For over 30 years, the United States has faced the challenge of revitalizing its deteriorating urban communities. Throughout the 1980s and early 1990s, U.S. policymakers have shown an interest in geographically targeted urban economic development strategies, specifically in the form of Enterprise Zones. Now renamed Empowerment Zones, these are sections of poverty stricken communities in which the Government hoped to promote economic development by providing businesses with incentives to locate in the zones. These Empowerment Zones primarily used tax incentives to convince businesses to relocate. Studies revealed that this approach to attracting businesses to the targeted region has met with minimal success. In the past two years, U.S. policymakers have proposed two initiatives that use the Federal procurement system as a means to inoentivize firms to locate into economically distressed urban and rural areas. This study analyzes the Federal Government's recent initiatives to stimulate economic development in America's inner cities with Federal contracting incentives. It answers questions surrounding the potential economic impact of such initiatives on the inner city. Lastly, the study recommends akemative policy approaches to applying Federal contracting incentives to create jobs and spur business investment in America's inner cities.