Clinton Unveils Aid Plan for Poor Areas : Inner-Cities: The $8.1-billion package would combine tax breaks, grants and cuts in red tape. It is a new approach to the idea of ‘enterprise zones.’

WASHINGTON — Citing a need for innovation to replace past failure, President Clinton unveiled an urban aid proposal Tuesday that would mingle tax breaks, grants and cuts in government red tape to assist distressed areas in helping their poorest citizens.

The five-year, $8.1-billion proposal takes a new tack on the “enterprise zone” idea of recent Republican administrations, calling for government to designate some communities to receive help, including tax breaks of up to $5,000 a year for businesses that hire local workers.

But officials acknowledged that the program is a modest one and said that its most important ingredient may be its attempt to reform the labyrinthine federal rules that often hinder efforts to rebuild poor areas.

In the past, federal aid “hasn’t always worked,” Clinton told a group of city and state officials during a conference call set up Tuesday morning to publicize the announcement. “There has been no strategy for using federal money. Your growth has been restrained by a maze of federal rules.”

A number of big city officials--including Los Angeles Mayor Tom Bradley, who took part in the conference call--hailed the program as a positive step. Nonetheless, mayors and governors are likely to view the proposal as but one piece of a broader aid program that they hope will include much bigger spending to create jobs, rebuild infrastructure and expand social programs.

The urban ills highlighted by the Los Angeles riots were very much on the minds of those who wrote the plan, said Bruce Reed, Clinton’s deputy domestic policy adviser.

“It’s been a year since Los Angeles sounded the fire bell in the night and it’s about time government and communities got together to rebuild the inner city,” Reed said.

In his phone conversation with Clinton, Bradley called the plan “innovative.” Los Angeles officials said that they planned to apply for the aid.

The proposal calls for the federal government to designate 10 “empowerment zones” and 100 “enterprise communities” around the country for special help. These may be cities, depressed rural communities or Indian reservations, with up to 200,000 residents in each.

The “empowerment zones” are to receive intensive federal help to test the idea that special, focused assistance can turn around blighted areas. Companies located within their borders can receive a full $5,000 tax break each year for each local worker they employ. Companies located outside a zone can get up to $2,400 in tax benefits for each worker they hire who lives within the zone.

The goal, Clinton said, is to “focus the limited amount of money we have” on zones that “will get a tremendous amount of concentrated effort.”

The other 100 zones will not be eligible for most of the tax breaks but can get special federal help from new federal initiatives and some existing programs.

Clinton cited, for example, planned federal initiatives to expand community policing and to set up special community redevelopment banks. The existing federal programs he referred to would include those for drug prevention, worker training, housing and child care.

The 100 zones would get “first crack” at such efforts, the President said.

The program’s $8.1-billion total would include $5 billion in new federal money, while the remainder of the money would be redirected from other federal programs.

The President’s current fiscal 1994 budget already includes $4.1 billion in funds to cover the tax breaks called for by the bill.

Communities would compete to become designated areas by filing applications to show that their economic and social problems qualified them for special help. They would also need to demonstrate that they had the support of private businesses for their efforts and they would need to develop a comprehensive plan to show how they intended to rebuild.

“Our proposal emphasizes job creation first and foremost and we think wage and tax credits are the most effective way to generate jobs,” said Reed, who helped develop the proposal.

Administration officials said that their talks with local and state officials convinced them that providing waivers on federal regulations would be one of the most productive ways to help. Too often, they said, regulations for one program hinders another program from reaching its goals.

To streamline such regulations, the proposal calls for creation of a special “enterprise board,” made up of federal officials from a number of agencies, to consider requests for waivers.

In its effort to enable communities and individuals to help themselves, the proposal in some ways embodies the “new Democrat” principals espoused by Clinton during the 1992 presidential campaign.

It would, for example, allow newly employed workers to set aside savings, tax free, of as much as $700. The goal is to foster self-reliance.

“These proposals were really at the heart of the President’s program,” Reed said.

Clinton aides said that the program would be an experimental effort that could be changed--or discarded--if it does not live up to its promise.

Enterprise zones were advanced in both the Ronald Reagan and George Bush administrations as a means to cure inner-city problems using the job-generating capacity of the private sector. The Republican proposals--including those of former Housing Secretary Jack Kemp--called for granting a series of tax breaks for business but did not tie them to the employment of local workers.

The new proposal would be introduced in the House Ways and Means Committee and is to be considered by Congress as part of the budget reconciliation bill, aides said.

Rep. Robert T. Matsui (D-Sacramento), a Ways and Means member, said that he sees “very good support” for the measure in the committee, and through the Congress as a whole.