates without strong justification.
So Far, the Fed has almost always been able to block reforms by taking advantage of Congressional divisions over the details. To overcome this, and to provide a timetable for bipartisan coalescence, Congress could pass a Sunset Review Act for the agency. Such an act would set a deadline for expiration of the present Federal Reserve Act.... In such a complete rewriting of the charter, all the anachronisms and anomalies of the present system could be addressed, including its special-interest power, regional misrepresentation, voting rules, unaccountability and secrecy.
We endorse these reforms.
Replicate Complementary Investments in Racial and Criminal Justice.29
A commitment to reform of preschool, public urban education and job training, combined with a policy of full employment in the inner city, are big first steps in bridging the millennium breaches of race and class that divide America.
However, given the racial biases we have documented (see Trends), a policy also is needed that more directly addresses race. Our point of departure is affirmative action. Neither the Republican nor the Democratic candidate for president in 2000 did particularly well in prep school. Yet each was accepted by a top Ivy League school.30 Affirmative action is alive and well in America for white men. The Shape of the River, a recent major study by the former presidents of Harvard and Princeton, empirically documents how well affirmative action succeeded for minorities at such elite schools.31 The President of the United States must set the tone, and reaffirm the importance of affirmative action. Leaders of elite universities must speak out more. Dr. Neil Rudenstine, the outgoing president of Harvard, should be appointed to lead a new federal commission on affirmative action. (See also the American Association for Affirmative Action, the National Council of La Raza, the Leadership Conference on Civil Rights, the N.A.A.C.P. and Chapter 7 in Locked in the Poorhouse under Publications.)
In addition, we need to:
- Create a racial bias commission to recommend systematic reforms in the juvenile justice and criminal justice system to eliminate racial bias, from police racial profiling to sentencing. The president then needs to act and use the bully pulpit to encourage states and localities to follow.
- Create a presidential commission to review the "concrete ceiling" and hiring practices of Wall Street and major corporations, followed by a presidential commitment to break through the ceiling.
- Replicate successful models of school integration (as in St. Louis) and housing integration (like the Gatreaux program begun in Chicago).32 (See The Millennium Breach, under Publications.)
- Encourage problem-oriented and community-equity policing, and models like them, as more just, effective and proven than the "zero-tolerance" policing practiced in New York City and other places. (See Youth Investment and Police Mentoring under Publications.) Encourage this policy directly through existing appropriations from federal agencies like the United States Department of Justice, and through increased foundation funding of national nonprofit organizations that can replicate success to scale.
- Encourage better training of officers for policing models like those in Boston, MA; Columbia, SC; and Dover, NH that are both more effective and more sensitive to the community.33 (See Youth Investment and Police Mentoring under Publications.)
- Invest in community courts, which move away from the assembly-line justice that all too often characterizes urban courts, to provide serious assessment of defendants' needs, match defendants with appropriate services (including drug treatment), and emphasize community-service sentencing and other alternatives to the needless incarceration of nonviolent offenders. (See Drug Strategies.)
- Provide greater support for treatment-oriented drug courts, which allow drug offenders' charges to be dropped if they successfully complete a drug treatment plan. Drug courts in several cities have been evaluated as effective in bringing addicted offenders into treatment and avoiding the cycle of repeated incarceration. (See Drug Strategies.)
- Replicate proven high-quality drug treatment programs in the community, closely integrated with local drug courts, to insure a continuum of comprehensive care for addicted offenders and their families. This must mean not simply providing treatment in the medical sense alone, but also linking treatment with skill training, education, and needed support services, including transportation and childcare. Successful community-based programs that work with families of addicted offenders, like La Bodega de la Familia in Manhattan,34 need to be replicated to enhance families' capacity for self-sufficiency and to reduce relapse and recidivism. (See Drug Strategies, the National Center on Addiction and Substance Abuse and the Drug Policy Foundation.)
- Create web sites that provide universal access to successful models of affirmative action and racial integration.
- Invest in comprehensive strategies to employ and reintegrate offenders into the community. Replicate much more widely the self-sufficient Delancey Street Foundation model in San Francisco, which already has been replicated in Los Angeles, New Mexico, New York State and North Carolina.35
- Create a comprehensive handgun control strategy. (See To Establish Justice, To Insure Domestic Tranquility, under Publications.)
As policy reforms are carried out and models of success are replicated, we need to respond to the failure of the "war on drugs," as acknowledged by its director (See What Doesn't Work), by revising our budget priorities. America spends 35% of its anti-drug resources on treatment and prevention and 70% on law enforcement. In some European countries, the percentages are just the opposite: 70% on prevention and treatment and 35% on law enforcement. In America, we need a ratio closer to that in Europe -- at least a 50% / 50% balance. One model for shifting budget priorities is the conservative State of Arizona. Arizona held referendums in recent years on the high costs of prison building. Voters decided to begin to divert non-violent offenders from the prison system into treatment alternatives. Under this law, treatment programs are funded for anyone who is convicted of a crime and has a substance abuse problem. Those convicted for the first or second time for possession of drugs for personal use are required to be sent to a treatment program rather than to state prison. An evaluation commissioned by the Supreme Court of the State of Arizona found recidivism rates for people so diverted to be low and concluded that a considerable amount of money had been saved for the taxpayers of Arizona. If Arizona can begin to move in this direction, then, we believe, other states can do the same.36
Table 1 summarizes the total cost of our proposed investments -- which seek to begin replicating what works to a scale equal to the dimensions of the problem.37
As much as possible, we encourage financing by the private sector and by state and local government. Yet experience has shown these sources to be unwilling or unable to invest at anything close to scale.
To be pragmatic, we therefore need to recognize that only the federal government potentially has the resources to replicate to scale.
At the same time, we recommend that these public dollars be implemented day-to-day as much as possible by private nonprofit grassroots organizations in concert with for-profits with records of inner-city success, and with local government. We need new, much more democratic, private nonprofit delivery systems. Devolution of program operations should be to the grassroots level, not the state level.
We believe that the transition to these reordered priorities should proceed over a period of several years. We need to make certain that there are sufficient numbers of nonprofit organizations with sufficiently mature capacity to carry out the recommendations in partnership with local government. Once the recommended level of funding is reached, the nation needs to maintain it for as long as is necessary to significantly reduce the poverty, job, wage, income, inequality, education, racial, criminal justice sentencing, prison and housing breaches that presently define the new millennium.
Summary of Federal Investments Proposed
|Replication of well-managed Head Start Preschool for all Eligible Poor Children
|Replication of the Comer School Development Plan, Full Service Community Schools, and Related Models of Success in Urban Public School Systems
|Creation of a Corporation for Youth Investment To Replicate After School Safe Haven Prevention Models, Quantum Opportunities Prevention Models and Related Successes
|Reform of the Workforce Investment Act to Replicate Training First Models like Argus, STRIVE and Job Corps
|Creation of 1,000,000 Private Sector Jobs for the Inner City Through Better Targeting Existing Economic Development Grants on Poverty and Inequality Reduction
|Creation of a National Community Development Bank Modeled After the South Shore Bank
|Generation of 250,000 Public Construction and Rehabilitation Jobs for the Inner City that are Targeted on Housing and Urban Infrastructure Development
|Generation of 1,000,000 Public Service Jobs for the Inner City That are Targeted on Public Service Employment in Day Care, Transportation Services, Urban School Staff Support, Non Profit Community Organization Support and Reform of "Welfare Reform"
|Implementation of Presidential Commissions on Affirmative Action, Racial Bias in the Criminal Justice System and Concrete Corporate Ceilings; Replication of the St. Louis and Gatreaux Models of School and Housing Integration; Creation of a Web Site on Successful Models of Affirmative Action and Integration; Replication of Successful Community Equity Policing Models, Community and Treatment-Oriented Drug Courts, and Delancey Street-Type Offender Employment and Reintegration Models2
2 This budget line item assumes substantial additional resources through a shift in priorities in America's "war on drugs", from 70% law enforcement and 35% prevention/treatment to 35% law enforcement and 70% prevention/treatment (or at least a 35%/35% split).
The official federal government surplus estimate over the next ten years is an astounding $4.2 trillion.38 This easily can accommodate the budget of Table 1. The truly disadvantaged have as much a claim as, for example, Social Security recipients. We must invest in those who are retired, disabled or in need of survivors' benefits from the Social Security system. To be fair to children, youth and the truly disadvantaged, we also must invest in their future ?their development, schools, job skills and communities. We do not need a World War to justify a GI Bill for investing to scale in our children and youth.
Portions of the budget on Table 1 also should be financed by reduced spending on what doesn't work.
In addition, we need reduced corporate welfare and tax breaks for the rich, as well as reduced spending on the military industrial complex.
Reduced Corporate Welfare and Tax Breaks for the Rich. Corporate welfare is in the form of direct subsidies to corporations, as well as tax breaks to corporations.
As Jerry Jones, Director of Employment Policy Initiatives at the Center for Community Change has concluded, Congress has crafted corporate subsidies that appear more rigorous in justification than application.39 Corporations are expected to develop applications for these subsidies that promote generic activities, like exporting or undertaking technology research. Yet the grant applications have few specifications for what actually should be exported or researched. And Congress has made the regulations vague in terms of who gets the new jobs that might result from federal investments.40
This has resulted in many federal grants that would appear to underwrite activities that companies probably would pursue on their own, even in the absence of a subsidy. For example, in a recent year, the Walt Disney Company received a $300,000 grant from the Department of Energy to develop better fireworks displays in theme parks. High-paid corporate lobbyists justify these federal subsidies on the grounds of job creation and economic growth. Yet there is little evidence to suggest that new jobs actually result from these federal subsidies. When it comes to the poor, Jerry Jones observes, "In virtually no instance are corporate subsidies targeted to specific communities or areas for the explicit purpose of creating jobs for the unemployed."41
Yet, corporate subsidies are a small part of corporate welfare. Substantially more corporate welfare comes in the form of corporate tax breaks. Unlike corporate subsidies that require grant applications and therefore include at least some screening for worthiness, corporate tax breaks are not targeted to specific corporations. Sometimes they are not even targeted to specific industries.
As a result, the corporate tax breaks are much more difficult to monitor than the corporate subsidies. The opportunities for abuse are all the greater.
Just how much do taxpayers pay each year for corporate subsidies and tax breaks? Estimates by national nonprofit organizations and independent authors run to over $150B per year if a broad definition of corporate welfare is used and if special breaks to individual investors and the rich are added in. Estimates by national nonprofit organizations that use a narrower definition that focuses only on corporations per se are that about $51B per year is given out in corporate subsidies and about $53B per year is given out in corporate tax breaks, for a total of about $104B per year. Estimates made by the Congressional Budget Office are that about $30B per year is given out in corporate subsidies and about $32B per year is given out in corporate tax breaks, for a total of about $62B per year.42
Table 2 illustrates a broader definition of subsidies and tax breaks to corporations as well as special breaks to wealthy individuals and investors. Table 2 is based on Take the Rich Off Welfare by Mark Zepezauer and Arthur Naiman.43 It includes just some of what they call "wealthfare." This amounts to about $156B per year. The Table 2 wealthfare categories and annual costs to taxpayers per year are: lower taxes on capital gains ($37B), accelerated depreciation ($37B), agribusiness subsidies ($18B), tax avoidance by transnational corporations ($12B), tax-free muni bonds ($9.1B), media industry handouts ($8B), tax loopholes for the insurance industry lobby ($7.2B), corporate meal and entertainment deductions ($5.5B), nuclear industry subsidies ($7.1B), aviation industry subsidies ($5.5B), mining industry subsidies ($3.5B), oil and gas industry tax breaks ($2.4B), export subsidies ($2B) and "miscellaneous" ($1.6B). Under each of these headings in Table 2, we have included a quote from Take The Rich Off Welfare to illustrate what is included. These breaks and subsidies are linked to the current system of campaign finance in the U.S. and secured through high paid lobbyists for corporations and the rich.44 (For Campaign Finance Reform, see Communicating What Works and Creating Action.)
As former Secretary of Labor Robert B. Reich concludes after reading a list of existing corporate welfare published by one middle-of-the-road nonprofit organization:45
The list contains all sorts of breathlessly ridiculous items, like $2B a year going to oil, gas, and mining companies for no reason whatsoever, $4B a year to pharmaceutical companies that create offices in Puerto Rico, $400M to Christmas-tree growers, windmill makers, and shipbuilders, and $500M a year to corn-based-ethanol refiners.
Also on the list is the $2B-a-year tax break for life insurance companies, $900M for timber companies, $700M for the dairy industry, and $100M a year to companies like Sunkist, Gallo, M&M, McDonald's, and Campbell Soup to advertise abroad. On top of that are billions of dollars of special breaks for multinationals that make their products outside the United States. Some well-connected companies like Archer-Daniel-Midland (ADM, a giant Midwestern corn processor) triple-dip: ADM benefits from a sugar program that bars imports and sets sugar prices higher than world levels (so ADM can sell its high-cost sugar substitute), a tax break for corn-based ethanol, and the direct subsidy to ethanol refiners. Taxpayers and consumers pay dearly for the welfare flowing to this single company.
And that's just the beginning: If TV networks had to bid for extra space on the broadcast spectrum instead of getting it free, they'd pay $4B a year. If private corporate jets had to pay landing fees at airports as commercial jets have to do, they'd pay $200M a year. If wealthy ranchers had to pay the full cost of grazing their cattle on public lands, they'd pony up $55 million a year. If corporations couldn't deduct the costs of entertaining their clients -- skyboxes at sports arenas, theater and concerts, golf resorts -- they'd pay $2B more each year in taxes.
Imagine if even a portion of this money could be used instead for education, job training, and helping the poor and near-poor get the jobs they need.
It is not our intent to detail the history, politics and legislative details of these subsidies and tax breaks. Nor is it to try to reconcile some of the differences in definition and scope made by nonprofit organizations and independent authors, on the one hand, and federal agencies like the Congressional Budget Office, on the other. The point is that these subsidies and breaks are enormous, wasteful, cost-ineffective and unfair. They need to be reduced through a new citizen movement (See Communicating What Works and Creating Action.)
Well-paid lobbyists will argue that the rich and corporations need government tax breaks, grants and subsidies to assure a robust economy. But this claim is disputed by the econometric forecasts made by Richard McGahey, then at the Center for Community Change. McGahey analyzed the impact on the economy of one million jobs if their total cost were financed by reducing corporate welfare by an equal amount. Using FAIRMODEL, a widely regarded econometric model based on 131 equations that is continually updated and re-estimated, McGahey compared the current econometric forecast produced by the model five years into the future to an alternative forecast with the public service job program financed by the corporate welfare cuts. Compared to the current forecast, the forecast with the proposed change "has a higher level of real and nominal economic growth, stable private sector employment, and a lower national unemployment rate." Real wage increases and inflation are virtually the same in the two scenarios.46
In other words, a shift in some resources from corporate welfare to public service jobs does not hurt the economy. It can help the economy.
For more on reducing corporate welfare and tax breaks for the rich, see Citizens for Tax Justice, the Corporate Welfare Information Center, Corporate Watch, the Economic Policy Institute, the National Center on Budget and Policy Priorities, the National Priorities Project and Taxpayers for Common Sense.
Reduced Spending on the Military-Industrial Complex. Founded by retired generals and admirals, the Center for Defense Information has proposed complementary reductions in spending on the military-industrial complex, in a way that nonetheless preserves the nation's status as the world's only superpower. We endorse these recommendations, and believe that a fraction of the funds so saved can help finance what works.
Examples of Current Wealthfare Subsidies and Tax Breaks to the Rich and Corporations
|Wealthfare Category and Illustration
|Annual Cost to Taxpayers
|Lower Taxes on Capital Gains
As Citizens for Tax Justice put it, "more than any other kind of income, capital gains are concentrated at the very top of the income scale."
On average, tax breaks from accelerated depreciation are worth more than $13,000 a year to households making over $200,000, but less than $70 a year to households earning under $50,000.
Tobacco, a drug that kills 48 Americans every hour, is...subsidized with a combination of price supports, import restrictions and production and marketing quotas.
|Tax Avoidance by Transnational Corporations
Of the US-based transnationals with assets over $100M, 37% paid no US federal taxes at all [in the early 1990s] and the average tax rate for those that did pay was just 1% of gross receipts.... Foreign-based transnationals did even better. 71% of them paid no US income tax on their operations in this country, and the average rate for those that did pay was just 0.6% of gross receipts.
|Tax-Free Muni Bonds
To help attract investors to bonds issued by state and local governments -- generally called municipal bonds, muni bonds or simply munis -- the federal government has made the interest on most of them exempt from federal income tax.
Officially, the Communications Act of 1934 declared that "the airwaves belong to the people." What it actually did was hand out portions of the airwaves free to businesses, which then made as much money off them as they could, without having to pay the government anything for the privilege.
Life insurance companies get to deduct the entire amount they set aside as a reserve each year, whether or not it exceeds the actual amount they have to pay out in claims.
|Business Meals and Entertainment
The meals and entertainment deduction amounts to an annual subsidy... for fancy restaurants, golf courses, skyboxes at sports arenas and the like. And it's applied unequally. Factory workers can't deduct meals or sporting events at which they discuss their jobs with colleagues -- nor any taxpayer who doesn itemize deductions.... Like deduction, this one is worth more to higher-bracket taxpayers, and it particularly subject fraud abuse.
Nuclear power still can't stand on its own two feet, but with a sugar daddy like the federal government, it doesn't need to.... The feds still provide the industry with most of its fuel and waste disposal, and much of its research.
If there's an argument for governmental subsidies, it's that they help "infant industries" get on their feet. Commercial aviation is hardly an infant industry anymore, yet the airlines are exempted from the fuel tax.
Since 1872, about $245B worth of minerals have been mined from public lands. And how much has our government collected in royalties? Absolutely nothing.
|Oil and Gas Tax Breaks
The rationale for this loophole is that it encourages exploration for new oil -- presumably something no oil company would otherwise do. Oil industry executives argue that other businesses are allowed to depreciate the costs of their manufacturing investments. That's true, but they're only allowed to take off the actual cost of those assets, not deduct 15% of their gross income virtually forever.
[T]he US Department of Agriculture [alone] currently spends $1.1B a year helping US-based transnational corporations market their products abroad.
For agreeing to make their ships available to the U.S. military in the event of a war, commercial ship owners are given an average annual subsidy of $3.5M per ship. The Pentagon, which has more than enough ships of its own, admits this program serves no earthly purpose, but we still pay $1B a year for it. Perhaps the maritime industry's $17M in PAC contributions over the past decade have something to do with it.
Note:The entries under each category in Table 2 are direct quotes from the authors that illustrate the tax break or subsidy.
Source: Mark Zepezauer and Arthur Naiman, Take The Rich Off Welfare (Tucson, Arizona: Odonian Press, 1996)
In sum, we have the knowledge and resources to replicate to scale a national policy that solves the interrelated dilemmas of high child poverty, dramatic inequality, inadequate job training, structural unemployment, poor inner-city education, resegregation, race and criminal justice discriminaiton, and prison-industrial complex profiteering that face the nation. Yet there is no action by our leaders. What can citizens do? See Communicating What Works and Creating Action. For a systematic array of organizations that share the Foundation's policy, see Links.
1. Lisbeth B. Schorr, Helping Kids When It Counts. The Washington Post, (April 30, 1997), p. A21.
4. The Milton S. Eisenhower Foundation, To Establish Justice, To Ensure Domestic Tranquility. (Washington, DC: The Milton S. Eisenhower Foundation, 199. See Publications); S. Shirke, et. al., The Effects of Boys and Girls Clubs on Alcohol and Drug Use and Related Problems in Public Housing (New York: Columbia University, School of Social Work, 1993); Andrew Hahn, Quantum Opportunities Program: A Brief on the QOP Pilot Program. (Waltham, Mass: Center for Human Resources, Heller Graduate School, Brandeis University, September, 1995).
14.Alan Okagaki, Developing a Public Policy Agenda on Jobs, (Washington, DC: Center for Community Change, 1997).
22. Jeff Faux, "The Economic Case for a Politics of Inclusion," Paper Prepared for the Milton S. Eisenhower Foundation's Thirtieth Anniversary Update of the Kerner Riot Commission. (Washington, DC: Economic Policy Institute, February 3, 1998). Jeff Faux, "You Are Not Alone." In Stanley B. Greenberg and Theda Skocpol, The New Majority: Toward a Popular Progressive Politics, (New Haven and London: Yale University Press, 1997).
29. Unless cited otherwise, this section is based on To Establish Justice, To Insure Domestic Tranquility, under Publications, and on Elliott Currie, Crime and Punishment in America (New York: Metropolitan Books, 1998).
35. Vince Stehle, "Vistas of Endless Possibility: Delancey Street Foundation Helps Felons and Addicts Rehabilitate Themselves Into Responsible Citizens," The Chronicle of Philanthropy, November 2, 1995, p. 59.
37. Details for how the line items in table one were calculated are found in Alan Curtis and Fred R. Harris, The Millennium Breach, op. cit. See Publications. Here is a summary:
The $7B per year for Head Start is the estimated cost for expanding the existing Head Start program to all eligible poor children.
The $15B per year for replication of successful public inner-city school reform initiatives is based on estimates by Joy Dryfoos that roughly 15,000 schools in the United States serve disadvantaged urban youth, children and teenagers; that the average number of students per school is about 1,000; and that the average cost per student to implement reforms that work is about $1,000.
The $1B per year for the Corporation for Youth Investment is a conservative estimate for funding, technically assisting and evaluating safe haven-type and Quantum Opportunities-type replications for a fraction of the children, youth and teenagers who could benefit from them.
The $4.5B per year for job training reform modeled after the Argus Community would allow training each year for a fraction of the 2,000,000-plus inner-city unemployed who need it.
The $1B per year for the National Community Development Bank is expected to generate a fraction of the $1,000,000 new private jobs that is our goal for the inner city.
The $5B per year for 250,000 public sector construction and urban repair jobs each year is based on estimates in United States Conference of Mayors, Ready to Go: New Lists of Transportation and Community Development Projects (Washington, DC: United States Conference of Mayors, February 18, 1993).
The $20B per year for 1,000,000 public service jobs is based on a minimum wage that averages to $20,000 per year, with benefits and administrative expenses. This is somewhat higher than the average assumed in Richard McGahey, Estimating the Economic Impact of a Public Jobs Program, (Washington, DC: Center for Community Change, 1997).
The $2.5B per year which includes replication of race-specific solutions has conservative estimates of the cost of significantly expanding proven successes, like the Gatreaux program for housing integration, along with the costs of a new on-line system to share facts on race and models of successful and racial dialogue. Most of the $2.5B is for replication of criminal justice, drug prevention and crime prevention models, based in part on estimates calculated by Joseph A. Califano, Jr., "Crime and Punishment And Treatment, Too," The Washington Post, (February 8, 1998), p. C7.