Clinton Urges Wall Street Firms to Invest in Poor Neighborhoods
Author: John Rega and Richard Keil
Posted on 01/13/2000 14:37:26 PST by Tumbleweed_Connection
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President Bill Clinton urged corporate executives on Wall Street today to invest in chronically impoverished areas, and promised to push for tax credits and loan guarantees as incentives. "The government can't do this alone,'' Clinton told an audience that included Citigroup Inc. Co-Chairman Sanford Weill and other executives. "This needs to be driven by private sector investment.''
Clinton said he will ask Congress to increase incentives and take other measures to spur about $20 billion in new investments to underserved communities.
Since 1992, Glenn Spencer and VCT have been telling America that this country is...
The program is one of several Clinton is promoting as he prepares the fiscal 2001 .budget request he'll send the Republican-controlled Congress Feb. 7. Clinton also wants spending boosts for education, medical coverage of poor children, and tax credits for the working poor.
Clinton has pushed for investment in poor neighborhoods and rural communities since last year, but legislators approved less than he sought for his "new markets'' initiative. Late last year, Clinton and House Speaker Dennis Hastert, an Illinois Republican, agreed to try to combine Clinton's federal loan guarantees with business tax breaks that Republican congressional leaders want.
Compromise Sought "I look forward to working with the president on creating a bipartisan package,'' Hastert said in a statement today. He called for "removing tax and regulatory barriers that prevent private sector investment in these areas.''
Congress last year provided $20 million for the American Private Investment Corp. -- a domestic version of the Overseas Private Investment Corp. -- designed to offer risk insurance for companies that invest in high-poverty zones. The corporation would guarantee loans and development money spent in poor areas.
Congress also approved another $16.5 million to help private-sector companies share technical expertise -- ranging from computer technology assistance to management training - with existing small businesses operating in poor areas. "Tax breaks always help,'' said Brian Dowling, a spokesman for Safeway Inc., the third largest U.S. grocery chain. "It has to make business sense, but they help.''
Safeway spent $146 million in five years building and remodeling stores in underserved neighborhoods, Dowling said. "They've been a good investment for us.''
Efforts to advance specialized business tax breaks and loan guarantees also have the backing of Aetna Inc., Cisco Systems Inc., Bank of America Corp., and Citigroup.
Executives from those companies joined Clinton on a four-day tour last summer through some of the nation's most impoverished areas, including Clarksdale, Mississippi, the Watts section of Los Angeles, the Pine Ridge Indian Reservation in South Dakota, and East St. Louis, Illinois.
Clinton today said he'll set off on another poverty tour in coming months. The new tour will seek "to close the digital divide'' by spurring investments that will help poor people afford access to the Internet.
Still, Clinton's program can't start until Congress formally authorizes spending of the funds. Hastert and Clinton agreed in November to find a way to free up the money; administration officials have been working with the staffs of Hastert and Oklahoma Republican J.C. Watts, who introduced his own economic development measure last year, to meld the two proposals.
Details of the Plan Under Clinton's plan, corporations would receive as much as $2 in guaranteed federal loans for every $1 they invest in a blighted area. The government would back as much as $1 billion in loans.
He's also expanding last year's request for a federal tax break of 25 percent on as much as $15 billion of new investments in community development organizations over 5 years, up from a cap of $6 billion under his previous request. The expanded credit would cost the government $5 billion, Gene Sperling, head of Clinton's National Economic Council, said yesterday. "If you're willing to take the chance of seeking a profit in the new markets with new partners, we'll help to lower your financing costs and some of your risk,'' Clinton said today.
Clinton further proposes to add 10 new empowerment zones to the 31 existing ones where businesses are eligible for tax credits on workers' wages and other breaks, costing $4 billion over 10 years, according to White House briefing papers.
Clinton's initiative also would create 10 to 20 New Markets Venture Capital firms, which will seek to attract investments in, and provide guidance to, startups in low-income communities.
"This is good business'' and an "inflation-free way to keep the economy going,'' Clinton told a gathering at Boricua College in Brooklyn at the start of his day. "You have to find new markets, and create new jobs and new businesses in places where they didn't exist before.''
Watts, for his part, would identify 100 localities with high unemployment and poverty rates, and give businesses in those areas a series of federal tax credits and tax breaks. It became a casualty of broader budget wrangling last year: Republican congressional leaders included it in a massive $792 billion, 10-year tax relief package that Clinton vetoed as "too bloated.''
Under Watts's plan, businesses in the high-poverty areas would pay no capital gains taxes on sales of their firms or shares of stock held more than five years.
Republican congressional leaders are pressing for capital gains tax relief for these business investments as one component of a final bipartisan plan, Hastert's spokesman John Feehery said recently. "Things are looking pretty good,'' Feehery said. "We think we'll be able to come up with proposals both sides can agree to.''