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Trump's right: Declare Baltimore a 'disaster' and rebuild it

Originally published in the Baltimore Sun

Economic & Fiscal Policy, Transportation, Welfare, Property Taxes, Taxes

by Sean Kennedy

OP-EDS

NOVEMBER 9, 2016 Bookmark and Share

Donald J. Trump is known for his hyperbole, but not all of his ideas are a stretch. Our inner cities are a "disaster," as he said in the final presidential debate — and they should be officially declared so.

Mr. Trump said on the campaign trail that he would "empower cities and states to seek a federal disaster designation for blighted communities in order to initiate the rebuilding of vital infrastructure, the demolition of abandoned properties and the increased presence of law enforcement." Now that he's captured the presidency, let's hope he follows through.

The idea is radical, revolutionary and just what urban America needs: a federal disaster declaration for our most impoverished neighborhoods hard hit by crime, urban blight and economic malaise.

When the president declares an area to be a disaster, additional federal assistance can be applied while regulations and rules for rebuilding and revitalizing the affected area are often waived or reduced.

Under the model established after the I-35W bridge collapse over the Mississippi River, federal authorities can streamline infrastructure and other projects that often take a decade from start to finish. The Minnesota bridge was rebuilt better than ever in 437 days by cutting out the red tape that typically mires such projects.

Cities and states could upgrade and rebuild quickly and cheaply.

Additionally, if a disaster were declared, it would enable individuals and businesses to apply more quickly for revitalization aid including home improvement and personal loans, but most especially start-up capital available from the Small Business Administration.

Access to capital, even a small amount, is one of the biggest hurdles to most aspiring entrepreneurs starting their businesses.

Most start-ups rely on the generosity of family and friends and personal savings to get going. But for black and Hispanic Americans, who are the primary residents of these inner-city neighborhoods, personal wealth (that is, assets plus income) has actually fallen in the years since the Great Recession in real dollars.

In Baltimore, the fall in income and wealth has been especially dramatic, according to Loyola-Maryland economics professor Stephen Walters. Property and income taxes have risen dramatically while real income, especially for minorities in the inner-city, has fallen precipitously since 1950. As the tax base shrank in the city, the wealth gap grew dramatically — with the poorest 20 percent in the area worth equal to 1/12th of the richest 20 percent.

Bank loans, too, are hard to come by for inner-city entrepreneurs since most institutions do not lend to individuals without assets and shaky credit — all too common circumstances for poor to working class Americans residing in our urban cores.

That scarcity of capital creates a vicious cycle because new, organic and home-grown business formation is a rarity, so the new jobs that come with new businesses never appear.

Even worse, aspiring business owners and inventors in the inner city are often precluded from receiving sustaining government assistance while they pursue their dreams.

Unemployment and disability insurance, for example, often have bars on self-employment and outside income while receiving benefits. Only a handful of states (which administer unemployment) allow entrepreneurs to collect benefits (and stop seeking salaried and hourly work) while they start-up. Maryland, for example, stopped accepting the funds available under federal law to administer such a program.

That's where another, equally radical Trump proposal comes in: microloans in lieu of social assistance payments. The most obvious example is unemployment payments, which could be turned into repayable but forgivable loans, according to Mr. Trump.

If the social assistance were converted into loan payments and the bar lifted on recipients' ability to start businesses or work toward their dreams, these individuals could begin the urban renaissance our inner cities desperately need.

For those who wish, the federal government should allow lump-sum payments of projected assistance to individuals with a business idea to help them get started.

Micro-lending models like this have been fabulously successful in the third world and in limited experiments in the United States. For taxpayers, the dollars are a sunk cost — recipients will get them either way from the government, but the upside is huge if they help to spur new business formation, job creation and most of all hope in these distressed communities.

Declaring our most beleaguered neighborhoods to be "disaster zones" and encouraging entrepreneurial activities through access to capital and microloans would inject capital, expedite much needed infrastructure and give our inner cities hope again.

Sean Kennedy (seandavid.kennedy@gmail.com) is a visiting fellow at the Maryland Public Policy Institute.