Housing official: Ron Paul's plan could spell trouble for Iowa City

BY SAM LANE | OCTOBER 24, 2011 7:20 AM

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Iowa caucus hopeful Ron Paul's proposal to eliminate the U.S. Department of Housing and Urban Development as part of a $1 trillion federal budget cut could have a "huge impact" on Iowa City, one local housing official said.

And an urban-development expert said doing away with the department would take away programs that are "absolutely essential" to some communities nationwide.

Paul touted his deficit-reduction plan — as well as his standard message of liberty and limited government — during a visit to the University of Iowa campus on Oct. 21. Paul spoke to a standing-room-only crowd of about 1,000 at the IMU shortly after the school's Homecoming Parade.

In addition to criticizing U.S. military policy and the Federal Reserve, the Texas congressman lauded his own plan as a way to "get serious" about cutting the country's debt.

"Our problems will get much, much worse and will be more chaotic if we don't do something about it," Paul told the rowdy audience.


But the plan itself could spell problems — at least initially — for areas such as Iowa City.

Iowa City Housing Administrator Steven Rackis said the city's Housing Authority receives roughly $7 million a year from HUD. The authority doles out more than $6 million of those funds to around 450 local landlords, helping finance a portion of rent for families based on their income.

The city also owns 81 public-housing units, so officials pay some of those federal dollars to private companies which perform maintenance on the units.

"I'd lose my job, but that $7 million [plus additional economic impact from that money] coming into this community would have a huge impact on the community … Not only would Mr. Paul have national associations to contend with, but how many businesses would he be affecting with the proposal?" Rackis said.

Entities separate from the city also receive HUD funds. In August, The Daily Iowan reported local organizations — including Big Brothers Big Sisters of Johnson County — will receive $5 million from HUD this year, an increase from the $1.7 million the groups usually receive.

Last year, Iowa City received more than $600,000 in Community Development Block Grants from HUD as well as nearly $600,000 more in HOME Investment Partnership Program funds.

But Paul contends eliminating HUD — as well as five other Cabinet departments, including the Department of Education — will help the country in the long run.

The deficit plan, Paul writes in the proposal, will provide "Major regulatory relief, large spending cuts, sound monetary policy, and a balanced budget."

According to Paul's proposal, the Congressional Budget Office's fiscal 2013 baseline budget for HUD allows for $46.3 billion in discretionary spending. But with the elimination of the department, the federal government will save more than $190 billion between fiscal 2013 and fiscal 2016, according to the plan.

However, at least one expert said he can't see the positive long-term effect of Paul's plan.

Richard Funderburg, a UI assistant professor of urban and regional planning, said departments such as HUD are intended to address regional inequality, and regional inequality needs to be approached on a national level.

"What [Paul is] suggesting is unproven," Funderburg said. "Most mainstream economists disagree wholeheartedly."

He said the idea of reaching an economic growth equilibrium by only reducing expenditures and taxes is based on a perfectly competitive market. To think the United States' market is perfectly competitive is "an absolute fallacy," he said.

Programs such as the Community Development Block Grants are "absolutely essential in empowering communities and bettering lives," Funderburg said, noting funds from the agency are particularly important for places such as Iowa, where the money has been used for flood-recovery efforts.

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