Broken-Promise Zones V.S. Economic Freedom Zones

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This past week the President has unveiled his plan for “promise zones” which are supposed to help communities tackle poverty. “Promise zones” are areas where the federal government will provide extra incentives through tax breaks and grants. The interesting thing about these promise zones are they are essentially the polar opposite of Kentucky Senator Rand Paul’s plan for economic freedom zones.

While both programs are designed to help the poor (in theory). Promise zones will force the poor to be dependent upon the government, while economic freedom zones let the poor assist themselves. Promise zones take tax revenue from other more successful parts of the country and redistributes it to needy areas. Economic Freedom Zones on the other hand require no federal monies and let depressed areas uplift themselves using people’s own money as the incentive instead of others. This is done in the zones by offering no federal corporate gains tax, a 5% federal personal income and corporate income tax and disposal of a large amount of red tape regulations.

The ruined Spanish-Gothic interior of the United Artists Theater in Detroit. The cinema was built in 1928 by C Howard Crane, and finally closed in 1974.  Photograph: Yves Marchand and Romain Meffre
The ruined Spanish-Gothic interior of the United Artists Theater in Detroit. The cinema was built in 1928 by C Howard Crane, and finally closed in 1974. Photograph: Yves Marchand and Romain Meffre.

Senator Paul released his economic freedom zones primarily as a way to help Detroit, Michigan recover from its current situation. A city that was once one of the wealthiest in the nation due to its large auto trade, that went bankrupt due to its even larger government.

Barack Obama infamously touted during his re-election campaign that he “refused to let Detroit go bankrupt”. However Detroit has gone bankrupt and the first five cities announced for Obama’s “promise zones” do not include Detroit. An awkward moment for a liberal city that is slowly becoming more and more anti-government due to its lack of functioning government services .

An area that was included though was south-east Kentucky which seemed more like a shot at Senator Paul’s home turf than a choice based on real need. While I can imagine the area deals with poverty, it puzzles me to think it or the other choices (San Antonio TX, Philadelphia, Los Angeles and the Choctaw Nation of Oklahoma) are any more worthy than Detroit or the Appalachian region of West Virginia in terms of need. This would lead even the most naïve spectators to think the President is simply using federal dollars to buy liberal votes in states with upcoming key political battles.

While Rand Paul did agree the GOP had political reasons for helping in Detroit he’s never proposed using anyone but Detroit’s money to help them. This is where I think the main difference comes between Senator Paul’s economic freedom zones and President Obama’s “promise zones”. Paul suggests letting Detroit help themselves and Obama suggests letting his five chosen districts help themselves to others’ tax dollars.

Economic history as many should know would suggest Rand Paul’s plan to be the superior one to help impoverished areas and I would dare to say President Obama most likely knows that as well. However if he were to concede and let Detroit and other parts of the nation succeed with Economic Freedom Zones it would undermine his whole presidency. It would prove the time tested theories that over burdensome taxes hurt the economy and that relentless regulation does the same thing. It would rewrite the narrative of who is really helping the poor from the bleeding heart liberal to the realistic conservative.

If the President’s plan on the other hand was put into action it would most likely prove the same points without the same assistance to the poor. If put into action like the botched Obamacare roll out it would show government’s massive inefficiencies and lack of success. However most likely it would not get covered as a failure but success because people would not see what the invisible hand of the market would have done in place of the iron fist of the government. Instead people would just see some nice buildings without knowing the mean cost which is well over market rates.

While both plans are assumed to have good intentions it is fairly obvious both would not have good results. An economic freedom zone would do far better than a “promise zone” ever could, due to its high incentive structure to work hard instead of lobby hard. In the horrid event that “promise zones” do become a thing, I want to make a proposal that the nation become a “broken-promise zone” in honor of Barack Obama’s promise to uphold the constitution. On a final point one must wonder who would really want to live in a “promise zone” of the guy who told the Politifacts “Lie of the Year”.


-Ron Johns

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Twitter: @RonJohnsOH

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