Ronald Reagan's mandate from the American voters last week could offer Washington business and government leaders an unusual opportunity to move off dead center in the search for ways to rebuild the District's private tax base.
As former District City Council Chairman Sterling Tucker noted, in talking about the surprise Republican landslide on Tuesday, "the city will have to make its case, and not just assume things."
Two important factors should be considered. For one thing, starting in January, the city's government will be under the surveillance of a Republican White House and GOP-controlled Senate for the first time in a generation -- and for the first time since home rule was granted.
Second, and most important, is the reality of the District's financial plight. This is a nonpartisan issue and is the single most serious economic problem faced by the Washington metropolitan area. The city doesn't even have money available to begin developing the lottery that the voters have endorsed to fulfill the promise of future tax revenues.
Statistics published last week indicate dramatically where new jobs are being created in metropolitan Washington, the nation's most affluent urban marketplace. Total employment in the 12 months through September rose by a healthy 52,900 to 1.57 million, with more than 12,000 new jobs in the professions and services industry alone.
This overall increase took place in a year when recession helped reduce area construction payrolls by 8,400, which means that local employment has an even stronger base.
But D.C.'s share of this jobs boom was just 2,200, a mere 4 percent of the metropolitan employment expansion. Only in the services area was there any substantial increase in the city employment base, and that was offset partially by declines in construction, communications, public utilities, retailing and government jobs.
Unemployment in the city also remains a greater burden for the government, local businesses and all area taxpayers. The D.C. jobless rate jumped 7 percent in September from 6.7 percent in August, while the metropolitan jobless rate was 4.3 percent, up from 4 percent. The amount of jobless benefits paid under the D.C. unemployment insurance program soared 44 percent from a year ago to $6.07 million for September.
These statistics do not reflect a new trend. For years, the city has been losing population, businesses, jobs and taxes. Moreover, D.C. has not won any significant portion of the new jobs attracted to the Washington area. And even though for a decade suburban governments have been writing open guidebooks on how to win new businesses and influence corporate executives, the city government has not developed an aggressive program to attract business and jobs.
The District Building quite properly shifts some of the blame for this state of affairs to Capitol Hill, because Congress has refused city budget requests to finance economic development activities (which survive, though in a modest way, on grants).
But, as Tucker said last week, maybe it's time for the city and its business community to assert some independent spirit.
What better place to begin than in the economic sector, at a moment when private industry job-creation is an important element of the incoming administration's program to curb inflation and restore real income growth?
There already exists, in a little-noticed section of the Republican Party platform and in texts of Reagan campaign speeches and debates, an idea that deserves more than the typical D.C. approach of appointing a commission to investigate and make recommendations two years later.
Reagan and the Republicans have proposed "enterprise zones" to help rejuvenate depressed or desolate neighborhoods in the nation's cities. Area business leaders ought to consider getting together with city government officials on a proposal to make Washington one of the first cities to experiment with this new approach. The Reagan White House might welcome the opportunity to move quickly in January to back such a plan, as evidence of their commitment to new ideas for problems that long have festered.
The concept of enterprise zones for cities was first suggested in 1977 by Prof. Peter Hall, an urban planning expert and socialist in England. Sir Geoffrey Howe, now Chancellor of the Exchequer in Prime Minister Margaret Thatcher's Conservative government, offered a modified version of Hall's plan the next year. Currently, the Thatcher government is moving ahead with creation of enterprise zones in seven cities.
In this country, economist Stuart Butler of the Washington-based Heritage Foundation has taken up the enterprise zone concept and suggested some approaches that he thinks would work in America. But the basic ideas remain those of Sir Geoffrey.
Sir Geoffrey's plan has these basic features:
An area of a square mile or so in a depressed part of the city would be designated as an enterprise zone, and virtually all planning controls would cease to apply there. Any building that complied with basic antipollution, health and safety standards, and for a legal purpose, would be permitted.
Any land or property in the zone owned by the city government would be sold to private bidders at auction in the open market, and new developments in the zone would be free from rent controls.
Entrepreneurs who moved into the zone would be granted reductions or exemptions from property taxes and there would be a reduction in capital gains taxes on development.
So special government grants or subsidies would be made to any enterprise in a zone, but there would be guarantees that public laws affecting investment and depreciation would not be changed to the disadvantage of the businesses.
Wage and price controls would not apply within the zone, and all of the conditions would be guaranteed for a stated and "substantial" number of years.
Reduced to the essential foundation, says Butler, the enterprise zone idea aims to stimulate business -- especially small business -- in depressed central city neighborhoods "by encouraging entrepreneurs to take the risk of setting up a business by removing unnecessary obstacles and reducing taxes."
What are the potential drawbacks? Butler cites several objections that have been raised, including the possibility that these zones will merely encourage existing businesses to move and cause a loss of tax revenues in their former locations. He argues that this is unlikely on a large scale.
There would be opposition to suspending minimum wage laws, too. Butler suggests as compromises a youth minimum wage, lower than the standard minimum (an idea Reagan has backed) or a subsidy/tax credit for those hiring labor in the zones. Federal legislation proposed in June by Reps. Jack Kemp (R-N.Y.) and Robert Garcia (D-N.Y.), which backs the zone theory, would keep the minimum wage intact but reduce employers' Social Security tax rates.
The District could wait for the new administration to make its move or for Congress to take up the Kemp-Garcia Urban Jobs and Enterprise Zone Act. But the city also could move ahead on its own.