Tag Archives: Empowerment Zones

Editorial: Barack Obama, Jack Kemp, & Baltimore

Jake Novak has a really good commentary up on the CNBC website about what we’re seeing in Baltimore right now:

I’m not going to bore you with a litany of solid statistics showing how cities like Baltimore have been awash in federal taxpayer money for decades provided by tax-and-spend Members of Congress of both parties. I’m also not going to say too much about the fact that Baltimore has been a state ruled by Democrats in the Mayor’s office for almost 50 years straight and how Maryland has been a solid blue state for the Democrats for about 40 years. It’s amazing how whether we’re talking about droughts in California or urban decay in cities like Detroit and Baltimore, somehow liberals make the uproarious claim that it’s the party that’s been pushed out of power in those areas for lifetimes that’s at fault.

Instead, let’s look at a person and a philosophy that person put into action that actually worked, is working, and will work to make cities like Baltimore better for generations to come. I’m talking about the late Congressman and HUD Secretary Jack Kemp, whose true concern for Americans trapped in failing city neighborhoods defined his political career for 30 years.

Kemp earned his “bleeding heart conservative” nickname by actually making a habit of personally visiting rough urban areas and interacting with the people there. His pre-politics career as a star NFL quarterback surely made doing that a lot easier for him, but so did his mantra of “don’t fear the voters” that he often repeated to his Republican colleagues. Kemp wasn’t the first to do this to great effect. John Lindsay, (then a Republican), was generally a terrible mayor of New York City. But he single handedly kept New York from devolving into the riotous chaos that erupted in so many other cities after the Rev. Martin Luther King Jr. was assassinated by personally walking from Gracie Mansion to Harlem almost completely unescorted and talking with the people in the neighborhood for hours. Harlem didn’t burn because Lindsay showed up. Kemp emulated that wise tactic many times. This personal connection lesson has so far been lost on President Obama who hasn’t set foot on the streets of Baltimore, nor did he go to Ferguson at the height of the unrest when his presence could have had such a calming effect.

But this wasn’t all about just showing up on the rough streets for photo ops, Kemp backed it all up with a policy that was based on the key understanding that government wasn’t the solution to economically-challenged inner cities. Kemp saw it as the problem. Only private sector interest and investment can meet those challenges and Kemp knew that removing government barriers to that investment was the key to it all. Kemp also made it happen. One great example of his success was New York’s Harlem neighborhood, which benefited from Kemp’s empowerment zone structure that mixed tax breaks with relaxed regulations to encourage new construction and business activity in those areas. Think of those zones as like charter schools; places where all the old rules are thrown out and only what’s needed is put in place to encourage the best achievement. To make these areas really work, the government has to cede almost all of its power and traditional funding programs there. In other words, what works for the depressed areas of our cities is less government, not more. Are you listening Mr. President?

Read the entire commentary here.

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Kemp: Fighting a new war on poverty

By Jack Kemp

May 25, 2007 for Townhall.com

To ignore the potential contribution of private enterprise is to fight the war on poverty with a single platoon, while great armies are left to stand aside. – Sen. Robert F. Kennedy

Mario Cuomo of New York electrified the 1984 Democratic Convention with his tale of America as two cities, one rich and one poor, almost permanently divided into two classes. Today John Edwards is running for president on this same platform and using the same metaphor.

But America is not divided into two cities; instead, America is divided into two separate and unequal economies, one that works well and one that is fatally flawed and must be fixed so as to combat poverty.

Our mainstream economy is entrepreneurially capitalistic: It is market-oriented and based on private property, ownership, the rule of law and with widespread access to capital and seed corn for new business ventures. It rewards work, savings, investment and productivity. This economy dominates the American market and serves as an example to the world of democratic capitalism.

The second economy functions in almost direct opposition to our mainstream capitalist economy. Similar to a Third World socialist economy, it denies people an entry into the mainstream due to the barriers to economic activities along with a virtual absence of any link between human effort and reward. It perpetuates poverty, dependency and welfare while discouraging employment, and it prevents access to capital, ownership of assets and quality education. The irony is that this second economy was created out of a desire to help the poor, alleviate suffering and provide a social safety net. However, instead of independence, this welfare-based economy has led to near perpetual dependency, and the social and economic costs to our nation are enormous in terms of unfulfilled potential and dashed dreams. As secretary of Housing and Urban Development from 1988 to 1993, I visited pockets of poverty in ghettos and barrios throughout America. I spoke personally with people living in the depths of poverty and hopelessness. I vowed then to take part in a bipartisan effort to help create an urban American Renaissance. I applaud Edwards’ attempts to raise the issue of poverty and challenge the Republican candidates to join in the debate.

The problem is that self-improvement and ownership of assets are discouraged by regulatory and tax policies that trap people in impoverished areas. In too many cases, the poverty that exists today is due in part to government welfare coupled with regulatory and tax policies that punish work, savings and investment and discourage ownership of assets. The system redlines certain areas of our country, limiting people’s access to capital, credit, mortgage loans and well-paying jobs.

To wage a real war on poverty, we should launch a 21st century Marshall Aid Plan in the cities of America to reform education; create job opportunities; and provide access to capital, credit and ownership opportunities for low-income Americans. This plan must be based on equal opportunities to get jobs, own homes and launch businesses.

The first step is to create Enterprise or Empowerment Zones that would eliminate the capital gains tax in the newly “green-lined” zones, allow for expensing of all investment in plant machinery and technology, and eliminate payroll taxes for men and women who are first-time job holders up to 200 percent of the poverty line.

Next we need to cut the bureaucratic red tape that makes development in urban areas. We need to look at the legal barriers to production and commerce. Local impact (development) fees, application processing costs, building codes, zoning and land use restrictions, and nongrowth policies greatly increase construction costs. Instead of creating regulations that make it more difficult to build in urban areas, entrepreneurs need to be offered incentives for investing in cities.

We must develop a tax reform system that rewards labor, savings and capital formation. A sure way to harm the economy and slow growth is through a capital gains tax, which is not a tax on the rich but rather on the poor who hope to improve their situations. You can’t get rich on wages. The only way to create wealth is to work, save, invest, make a profit and reinvest.

Finally, we need to provide homeownership opportunities and affordable housing to the most impoverished in society who often become trapped in public housing. Through public-private partnerships with organizations such as the Federal Housing Administration, Fannie Mae and the Federal Home Loan Bank, we need to dedicate a percentage of profits to help develop work-force and affordable housing while encouraging homeownership policies to get people on the path out of poverty.

Through eliminating America’s second economy and tapping into the economic forces of a more democratic system of capitalism, we can develop a formula for ending chronic poverty in America. Everyone should have the opportunity to go as high as their merit, ability, determination and quality of their performance can carry them.

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Kemp: Tax cuts are right for the 21st century

By Jack Kemp

August 8, 2006 for Townhall.com

Twenty-five years ago, on Aug. 13, 1981, President Reagan signed what was called the largest tax cut in U.S. history. In actual point of fact, it was no larger then the Kennedy tax cuts of 1961-62. Both were designed to get America moving again, and both worked well as they lowered marginal tax rates about 25 percent across the board over three years.

In 1978, I had, along with my Senate colleague Bill Roth of Delaware, co-sponsored the Kemp-Roth Bill that advocated a 30 percent across-the-board tax rate cut. The top rate in the ’70s was 70 percent, and the capital gains rate was 49 percent. I argued that lower tax rates on labor and capital would grow the economy and put an end to the Keynesian dilemma of simultaneous inflation coupled to recession.

What escaped the attention of both the conventional “left” and “right” was that tax rates at 70 percent on income and 49 percent on capital gains led to a slow growth or, even worse, a recession. Tax revenues were falling; thus a reduction in tax rates would lead to more revenues, not less. I quoted President Kennedy to candidate Reagan over lunch in 1979, and he took up the “cause” of supply-side economics and made it his signature issue in the primaries of 1980.

I went a step further and quoted Sen. Robert Kennedy to argue for enterprise zones in urban and rural pockets of poverty to unleash the power of private enterprise to wage a new war on poverty: “To ignore the potential contribution of private enterprise is to fight the war on poverty with a single platoon while great armies are left to stand aside.”

Thanks to President Clinton and a GOP Congress in 1995, we finally got a mild version of the Enterprise Zones (Empowerment Zones). I had hoped, though, that they could be bolder and eliminate capital gains taxes on those people who would put their surplus capital at risk in the “green-lined” areas of America from the Gulf Coast of Louisiana and Mississippi to the still “de-facto” red-lined zones of the urban Northeast and south central Los Angeles. Any community would qualify that had a high level of unemployment, welfare and poverty.

Today tax rates are still too high on labor and capital and prohibitively higher still on those low-income men and women who want to leave welfare to take entry-level jobs. When a person leaves welfare, which is tax-free, to take an entry-level job, they lose welfare payment and face income and payroll taxes that push them, in some cases, over 100 percent tax at the margin. According to a study done by Christopher Jencks and Kathryn Edin in American Prospect magazine, a mother with two children who is employed at about $5 an hour would take home about 45 cents an hour less than if she were on welfare. She loses $4 a day after taking into account the loss of government benefits, taxes and such work-related expenses as transportation and child care.

President Bush has been stalwart in defending his efforts to make permanent the lower tax rates on capital gains dividends plus his attempts to put an end to the insidious tax on death. The trouble with the White House is that they keep calling this a policy of tax relief. That term implies tax revenue losses, when, in reality, we’ve seen three years of tax revenue growth. On average, tax revenues are up 15 percent a year for the last three years, with unemployment dropping from 5.5 percent to 4.7 percent.

No economic policy lasts forever, but with lower rates on all sources of income, economic growth has averaged more than 4.5 percent. Despite terrible conditions of war and instability with spiking oil prices, our economy is growing with inflation relatively low.

As one of the few legislators who was around in the ’70s and ’80s when controversy surrounded the Kemp-Roth Tax Rate Reduction Act signed into law 25 years ago by President Reagan, I leave you with the single greatest quote of President Kennedy 1961 that convinced me and President Reagan of the efficacy of lower tax rates:

“Our true choice is not between tax reduction, on the one hand, and the avoidance of large federal deficits on the other. It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough jobs or enough profits. Surely the lesson of the last decade is that budget deficits are not caused by wild-eyed spenders but by slow economic growth and periodic recessions, and any new recession would break all deficit records. It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise revenues in the long run is to cut rates now.”

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