Earlier this year, a federal judge decided to let the Association of Community Organizations for Reform Now (Acorn) continue receiving money through the federally funded Community Development Block Grant program (CDBG). Critics of the controversial activist group were outraged: after all, Congress had banned it from participating in federal programs after embarrassing videos showed its mortgage counselors advising undercover journalists on how to break the law. As it turns out, the judges decision probably wont be enough to keep Acorn from going out of business. But the real outrage is that CDBG still exists.
Nearly four decades old, CDBG has dished out some $120 billion in local grants over the years, with little to show for all that taxpayer money. Designed initially as a community-rebuilding and antipoverty effort, CDBG doesnt require its beneficiaries to prove that they are, in fact, improving their local communities or reducing poverty. As a result, the program has evolved into little more than a congressional patronage tool, a free ride for politically connected social programs that have never demonstrated their effectiveness, and a way for municipal politicians to finance their favorite schemes when their own budgets come under pressure.
The CDBG program was a reaction to the Johnson administrations Great Society efforts, which had tried to use massive federal spending to rebuild deteriorating urban neighborhoods, stimulate local economies, and even stitch together the sense of community that was disappearing from inner cities. Johnsons successor, Richard Nixon, decided to contain the vast federal bureaucracy that these programs had spawned by giving money directly to states and cities, where local politicians would administer it. Congress and the Nixon administration accordingly gave localities wide discretion in how to spend the money.
The Nixonites faith in local officials now seems quaint, considering the way they began manipulating the program almost immediately. Often ignoring the most distressed communities, local pols channeled the grants into their pet projects, including tennis courts and parks in affluent areas, purchases of CB radios and other perks for senior-citizen centers, and new roads and other infrastructure improvements in thriving neighborhoods. Officials claimed that this spending would provide employment to the poor, though there was never any evidence of that.
The widespread abuse of the program prompted immediate calls for reform. In 1976, presidential candidate Jimmy Carter complained about frivolous uses of the federal aid and promised changes. But once elected, Carter realized that CDBG could be a formidable political tool; rather than reform it, he vastly expanded the grants so that any community in America could qualify for them. In doing so, he won the support of Washington Republicans as well as Democrats and of small-town councils as well as big-city mayors. This widespread backing helped insulate the program from efforts by Carters successor, Ronald Reagan, to kill it.
Block grants soon became a national scandal. In the 1980s, an investigation by the general counsel of the Department of Housing and Urban Development found rampant favoritism in awarding the grants and disclosed that members of Congress were using the program for their own pet projects inserted into HUDs appropriations bills, from sugarcane mills in Hawaii to a library and recreation center on Mackinac Island in Michigan to a county courthouse in Newport, Washington. A few years later, President Clintons transition team criticized the program for systematic plunder of many millions of taxpayer dollars. Still, when big-city mayors who had backed Clinton presented him with a list of projects that were ready to go if he could find the funding, the new president proposed a $2.5 billion increase in block grants. And though Clinton promised to clean up the program, a 1999 audit by the General Accounting Office found that CDBG was in worse shape than ever.
Realizing CDBGs sorry track record, the George W. Bush administration tried to cut its funding significantly and redirect what would be left of the program into narrower, more focused, economic-development projects in poorer neighborhoods. Bushs Office of Management and Budget even proposed new standards to evaluate the effectiveness of such programs, including requiring measurable results like declining poverty rates and rising income levels. But Congress resisted making changes, and Bushs critics, ignoring the long history of CDBG ineffectiveness, blasted the president for wanting to slash aid to cities. Former Baltimore mayor Martin OMalley ludicrously compared the proposed cuts to a terrorist attack.
The program has survived one damning report and investigation after another. In 2004, a Buffalo News investigative series concluded that the city had squandered virtually all of the $550 million it had received in block-grant money since the 1970sa significant discovery, considering that Buffalo had won more CDBG funding per capita than any other American community. The paper found that city hall frittered away much of the money through parochial politics and bureaucratic ineptitude, an assessment that Buffalo officials didnt even dispute. The citys mayor, Anthony Masiello, told the News that CDBG was a politically motivated system, while city council member Joseph Golombek, Jr. later said that local politicians were pigs feeding at the trough of the program. Left unanswered was why there had been so little federal oversight during all those years of abuse.
The CDBG program should be even safer under President Obama. As a presidential candidate in 2008, he described it as his Number One spending initiative for cities. The grants were an important program that provides housing and creating [sic] jobs for low- and moderate-income people and places, Obama said.
In the long history of CDBG, perhaps the most comical abuse of funds occurred when the mayor of a small Texas town illegally used tens of thousands of dollars to pay for psychic readings. While its not recorded what the psychic told the mayor, it could very well have been something like this: Your tenure, Mr. Mayor, is likely to be short. But block grantstheyll go on forever.
Steven Malanga is the senior editor of City Journal and a senior fellow at the Manhattan Institute. He is the author of The New New Left.