OPENING NEW MARKETS
The New Markets Initiative
The United States is currently in the midst of the longest peacetime expansion in its history. The strength and duration of this expansion has helped bring economic opportunity to millions of people once cut off from the economic mainstream. But too many urban and rural areas have not participated in this growth. These areas have tremendous potential as New Markets. The President’s expanded New Markets initiative will spur $22 billion in new capital investment in businesses in these economically distressed areas through a package of tax credits and loan guarantees. The package includes the following components:
- More Than Doubling the New Markets Tax Credit - The President proposes to more than double the New Markets tax credit to spur $15 billion dollars in new investment in community development in economically distressed areas. An entity making new equity investments in a selected community development project would be eligible for a tax credit worth 25 percent of the cost of the investment. A variety of vehicles providing equity and credit to businesses in underserved areas would be eligible. The total cost of the tax credits amounts to about $5 billion over 10 years.
- Expanded Empowerment Zone Tax Incentives - These tax credits will extend and improve economic growth in the 31 existing urban and rural Empowerment Zones, administered by HUD and USDA, and support a third round of 10 new empowerment zones to be designated in 2001. The total cost of these proposals will be $4.4 billion over 10 years.
- America’s Private Investment Companies (APICs) - Modeled after the Overseas Private Investment Corporation’s (OPIC) successful investment fund program, APICs would provide guaranteed debt to private investment companies, licensed by HUD, to help leverage private equity capital and lower the cost of capital for investments in low- and moderate-income communities. For every dollar that private investors provide, the government will guarantee two dollars in debt to expand the APIC’s pool of capital available for making investments and enhance the return on those investments to the private investors. APICs will make equity investments in larger businesses that are expanding or relocating in inner cities and rural areas.
- New Market Venture Capital Firms (NMVCs) - The President is asking for $51.7 million in his 2001 budget to allow SBA to match equity investment and technical assistance funds to finance 10-20 new investment partnerships – New Markets Venture Capital Firms -- selected to provide both long-term growth capital and expert guidance to entrepreneurs who need both in order to transform their small businesses and great ideas into thriving companies.
- Other Elements of New Markets - Other elements include: increasing the funding for SBA’s microenterprise lending program; creating PRIME-- a program providing technical assistance to low-income entrepreneurs; boosting CDFI funding; expanding support for BusinessLINC to encourage large businesses to work with small businesses in new markets; and establishing a New Markets University Partnerships pilot project which, under the auspices of HUD, would provide Universities with funding to develop local community partnerships, assistance to intermediaries, and technical and business development assistance to new and existing firms. In addition, to better serve Native American communities, the President will provide additional funding to expand the New Markets initiative to Indian Country.
In the Mississippi Delta, poverty remains at 175 percent of the national average. The President has proposed the creation of a new Delta Regional Authority, modeled after the successful Appalachian Regional Commission, to bring the resources of a Federal-State partnership to the fight for economic growth in the region. This partnership will help bring the infrastructure and job training needed to make the Nation's prosperity a reality in the Delta.
Native American Initiative
In order to better serve Native American communities in this millennium and to honor the federal government’s trust responsibility to tribes, the President’s budget includes an increase of $1.2 billion over Fiscal Year 2000 for key new and existing programs assisting Native Americans and Indian reservations. This initiative brings together several agencies in order to address the needs of Native American communities comprehensively. Some of the highlights of this initiative include: $300 million for Bureau of Indian Affairs school construction and repair; $349 million through the Department of Transportation for roads in Indian Country; $650 million to provide rental and homeownership assistance through the Department of Housing and Urban Development (HUD); and $2.6 billion for the Indian Health Service. Other key components of the Native American initiative include: “New Markets” economic development initiatives such as funding to create Native American Small Business Development Centers at the Small Business Administration; funding to create a Native American Economic Development Access Center at HUD; addressing the “digital divide” by creating a new program, in conjunction with the tribal colleges, to encourage Native Americans to enter information technology fields; funding 500 new Native American school administrators; increased funding for tribal colleges; $49 million to fund technology, infrastructure, planning, and public works projects at the Economic Development Administration; and increased funding of $103 million for the third year of the joint Department of Justice/Bureau of Indian Affairs Law Enforcement initiative.
Strengthening the Farm Safety Net
As the President has noted on numerous occasions since its passage, the 1996 Farm Bill fails to provide America’s farmers with an adequate safety net. As prices have remained depressed for the past two years, the Federal government has provided over $15 billion in emergency assistance. In order to provide American farmers and ranchers with the critical assistance that they need and deserve, the President’s budget includes $11 billion to strengthen the farm safety net until the next farm bill in 2002, with three key components: conservation, supplemental income assistance, and crop insurance. The budget includes for FY 2001:
- ·$1.3 billion to help family farmers take steps to protect water quality and the environment and to preserve farmland, including $600 million for a new conservation security program that will assist farmers who voluntarily adopt comprehensive plans to curb erosion and protect water supplies from pesticide and nutrient runoff.
- ·$3.1 billion for a new targeted supplemental income assistance program that will provide payments to producers whose farm revenue falls more than 92 percent below its 5-year average.
- ·$640 million to subsidize the cost of crop insurance premiums, to allow farmers to purchase higher levels of coverage than are included in the basic catastrophic coverage.
From Digital Divide to Digital Opportunity
Access to computers and the Internet and the ability to use this technology effectively are becoming increasingly important for full participation in America’s economic, social and political life. Unfortunately, there is strong evidence of a “digital divide” – unequal access to technology by income, education level, race, and geography. In 1998, those with a college degree were more than eight times more likely to have a computer at home and nearly sixteen times as likely to have home Internet access as those with an elementary school education. And the gap is widening. This growing divide also cleaves our community along income, ethnic, and geographic lines, with affluent, white, and urban/suburban households enjoying better computer and Internet access than their African-American, Hispanic, less affluent and more rural counterparts. To address this troubling trend, the President will shortly unveil a comprehensive program that relies on all levels of government working in partnership with the private sector and non-profit organizations and also will lead high-tech executives and others on a New Markets tour focused on closing the Digital Divide.
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