How Much Difference Can Obama Really Make on the Economy?

"Promise zones," one of the president's flagship income-inequality initiatives, are a study in what happens when his idealistic vision collides with real-world political constraints.
President Obama high-fives a man during a White House even to launch his "Promise Zones." Kevin Lamarque/Reuters)

After five years of bitter partisan combat, President Obama warned Congress Tuesday that he will move forward on his economic agenda with or without their help, threatening to make an end run around legislative gridlock through a series of new executive actions designed to lay the groundwork for liberals’ newly declared war on income inequality. 

Although he didn’t mention them by name in last night’s State of the Union address, one of the president’s more ambitious ideas to address economic instability is a plan to create “Promise Zones” in low-income communities, where the government would target federal investment to reduce poverty in select neighborhoods.

Obama actually introduced the initiative in last year’s State of the Union address, but earlier this month, he finally got around to selecting the first five zones—in Los Angeles, Philadelphia, San Antonio, Southeastern Kentucky, and the Choctaw Nation of Oklahoma. The plan, he said, is to expand the program to 20 neighborhoods by the end of his second term. “Your country will help you remake your community on behalf of your kids,” he told a White House audience on January 9. “Not with a handout, but as partners with them every step of the way.”

The initiative, part of Obama’s promised “year of action” on income-inequality issues, is designed as a direct government intervention into struggling neighborhoods. Basically, the idea is to blitz the Promise Zone with a menu of social services, in the hopes that the combined resources will improve economic mobility and quality of life for poor residents in the area. Selected communities will receive federal assistance from multiple agencies to combat a range of social issues surrounding poverty, with the goal of coordinating the often-haphazard flow of government spending into depressed areas. But like much of the president’s anti-poverty agenda, the broad scope of the Promise Zones has been limited by political gridlock and spending constraints. With no new funding attached to the program—and no clear mechanism for determining its effect on poverty—big questions remain about whether the Promise Zones will actually alleviate poverty in the communities that need it most.

At first glance, the Promise Zones look like another tired retread of the low-tax, low-regulation “enterprise zones” embraced by conservatives as a way to spur economic development in urban areas. Championed by Jack Kemp in the 1980s and 1990s as “empowerment zones,” federal enterprise zones were implemented by Congress during the Clinton Administration, producing mixed results. While some early assessments discovered that the zones did experience some job growth, reports from the Government Accountability Office found that it was impossible to tie those benefits to the enterprise zone program. Academic studies, including a 2002 paper from two University of Iowa researchers and a 2006 report in the Journal of Urban Affairs, similarly concluded there was little evidence that enterprise zones have had a measurable impact on economic growth or job creation.

Nevertheless, the idea periodically resurfaces in Republican anti-poverty platforms, most recently in the form of Rand Paul’s Economic Freedom Zones Act, which would slash taxes and regulations in areas with high unemployment or unstable municipal finances. Apparently seeing similarities between Obama’s Promise Zones and his own proposed legislation, Paul, who attended the White House announcement this month, smirked: “They say the sincerest form of flattery of imitation.”

But while conservative poverty policies have largely shunned federal programs in favor of private-sector or state solutions, the Promise Zones envision a hands-on role for the government—not just to encourage economic growth, but to address problems associated with poverty, from improving public safety and investing in transportation infrastructure, to increasing access to affordable housing and expanding so-called “cradle-to-college” services in local schools.

The zones build on the administration’s Neighborhood Revitalization Initiative, a multi-agency anti-poverty strategy established in Obama’s first term. That initiative combined Promise Neighborhood grants funded by the Department of Education, Choice Neighborhood grants from the Department of Housing and Urban Development, and the Justice Department’s Byrne Criminal Justice Innovation program. To be eligible for the Promise Zone designation, neighborhoods must have already received at least one of these grants, demonstrating that it is on board with the Obama Administration’s community-based approach to addressing poverty issues. (It’s also worth noting that the three cities awarded a Promise Zone designation—Los Angeles, Philadelphia, and San Antonio—are all led by Democratic mayors with close ties to the White House.)

“In the broadest sense, the enterprise-zone and empowerment-zone programs were about business and economic development in targeted places,” says Alan Berube, a senior fellow at the Brookings Institution Metropolitan Policy Program. By contrast, he says, the Promise Zones take a more comprehensive approach to addressing income inequality, using a range of evidence-based indicators that research has shown to have an effect on poverty outcomes. “It’s about anything and everything the federal government is currently doing to strengthen these poor communities,” Berube adds.

Hamstrung by tight spending limits and Republican intransigence, the Promise Zones are actually a rather restrained approach to dealing with income inequality. Obama essentially acknowledged Tuesday that any major overhaul of federal poverty programs is pretty much off the table in the current Congress, and it is unlikely that the House will even pass the relatively modest tax credits Obama has requested for the Promise Zones. Instead, the zones will reward designated communities with priority for existing grants, and provide an on-site team of federal employees to help identify government resources and cut through bureaucratic red tape.

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Grace Wyler is a journalist based in New York. She was previously the politics editor at Business Insider and has written for Time, ViceNew York, and The New Republic.

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