For the last three years, Stuart M. Butler has been telling anyone who would listen that the secret to revitalizing urban America lies in pruning the thicket of federal regulations strangling its creative impulses.
A young British economist whose conservative views are sharpened by a biting wit, Butler has been one of the first and foremost spokesmen for the creation of urban "enterprise zones" since joining the Heritage Foundation in 1979. Now, after nearly two years of delay, the plan is suddenly making headway.
The Senate Finance Committee approved a version of the legislation in September, and President Reagan has singled it out as one of his top priorities for the lame-duck session of Congress, which starts Monday.
You might expect to find Butler flinging off his bow tie and opening champagne. Instead, he complains that the Reagan administration has so watered down his urban recipe, and thrown in so many complicated elements, that it has lost the simple flavor that made it so attractive.
"It's become a typical federal bureaucratic morass so that no one knows who the hell is eligible," Butler declared. "The Treasury had these little gray men supplying all kinds of complicated fine print. You weren't supposed to have to hire a lawyer and accountant to find out if you're eligible.
"The administration has been so skeptical and resistant to the idea," he said. "They really don't know anything about the inner cities. They'd rather just have something where President Reagan can cut a few ribbons."
For many conservatives, the enterprise zone provides a rare chance to suspend all those federal regulations they have long detested. Best of all, it won't cost very much.
The decline of American cities, Butler contends, has been hastened by government policies. Rent control has dried up the supply of housing by denying builders a reasonable profit. The minimum wage has overpriced the labor market, especially among the unskilled. The Davis-Bacon Act has driven up construction costs by mandating union-scale wages. High taxes have taken much of the incentive out of starting a small business.
Butler's goal is to create an entrepreneurial climate where small businessmen, aspiring workers and neighborhood self-help groups can thrive. "The idea," he said, "was to put a fence around an area that said, 'Congratulations, you are now in an enterprise zone. Federal rules no longer apply.' "
Toward that end, Butler wanted to eliminate Social Security taxes on employe wages. He would lower property taxes and suspend local zoning laws. He would dispense with the minimum wage, rent control and capital gains taxes. And he proposed a 100 percent tax credit for new investment in the zone, with the money actually refunded to fledgling businesses.
The idea soon caught the eye of a supply-side apostle, Rep. Jack Kemp (R-N.Y.), who got candidate Ronald Reagan to endorse it. After Reagan's election, Kemp produced a revised bill with liberal Rep. Robert Garcia (D-N.Y.), who made it respectable for Democrats to support.
But while the Housing and Urban Development Department was to run the program, the Treasury was given the job of drawing up the administration bill. Meetings dragged on for months as Treasury officials raised objections. "There was no indication the discussions would ever cease," Butler said.
"All along people at Treasury have been reluctant about it," said an aide to Sen. John H. Chafee (R-R.I.), a prime Senate sponsor. "The administration likes to talk about enterprise zones, but they haven't put much behind it." Responds David Glickman, a deputy assistant secretary: "The Treasury Department has not been obstreperous on this matter. We tried to balance it out as best we could, to make sure it was cost-effective and not horrendously expensive."
By the time the White House bill surfaced last March, many of the original ideas had been lost. Efforts to cut back on Social Security taxes and the minimum wage were dropped as too controversial. Other incentives, from property taxes to zoning, would simply be "encouraged." A big income tax break for zone employes was scrapped as a kind of "combat pay."
But proponents were most disappointed over the scuttling of a plan to give new businesses a 100 percent tax refund for any investments made in the zone. Administration officials, determined to protect the bill from any actual spending, insisted this would be too costly.
"Most small businesses don't pay income taxes for years, so giving them a tax credit won't help them in the slightest," Butler insisted. "A typical start-up business will not be able to use any provision in this bill."
The 63-page Senate bill does include an investment tax credit of up to 10 percent, and a modest income tax credit for businesses that hire new workers. It offers a 50 percent income tax credit for firms that hire "economically disadvantaged individuals," a category that requires 32 paragraphs of definition. And it sets aside a third of the 75 zones for rural areas as a political compromise.
Supporters now hope that cities will find imaginative ways for neighborhood residents to deliver public services more cheaply. Ghetto youngsters might be hired to collect garbage for less than the $15 to $20 an hour commanded by sanitation workers.
But union leaders are up in arms over that idea, which underscores the fact that the enterprise zone has no real constituency. "The people arrayed against this are city officials, planners and consultants -- all these middlemen who have done very nicely on federal money," Butler said.