A Disturbing Disarmament

Funding cuts threaten proven weapons in the war on poverty

By Bruce Katz

Urban poverty has always been one of America's open secrets, only vaguely acknowledged until events like Hurricane Katrina bring it to the fore. At such times there is often much discussion but few solutions. Yet, despite the hand-wringing, this nation actually has a number of proven market-based tools to fight poverty, especially in neighborhoods where it is concentrated. Strangely, these tools have been repeatedly under attack by the Bush Administration and survive due to rare bipartisan support in Congress.

Although the worst days of urban decay have passed, nearly 8 million people still live in about 2,500 city neighborhoods where more than 40% of the residents are poor. These places are stratified by race as well as class. In cities as diverse as Cleveland, Miami, New York, Atlanta, Los Angeles, and pre-Katrina New Orleans, more than 30% of poor blacks live in neighborhoods of severe economic and social distress.

Residents of these communities face daunting obstacles: failing schools, unsafe streets, run-down housing, and few local jobs. But there is also a huge cost that extends far outside these pockets of poverty. Cities are forced to pay for the higher costs of delivering health, education, police, fire, judicial, and other services in high-poverty environments, often amounting to hundreds of dollars annually per city resident. With higher expenses come higher taxes, inhibiting cities' ability to attract and retain middle-class families, the backbone of resilient economies. And the concentration of neighborhood poverty leads inexorably to the concentration of poor children in neighborhood schools, undermining almost every other public or private effort to educate them.

BUT THE GOOD NEWS IS that concentrated poverty is not intractable. During the 1990s the federal government made huge progress breaking up the concentration of poverty through several bold actions. A twin focus on housing and work drove these results.

In cities like Atlanta, Louisville, and St. Louis, the $6.5 billion federal HOPE VI program literally demolished the worst public housing projects -- think the bleak high-rise warehouses of poverty built in the 1950s -- and replaced them with new, economically integrated developments. These complexes have sparked a mini-revival in many inner cities, unleashing new private investment in business and housing.

The past decade also witnessed substantial growth in the use of housing vouchers. Studies show that children and adults who use vouchers to move to areas of lower poverty have better access to good schools and jobs and get an almost immediate improvement in mental and physical health.

Finally, to reward work the federal government in 1993 doubled the Earned Income Tax Credit (EITC) for low-wage households, lifting millions of workers out of poverty and strengthening neighborhoods with minimal bureaucracy.

These efforts use the market to drive wealth creation, neighborhood renewal, and business expansion. The best of the HOPE VI projects were privately built and remain privately managed, providing real marketplace consequences should they fail. Housing vouchers enable low-income families to choose where to live in the private rental market, rather than being consigned to dysfunctional areas. And the EITC, only received by those who work, was Ronald Reagan's favorite antipoverty program.

Despite these conservative credentials, the Bush Administration has withdrawn support for all three initiatives as part of a broader effort to cut spending. Funding for the HOPE VI program was drastically cut -- to just $150 million annually, down from $600 million -- after the White House called for its elimination. Likewise, funding for additional vouchers has been reduced, and the Administration proposal to devolve the program to the states would further undermine this proven tool. There are even proposals to limit access to the EITC.

This is the wrong path. We need to restore funding for these programs and policies with a track record of rewarding work, promoting housing choice, and encouraging mixed-income neighborhoods. We also need to embrace innovations, like the President's call for the creation of a home ownership tax credit, a vehicle that could spur the market for moderately priced occupant-owned housing in cities. We know how to reduce concentrated poverty in America. And we can do it in a market-based way that leverages public dollars for national gain -- but only if Congress and the President work together.

Bruce Katz is a Vice-President at the Brookings Institution and Founding Director of its Metropolitan Policy Program

    Before it's here, it's on the Bloomberg Terminal.