A homeless encampment made of tents and tarps lines the Santa Ana ROBYN BECK/AFP/Getty Images

Investing in Poverty Reduction

After almost a year of accomplishing nothing, the Republican-led US Congress has managed to enact a far-reaching tax law and budget legislation that will shape the contours of future government spending. Neither will solve America's most pressing economic challenges, but each does include at least one sensible idea for tackling poverty.

BERKELEY – The tax legislation that US President Donald Trump signed into law last December will dramatically increase inequality and the federal budget deficit. Yet, hidden within it – and within budget legislation enacted in February – are two promising programs for helping state and local governments address the needs of disadvantaged Americans.

The new tax law creates generous incentives to encourage private investment in distressed urban and rural areas; and a provision in the budget package will establish a competitive grant program to help states fund “pay-for-success” contracts. Both ideas have their roots in the Democratic administrations of Presidents Bill Clinton and Barack Obama; but they attracted congressional Republican support because they empower state and local governments, rely on public-private partnerships, and encourage rigorous impact assessments.

The provisions in the tax law to encourage private investment in impoverished areas center on the creation of “Opportunity Zones” (a term coined more than 30 years ago by New York Governor Mario Cuomo). The OZ program grants US governors the authority to designate up to 25% of low-income census tracts – those with an individual poverty rate of 20% or higher, and median family income below 80% of the state or territorial average – as OZs.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

http://prosyn.org/I6zvtaz;

Handpicked to read next

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.