American Idea Foundation

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Skeptical About Opportunity Zones? Look to Erie, PA

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By: AIF Staff

As the American Idea Foundation has previously detailed, Opportunity Zones are economically distressed census tracts that are eligible for preferential tax treatment. They were created as part of the 2017 Tax Cuts and Jobs Act and are designed to incentivize long-term investment in low-income and economically disadvantaged communities by offering a deferral of capital gains taxes for investors.

Last month, a handful of House Democrats attempted to amend an annual appropriations bill to prevent the Internal Revenue Service from using funds to oversee the development of the nearly 8,800 Opportunity Zones around the United States. This stunt, if successful, would have been a mistake – one that would have had real consequences for the people living in these zones.

To be clear, since Opportunity Zones became law, legislators from both parties have attempted to improve the oversight over these areas to ensure they meet their intended purpose of truly helping individuals and communities in need. Debates about how to refine and improve Opportunity Zones are welcomed, as many reforms are well-intentioned. However, attempts to end the Opportunity Zone program outright or to defund them are not only short-sighted, but also would harm the very individuals that legislators claim to want to help.

Rather than attempt to score partisan, political points, legislators should be united in making Opportunity Zones work. Opportunity Zones hold the potential to revitalize economically distressed areas and bring good-paying jobs, additional housing, better educational opportunities, much-needed infrastructure improvements, and critical investments to areas that need it. There are many good ideas – from both Democrats and Republicans – about how to expand economic opportunities and fight poverty, but Opportunity Zones should be given the chance to succeed. This critical tool for revitalization should not be reduced to a political football.

The main reason that policymakers should give Opportunity Zones the chance to germinate? They’re working. Communities are beginning to see real results from public and private partnerships. Investment is flowing into communities and meaningful improvements are beginning to occur. One promising example is found in Erie County, Pennsylvania.

Nestled on a Great Lake near the U.S.-Canada border, Erie, Pennsylvania is the epidemy of a small, Midwestern city. Erie has a rich industrial and manufacturing history and is currently attempting to modernize, transform, and diversify itself to meet the demands of the 21st century economy while also holding tight to the values that make it so unique.

As Forbes noted: “Battling outsourcing, automation, and seismic shifts in global supply chains, the once-thriving industrial city became a parable for the socioeconomic decline of America’s manufacturing heartland. A 2017 report described Erie in stark terms, concluding that nearly half of all Black residents live in poverty, and that the median Black worker in Erie makes a mere 43% of median white worker’s earnings.” Further, in 5 of Erie’s 8 Opportunity Zones, “more than 35 percent of families had income below the federal poverty level. In the other three, the poverty rate for families was above 20 percent.”

But now, thanks to its use of Opportunity Zones, Erie is on the rise. A video produced by the local Chamber of Commerce, “Erie Amazes,” highlights how the city is primed for revitalization.

Erie is turning itself around one building, one block, and one neighborhood at a time. It is a prime example of how innovative, local leadership, when combined with sound, federal policies can make a difference and improve people’s lives.

In February 2020, the Erie Regional Chamber and Growth Partnership presented their  “Reinvestment Roadmap” at the White House. The presentation makes clear that by effectively utilizing Opportunity Zones and partnering with relevant federal government agencies, Erie is massively accelerating its revitalization.

The White House Opportunity and Revitalization Council succinctly defined the mission of Opportunity Zones, saying: “Private capital and public investment will stimulate economic opportunity, encourage entrepreneurship, expand educational opportunities, develop and rehabilitate quality housing stock, promote workforce development, and promote safety and prevent crime in economically distressed communities.”

And as the presentation by Erie’s Chamber makes clear, the city has big plans to leverage the benefits provided to investors via the Tax Cuts and Jobs Act to improve their infrastructure, transportation systems, educational offerings, business development pipelines, and make the community cleaner and safer. All of these will enhance resident’s quality of life.  

To be sure, Erie’s plans are ambitious, but they are already beginning to come to fruition thanks to the city’s belief in its people and its citizens. As the Washington Examiner’s Salena Zito recently wrote: “To anyone who has said it would be impossible to transform one of the poorest ZIP codes in the country into a role model for achieving economic prosperity…. They have definitely underestimated the determination of Erie’s local civic, foundation, and business leaders to not give up the ship.”

In 2019, according to the Economic Innovation Group:

“Fortune 500 company Erie Insurance, the city’s largest employer, announced its new $50 million Opportunity Fund. The first investment will support the creation of a food hall for nine local vendors…The food hall will anchor a broader $30 million transformation of the city’s North Park Row into a culinary arts district, which project sponsors Erie Downtown Development Corporation anticipate will create approximately 240 jobs.”

And because of this local commitment to rejuvenation, at the end of June 2020, Boston-based Actaris Impact Investors announced a $40 million investment in Erie’s Opportunity Zone. The hope is other capital will soon follow as investors see the potential of Erie’s workforce and the comradery of the community to improve itself. As Forbes explained:

“Erie is currently home to some $750 million in ongoing investment. The EDDC and Erie Regional Chamber and Growth Partnership are working to get even more capital into the areas where it will have the biggest impact. The first phase of EDDC’s plan will add more than $100 million in investment into downtown Erie through 2022. In that time EDDC hopes to triple the number of businesses within the development, raise job numbers from 90 to over 425, and multiply the number of residential units by more than ten.”

To be clear, the goal of Opportunity Zones is not to gentrify Erie or displace the very people that are so connected to the city’s history. The hope is to build Erie up from within, with a rising tide lifting all boats. As John Persinger, the head of the Erie Downtown Development Corporation, told the Wall Street Wall Street Journal: “When people raise fears of gentrification, I say we can’t afford to lose one more person. We don’t want to push anyone out. We want to bring more people in and raise the quality of life for everyone.”

The story of Erie makes clear that Opportunity Zones will take time to develop. They will require significant buy-in from local leaders, community organizations, and federal officials. But the promise and the potential to rejuvenate these 8,700 areas in our country is too important to be derailed by partisan fighting in Washington, DC.

Thanks to Opportunity Zones, Erie has the ability to amaze and become a model for the rest of the nation. Policymakers just need to focus on supporting these local efforts, not undercutting them.

American Idea Foundation President Paul Ryan discusses “Governing and Policy in 2020 and Beyond”

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By: AIF Staff

Washington, DC – Last week, former Speaker of the House and President of the American Idea Foundation, Paul Ryan talked with Tom Donilon, Chairman of the BlackRock Investment Institute and former Obama Administration National Security Advisor, as part of the 2020 BlackRock Future Forum. In a panel discussion entitled: “Governing and Policy in 2020 and Beyond,” the two conversed about a number of pressing policy topics including how to expand economic opportunities following the COVID-19 pandemic, how to address the national debt in a bipartisan way, and how to reduce polarization through more robust civil discourse.  

Excerpts of Speaker Ryan’s comments, which have been slightly edited for clarity, follow.

On Addressing Systemic Racism and Economic Inequities:

“First, I think of the George Floyd murder, and I use that word carefully, I think it opened a lot of eyes in America. I think a lot of scales fell from people’s eyes and I think that they saw this needs to be looked at in a way that opens the hearts and minds of people who have never thought of these things before, so that we really can empathize with minorities who did and who do face systemic discrimination. This, first of all, needs to be acknowledged and then something’s got to be done about it.

“I do believe that leading with the [right] kind of tone and the [right] words matters. “Black Lives Matter” are true words. No one should be worried about saying that these words are true and then, we can have hopefully an honest and reasonable debate about what to do about it.

“Should we defund the police? No, I don’t think we should defund the police, but should we work on making equality of opportunity policies more in reach for other people? Yes. Look, I have gone through the opportunity zone legislation, I authored the criminal justice reform bill, and I think there are a lot of things like that that can be done to speak to the concerns of people who feel like the American Dream is just not there for them,  that they’ve been excluded from it.

“I really believe that this moment is a moment that calls for empathy, understanding, listening, and then innovative policies because people’s minds really are open to these problems and addressing these injustices that are baked into the system, that have been part and parcel of the American system, that a lot of people see. I really do think we can go after the root causes.

“One of the things I work on at Notre Dame and at the American Idea Foundation is trying to go at the root causes of poverty, the root cause of the lack of economic mobility. There are so many things I think we can do as a country, on a bipartisan basis, to address these inconsistencies and these inequities.”

On the Federal Government’s Response to COVID-19:

“On the economic front, I think [it] was a pretty impressive response. Frankly, globally speaking, you saw central banks around the world pumping liquidity into the system and I do think that the cooperation by my former colleagues in Congress with what we call “Phase 1” through “Phase 3.5” was really pretty impressive…. You had a very impressive economic response and I think that really helped bolster the economy and brought the bottom up from where it would otherwise have been. As a result, whether it is the Congressional Budget Office or the Federal Reserve, they are forecasting some pretty positive economic growth in Q3.

“The health response, I think, is a little more mixed. You have federalism here in America, so you’re going to have different responses and some states did better than others. Densely populated areas obviously fared worse than other [areas] but I think all along, we did not [yet] overwhelm our healthcare system and we did not have the overcrowding in our health care system that we feared.

“What I regret in all of this is how COVID-19 has become kind of partisan, how the necessary social distancing and the protocols that we need to operate in society have unfortunately become partisan, and I worry about that as the summer continues and as the fall resumes before we actually have a vaccine.”

On Reforming & Strengthening Social Safety Programs:

“My biggest concern, under whomever becomes president, is fiscal policy and our entitlements, which are unsustainable. They’re on an unsustainable path. It’s not too late to fix them on our own, in a way that fulfills each of their missions, but if we keep kicking the can down the road as both presidents and both parties have done, then I really do worry that our monetary policy and our fiscal policy are on a collision course with one another. And the next president is going to have to deal with that.”

On Reducing Polarization & Encouraging Discourse:

“I did 20 years in Congress from 1998 until 2019 and in that arc of time, I saw an enormous transformation of our politics and it coincided obviously with the internet, digital, data, and the rest. And in the old days, like 10 years ago, the way you measured success in politics was really what I would call a “meritocracy,” where success was measured by persuasion and legislation. [Success was measured] by could you create innovative policies that solve the problems of the day and persuade people: your constituents, your colleagues, and the country, with the way to go and that was sort of how you measured success in politics.

“In this day and age, I think success in politics is measured more on the right and the left right by provocation so we now have what I would call, in both parties frankly, the “entertainment wings” of our parties, where people look at this as why do the long slog of spending 10 and 20 years in Congress, proving yourself through a meritocracy, when you can leapfrog that entire meritocracy if you are good on Twitter, on Facebook, on digital, and if you can really be entertaining on cable television, you can immediately leapfrog that entire meritocracy and become a national player overnight. I can think of episodes on both sides of the aisle where people did that but what that does require though is fragmentation and polarization.

“And so, you get to the point where a lot of people are looking over their right shoulder if they’re a Republican or if they’re a Democrat, they’re looking over their left shoulder worried about a primary. And so, they’re focused on staying in their partisan lane and entertaining, so my worry is we now have entertainment politics, which is really by design extremely partisan. You can monetize it, you have whole websites, you have whole entertainment venues that make money off of this polarization, so what is the antidote to that?

“What do I tell students at Notre Dame as you run into this problem? You have to get more involved, not impugn people’s motives, don’t question their character, understand where they’re coming from, and have a civil debate. I think the best alternative and the best antidote to this is to do everything we can to revitalize civil society, that space between ourselves and our government, where we occupy our lives and where we put the phone and TV down and go actually interact with other people, and get out of your comfort zone and spend time with people who are not like you or who don’t think like you, who don’t look like you, and don’t live near where you live. To me, the more you can get society to integrate itself through a civil society is the best way to try and heal our politics so that we can have common ground, so that we can have a politics of mutual understanding and room for a civil debate.”

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Policy Discussion on 2nd Chances: Developing New Solutions for Returning Citizens

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By: AIF Staff

On July 16th, the American Idea Foundation held a virtual panel discussion with policymakers, private-sector leaders, and on-the-ground practitioners about how to create pathways for success as individuals exit the criminal justice system and work to become contributing members of their communities.

The conversation, led by former Speaker of the House Paul Ryan, highlighted a central premise of the American Idea Foundation: The belief that the best public policies are not made in a vacuum in Washington, DC, but rather are developed, informed, and shaped in a collaborative fashion between policymakers, individuals who are leading on the front-lines and helping vulnerable populations, and their partners in universities, community groups, non-profits, and corporations. Good public policy is not only a natural byproduct of this ongoing collaboration and dialogue, but it is also informed by the experience of individuals and experts, and the data and evidence that has been developed over years of practice. The fact that the First Step Act, which became law in 2018 and which modernized important parts of our criminal justice system, resulted from this type of policy-making process is precisely why it has the potential to be so impactful in the lives of so many.

The First Step Act, as the name implies, was simply the beginning on an ongoing effort to help individuals who made mistakes and atoned for them get on with their lives in a meaningful way. The law created conditions by which individuals could start down a path of redemption and hopefully, with the right support systems, change their ways. The authors of the First Step Act knew that the government, on its own, would not be able to solve a multi-faceted issue like recidivism, and for the law to achieve its stated aims, it would require partners in communities and in industries to assist in expanding opportunities for those trying to rehabilitate themselves following their interactions with the criminal justice system.

The American Idea Foundation wanted to highlight some of these partners who are helping policymakers realize the noble goals of the First Step Act and who are making a difference in reducing recidivism. It did so in a policy discussion entitled, Second Chances: Developing New Solutions for Returning Citizens, which featured leaders from READI Chicago, JPMorgan Chase, and United Health Care.

As Speaker Ryan said when introducing the panel: “Today, we will be talking with some of the organizations that are giving concrete second chances to those who make mistakes. We’re talking to the experts in the field who are actually breathing life into [the First Step Act] and showing how it can work. These organizations are not just providing practical on the ground assistance to the least among us, but they are also developing the practical insights that will lead to the next round of criminal justice reforms, whether they be at the state, local or at the federal level.”

A few excerpts from the policy discussion follow:

Speaker Ryan on Why Criminal Justice Reform Matters & His Evolution on the Subject:

To kick off the panel, Speaker Ryan shared what motivated him to tackle the issue of criminal justice reform. He discussed how his thinking about the issue changed as evidence and research was developed and showed the benefits of giving individuals who paid their debt to society a second chance to lead fulfilling lives.

“As a practicing Catholic, one of the precepts of my faith is that we work to protect the least among us. And for too long as the society, we have ignored those who have made mistakes and paid for those mistakes and we ended up turning what is the legitimate punishment for wrongs committed into a lifelong brand, eliminating the ability for individuals to turn their lives around, permanently separating parents from children and driving millions into despair.

“America at its best is an America that provides for second chances. If a small business owner fails, they pick themselves up and they try again, but for too long, we’ve decided that individuals who break the law don’t get a second chance. Of all the things that our country has demonstrated, it is the power of redemption and so we need to make sure that we realize the power of redemption in our criminal justice system, and with the First Step Act, we have changed that paradigm and formerly incarcerated individuals are now getting a second chance to lead better and more productive lives.”

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Ryan continued, “[The passage of the First Step Act] was one of the least covered events of 2018, and yet it might be one of the most consequential from a public policy perspective. So, how did Republicans and Democrats come to agree on controversial hot button issues that they hadn’t been able to come together on and that was so difficult for so many years?

“One reason that policymakers were willing to take a political risk was because of both practical and intellectual research in the field of criminal justice. My experience was instructive: In 2007, I was one of several conservatives who voted against the Second Chance Act, but around that time, a sea change was starting to occur. If you recall, back when the 1994 Clinton Crime Bill [was being considered], you had Republicans and Democrats trying to outmaneuver each other to be “tough on crime,” with “three strikes you’re out” and things like that, which was the political movement of the time. But starting in 2007, states like Texas and a whole swath of generally conservative-leaning states began reforming their laws in ways that better protected their citizens and ensured victim’s rights while ensuring a fairer criminal justice system. These states focused on how they could reduce the need to imprison non-violent offenders and reattach these people to the workforce. And where these laws have been passed, we generally saw reduced recidivism, we saw reduced crime, and we saw reduced costs associated with jailing offenders.”

JPMorgan Chase: A ‘Bell Cow’ Reducing Barriers to Employment for Released & Reformed Individuals

In an exchange with Heather Higginbottom, President of JPMorgan Chase’s Policy Center, Speaker Ryan praised the company for leading the way in reforming its hiring practices and leading the charge in its sector to hire individuals with criminal records. Higginbottom went on to explain exactly what JPMorgan is doing to reduce recidivism and how it is working: 

“Several years ago, JPMorgan banned the box on its initial hiring application, which is now something that the federal government has done and is another piece of bipartisan legislation that passed recently for federal government contracting jobs, and that was an important step because we want to hire the best people, and that checkbox was denying us access to a diverse pool of the best talent.

“When you think about the fact that one in three Americans has a criminal record, it’s unbelievable, and you think about what the impact is, [what are] the collateral consequences of that, and what that means to the economy and to a business. But our HR leaders and our CEO wanted to go further and say: If we’re going to be really intentional about this, it’s not just “ban the box,” but we need to go further. We need to learn. We don’t have all the answers yet, but what we have is a commitment, so we started in Chicago, a pilot program and an initial effort to partner with community organizations to find a diverse pipeline and help [people] understand [how to get a job].

“You know, banks are highly regulated and appropriately so. A lot of people think that “I can’t get a job. I don’t know how to get a job since I have a criminal record. What is the process? How do I go about doing this?” And so, we’re partnering with community organizations to help people navigate that process. They’re going through the same door as anyone else to get a job, but they’re prepared. They understand what they qualify for and what they wouldn’t and it’s been a good success. It’s one that we’re going to replicate in other places.

“I’ll say two things: One, JPMorgan can’t solve this problem on its own and that’s why we really are making a call for all businesses to stand with us and to learn together about how to do this and how to tap into this incredible source of talent and how to understand that a criminal record should not stay with someone forever, and that you are missing out on a whole suite of professionals when that’s a limiting factor.

“10% of our new hires last year, in 2019, are people with criminal records and in 2019, we hired 1,000 people more than the year before with criminal records. We are learning. We are intentional. We are focused and we are finding this to be a very successful effort for our firm. We know that it’s possible for others and that we need to kind of band together and do this….

“This impacts everybody, and you start to say this system just doesn’t make sense. It doesn’t make sense for employers, it doesn’t make sense for families, and this system is designed in such a way that we’ve got to make changes and adjustments and I think, in addition to the research and folks really understanding that means that change needs to happen, we also see how directly this impacts so many people across the country.”

Following Higginbottom’s explanation of JPMorgan’s efforts, Speaker Ryan noted: “JPMorgan Chase is a bell cow…. You need bell cows to lead the herd to the right place and…. having a place like JPMorgan Chase do this is really important. It’s a trendsetter, and it’s exactly the kind of follow through you need after passing a law like this.”

Discussing READI Chicago’s Work to Reduce Violence and Transform Lives in Chicago:

Bringing another practitioner’s voice to the panel was Eddie Bocanegra, who is a senior director of the Heartland Alliance and a leader at READI Chicago, where he works to decrease gun violence in the Chicago area and to help give individuals a second chance at life. You can read more about Eddie’s transformative story here. Bocanegra shared his powerful, personal experience with the criminal justice system and how it motivates him to assist others. He also detailed READI Chicago’s randomized controlled trial (RCT) which is helping to evaluate the best way to reduce recidivism.  

Bocanegra said: “There is plenty of research out there that really has looked at both the issue of violence but also useful re-entry work examples. There is a lot of good, promising information out there on what’s working and what’s not working, but for whatever reason or another, it seems that sometimes that information is not communicated effectively to the people who are in a position to write the policy or the lawmakers might interpret in a very different way. Sometimes, I will even make the argument that people are not willing to put their political capital to really make these changes so to hear about the steps that you have taken to move forward in that direction, I think it’s extremely important for us to continue to build on that….

“[A Randomized Controlled Trial] is really the gold standard of research. It’s what we do in medicine to see what’s working and what’s not working. In fact, right now with COVID, we are using that [approach]…. so, imagine that we did the same thing with people. Imagine if we did the same thing in areas where [violence] was extremely concentrated, and that violence typically is driven by 70-80 people who are driving that violence. So, imagine if you were able to test one supportive population and, in our case, what we’re doing is testing whether or not jobs and this kind of behavior therapy really helped us.”

Speaker Ryan discussed why having randomized controlled trials, like the one being conducted by READI Chicago, makes a difference to policymakers as he recounted an episode during the consideration of the First Step Act: “I remember when we were pushing this bill in the House, a senior person in my party showed me some campaign commercials that were going to be run against us if we passed this legislation. [The commercials were] showing that we were soft on crime, showing that we were going to be harming our constituents and this and that. There was a lot of political intimidation against doing things like this and that’s how typical issues work. It was because we had all of this evidence, frankly, from states like Texas which showed we can actually make a difference on all fronts by reducing violence, by creating redemption, by getting people back to work and because we add unassailable evidence from randomized controlled trials that proved if you do it this way, it will work and make a difference.

“This helps take the politics out of it and it helps get over the criticisms that you’re getting something done. So, personally, this is why at the American Idea Foundation, we are basically focusing on RCTs and building a big bank of evidence so that communities and charities and local governments can replicate successful models that have been proven to work and they can overcome the partisan gridlock that usually engulfs issues. Having something like an RCT in Chicago, which is a place that everyone is paying attention to and showing your proven results, I really think that is exactly what is needed to get to the next wave of reforms of redemption and criminal justice policies.”

Examining United HealthCare Community Plan of Washington’s Model:

The policy discussion also featured Cindy Spain, the Chief Clinical Officer from United Healthcare Community Plan of Washington, who shared her company’s experience taking a circumspect view towards caring for individuals and in the process, helping those exiting the criminal justice system land on their feet.

As Speaker Ryan noted: “Eight years ago, I went up to UnitedHealthcare, which is headquartered in Minneapolis, and met with Steve Helmsley and his team to talk about treating the whole person in healthcare. If you just only deal with the momentary problem of a health issue that is affecting a person, you’re not going to solve the underlying problem which is the whole person…. I think so many criminal justice issues can be resolved through access to high quality health care and by dealing with the whole person, you really created a really interesting model out there in Washington State…. that really needs to be replicated throughout the country.”

As Spain explained, the local partnerships that United HealthCare created in Washington has led to tangible results and improved outcomes for individuals and families. In describing their model, Spain said: “We actually work with the Health Care Authority and part of our contract is to do some jail transition services work. Previously, it was focused on the behavioral health aspects of mostly incarcerated folks. However, we decided to go into the jails and meet with our former members because they’re in a suspended state of Medicaid at that time, and talk to them about the issues that they’re [battling] to have a successful release to the community and as part of that, our community health workers identify social determinants of health (SDOH) issues that are ongoing, such as homelessness, an inability to connect with their primary care physicians, an inability to get into treatment that they might need, and we help facilitate that as they get released back into the community.

“Many of our members end up getting released directly into substance use disorder treatment [programs]. Some of them get released directly into mental health settings. We facilitate that as well as keep engaged with them after they are released into the community to make sure that they can get their medications, that they have someplace to live….

“We have partners within our health plan on the behavioral health side, and we work very collaboratively with them on mental health as well. We make sure that everything that’s been identified while they’re incarcerated, such as their substance use but also schizophrenia or bipolar, if they need to be connected to those services as they are released back into the community, we work with our partners to make sure that they get those systems set up for them before they are released. We make sure that we have identified providers of those services and that they have agreed to take the returning citizen into those services immediately so that there isn’t any delay and so as they step out that door, they step into a taxi and they get delivered to the door of those behavioral health organizations or primary care physicians or a substance use treatment facility.”

As Spain elaborated, United Healthcare believes that continuity of care and providing individual assistance to returning individuals is key to long-term success for those reentering society. When discussing the duration and nature of the care model, she said: “We stay connected via community health workers who are actually meeting face-to-face with these citizens before they are released. We’ll follow them as they go back [into society] …. and give them all of our contact information, meet with them in the community as they are released and continue to evolve with them if they need to have ongoing care management. We will follow them as long as they need to be followed and as long as they’re agreeable to doing so and gain benefit from it.”