Conservative Tackles Urban Woes : Economist Seeks to Lure Constituents of Liberal Groups

WASHINGTON —  When Kimi Gray has a problem, she often calls Stuart Butler.

“He’s this little, funny-talking fellow. He has a British accent, you know,” said Gray, a community activist who lives in a public housing development in northeast Washington.

Gray, chairman of her neighborhood’s resident management corporation, first met Butler at a ward meeting to which he was invited. “What he said sounded good to me. We basically found out we had similar ideas.”

What makes the Butler-Gray link unusual is that Butler is one of the chief architects of economic policy at the Heritage Foundation, a conservative think tank, and a frequent adviser to the Reagan Administration and conservative members of Congress, such as Rep. Jack Kemp (R-N.Y.).

Butler epitomized a large segment of the new conservative movement that has become vocal in pursuing its new economic ideas at a time when the country seems to be turning away from old solutions to persistent problems.

Butler said he and other conservatives hope to attract the traditional constituents of liberal coalitions with their ideas, such as offering incentives to promote growth in blighted areas and helping public housing residents to own their own homes.

Enterprise Zones

Two of the concepts with which Butler is often associated are enterprise zones, which provide tax and other incentives to create economic growth in depressed inner-city areas, and privatization, the selling off of federal assets to reduce federal spending and remove government from non-essential activities.

Many of Butler’s ideas have been picked up by the Reagan Administration, which has formed a close association with the Heritage Foundation. Butler is credited with bringing the enterprise-zone idea to the United States from Britain.

After Butler published a paper on it in 1979, Kemp sponsored legislation on enterprise zones, and President Reagan later included such a proposal in his first budget.

Butler began work on privatization several years ago and has written one of two books in the forefront on the subject. He often has been called in to consult with the Office of Management and Budget, and privatization became a big element in the Administration’s budget this year.

Butler “was a useful resource,” said Ed Dale, OMB spokesman. “He’s an important guy. He’s recognized as knowledgeable on the subject. Our people talk about it a lot with him.”

Kemp’s staff drafted his enterprise zone bill after consulting with Butler. “When we were developing our bill, our staff was in very close contact with him,” a Kemp aide said.

Butler said he plans to unveil a conservative blueprint for welfare reform next year, which he also hopes to pass on to the Administration.

Gray said she doesn’t care about Butler’s conservative credentials. “I think sometimes people have a misinterpretation of liberal, conservative,” Gray said.

Staunch Free-Marketer

“We’re talking about save the people, my people. There is no liberal, conservative. I forgot about white, black, conservative, liberal, Republican. I got past his accent after our first meeting.”

Butler is as conservative an economist as they come. He is a staunch free-marketer and helped found the Adam Smith Institute in Britain, a small Heritage-type think tank named after the 18th-Century economist who described how free markets work.

But behind Butler’s pin-striped suits, tortoise-shell glasses and placid manner is not your stereotype of an Oxbridge egghead.

Butler grew up in a sheep farming district about 80 miles south of Manchester, England. He was the son of a post office mechanic who left school at age 13.

Butler said he didn’t have indoor plumbing until he was a teen-ager and obtained water from a village well.

After teaching in Yorkshire for a year, he came to the United States and taught economics at Hillsdale College in Michigan and joined Heritage in 1979 as a policy analyst.

Now he is equally likely to be found attending dinner parties at the British Embassy or visiting South Bronx tenements or Gray’s northeast neighborhood here.

Similar to Frontier

At the University of St. Andrews in Scotland, Butler studied physics and mathematics, economics and American economic history, which he said helped him develop his “frontier” notion of blighted areas.

Many inner-city areas are similar to the American frontier of the 1800s, he said. Like the frontier, the inner city can carry dangers, but also opportunities to build from the ground up and to try creative ideas, Butler said. “If you read the history of the United States, you begin to see parallels,” he said.

However, today’s pioneers are often thwarted by government regulation, which his enterprise-zone plan is supposed to alleviate, Butler said.

Butler, unlike many conservative economists of past generations, said he is intellectually challenged by the problems posed by America’s inner cities.

Butler said that after years of liberal Great Society welfare programs of the 1960s and 1970s, it is time for conservatives to come forward with a welfare reform plan.

“Just watching the welfare debate, conservatives have never been able to frame a model of where they ought to go,” Butler said. “It had always been the Great Society versus the nit-pickers. There was a necessity to paint an entire model and not demonstrate to liberals that we’re trying to get rid of everything. We need a blueprint, a backdrop to respond to issues all the time.”

Government programs have contributed to the breakdown of the family unit by making family members independent of each other and dependent on federal support, Butler said.

“Let’s consider the family as a very fundamental unit,” he said. The government should “restructure programs to restructure the family. We’re beginning to start looking at programs for teen-age children.”

Intellectual Challenge

Butler said that policy-makers should “see people in terms of community, church, community organizations. We, as conservatives, are more concerned about strengthening these. The government should assist other institutions.”

Butler said he was attracted to many inner-city public-policy issues, such as how to promote growth in blighted areas, by the intellectual challenge of showing how a free market--a conservative ideal--can work in depressed areas. “If it can work there, it can work anywhere.”

In February, 1979, the Heritage Foundation published a paper by Butler on enterprise zones, which attracted Kemp’s attention and later members of the Reagan Administration.

Butler’s paper drew on research by a professor at Reading University in Britain and by Sir Geoffrey Howe, currently British foreign minister who at the time was the British Conservative Party’s spokesman on economic issues.

“The essence of the proposal put forward by these leading figures independently of each other is for the most decayed segments of major cities to be classified as enterprise zones and for virtually all zoning, employment protection and other controls within them to be suspended--and perhaps even for property taxes to be abolished,” Butler wrote.

Although federal enterprise zone legislation has stalled in Congress, Butler said that he is gratified that at least 30 states have adopted their own measures. “The idea now is to get a lot of states to show it works,” he said.

Jeff Faux, president of the Economic Policy Institute--set up less than a year ago in part to counter conservative ideology--argues that enterprise zones are overrated, however.

Businesses don’t move to other areas because of tax breaks, Faux said; they look for an educated work force and safety. Enterprise zones “don’t touch the real problems of pockets of poverty in the United States,” Faux said.

However, Faux conceded that liberals and Democrats have had a problem getting across a message about what to do about poverty and how to help their traditional constituents, such as the poor, blacks and blue-collar workers.

“Too many liberals are frightened of getting into the debate with conservatives” because of fear of suggesting solutions that involve the government, Faux said. Liberals and Democrats “have been too reluctant to be different from Republicans.”

One of the latest issues that Republicans and some Democrats have latched onto is privatization, a topic Butler has worked on for at least two years and with which he is identified among conservatives on Capitol Hill.

Privatization was a much-ballyhooed part of the 1987 Reagan budget, with proposals to sell such assets as Conrail, electrical power agencies and naval petroleum reserves and phase out federal credit activity.

The House and Senate have passed substantial parts of Reagan’s privatization program. The House was particularly keen on selling Conrail and the government’s portfolio.

Some economists are skeptical about privatization, saying that the government won’t be able to sell its money-losing assets, and if it sells its best assets, it may reduce the budget next year but in the long run will lose important sources of revenue.

“As a budget issue, it cannot be very interesting,” said John Makin, economist at the American Enterprise Institute.

However, Makin said that privatization is interesting as an issue of determining whether the private sector can run some government-owned businesses better than the government can.

“I don’t think it is a top-line issue,” Makin continued. “It did come up around budget time, and I think it became clear the budget potential was very limited.”

Faux said he doesn’t buy the idea that the private sector necessarily is more efficient than the government.

For example, contracting out some government work to private businesses has been a major source of fraud, Faux said. It also generally leads to lower wages and helps break unions, he said.

Butler said that while Congress is moving slowly on the privatization issue, it is not dead yet. What’s needed, he said, is a better strategy for selling the benefits of privatization to Congress.

One way is by forming interest groups that will benefit from federal assets moving to private hands. For example, he said employees of a federal activity should be given a stake in ownership once it becomes private, so that an interest group of employees is built up who have a stake in the company.

Although Butler’s ideas may not have won over Congress and some liberals, they have gotten a convert in Kimi Gray, who talks to Butler about public housing and how low-income people can start their own businesses.

“I love his home-ownership-for-low-income-residents idea,” Gray said.

“I love his idea . . . that if you lose your job, you can get part of your unemployment compensation and invest it in a business. Stuart is one of my favorite people. He’s good people.”