Matthew Yglesias: Community Development Block Grants

Community Development Block Grants

When it comes time to slash the budget, Republicans like to make sure that the burdens are born by the poorest among us. Hence cuts in Medicaid, Section 8 housing, and the Community Development Block Grants program. Medicaid and Section 8 are both wonderful things. I've heard, however, from some seemingly well-informed liberals that Kaus is right to call CDBG "an ineffective antipoverty program . . . slush funds for local politicians, who too often sluice the federal money to their developer friends to build ugly downtown hotels." A liberal friend on the Hill who worked last year a related program that's being folded into the CDBG (with their combined budgets cut) agreed that he could see little real economic development benefits flowing from these sort of grants. But before I leap to join the heterodox faction, does anyone have a link to a careful argument that CDBG is, in fact, worthwhile. Not just someone pointing out that it's anti-poverty spending and its scandalous to be cutting anti-poverty spending while cutting taxes for the super-rich. I agree! Bush's Medicaid plans are a moral outrage. But specifically does CDBG work? How well does it work compared to other anti-poverty programs?

UPDATE:

This paper from the Urban Institute argues that Community Development Corporations -- partially funded by CDBGs -- have been highly effective policy tools, an argument I read at some length in Comeback Cities, a book I recommend. They also note:

In our analysis of change over time and across cities, we found that at the beginning of NCDI, cities with the same amounts of housing funding flowing into their communities from HUD's HOME and Community Development Block Grant (CDBG) programs had very different numbers of capable CDCs active in poor neighborhoods. This is because cities make different policy choices regarding the role of CDCs in community development—some explicitly favoring CDCs, others not.

That seems to suggest that cutting CDBG funding and reallocating the money to something more explicitly designed to promote CDCs would be a good idea, while cutting CDBG funding in order to finance high-end tax cuts (what Bush is doing) are not. Other Urban research here though the rest doesn't seem to be as on-point based on skimming it (apologies, but it would take a lot of time to go through this all rigorously).

Brookings rather cryptically argues that:

Federal block grants to states and cities are existing place-based programs that can be refined to better recognize the disproportionate impact of concentrated poverty on large cities. That means restructuring block grant allocation formulas so that cities with relatively high proportions of poor residents receive greater per capita assistance than cities with fewer poor residents. For instance, Community Development Block Grants (CDBG) and public housing grants are already largely directed toward high-poverty jurisdictions. However, the allocation formulas for such programs could be improved to better equalize the poverty and immigration costs across many of the nation's largest cities and their suburbs. Even so, the dollars involved in these traditional urban programs are not sufficient to address the magnitude of the fiscal imbalance faced by cities with higher concentrations of poverty.

Tentatively, this seems more like a program in need of reform than cuts.

February 10, 2005 | Permalink

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Comments

"does anyone have a link to a careful argument that CDBG is, in fact, worthwhile?"

Two useless retorts:

- CBGB's is quite worthwhile. Where else would punk bands get their start?

- If rural areas can have ethanol subsidies, why can't urban areas have CDBG's?

But absent any actual knowledge on the topic at hand, I will say that I enjoyed Kaus's Kerry snipe.

Posted by: Petey | Feb 10, 2005 1:47:40 PM

Re: the TNR article on Medicaid that you linked to, Matt. It's one thing to characterize Bush and certain state governors as heartless creeps for trying to block-grant Medicaid funds or cut people from the rolls who probably shouldn't be there, but then there's reality: If Medicaid isn't reformed, it's going to start eating up a larger and larger share of each state's budget, until it crowds out funding for education, roads, and other services completely. Saving Medicaid as it stands wouldn't just be a matter of raising taxes, unless you eventually want to raise state taxes by 80, 90, or 100%. The fact is, Medicaid already has too many people on it, and it offers them more benefits than people get in normal, private insurance plans. And we're just supposed to keep ponying up for it, fiscal consequences be damned? There's plenty of evidence that Medicaid "crowds out" private plans; if someone can sign up for Medicaid essentially for free (even if he could afford some sort of basic insurance), why on earth wouldn't he take advantage of Medicaid's generosity?

I just don't understand why it's productive to call governors like those in Mississippi, Tennessee, and elsewhere, heartless bastards for trying to reform Medicaid so that it doesn't lead them to bankruptcy. If they can't cut people from the rolls, decrease certain non-essential benefits, increase co-pays, or raise taxes (obviously a politically unfeasible option in many states), just what the hell are they supposed to do?

Posted by: what? | Feb 10, 2005 1:49:01 PM

Don't forget that the reason we have CDBG is that Reagan budget-cutters wanted an easier way to abolish programs, so they combined lots of specific granting programs into one mishmash.

Ostensibly, it was to allow "local control". Back when conservatives cared about federalism and such things, they argued local authorities would have a better idea of how to address local problems. Of course, the reality was that the total of the new block grants was never as large as the combined funding for the programs they replaced.

And now they will cut the CDBGs - because there's too much local control? Geez...

I'd say there's an equity issue here... Perhaps if the proposal was to replace the CDBGs with a nice selection of new federal programs for cities and poor communities, there'd a good argument. Otherwise, it's just more class warfare.

Posted by: Silent E | Feb 10, 2005 1:53:07 PM

Since CDBG has been around since the Housing and Community Development Act of 1974, why don't you do what President Bush claimed he has done (which I seriously doubt) and go look at the evaluations of CDBG done by HUD over 30 years, and by urban studies scholars in a variety of professional journals over 30 years? Or even--shucks, you are in the same town--call up some of the professionals at the Urban Institute who do evaluations of CDBG and ask for their references. It is a block grant, with all the weaknesses and strengths of the beast. Yes, Cdbg money can and has been put to unhelpful activities, and those not targeted to its intended beneficiaries. But for local public officials and communities and citizens 9and their organizations) who know the rules and push hard for the types of investment and development called for in law and regs, it can be used for a lot of good things, gotten no other way. Particularly, there is almost no other way for cities to meaningfully fund housing rehabilitation (or related infrastructure rehab) than to use CDBG and other federal funds. To get some 30-year perspective isn't hard, just requires some homework.
Charles

Posted by: charles | Feb 10, 2005 1:56:49 PM

what? writes: " It's one thing to characterize Bush and certain state governors as heartless creeps for trying to block-grant Medicaid funds or cut people from the rolls who probably shouldn't be there, but then there's reality"

Reality according to the TNR article:

"the real reason Medicaid keeps getting more expensive is that more and more people need it. Employer-provided health insurance is ever more difficult to find; affordable long-term care for the elderly virtually impossible. Medicaid is nobody's ideal solution to these problems. ... But, for all of its flaws, it's the most cost-effective option on the mainstream political agenda..."

"Think of it this way: If Medicaid hadn't grown to fill the yawning gaps in private coverage over the last decade, today we would probably have 50 million uninsured Americans instead of 45 million. ... rolling back Medicaid means the poor and disabled will have to confront medical bills alone. The bankruptcies will pile up, emergency rooms will get even more crowded, and, yes, some people will die."

Posted by: Petey | Feb 10, 2005 1:57:33 PM

State and local governments dispensing federal cash, pursuant to federal rules, subject to oversight by federal bureaucrats, using bureaucratic processes and evaluation criteria, to whoever writes the best grant application – how could this possibly provide a net economic benefit to the nation? It would be far preferable to eliminate the program, reduce taxes (or borrowing) by an equivalent amount, and thereby eliminate the economic friction involved in administering the program.

Posted by: ostap | Feb 10, 2005 2:07:30 PM

P.S. There are a number of organizations in Washington with a long track record of working with low and moderate income community and neighborhood groups in their using the Community Development Block Grant. That is, they have experience on the ground with the pluses and minuses of the program. You should get in touch with the Center for Community Change as one such organizations for their considered evaluation of the CDBG program. As federally assisted housing programs have shrunk over the last 25 years (see what Section 8 once was to what it is now), as urban aid of various kinds (EPA, Interior, etc.) have shrunk over the same time period, what is left in urban aid that is targeted to low and moderate income people? It is not enough by itself, but for a nation and a national government that a generation ago was trying to address an "urban crisis," it is about all that is left. Shall we declare "victory" over the urban crisis as over Iraq, and just move on to Iran or North Korea, or wherever? It may be one of the few symbols left of federal concern for cities (and one originated by Richard Nixon, at that, to move federal money out of LBJ's poverty programs), but I would hate to give that up entirely, especially because a number of urban low income communities now know how to use the program for community benefits.

Posted by: charles | Feb 10, 2005 2:18:07 PM

North Korea finally admits to Nukes. Don't you just love that cuddly little appeasement character.

Posted by: danfromcos | Feb 10, 2005 2:19:09 PM

Petey: TNR and MY are ignoring the catch-22 of Medicaid: For several businesses, it's cheaper not to offer insurance and let its employees be on Medicaid. So businesses have no incentive to pay for HI b/c they can be a free rider.

And Medicaid enrollees have no incentives b/c they don't pay for the services. And it's not surprising that a free good gets consumed a lot more than a good that costs money.

The numbers of Medicaid/Medicare are just scary. And I don't know what the answer is in fixing the system.

Posted by: Hoo | Feb 10, 2005 2:19:19 PM

OSTAP doesn't even understand CDBG. Since the Reagan years, CDBG has bee split into two parts: a "large cites" part, and a "small cities" part. All cities in the nation over 50,000 in population get an annual allocation under one of the applicable CDBG formulas (the law defines them as entitled to it), even though they have to write a grant application to HUD (saying what they intend to do with the money in the allowed program areas of expenditure). These grant apps are not the basis on which CDBG money is allocated to cities (the formula determines that) but they are a great help to local community groups in both setting the local agenda for uses of the money and for holding their local officials accountable for what it was actually used for. The cities under 50,000 in population actually have to enter into a competitive grant application contest with their STATES' development offices, because small cities CDBG is first allocated to the states for them to parcel out to small localities. If you don't like this provision, argue with Reagan and his "new federalism" people. I think (could be wrong,last time I looked) large cities CDBG allocated 80% of federal funds, small cities 20%. Even with division, the largest share is awarded in a non-competitive program.
Charles

Posted by: charles | Feb 10, 2005 2:31:03 PM

"The numbers of Medicaid/Medicare are just scary. And I don't know what the answer is in fixing the system."

Scary? I'd say the number of folks not on Medicaid is scary. But then again, I'm silly enough to think health care should be a right in a rich society.

The answer to fixing the system has been apparent for over a decade now - some form of universal health insurance is the only way to keep costs rational and contained.

Posted by: Petey | Feb 10, 2005 2:32:50 PM

Posted by: charles | Feb 10, 2005 2:33:17 PM

What? is obviously clueless about who is on Medicaid. You cannot just choose to be on Medicaid, you have to be poor. As in: too poor to afford health insurance.

It is means tested, some programs both for income and assets. And many states do not even offer Medicaid for the presumed worst offenders: single, childless, able-bodied, working age adults. Texas sure doesn't. Kids and pregnant women can get Medicaid if their monthly income is below 185% of poverty. A non-pregnant parent can get Medicaid if their total assets are below $1000 and their countable net income (recognizeable needs) is below, for example, $188 per month for a mom and 2 kids.

Find room in that number for an individual health insurance policy.

And realize, also, that the largest part of Medicaid goes to the elderly (plus they get Medicare!) There are millions of elderly in nursing homes paid for by Medicaid. If you want to make a dent in Medicaid, send these millions home to live with their kids.

What the idiots in our society do not realize (because they do not care to think) is that health care cannot truly be economized by having our state and government pay for less. By law the health care buck stops at local government. Your local taxes fund the final safety net: your local public sector hospital and clinic system. Every time Mr. Bush cuts Medicaid realize that your local property and sales taxes just went up a proportionate amount. There is no free lunch in health care either.

There are only two directions this problem can go that will resolve our health care financial issues: a single payer system or rationing/refusing treatment based on the ability to pay.

Posted by: Nat | Feb 10, 2005 2:37:42 PM

What? says: if someone can sign up for Medicaid essentially for free (even if he could afford some sort of basic insurance), why on earth wouldn't he take advantage of Medicaid's generosity?

Let me take a lesson from Bush's methods and offer anecdotal info. My son is 21, has a job that pays $10.00 per hour, and is limited to 20 hr per week maximum, with unpaid holidays and other unpaid days off throughout the year when the office is shut down. They don't offer group health insurance, even at 100% employee payment. He goes to college full time. His dad died when he was 5. I was fine for over 10 yrs., then got very sick and havent't worked now for over 5 years. I lost my house, which I had to sell to meet expenses of my illness and his education, although we did qualify for small grants and more substantial loans that he will repay after graduation.

He makes too much to qualify for medicaid. He makes less than $10,000 per year. He bought a bare bones plan and it is over $300 per month. Good thing too because he had an attack of appendicitis and had to have his appendix removed. I guess old what? thinks that he would have been covered if he had no insurance, but old what? would have been wrong. They probably would have performed the emergence surgery if he showed up at an emergency room uninsured and in severe distress, but would then he'd be paying the highest levels, well above those charged to the insured, for everything. Anyway, it is clear to me that old what? is either willfully ignorant or as he so interestingly put it, "...a heartless bastard".
If what" thinks that someone making even LESS than my son, in order to qualify for Medicaid, could actually afford some sort of basic insurance, maybe he can share with the rest of us where this insurance is offered.

Posted by: wishful | Feb 10, 2005 2:54:42 PM

This is mostly beside the point but in the suburban NJ towns I cover at a weekly newspaper, CDBG funds are often used for little initiatives like helping senior citizens hire a handyman to make repairs to their property or their sidewalks or whatever. i think towns have also applied for funds (the county gets a pot of money and it's divvied up at that point) to do things like add an elevator to the municipal building. basically small but worthwhile things, though the program can be hard to administer because you need someone who has both technical skills and people skills. but i'm sure this accounts for only a fraction of total CDBG funds.

Posted by: Greg | Feb 10, 2005 2:59:06 PM

Oddly enought I thought it would be fairly easy to find some outside evaluations of CDBG programs and activities. A Google search (CDBG evaluations) returned 12,000+ hits, but after scrolling through a couple of hundred, I gave up. A search on the Social Science Research Network found no papers with CDBG or Community Development Block Grant in the title or abstract.

I'm guessing there's room here for someone to do some useful work. If anyone cares at this point.

Posted by: Donald A. Coffin | Feb 10, 2005 3:10:05 PM

This is very odd: for the second time in a few days you post asking for info on a relatively obscure topic I am planning to write about. Hmm.

CDBGs, as people have noted, are very flexible, and allow for a lot of local control. This of course means that when the local controllers are dumb or corrupt, the grants can be used for patronage. When you opt for local control, those are the risks. However, where the local government more or less works they are an incredibly useful tool, especially for doing little necessary projects that are hard to fund in other ways (e.g., fixing the roof on a low-income childcare center, or helping to repair low-income housing.) It can be very cost-effective (consider the difference between fixing the roof on a childcare center to bring it back to code and building a new center). Most importantly, it's one of a cluster of programs aimed at low-income housing and economic development that have already been cut badly, and that we really need. The idea of cutting CDBG to fund e.g. the repeal of the estate tax makes me sick.

Posted by: hilzoy | Feb 10, 2005 3:23:06 PM

Charles, I think you just proved my point. Thanks.

Posted by: ostap | Feb 10, 2005 3:46:05 PM

ostap's point being, apparently, that tax cuts for, say, Carly Fiorina will inevitably lead to decent low-income housing in inner cities by methods far more efficient and transparent than giving cash to organizations located in inner cities.

Also, with tax cuts, you get ponies.

Posted by: JRoth | Feb 10, 2005 4:30:28 PM

JRoth - No, not my point. As relevant to your post, my point is that it would be better to provide tax cuts for people who live in inner cities so they can figure out for themselves how to spend their money, than to siphon off a piece to feed bureaucrats who cycle their money around the country before giving them back less than 100 cents on the dollar. The grant process distorts decisions, and the cycling process is sheer waste.

Posted by: ostap | Feb 10, 2005 4:59:24 PM

Can we, please, make medical insurance tax-neutral so it is no longer directly linked with our employment? Thanks!

Posted by: Mr. Econotarian | Feb 10, 2005 5:14:12 PM

Can any give me a clue as to what is really going on with Section 8 housing in this budget?When I go to the website of my local Section 8 authority,I see a message which says the program is in a crisis,yet the HUD website claims Bush has not cut section 8 but actually added one billion to it.

Posted by: F | Feb 10, 2005 5:34:48 PM

"Can we, please, make medical insurance universal so it is no longer directly linked with our employment? Thanks!"

Posted by: Petey | Feb 10, 2005 5:37:23 PM

ostap blows it again. CDBG is targeted by law to persons and households of low and moderate income. Also, by tax law, a large proportion of them do not pay ANY federal income tax, having too little income to be required to do so. Any kind of tax cut would do this urban population NO GOOD AT ALL, their not being able to be eligible for nor participate in it. The statutory requirement of CDBG is not that it be a "net economic benefit to the nation," but that it be a community development benefit to low and moderate income persons and households residing in specific places. The evaluations cited above, applying statutory definitions and rules criteria, show that, in many ways and in most places, CDBG has met these definitions and criteria, but in some ways could do so better. In order to achieve the same policy goals, ostap presumably wants non-applicable, non-existant tax cuts to be targeted at and used by the same population for the same common purposes, or will trust the Bush administration to target some undefined benefits to the same low income urban population with no requirement, no rules, and no evaluators. I'm sure they would do that. Even if they did, how would ostap--and more importantly, the intended beneficiaries-- know?
Charles

Posted by: charles | Feb 10, 2005 5:37:43 PM

As relevant to your post, my point is that it would be better to provide tax cuts for people who live in inner cities so they can figure out for themselves how to spend their money, than to siphon off a piece to feed bureaucrats who cycle their money around the country before giving them back less than 100 cents on the dollar. The grant process distorts decisions, and the cycling process is sheer waste.

If you make tax cuts based on living in inner cities, a lot of really rich people are going to end up nominally residing in inner cities, cutting overall tax revenue and not helping the goal of the problem. Whether the additional costs this produces (or the bureaucratic costs of monitoring to prevent it) is more inefficient than CDBG's is something that can be debated, but you shouldn't suppose that target tax cuts magically have no inefficiency.

Posted by: cmdicely | Feb 10, 2005 6:58:38 PM

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