POLITICSnEZ Livingnby Jeffrey A. TuckernEnterprise Zones and thenWelfare StatenEnterprise zones have been a pillarnof the Republican antipovertynagenda for at least twelve years. Butntoday enterprise zones (EZs) representnlittle more than government welfare bynanother name. As such, they symbolizena general Republican ideological declinenfrom free-market conservatism tonbig-government welfarism.nOriginally, the idea was to use freemarketnforces, not subsidies, to mitigateninner-city poverty and integrate theninner-city poor into the labor pool. Annarea declared an EZ was to create anbottom-up entrepreneurial revolutionnby having no artificial barriers to economicnopportunity.nAccording to Housing and UrbannDevelopment Secretary Jack Kemp,n”the purpose behind enterprise zones isnreally very simple: stop doing things thatndestroy our cities, snuff out jobs, andnsmother the entrepreneurial spirit. Instead,nfoster an investment climate thatnwill create new jobs and help producenhundreds, perhaps thousands, of newn46/CHRONICLESnVITAL SIGNSnentrepreneurs and small business people.”nBesides Mr. Kemp, the other veterannenterprise zone advocate is Stuart Butler,ndirector of domestic policy at thenHeritage Foundation in Washington,nD.C. Mr. Kemp and Mr. Butler disagreenon who originated EZs. Mr. Butlerncredits the idea to Britain’s Sir GeoffreynHowe, who designed Margaret Thatcher’snantipoverty program for industrialncities. Mr. Kemp, however, says the EZnidea comes from his study of postwarnhistory, when the U.S. spurred developmentnin Puerto Rico through a taxcuttingn(and subsidy) program callednOperation Bootstrap. Mr. Kemp wantsnto replicate that program in povertystrickenncities (though he made nonmention of subsidies in the eady days).nIn 1979 Mr. Butler, then writingnfrom London, dispatched the originalnEZ plan for America in an “InternationalnBriefing” published by the HeritagenFoundation. It was a radical alternativento the Great Society programs.nThe EZ would eliminate planning controlsn(including zoning), abolish minimumnwage laws and rent controls,nrequire the selling of “all” city-ownednland, and lower property taxes for incomingnentrepreneurs. Most importantly,n”no company entering a zonenwould be eligible for any subsidy, grant,nor other form of government assistancenwhatsoever.”nIt was a good plan, and it might havenworked. It didn’t cost taxpayers a dime;nnone of the provisions of the eady EZsnwere redistributive. There was even talknof making the entire country an EZ.nThe conservative movement universallynadopted support for enterprise zones asnan ideological litmus test.nBut by 1981, when the idea reachednthe policy stage, the radical EZ plan hadnbeen watered down. What the Reagannadministration and its associated thinkntanks supported instead was a version ofnthe EZ concept that had little to do withnthe original Butler plan. It spoke only ofnlarge and diverse tax breaks and minornderegulation; every other provision wasnnntossed out.nTen years have passed, and despitenthe hopes of EZ supporters. Congressnhas not passed a federal EZ plan, exceptnfor a 1987 bill that gave HUD thenpower to declare that 100 targeted areasncould receive federal dollars. Becausenthis bill was passed under the discreditednPierce regime, Mr. Kemp has chosennnot to act on it. But since 1981, lawmakersnin 38 states have adopted somenform of EZ legislation, mostly in hopesnof benefiting from federal legislationnthat has yet to materialize. The existingnEZ programs, so often praised andnanalyzed, are all run by the states.nCommon to all state EZ plans are taxnincentives and regulatory changes forneconomically depressed areas. Employersnare allowed property tax abatements,ntax credits for hiring new employees,nextended tax write-offs for business losses,nincome tax credits, and sales taxnbreaks. The plans also promise to cutnred tape that inhibits entrepreneurship.nNone mentions wage or rent controls ornprivatization.nMany conservatives have praisednthese various state plans and urged thenfederal government to cooperate withnits own legislation. Mr. Kemp says, fornexample, that state-run EZs “have createdn180,000 new jobs, retained neariyn68,000 jobs, and promoted more thann$9 billion in new investment.”nUnfortunately, these numbers cannotnbe taken at face value. They glossnover the dirty little secret of today’s EZs.nBesides tax breaks and deregulation, thentypical EZ has a third plank: a promisenof pro-business welfare. Though thisnhas been completely overiooked in publicndebate, it amounts to redistributionnfrom taxpayers to businesses.nAmong the states ofl^ering hugengrants to business for “job training” arenVermont, Connecticut, New York,nNew Jersey, Rhode Island, Pennsylvania,nIllinois, Kansas, Arkansas, Louisiana,nAlabama, Oregon, and Nevada.nThey force taxpayers to pay the salaries,nin whole or in part, of new employees.nIn some cases, the state subsidizes em-n