ACORN: The Most Cost-Effective Investment the Government (and Foundations) Have Ever Made
To understand the current attacks on ACORN, and the organization itself, we need to go back more than 60 years, to the 1930s and the New Deal, when for the first time, the federal government accepted responsibility for directly helping the non-working poor.
These programs were expanded in the 1940s, but in the 1950s, a backlash erupted against the poor, driven by several factors.
The postwar prosperity dramatically reduced the number of poor families, and an increasing number of black women were added to the welfare rolls, injecting race into the debate.
Meanwhile, a Republican White House mostly left welfare matters to the states.
The myth of welfare recipients as lazy, immoral chiselers began to circulate. States adopted punitive laws to reduce welfare rolls. Special units of welfare departments conducted "midnight raids" to see if the recipients were involved in a relationship with a man, something that would result in a cut-off of benefits. The average grant declined.
In desperation, low-income mothers in dozens of big cities organized for survival. They came together to collectively negotiate not only with welfare offices for benefits, but with utilities to eliminate deposits required from low-income households and with the post office to install locks on mailboxes in apartment houses to prevent the theft of welfare checks.
Several veterans of the civil rights movement worked to bring local welfare-rights organizations together into a national organization.
In June 1966, a coordinated national day of action brought tens of thousands of people into the streets in 16 major cities. Two months later, representatives of 75 local welfare-rights organizations convened in Chicago to create the National Welfare Rights Organization.
Led by George Wiley, a Ph.D. chemist and leader of the Congress of Racial Equality, NWRO was an unusual organization. It was a federation of local groups that coordinated local and national actions. Black women comprised a majority of its leadership.
NWRO's successes led to rapid growth. By 1969, it boasted over 500 chapters with 22,500 dues-paying families.
In the late 1960s, a growing number of people looked to create a broad-based anti-poverty movement, an idea embraced by the Rev. Martin Luther King Jr. in his Poor People's Campaign, in which NWRO played an important role.
In 1972, when Wiley left NWRO, he told the New York Times, "The welfare-rights movement created a political and economic crisis around the issue of welfare which could have led to reform or repression. What we are witnessing is repression, and we need a broad, organized movement to counter it."
Wiley wanted to use the NWRO model to build a coalition of the working poor, unemployed, seniors and the lower middle class around issues such as national health insurance, consumer rights, housing and tax reform.
After a tragic accident took Wiley's life in 1973, the Association of Community Organizations for Reform Now, created by two former NWRO organizers Wiley had sent to Little Rock, Ark., in 1970, became the primary vehicle for implementing his vision.
Led by Wade Rathke, ACORN had affiliates in 20 cities by 1980. Today, it has about 400,000 low- and moderate-income members in more than 100 cities in 40 states.
ACORN is one of the few grassroots neighborhood organizations capable of wielding power on a national scale.
It is unique in the combination of strategies it uses: organizing, direct action, lawsuits, lobbying and the provision of direct services.
That ACORN is a federation of self-governing locals with a national board comprised largely of poor people seems to both amaze and gall the right.
Early this year, the conservative blog, Provocateur said about ACORN's board members, "They rose through the ranks of ACORN, often starting as foot soldiers fighting for causes near and dear to them. Since ACORN is often associated with causes for poor, most of the board are themselves poor. As such, they are often rather unsophisticated, and thus will be overwhelmed by the sophisticated nature of the organization itself."
ACORN has been a target of the right virtually since its founding. During the l980s and early 1990s, President George H.W. Bush's Department of Labor convened a grand jury to investigate ACORN's relationship to the progressive labor union SEIU.
The investigation was dropped after Bill Clinton took office. The President George W. Bush's Attorney General Alberto Gonzales was forced to quit in part because he fired several U.S. attorneys who refused to go after ACORN's voter-registration efforts when they found no evidence of alleged voter fraud.
ACORN's bottom-up and coordinated structure has enabled it to confront national corporations in a way few other organizations can.
When Reagan and the first President Bush's regulators failed to enforce the Community Reinvestment Act, ACORN and other groups conducted their own studies.
They identified banks with patterns of discriminatory lending, exposed these practices to the media and then demanded regulators do their jobs. The combination of publicity and confrontations led many lenders to agree to make loans to borrowers who could afford them.
Later, ACORN helped to get the Treasury Department to reverse its 10-year-old ruling that federal rules pre-empted 35 state laws curbing prepayment penalties that were costing borrowers more than $2 billion a year.
ACORN's provision of services has also enabled it to see national problems before they become national problems. Its mortgage counseling for lower-income households led it to sound the alarm about an industry that was manipulating families into taking out risky loans.
ACORN called adjustable-rate mortgages with teaser rates ticking time bombs. It beseeched Congress to not deregulate an increasingly irresponsible banking industry.
Conservatives call ACORN's confrontation tactics "shakedowns" or "extortions," for they often result in large corporations shelling out money.
I call it justice.
ACORN doesn't have the power to fine corporations or put their executives in jail for misdeeds. It only has the power to ask those who have done harm to pay to reduce that harm and prevent future injury.
In its 1993 campaign against insurance redlining, ACORN targeted Allstate and held actions in offices in l4 cities.
Allstate signed an agreement creating a $10 million program to offer below-market mortgages to low-income buyers.
In 2000, ACORN began a national campaign to combat the predatory lending practices of Household Finance Corp., one of nation's largest subprime lenders. ACORN used lawsuits as well as direct action, resulting in a $150 million class-action settlement that included $72 million for a foreclosure-avoidance program.
As ACORN grew, it often created tensions with existing organizations in its new cities. It got a reputation for not playing well with others. But few questioned its effectiveness.
Sometimes the scope of ACORN's activities is breathtaking.
In 2008, John Atlas and Peter Dreier, who have followed ACORN closely for many years, listed some local news stories about ACORN in the previous few weeks.
The New York Times wrote about ACORN's successful campaign to save 5,881 rental units of working-class housing in Brooklyn.
The Las Vegas Review-Journal and Orlando Sentinel reported on ACORN's local voter registration drive.
The Pittsburgh Post-Gazette recounted an ACORN demonstration at a local bank, with members blowing whistles and chanting “Criminal offenders, predatory lenders.”
The Dallas Morning News reported on ACORN's campaign to expand health insurance in Texas, while dozens of papers highlighted ACORN's key role in a new national coalition of unions, consumer and religious groups to fight for universal health care.
The New Orleans Times-Picayune described ACORN's ongoing work to rebuild homes in the Lower Ninth Ward neighborhood battered by Hurricane Katrina.
The San Francisco Chronicle reported that Gov. Arnold Schwarzenegger signed a bill pushed by ACORN that will help desperate California homeowners avoid foreclosures."
Conservatives themselves reluctantly recognize ACORN's importance. In a 2006 Wall Street Journal column, Steven Malanga of the Manhattan Institute complained, "When Chicago's City Council this summer required big-box stores to pay new employees at least $10 an hour, supporters of the legislation held an impromptu celebration in the council galleries.
"The hoopla was reminiscent of another scene five years earlier in New York, when opponents of Mayor Rudy Giuliani's effort to privatize failing public schools embraced in the streets after parents rejected the idea.
"What linked these celebrations was the left-wing Association for Community Organizations for Reform Now (ACORN) which led the campaign for the legislation and against privatization."
Since the tax advice of a few ACORN employees is at the heart of the current controversy, it might be helpful to understand how and why ACORN became involved in tax assistance.
In late 2003, ACORN launched a four-city program that offered assistance to families eligible for the Earned Income Tax Credit, the nation's largest income-support program. It did so in part because the IRS estimated that some 5 million qualified families failed to claim the credit.
ACORN tax preparers were trained and credentialed in coordination with the IRS. ACORN members went door to door to inform people about free tax services and the EITC.
In a formal evaluation of the program, Fred Brooks, Robert Fisher and Daniel Russell found that it was ranked near or at the top of all free tax services in those cities. Canvassed respondents in New Orleans, for example, were five times more likely to choose free tax preparation compared to income-equivalent comparison group, saving them $200-$300 each.
ACORN's tax assistance resulted in almost $4 million in tax refunds to low-income families. The next year, ACORN expanded its EITC assistance to 51 cities and generated $19 million in total refunds.
In typical ACORN fashion, its tax-advice service led to direct action. ACORN discovered that poor people who file for the EITC often take out short-term, very-high-interest loans, called Refund Anticipation Loans to receive their money a few days or weeks sooner.
In 2003, more than 50 percent of tax preparers' customers who received an RAL also received the EITC. By some estimates, the almost 200 percent annual interest customers paid on their RALs, plus the associated administrative fees reduced the EITC refunds lower-income households received by more than $500 million.
In the 1990s, when RALs exploded, state attorneys general went after companies like H&R Block for unfair and deceptive practices.
By 2000, according to the New York Times, Block had been sued no fewer than 22 times.
But lawsuits didn't stop tax preparers, or even slow them down, because RALs were extremely profitable. In 1999, H&R block made a profit of over 50 percent on its sale of RALs. In 2004, Jackson Hewitt, the second-largest tax-preparation chain in the country, said that RALs accounted for 29 percent of the company's revenues.
In January 2004, ACORN mounted coordinated actions against H&R Block in 43 cities, accusing it of stealing from low-income communities. Within a month, H& R Block and ACORN reached an agreement: H&R Block agreed to give ACORN money to expand its EITC outreach and eliminate its RAL application fee nationwide. It also agreed to hire and train ACORN members to be tax preparers.
ACORN has reportedly received about $53 million since 1994 from the federal government, about $3.5 million a year. If so, it must be the most cost-effective investment the federal government has ever made, assuming the investment was made to help the poor.
In 2005, ACORN did an analysis of how much money its activities had generated for low- and moderate-income households in the 10-year period from 1995 to 2004.
One should, of course, approach the findings of an internal report cautiously. But its methodology is transparent and sound. It counts, for example, only those campaigns in which it played the lead role.
The conclusion? Over 10 years, ACORN's direct services and local and state campaigns generated monetary benefits for lower-income households totaling some $15 billion, or $1.5 billion a year. This includes the impact of enacting living-wage or minimum-wage or predatory-lending ordinances or statutes.
The recent video of an ACORN employee giving tax advice to a make-believe prostitute and her "pimp" to engage in a make-believe crime is certainly damning.
But we should compare the swift punitive reaction by Congress and the media to that video with their reactions to real-world tax advice given by huge accounting firms to the richest of us that resulted in real-world millions of foreclosures and millions more plunging into poverty.
We don't have the tape of executives at the giant accounting firm KPMG dreaming up a new intangible asset that would save its client WorldCom millions in state taxes.
The new asset was called "foresight of top management." Shortly thereafter, the foresight of WorldCom's top management resulted in a 25-year prison sentence for WorldCom's CEO and five years for its CFO.
On the anniversary of the September 2008 financial meltdown, a plaintive CNN headline asks, "Will any Wall Streeters go to jail for this? … Why vengeance over the financial crisis is so elusive."
Or consider the reaction by Congress and the media to cases where the misdeeds of profit-making businesses actually kill people.
There have been four documented fatalities of soldiers from electrocution while showering in Iraqi barracks whose electrical wiring was installed by KBR.
Until 2007, KBR was a subsidiary of Halliburton. Unlike in the case of ACORN, after the allegations became public, the federal government didn't rush to cancel KBR contracts.
Instead, the Republicans stayed mum, and the Pentagon paid KBR huge bonuses. In early 2009, the Pentagon awarded KBR a $35 million contract for more electrical work even while the company was under a criminal investigation for two electrocution deaths, according to Pratap Chatterjee, former executive director of CorpWatch and the author of Halliburton's Army.
If the misdeeds of individuals at ACORN are the problem, ACORN's swift action in bringing on an independent board to conduct an internal audit is the answer, not cutting off funds or pillorying the organization.
But improving internal controls isn't the right wing's end game. Destroying a remarkably successful 50-year-old grassroots model for defending the poor and workers is.
An improved management structure may well be necessary.
But the desperate situation facing tens of millions of households in the country, and the reticence of Congress and the White House to act firmly on their behalf, makes this a time when foundations, for example, should expand, not contract, their financial support to ACORN.
And perhaps Congress and the federal government could pull a Halliburton and double ACORN's contracts after its missteps became known.