The New Yorker's John Cassidy and I are on the same page regarding ways in which Washington could and should help Detroit. I don't see a federal bailout forthcoming, but, like Cassidy, I've stressed that the federal government should
...help with the tasks of downsizing and of rebuilding roads and schools, and taking other measures to attract businesses and families. Congressional Republicans will almost certainly refuse to coöperate, in which case the Administration could pursue means to use existing budget sources, the way it -- and the Bush Administration -- used tarp funds to finance the auto bailout.
Last week, the president, in laying out his economic agenda, talked about the need to repair the country's infrastructure. Where better to start than in Detroit? By the standards of the banking and auto bailouts, the sums involved are small: the banks received seven hundred billion dollars; the auto companies eighty billion...a smaller, rebuilt Detroit could eventually thrive. "I speak of new cities and new people," Obama said last week, quoting Carl Sandburg. Here's an opportunity to turn words into deeds.
So let's think about what actually might be possible here. As Cassidy says, forget Congress. To actually help reduce blight and unemployment in an American city would distract from their rigorous schedule of votes to repeal Obamacare.
But did not the POTUS recently say that if Congress won't help, he'd use the power of his office to figure out other ways to go at this?
Enter the Hardest Hit Fund, a piece of the TARP designed to address housing issues in states where the nexus of falling home prices and unemployment have been most severe. As per the Treasury:
- First announced in February 2010, the Hardest Hit Fund provides $7.6 billion to the 18 hardest hit states [including MI -- JB], plus the District of Columbia, to develop locally-tailored programs to assist struggling homeowners in their communities.
- HHF programs are designed and administered by each state's Housing Finance Agency (HFA). Most of these programs are aimed at helping unemployed homeowners remain in their homes while they search for new employment and those who owe more on their mortgage than their home is worth.
- State HFAs have until the end of 2017 to utilize funds allocated under HHF.
Though that second bullet suggests that blight reduction and perhaps even urban infrastructure wouldn't fall under the HHF, that's not the case. As recently as June, MI announced that $100 million from the HHF would be used to demolish abandoned homes on blighted properties in five cities, including Detroit. Most importantly, such appropriations do not need to go through Congress.
Of the $7.6 billion set aside for the HHF, just $2.7 billion has been allocated so far. That doesn't mean those resources can freely flow to Detroit, nor that the city could effectively and efficiently absorb the resources. First, the other HHF states have their own claims on the money, and state allocations have been largely set, with about $500 million allocated to MI, of which about $100 million has already been dispersed. Also, without Congress, it's hard to reprogram those funds for say, public jobs not related to blight reduction.
But I'd strongly urge the administration to see how far they can go here. Reducing blight can potentially a) provide a number of decent jobs for unemployed construction workers, b) include a lot of public infrastructure improvement, and c) must occur is that city is to attract new businesses.
Tapping the HHF more deeply for Detroit seems like an excellent example of an action the president could take that's wholly consistent with the position he's staked out in recent weeks about going around the do-nothing Congress.
The sooner the better.
This post originally appeared at Jared Bernstein's On The Economy blog.
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