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Soundings

Steven Malanga
Bushwhacked by Obama
The ironic fate of the Community Development Block Grant program
Summer 2012

When Barack Obama ran for president in 2008, he vowed to pour resources into American cities via the Community Development Block Grant program, a remnant of 1970s urban policy. Obama called CDBG an “important program” and praised it for providing housing and “creating jobs for low- and moderate-income people and places.” How ironic, then, that funding for CDBG has withered under President Obama. With the nation facing budget deficits as far as the eye can see, we may finally be witnessing the collapse of a decades-old program that, despite the president’s faith in it, is woefully ineffective.

CDBG emerged from the Great Society efforts of President Lyndon Johnson, who believed that massive federal funding could help revive declining urban areas. Disliking the idea of federal bureaucrats’ calling the shots in local redevelopment efforts, the Nixon administration rolled the money into block grants to municipalities and states, giving local politicians discretion in how to spend it. President Gerald Ford formalized that arrangement, signing legislation in 1974 that created the CDBG program as we know it today.

Rather than distribute the block-grant money wisely, however, many local leaders transformed CDBG into a never-ending funding stream for politically connected nonprofit groups that rarely had to demonstrate the efficacy of their antipoverty efforts. Local pols also used the grants to help middle- and upper-income communities finance everything from tennis courts to historic restorations, projects that had little to do with easing poverty but that broadened the program’s support.

CDBG’s abuses were well chronicled over the years. Democratic presidential candidate Jimmy Carter complained in 1976 about frivolous uses of the federal money. In the late 1980s, an investigation by the general counsel of the Department of Housing and Urban Development disclosed that members of Congress were inserting their own pet projects (often for well-off communities) into CDBG appropriations bills—including, among many other examples, a library and recreation center on Mackinac Island in Michigan and a county courthouse in Newport, Washington. In 1992, president-elect Bill Clinton’s transition team decried what it called the “systematic plunder of many millions of taxpayer dollars” in block grants and other HUD programs.

Finally, in 2005, the administration of George W. Bush proposed seriously reforming and shrinking CDBG. Middle-class and wealthy communities would no longer get funding. Small grants, which thousands of politically connected nonprofits relied on to run their ineffective programs, would disappear in favor of funding for a few major projects in truly blighted areas. If the organizations getting the grants failed to produce measurable results, such as reductions in poverty or increases in local employment, the federal government wouldn’t renew their funding.

Bush’s reforms went nowhere. The program’s expansion to middle- and upper-income communities had provided CDBG with a broad constituency, and congressional representatives from both parties resisted the proposed changes. Mayors, too—many of whom had dished out (and wasted) millions in grant money over the years—reacted hysterically. Baltimore mayor Martin O’Malley even compared the downsizing of CDBG to a terrorist attack, though his city had put tens of millions of dollars in grants to little good. As one academic expert on Baltimore observed in 1994, two of the city’s neighborhoods, Park Heights and Upton, had accepted $100 million in CDBG money but were “much worse off” than before the funding had arrived. Even a troubling 2006 disclosure by the HUD inspector general—that 159 indictments for fraud and misuse of CDBG funds had taken place over the previous two years—did little to spur reform.

President Obama’s 2009 stimulus package seemed to offer hope to CDBG beneficiaries that a new era of even more funding was dawning. America’s mayors sent the president a book of prospective projects, about 2,400 of which were designated as CDBG ventures. Gastonia, North Carolina, for instance, sought $22.4 million for something called Big Splash—an aquatics center, fitness facility, and “quality meeting space.” Maui, in Hawaii, sought $6 million to install solar-heating systems in its community pools. Dayton, Ohio, wanted $13 million to build a recreation complex that would allow it to compete with similar ones in richer suburbs. Impressed, the president added $1 billion in additional CDBG spending to his 2009 stimulus package.

The boost didn’t last long after the stimulus funds ran out. With debate raging in Washington about how to narrow the federal budget deficit, the president has slashed CDGB funding to a mere $2.9 billion annually in his last two budgets—down from $5 billion a decade ago. These cuts haven’t provoked the controversy that Bush’s proposed reforms caused. Mayors have quietly urged Obama to find more money for the initiative, and a few newspaper stories have noted the impact of the reductions on local projects (usually without asking whether the projects accomplish anything). For the most part, though, CDBG’s most vocal White House proponent has escaped criticism for downsizing a program that his predecessors targeted for years. Time will tell whether Obama’s reduced funding will spell the beginning of the end for CDBG, an initiative that vividly demonstrates how little the federal government understands about why communities fail and how they can revive.

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