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President challenges America with plan; cities have a big role to play.

President Bill Clinton challenged the nation's cities' leaders and all Americans to join him in changing the course of the nation in his first State of the Union address to the new Congress last Wednesday evening:

"It has been too long--at least three decades--since a President has challenged Americans to join him On our great national journey, not 'merely to consume the bounty of today but to invest for a much greater one tomorrow."

Noting that "for too long we've drifted ,without a strong sense of community," the President proposed a three-part national economic recovery plan to restart the nation's local economies and reinvest in rebuilding and reshaping the nation. He asked the Congress to enact a $30 billion economic stimulus program, a $168 billion long term human and public investment plan, and a $463 billion deficit reduction plan:

"If we have the vision, the will, and the heart to make the changes we must, we will enter the 21st century with possibilities our parents could not even have imagined, having secured the American dream for ourselves and future generations.

"Now it is up to those of us in this room to deliver. Tonight I present to you a comprehensive plan."

NLC President Don Fraser accepted the President's challenge and committed the nation's municipal leaders to a course of constructive change:

"Two months ago, the leaders of the nation's cities, meeting in our own Congress of Cities in consultation with President Clinton's economic advisors, adopted a national economic recovery plan calling for restarting our economies through an economic stimulus strategy; reforming federal budget priorities for investment and deficit reduction; and investing in communities and people.

"We are pleased that the blueprint we adopted--as Republicans, Democrats, and Independents representing all of our citizens-has become a blueprint for the nation. Now it is our job to work not only with the White House and the Congress to see this bold plan enacted, but also to work in our own cities and towns to make it work."

The President asked Congress to pass and have on his desk for signature a short term economic stimulus plan by March 23rd to help restart the nation's local economies, and he outlined a long term plan to change federal budget priorities and reduce the federal deficit and national debt. The overall plan, if adopted, would provide for an almost immediate increase in funding for ready-to-go community development, transportation, and wastewater projects and an increase in summer youth jobs in cities and towns. Over the longer term, it would reverse the disinvestment in cities of the last decade and begin a process of human and capital investment.

House Appropriations Committee Chairman William Natcher (D-Ky) promised to begin work on the short term spending package as soon as he receives it from the White House this week.

The administration plans to submit the details of the long term investment and deficit reduction plans to Congress on March 23.

The short term plan involves more than $15 billion in additional funding for cities and towns in the current year and about $15 billion in tax incentives.

The President said he hopes to create as many as 500,000 new jobs as quickly as possible through the combination of supplemental spending and tax incentives. The longer term plan aims for a goal of changing federal budget priorities to reduce the deficit and invest more in human and capital investment in communities.

Short Term Economic Stimulus

President Clinton proposed a two-part economic stimulus plan to jump start the nation's local economies and provide for up to 500,000 new jobs which would produce long term economic benefits for cities and towns.

First, he asked Congress to begin work immediately on a supplemental appropriations bill--additional funding for the current year--requesting funds for the Community Development Block Grant (CDBG) program, the nation's surface transportation (ISTEA) programs, the Clean Water program, and the summer youth unemployment program.

The President would declare the new spending an emergency in order to avoid violating the law prohibiting the use of defense and foreign aid savings from being used for investment in cities.

All of the stimulus funding would be through existing programs in order to accelerate delivery to local governments to ensure new jobs in cities could begin within 90 days of final action by Congress.

Second, Clinton asked Congress' tax writing committees to begin work on .$15 billion worth of tax incentives: reauthorizing and permanently extending priority municipal tax programs, creating new authority for distressed cities and towns to issue tax exempt, bank-leveraged economic development bonds, creating urban and rural enterprise zones, extending the expiring unemployment benefits program, and creating a retroactive investment tax credit program.

Clinton asked Congress to act on his supplemental funding request by March 23rd in order to allow municipal leaders to put the funds to work before the summer begins. The key municipal funding would be directed as follows:

CDBG: $2.5 billion

The Community Development Block Grant funds would increase current city grants by about 60 percent. The administration will propose dropping the public service restrictions and allowing HUD to waive rules that restrict prompt spending by cities. HUD would propose that any of these supplemental funds not spent by cities at the end of 1994 be recaptured.

The extra, one-time funds are focused on projects ready to go in 90 days for entitlement cities and 180 days for small cities. HUD expects the funds to be used for transportation, water, and sewage projects in low income neighborhoods, as well as all other eligible uses.

Transportation: $4.16 billion

The proposal includes $3 billion for ready-to-go highway projects, $750 million for ready-to-go public transportation projects, and $250 million for airport improvements with the funding dedicated to projects that can be initiated within 60 days. Funds made available but unspent at the end of the year would be redistributed to other cities and states that run out.

Clean Water: $ .845 billion

The proposal would accelerate funding for the State Revolving Loan Fund (SRF) from next year into this year by $845 million and waive state matching requirements.

Youth Apprenticeship Credit

The President's plan proposes the creation of a new youth apprentice credit.

Summer Youth Unemployment:. $1 billion

The proposal would fund an additional $1 billion in summer youth unemployment programs in cities --exactly the same amount as last summer.

Leveraging Investment in Cities

To leverage investments in cities from the private sector, the President proposed:

Municipal Priority Tax Extenders

The President proposed reauthorizing retroactively and permanently extending the expired municipal authority to issue tax exempt municipal mortgage revenue and small issue industrial development bends. He requested Congress to pass legislation to reauthorize and extend permanently the low income housing and targeted jobs tax credit programs.

A Distressed Cities and Towns Enterprise Zone Program

The President proposed a two-tiered urban and rural enterprise zone program which would authorize every eligible city and town to issue a new kind of tax exempt economic development bond. There would be incentive for Focal banks to purchase the. bonds, and the bonds would count only 50 percent against the state private activity volume cap. The proposal would provide for nearly $5 billion in direct aid and tax incentives for up to 50 urban and rural enterprise zones over the next five years.

Expand the Earned Income Tax Credit

The President proposed a $26 billion expansion of the Earned Income Tax Credit (EITC) program to insure that no working family would fall below the federal poverty level.

Long Term Budget Priorities and Deficit Reduction

President Clinton also presented the outlines of his longer term economic plan to change federal spending priorities and reduce the federal deficit. The White House intends to submit the president's detailed long term investment and deficit reduction plan later next month.

The President called for $160 billion in longer term investments, including $136 billion in new spending and over $24 billion for private sector tax incentives over the next four years. He proposed capital initiatives important to cities in the areas of: economic development, transportation, housing and community development, and rural development. He proposed human investments in the areas of: Head Start, national service, education programs, anti-crime and worker training.

In presenting the outlines of his investment and deficit reduction plans, the President said:

"Our plan looks beyond today's business cycle. The heart of the plan looks to the long term."

To reduce the federal deficit, the President proposed more than $245 billion in federal tax increases and over $200 billion in spending cuts. The spending cuts would be greatest for federal entitlement programs and national defense, $91 billion and $75 billion respectively. The administration also proposed significant cuts in foreign aid and $50 billion in domestic programs.

The administration projects that the combination of tax increases, spending cuts, and investment would reduce the 1997 federal deficit by about $140 billion to $206.5 billion.

Noting that the nation is "standing on the edge of the 21st century," President Clinton told the Congress:

"Perhaps the most fundamental change our new direction offers is its focus on the future and the investments we seek in our children."

For cities and towns faced with escalating costs of unfunded environmental mandates, the President promised the "most ambitious environmental cleanup of our time," but he offered no details of what federal resources or flexibility would be available to assist local governments.

The President said his budget plan would cut $140 billion from the federal deficit by the year 1997. He said it would include 150 specific cuts and that there would be no sacred cows except the fundamental abiding interest of the American people.

For cities, the most significant cut appeared to be the proposed phase-out and elimination of the municipal wastewater program, projected to cut the federal deficit by over $4 billion. Because the White House documents also proposed beth a new Safe Drinking Water revolving loan fund (SRF) and capitalizing the existing state revolving loan fund program to help address stormwater requirements, the net impact on cities and towns was uncertain.

By far the greatest contributor to deficit reduction under the President's plan would be federal tax increases. The major tax increases would include:

* raising individual tax rates for high income persons

* an income surtax

* closing loopholes

* raising corporate taxes

* cutting deductions for lobbying lunches

* eliminating the Medicare tax cap

* increasing the amount of Social Security subject to taxes

* a broad-based BTU tax

Proposed Family Initiatives

The President outlined a series of investments in children that he said would produce long term savings to the nation:

* funding for immunizations for all children

* expansion of the Women, Infant and Children's program

* expansion of Head Start to every eligible child

* apprenticeship programs in every state

* a Unified, simplified worker retraining program

* a national service program

* the toughest child support system this country has ever had

* a tough crime bill to challenge the violence that is tearing our communities apart

* an expanded EITC to ensure that any family that works 40 hours per week and has a child will no longer be in poverty
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Title Annotation:includes related plan outline as well as information on the cities' role and on family initiatives; Bill Clinton
Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:Feb 22, 1993
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