Enterprise Zones: `Greenlining' for Growth

THE startling verdict in the Rodney King case may have been the spark that ignited the Los Angeles riots, but the flammable material - unemployment, illiteracy, drugs - has been gathering in most American cities for decades.

Poverty does not justify crime; in fact, the poor are more often victims of crime. But in the wake of the recent violence, with law and order restored, the economic and social ills of inner-city Los Angeles and other poor regions of our country remain. It is those problems to which we must turn if we want our urban neighborhoods to be places of peace and prosperity once again.

It is clear that the old answers of the left and the right won't suffice. Neither pouring money into people's pockets, nor raining nightsticks down on their heads is the answer to what ails urban America. We must stop the finger-pointing and blame-assigning and get to work solving the problem of poverty in America.

Enterprise zones are a good idea that we know work and can pass Congress. What poor people need most is jobs. Not dead-end, make-work government jobs paid for by taxpayers, but full-time, upwardly mobile, private-sector jobs. With jobs, the poor can get off welfare and out of public housing, can find better health care and save for a home, or education for their kids. Jobs equal hope, which is in short supply in South-Central L.A., Milwaukee, Bridgeport, Conn., and most other American cities, and in many

poor, rural areas as well.

Encouraging businesses to invest in poor neighborhoods to create jobs is not an easy task. But enterprise zones can get us started. It's an idea with roots in England, and was first promoted here by then Reps. Jack Kemp and Bob Garcia, a conservative and a liberal, more than a decade ago. We believe enterprise zones will target economic growth where it is needed most. Not by law or by regulation, but by making investments along poverty-stricken streets so financially attractive that businesses will not b e able to resist.

Actually, there are already more than 2,200 enterprise zones in America, created by 37 states in their impoverished urban and rural regions. With only state and local incentives to offer businesses, those zones have generated capital investments in poor neighborhoods in excess of $28 billion and created more than 258,000 jobs. What we propose, through our Enterprise Zone Job-Creation Act, is to add federal incentives to 50 enterprise zones around the country, such as:

* A zero capital-gains rate for the sale of a business that has existed in a zone for at least two years;

* A tax deduction of up to $50,000 a year for the purchase of stock in small companies located in an enterprise zone (up to a lifetime cap of $250,000); and

* A 5 percent tax credit to low-income enterprise zone employees (up to $625 per worker per year).

The combination of federal, state, and local tax incentives will attract businesses to poor areas, will encourage people to invest in such businesses, and will stimulate businesses to hire and train unemployed and economically disadvantaged people. The resulting economic growth in depressed cities and rural areas will restore the tax base of those communities, while reducing the demand for expensive social services.

There is a price tag to create federal enterprise zones - it will cost $1.7 billion in lost tax revenues over a five-year period. But that price is worth bearing, especially when one considers the nearly $800 million cost of a couple of days of rioting in just one American city. There is also the likelihood that enterprise zones will, by virtue of the economic growth they stimulate, generate new revenues for local, state, and federal governments. As businesses thrive in enterprise zones, they will pay mo re taxes. And the poor people they hire as workers will no longer use as many tax dollars for their food, housing, and other basic needs. Poor communities in America, for too long "redlined" by banks and other businesses, must now be "greenlined" for growth, so that those who live there can be given the tools to succeed.

We hope that the crisis in Los Angeles, which has illuminated the crisis in poor neighborhoods across this land, will shed light in the halls of Congress, where enterprise-zone bills have languished for too long. It is time to break through the partisan stalemate, break through the ideological conflicts, and pass enterprise-zone legislation. As President John Kennedy said during the civil rights crisis in 1963: "We face a moral crisis as a country and as a people.... It cannot be quieted by token moves or talk. It is a time to act. Those who do nothing are inviting shame, as well as violence. Those who act boldly are recognizing right, as well as reality."

We don't pretend that enterprise zones alone will solve the crisis of the poor in America. Racism, disease, drug abuse, crime will all require new approaches. But enterprise zones are a start. They do work in the states, the laboratories of democracy, and they will work even better with federal incentives. So let's seize the moment, drop the politics, and get something done.