Bushwhacked by Obama - The ironic fate of the Community Development Block Grant program

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.

Steven Malanga is the senior editor of City Journal and a senior fellow at the Manhattan Institute. His latest book is Shakedown: The Continuing Conspiracy Against the American Taxpayer.

.....thousands of self-serving politically-connected nonprofits sucked-up millions of CBDG tax dollars for sham programs.....monies that ended up laundered and wire transferred offshore and into secret LLC accounts for themselves...and probably lotsa kickbacks to crooked politicians.....

Non-profits shoulld be banned completely---they are nothing more than money laundries for political scumbags and their crooked cronies, all engaged in tax evasion. Here's how it works in one NY district.

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REFERENCE NY State Assemblywoman Naomi Rivera (D-Bronx) stands accused of using a phony tax-funded nonprofit as her personal ATM, establishing a pattern of racketeering, conspiracy and collusion.

Rivera steered hundreds of thousands of tax dollars ostensibly to "help the poor" in the poverty-stricken Bronx slum---via the non-profit Bronx Council for Economic Development, controlled and tax-funded by the Rivera crime family.

The extended Rivera family is a collusive tight-knit coterie of political operatives in the crime-laced latino uderworld. Naomi Rivera is facing several state and federal probes for using the non-profit illegally--and for sex, by giving her lovers non-profit jobs.

Now, investigative news reports show Naomi's son GianCarlo Fret, 29, raked in tens of thousands of tax dollars in non-profit jobs----and pocketed suspiciously odd amounts from non-profit coffers that appear to be supporting a "habit."

Giancarlo was a $22,335 “student assistant” at the NY Dept of State in 2008 and part of 2009.

At that time, the NY State Dept was run by Lorraine Cortez-Vazquez, a former president of the Bronx-based non-profit Hispanic Federation. The non-profit Federation scored an astounding $22 million in public funds (what they admit to). Cortez-Vasquez was also a board member of Naomi's non-profit---the do-nothing Bronx Council for Economic Development.

Naomi Rivera paid-off her son's live-in girlfriend, Ebony Rubio; Rivera hired Rubio as a "constituent liaison" in her tax-funded legislative office, paying Rubio up to $27,063 a year between 2008 and 2010, records show.

Rubio also got a suspicious-sounding $700 in 2007 from Rivera’s campaign war-chest and another $60 in 2008 from the Democrat party’s treasury controlled by Naomi's father, Jose Rivera (also a state legislator and Dem party boss).

State legialtor Jose Rivera gave his grandson an odd-sounding $1,675 in "consulting" fees between June and July from the non-profit Bronx Democratic Trustees Committee, controlled by Jose Rivera.

Giancarlo also got a financial windfall as a $10.34 an hour “temporary clerk” at the non-profit Bronx Board of Elections from 2004 to 2005; his uncle, Naomi's brother, Joel, is married to Valerie Vazquez, director of communications and public affairs for the non-profit NYC Board of Elections.

Now, Assemblywoman Naomi Rivera (D-Bronx) stands accused of using her tax-funded nonprofit as a personal ATM, establishing a pattern of racketeering, conspiracy and collusion.

Rivera calculatedly used the non-profit: (1) to wine, dine and weekend w/ her lovers, (2) to bed down w/ non-profit employees, (3) to give non-profit monies to her son and other relatives, and, (4) to illegally siphon off tax-free non-profit tax revenue for her election campaigns.

Rivera steered hundreds of thousands of tax dollars ostensibly to "help the poor" in the poverty-stricken Bronx slum---to the non-profit Bronx Council for Economic Development, controlled and funded by the Rivera crime family.

From all the investigative reporting to date, we know the Rivera family is a collusive, tight-knit coterie of political operatives in the crime-laced latino uderworld.

Non-profits don't have be banned, there are some worthwhile NP charity organisations.

But since they are, by definition, tax-free orgs, they are already receiving a "benefit" from the government (employees do pay regular income and auxiliary taxes on their salaries) and there should be a law that prohibits federal, state and municipal governments to provide funding of and/or regulatory benefit to any NP NGOs (such as Planned Parenthood) i.e., "the separation of Non-profit and State".

Otherwise, NP orgs are simply an invitation to political-financial corruption. Non-profits are usually considered by the public as "good" and "for public benefit" so it's very easy for politicians to use them to funnel Other People's Money with predictable benefit to their friends and themselves. In other words, these Non-profits can be a great racket for politicians and their friends.

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