Bread & circuses.

FIVE months after the GOP retained both Houses against the odds, Congress looks unlikely to cut taxes, end race and gender preferences, or even eliminate the National Endowment for the Arts. But this mean season for conservatives will be brightened if the American Community Renewal Act is passed. Providing their own leadership, two young Republican congressmen are promoting landmark legislation that seeks to revive faith, private enterprise, and charity in the nation's poorest neighborhoods. And in a rare example of bi-partisanship that is not code for a GOP surrender, they have been joined by members of the Congressional Black Caucus.

It began last month when Reps. J. C. Watts of Oklahoma and Jim Talent of Missouri introduced a bill that all but reverses the government's thirty-year-old approach to poverty. Instead of creating new programs, subsidies, and specialists, their bill reduces taxes, regulations, and licensing rules. The bill is supported by scores of conservative groups, including Americans for Tax Reform, the Family Research Council, the Christian Coalition, the Institute for Justice, the Goldwater Institute, and the Hudson Institute.

More significantly, black liberals agree with it too. New York Rep. Floyd Flake (ACU rating: 0) is an original co-sponsor. Pastor of the Allen AME Church in Queens, whose community operations include a private school and housing for the elderly, Rep. Flake employs over seven hundred people. "What Floyd Flake knows will work," says Jim Talent, "is based on his own experience." Rep. Donald Payne of Newark, New Jersey, past chairman of the Congressional Black Caucus, and Rep. Eva Clayton, who represents one of North Carolina's black-majority districts, are also co-sponsors.

Though an architect of the GOP welfare-reform bill, Talent agrees with Watts that it's not enough to end the worst incentives of the status quo. The two congressmen resolved to draw up a plan with community-based self-help groups that would promote economic growth and moral renewal in neighborhoods devastated by years of the Federal Government's welfare largesse.

Drawing on the work of Bob Woodson, president of the National Center for Neighborhood Enterprise, Talent and Watts want to create a hundred urban and rural "renewal communities." To qualify, an area must have high rates of both unemployment and poverty. State and local governments must then pledge to reduce taxes, fees, and regulations, to improve local services, and to encourage the sale of land, homes, and business sites to neighborhood groups and private businesses. The state's reward is that once an area is designated a renewal community, then its federal taxes would be sharply reduced. Investments in qualified businesses would enjoy a 100 per cent exclusion from capital-gains taxes and generous tax credits.

But the main aim is to change the behavior of the people in the renewal areas. To encourage personal savings, for instance, low-income families in these communities would be permitted to deduct contributions to special family savings accounts and withdraw money tax-free for certain expenditures. To encourage home-ownership, unoccupied dwellings currently owned by HUD would be transferred to local governments. These would then have to make them available for sale to community-based groups on a cost-recovery basis.

The bill also creates a new charitable tax credit of 75 per cent for donations of up to $200 to qualified charities as long as the taxpayer also volunteers at least ten hours a year for the recipient organization. Charities qualified under the bill must provide direct services to the poor. They could not engage in lobbying or public-policy advocacy.

Will God succeed where Uncle Sam failed? For the main departure from political orthodoxy of the Talent - Watts - Flake bill is its premise that religious faith can help solve social problems. Rep. Talent points to the impressive results of the Victory Fellowship drug-rehabilitation program in San Antonio, whose founder, Freddy Garcia, favors Bible study over professional counseling and claims a 70 per cent success rate. Such faith-based drug-treatment programs have very low recidivism rates but face constant harassment from government regulators. The Community Renewal Act would permit these programs to receive federal assistance through contracts or vouchers. These funds could then be used for counseling programs with religious content. (Beneficiaries are always given the right to choose a non-religious program.)

Above all, local officials must make a commitment to operate an educational-opportunity program that provides federally funded scholarships for both secular and church-run primary and secondary schools. Scholarships and transportation aid would be provided on a first-come, first-served basis, and the locality would fix the scholarship's value. The sponsors hope to spend $1 billion on the scholarship program over the next five years.

WHEN Jim Talent meets with neighborhood associations, he warns them that school choice will be fiercely opposed by the education establishment. But they insist the provision is vital, and Talent agrees. He underscores his own commitment to the school-choice provision: "It's a question of the vital needs of these kids and I'm not prepared to sacrifice another generation on the altar of dogma."

But what are its prospects? Sens. Spencer Abraham (R., Mich.) and Joseph Lieberman (D., Conn.) have introduced the bill in the Senate. But key committee chairmen have been unenthusiastic about it. House Ways and Means Committee Chairman Bill Archer (R., Tex.) doesn't relish tinkering with the tax code, and Education Committee Chairman Bill Goodling (R., Pa.) is a foe of school choice. Talent hopes to convince them that "We can turn a lot of people into conservatives with this bill -- whether they know it or not." Maybe. But will it turn GOP congressmen into conservatives?