New Geography

Category: Policy

  • Obama, Fight The Green Agenda

    In his remarkable rise to power, President Barack Obama has overcome some of the country’s most formidable politicians – from the Bushes and the Clintons to John McCain. But he may have more trouble coping with a colleague he professes to admire: former Vice President Al Gore.

    To date, motivations from sweet reason to hard-headed accommodation have defined Obama’s Cabinet choices, most notably in such areas as defense and finance. Oddly enough, though, his choices on the environmental front are almost entirely Gore-ite in nature. Obama’s green team, for example, includes longtime Gore acolyte Carol Browner as climate and energy czar, physicist Steven Chu as energy secretary and, perhaps most alarmingly, John Holdren as science adviser.

    These individuals are not old-style conservationists focused on cleaning up the air and water or protecting and expanding natural areas. They represent a more authoritarian and apocalyptic strain of true believers who see in environmental issues – mainly, global warming – a license to push a radical agenda irrespective of its effects on our economy, our society or even our dependence on foreign energy.

    We should not underestimate the power of these extreme greens. They can count on the media to cover climate and other green issues with all the impartiality of the Soviet-era Pravda. Stories that buttress the notion of man-made global warming – like reports of long-term warming in Antarctica – receive lavish attention in The New York Times and on Yahoo!.

    Meanwhile, other reports, such as new NASA studies indicating cooling sea temperatures since 2003, or the implications of two unusually cool winters, are relegated to the mostly conservative blogosphere.

    I am no scientist. For all I know, both sides are lying or exaggerating. However, we do need to take history into account. Scientists have not been and are not immune to hysteria or groupthink, particularly when taking the “correct” view means a lush supply of cash from foundations and governmental labs. Nor is “consensus,” however constructed, always right.

    In fact, lockstep “official” science is often very wrong – from the pre-Copernican view of the solar system, to the decades spent ridiculing the now undisputed reality that continents drift over time, to eugenics or even, back in the 1970s, concern over “global cooling.”

    The past also suggests we should be particularly leery of purveyors of impending natural apocalypse. Holdren, the new science czar, for example, is a longtime disciple of the largely discredited neo-Malthusian Paul Ehrlich, who in the early ’80s bluntly predicted that global mass starvation was imminent and that critical metals would suffer severe shortages. Neither calamity has occurred – even as both global population and economic activity have surged dramatically.

    Obama may also want to consider the consequences of following the catastrophists. Supporting green causes might have been useful for bludgeoning George Bush and for raising cash over the Internet from affluent urban professionals. But now these environmentalists could obstruct his program for creating broad economic recovery and meeting the nation’s energy challenges – and they could even slow his party’s quest to secure a permanent electoral majority.

    For one thing, the economic crisis has shifted the public’s attention away from environmental issues. Recessions may reduce greenhouse gases and halt development, but they terrify voters and shift their priorities. A recent Pew survey of 20 top priorities for 2009 shows the public places a growing emphasis on strengthening the economy and particularly creating jobs, each cited by over 80% of respondents.

    In contrast, concern over the environment has dropped to 41% – down from 57% in 2007. Global warming ranked dead last; 30% of respondents named it a priority, a figure down from 38% just two years ago.

    Green activists might force the administration to eschew some of the tools that could best restore the economy. For example, they often oppose expenditures that drive industrial and agricultural growth – investments in ports, roads, bridges and even freight rail – which some see as greenhouse gas boosters. With the likes of Browner, Chu and Holdren in charge – no matter what Congress’s intentions are – an emboldened regulatory apparatus could use their power to slow, and even stop, many infrastructure improvements.

    At the same time, greens can be expected to line up with the information-age lobby, whose notion of stimulus focuses largely on universities, health care, arts, culture and media. This “post-industrial strategy,” notes author Michael Lind, may be fine for Manhattan and San Francisco, but it’s not so appealing in Michigan, Ohio, Appalachia or the Great Plains.

    All this green-blessed employment would likely produce precious few well-paying, long-term, private-sector jobs for middle- or working-class Americans. Obama should understand, as much as anyone, that the votes that won him the presidency came largely from suburban voters who are concerned about their economic futures.

    Of course, suburbanites care about the environment too, but they would rather see practical steps to clean up air and water quality and expand public open space. In contrast, the greenocrats are generally hostile to cars and single-family homes – the suburbs themselves. In other words, they largely detest many of the very things middle-class voters cherish.

    Perhaps nowhere will this green agenda create more potential problems than in the energy arena. I have long held that conservation should be encouraged in every reasonable way possible. However, it is clearly fanciful to believe that solar, wind and other renewables can supply the bulk of the new power we need now to, as President Obama put it, “fuel our cars and run our factories” – much less meet the needs of the 100 million or more American who will be online by 2050.

    Just look at the numbers. According to the latest (2007) figures from the Energy Information Agency, renewable energy accounts for less than 7% of U.S. consumption – and almost all of that is derived from burning wood and waste and hydroelectric power. Nuclear generation accounts for over 8%, while fossil fuels meet nearly 85% of America’s energy needs. On the other hand, wind and solar power, which the new president has promised to “harness,” account for just 0.39% of total American energy.

    Even doubling renewables in the next few years – itself an expensive and difficult goal – would do relatively little to meet the nation’s demand for energy. In this light, the incoming energy secretary’s strong antipathy to fossil fuels – particularly coal, which he once described as his “worst nightmare” – coupled with his lack of enthusiasm for nuclear power, which is collectively the source of over 93% of U.S. energy, seems a bit problematic.

    We can only solve America’s energy needs by blending a variety of alternative solutions – renewables, conservation, nuclear – with fossil fuel-based energy. This approach, which would vary by region, would also help revive manufacturing, agriculture and other productive industries. A renewables-only approach, in contrast, would impose very high prices and require massive subsidization, leading to greater dependence on overseas energy and also, perhaps, to a permanently shrunken economy.

    These challenges, along with recent shifts in the public’s priorities, suggest that the president may need to distance himself from his extreme green advisers – or, somehow, get them to toe a more sensible line.

    In his new job, President Obama must confront many dangerous ideologues from organizations like Hamas and al-Qaida. His political future, however, may ultimately hinge on how he handles the dogmatic ideologues he has now lifted to the highest levels of our government.

    This article originally appeared at Forbes.

    Joel Kotkin is executive editor of NewGeography.com and is a presidential fellow in urban futures at Chapman University. He is author of The City: A Global History and is finishing a book on the American future.

  • Infrastructure and Aesthetics

    In his 2005 book Infrastructure: A Field Guide to the Industrial Landscape, Brian Hayes surveys the built environment with an undaunted appreciation of the vast networks of infrastructure systems in America. Hayes, a writer for American Scientist, argues that common understanding of infrastructure is just as important as an understanding of nature itself. Without the ubiquitous power lines, the oft disparaged garbage dumps, or the controversial mining industry, the United States would not have been able to achieve status as the paragon of 20th Century modernization – a pattern now emulated by the likes of China and India.

    Yet it seems that ‘infrastructure’ has lost its fabled status in America. Our parents – or grandparents, depending on your age – celebrated achievements such as the building of the Hoover Dam or the California Water Project. But starting with the 1970s, as the environmental movement began to gain steam, and more recently after Al Gore’s documentary An Inconvenient Truth, large scale infrastructure has increasingly become something to be reviled.

    The only time we are reminded of our infrastructure is when tragedy strikes, be it a mining accident, a bridge falling down or a collapsed levee. It’s as if we wish to keep the very things that support our modern lifestyles ‘out of sight out of mind’. No one really wants to know where their trash ends up or what the intricate processes for treating sewage are, nor does anyone want to be a neighbor with a coal burning power plant.

    At the same time what had once been centers for productive industry have also been redeveloped into hip and trendy neighborhoods marketed to those looking for an ‘edgy’ urban experience. To be sure, part of the allure of once industrial areas such as San Francisco’s South of Market and Brooklyn’s Williamsburg lies in the gritty aesthetic and adaptability of warehouse and manufacturing buildings for reuse.

    Yet even though residential development may be halted for the foreseeable future, it is critical to not lose sight of the aesthetic value of the industrial landscape. This ‘diamond in the rough’ appeal applies not only to converted lofts and art galleries but to both our current functioning and yet-to-be built infrastructure as well.

    The potential for infrastructure to please the eye and to uplift the soul is not lacking in historical precedent. Some of the greatest monuments to the genius of ancient architects remain those which served as essential infrastructure, the most notable example the aqueducts constructed by the Romans.

    Yet today, aside from exceptions like the bridges of Spanish architect Santiago Calatrava, the world of high architectural design has largely ignored the possibility that infrastructure could be beautiful. Instead, design media is relentlessly focused on museums and other elitist structures with the more mundane and common buildings being “left to the engineers”.

    LeCorbusier, the late Swiss/French architect and one of the ‘godfathers’ of modern architecture would be rolling in his grave if he knew this was the case. In his seminal manifesto Towards a New Architecture, LeCorbusier speaks of his appreciation for the industrial aesthetic: “Thus we have the American grain elevators and factories, the magnificent first-fruits of the new age”.

    LeCorbusier, or ‘Corb’ as he is called, went on to apply the industrial aesthetic to socialist housing schemes while proclaiming that the “house is a machine for living in”. Although the jury is still out on whether or not living in a machine has mass appeal, Corbusier’s celebration of the simple and repetitive massing of structures such as grain silos is a good reminder that beauty can be derived from infrastructure.

    Early 20th Century American city builders also celebrated infrastructure. Willis Polk, a prominent San Francisco architect, was commissioned in 1910 to build a water temple in Sunol, California. Sunol, about 40 miles outside of San Francisco, was where converging water lines met before feeding into the city. Sensitive to the importance of getting fresh water to a growing population, some of San Francisco’s wealthiest citizens hired Polk to design the structure, which was inspired by the Temple of Vesta at Tivoli. Soon after, the area around the iconic structure became a popular spot for park goers.

    Similarly, Los Angeles architect Gordon Kaufman was hired to add aesthetic merit to the Hoover Dam. Still generating power for parts of Southern California, Nevada and Arizona, the massive dam symbolizes one of the most ambitious pieces of infrastructure in American history. At the time, the dam was the world’s largest concrete structure, yet Kaufman softened the aesthetics by adding a simple and elegant Art Deco touch to the otherwise imposing structure.

    The marriage of aesthetic beauty and infrastructure does not always have to take place at the grand scale of the Hoover Dam or the Golden Gate Bridge. In contrast, the barn, according to Brian Hayes, remains “the unmistakable icon of American agriculture and rural life.” The barn, a prevailing theme in American literature, represents function and flexibility of the highest order: one day it could be housing livestock while the next it could serve as a dance hall. Whatever the function, there is no questioning the charm of these structures dotting the rural landscape. With a renewed interest in family and organic farming in current popular culture, these buildings – including new barns – could assume a renewed meaning.

    With the Obama stimulus plan comes not only an opportunity to create jobs but to advance a cultural appreciation for the structures and systems that have made the United States a model to be emulated. Wind turbines, for instance, are gaining traction as the symbols of clean energy. When driving past large scale wind farms like the San Gorgonio Pass near Palm Springs, the movement of the out-of-proportion blades coupled with the dizzying repetition of turbines results in something similar to a pleasant hallucination. The appreciation for wind turbines is a start in the right direction, yet if we are to ensure that the systems that run the country are suited to last for generations to come, the culture needs to once again celebrate, rather than demonize, our infrastructure.

    Adam Nathaniel Mayer is a native of the San Francisco Bay Area. Raised in the town of Los Gatos, on the edge of Silicon Valley, Adam developed a keen interest in the importance of place within the framework of a highly globalized economy. He currently lives in San Francisco where he works in the architecture profession.

  • What Way for the Stimulus? Post-Industrial America vs. Neo-Industrial America

    As a result of the economic crisis, there is a broad consensus in favor of large-scale public investment in infrastructure in the U.S., both as part of a temporary stimulus program and to promote long-term modernization of America’s transportation, energy, telecom and water utility grids. But this momentary consensus masks the continuing disagreement on whether the U.S. government can legitimately promote American industries, and, if so, which industries. This is a problem for infrastructure policy, because different national infrastructures correspond to different national economic strategies.

    Consider the antebellum U.S. in Henry Clay’s American System: federal infrastructure investment in canals and later railroads (“internal improvements”) was part of a package that included import-substitution tariffs to protect infant U.S. industries from British competition. For Clay and his Whig allies and followers, including future Republicans such as Abraham Lincoln, internal improvements and tariffs were not ends in themselves. They were instruments to be used in the pursuit of the Whig-Republican vision of a decentralized, mixed industrial and agricultural economy where business owners, mostly small, and free workers, mostly prosperous, could realize the utopia of Clay’s “self-made man.”

    From Thomas Jefferson to Jefferson Davis, the Southern planters who opposed such ambitious schemes had no objection to infrastructure as such. They favored infrastructure tailored to suit the needs of their semi-colonial slave plantation economy, based on exports of cotton and other commodities to British and Western European factories. Local wharves and harbors that facilitated the shipment of crops to industrial Britain were acceptable to the planters. They opposed infrastructure that would encourage industrialization in the South or the U.S. as a whole, out of fear that urbanization and industrialization would threaten their local dominance over both black slaves and poor white yeoman farmers. They also feared they would be marginalized in national politics – as they indeed were – by industrialists, merchants and financiers.

    Today, the rivalry is not between the champions of an industrial America and an agrarian America. Rather, it is a rivalry between the champions of a neo-industrial America, which includes world-class industrial agriculture, and a post-industrial America, in which most if not all manufacturing and even agriculture will be outsourced. In this formulation, post-industrial America emerges as a consumerist paradise populated by investors, executives of multinational companies, rentiers, realtors, government and nonprofit bureaucrats, and a supporting cast of service sector proletarians including nursing aides, nannies, gardeners, security guards and restaurant and hotel workers.

    Just as there was one logical infrastructure for the industrializing North and one for the anti-industrial plantation South in the nineteenth century, so in the twenty-first century a different infrastructure would be appropriate, depending on whether the goal is a post-industrial America or a neo-industrial America.

    A post-industrial infrastructure can be simple, local and substantially foreign.

    The post-industrial infrastructure can be simple since it involves little more than the roads and harbors needed to bring in high-value-added imports from abroad and ship out low-value-added American commodities. Adequate harbors are necessary, as are adequate highways to help ship U.S. soybeans and timber to industrial Asia while bringing Chinese, Japanese and Korean goods to Wal-Marts for distribution.

    The post-industrial infrastructure can also be local. Just as the Southern planters were indifferent or hostile to regional or national infrastructure projects, so the elites of the service sector are interested chiefly in the infrastructure needs of the half dozen or so coastal megalopolitan areas where they live. Many favor high-speed rail to connect nearby big cities on the coasts, while denouncing federal investment in non-metropolitan areas as boondoggles. The FIRE (Finance, Insurance, Real Estate) economy of post-industrial America could function reasonably well as long as a handful of colossal city-states – Boswash, Northern California, Greater LA, the Texas Triangle – had state-of-the-art local telecom and transportation and energy grids. So what if the rest of the continent decayed?

    Finally, the post-industrial infrastructure can be largely foreign. Most of the urban service sector elite favors both outsourcing American industry and importing a new metropolitan immigrant proletariat willing to work for lower wages and fewer benefits than native Americans. To be sure, someone must build the components of the metro infrastructure and put them in place. But steel can be shipped in from Asia and assembled in New York, San Francisco, Atlanta, Chicago and Houston by immigrants, legal or illegal. Better yet, the metro-supportive infrastructure can be leased or permanently sold to foreign consortiums and even foreign sovereign wealth funds, in order to avoid the need to raise taxes to pay for upfront costs or repay bonds over the long term. The “leakage” of federal stimulus spending to benefit Chinese factories, law-breaking Latin American illegal immigrants and petrostate sovereign wealth funds will not bother elites who are not only post-industrial but to a large extent too sophisticated to worry about narrow patriotism.

    If the infrastructure of a post-industrial America would be simple, local and largely foreign, the infrastructure of a neo-industrial America should be complex, national and predominantly American.

    A neo-industrial infrastructure necessarily must be complex, because the purpose of a neo-industrial infrastructure would be onshoring – arresting and in some cases reversing the transfer of high-value-added manufacturing and services to other countries. This requires something more than freight rail bringing Chinese imports to Wal-Mart and airports helping to deliver Amazon.com boxes to urban apartments. It requires an infrastructure tailored to the needs of an entire complex ecosystem of factories, design offices, and their suppliers and contractors. And that infrastructure not only must be rebuilt in existing industrial areas like Detroit but also built from scratch in areas such as the Great Plains. It would aim to put many of tomorrow’s factories and research parks in today’s depopulating rural areas and derelict inner cities.

    A neo-industrial infrastructure must be national and inclusive in scope. Its goal resonates with the aspiration of Henry Clay Whigs, Lincoln Republicans and William Jennings Bryan Populists – a decentralized, prosperous middle-class society of small and medium-sized towns as opposed to a country where half a billion people are crammed into a few plutocratic megacities and forced to live in dense apartment blocks.

    Such decentralization – contrary to the claims of some urbanists and greens – need not mean excessive “sprawl.” This is still a very large country with lots of land, as anyone who spends time away from the coasts recognizes.

    But more important, there can only be an independent middle-class majority in a United States with 400 or 500 million people in 2050 if most Americans live and work in relatively low-density areas where homes are affordable and small business rents are not crippling. That means building new towns and new industrial centers away from the existing ones, to spread out the population and accommodate tens of millions of new immigrants with desirable skills. The rich, who will remain concentrated in a few metro areas, where they can socialize, compete and conspire with one another, must be taxed by the federal government to subsidize the infrastructure of the entire continental U.S., not just their own cities, metro areas and states.

    Last but not least, a neo-industrial infrastructure must be predominantly national with respect to its components and its workforce. It would be self-defeating to design an infrastructure friendly to American industries and workers and then hire foreign industries and foreign workers to build it. Most or all federal infrastructure spending should be reserved for corporations and suppliers whose high-value-added production takes place on American soil. And all jobs directly or indirectly related to infrastructure construction should be reserved for citizens or legal immigrants. Law-abiding American citizens should not be taxed to subsidize law-breaking illegal immigrant workers and the unpatriotic, criminal contractors who employ them. This is not “nativism.” The right kind of legal immigration would be an important part of any neo-industrial strategy, as would taking advantage of foreign direct investment by foreign companies and sovereign wealth funds in mutually beneficial ways.

    The debate about infrastructure, then, is also a debate about the future industrial profile of America. Will America in the twenty-first century be neo-industrial or post-industrial? This debate, in turn, may well determine whether the U.S. will become a decentralized, continental middle-class society or a collection of plutocratic, hierarchical city-states. The stakes could not be higher.

    Michael Lind is Whitehead Senior Fellow at the New America Foundation and Director of the American Infrastructure Initiative.

  • Should We Bailout Geithner Too?

    This morning the Senate Finance Committee approved the nomination for treasury secretary of Timothy F. Geithner, head of the Federal Reserve Bank of New York. Geithner is a Wall Street darling, but taxpayers may have a different take. Senator Jim Bunning (R-KY) reminded us at the Senate confirmation Hearing January 20 that Geithner was part of every bailout and every failed policy put forth by the current Treasury secretary. After you read this, you should begin to see why I’m so opposed to Geithner’s appointment – I don’t want the fox any closer to the hen house than he already is.

    For starters, look at what the Fed has admittedly been up to – this is from a recent speech by the President of the San Francisco Fed, Janet Yelin. The Federal Reserve Act authorizes the Fed to lend to “individuals, partnerships, or corporations” in extraordinary times. For the first time since the Great Depression, the Fed is invoking this authority to make direct loans to subprime borrowers – that is, those who can’t get credit from a bank.

    Basically, the New York Fed, under Geithner’s direction, created a couple of special companies so they could print money to get around restrictions on what the Fed can do directly. Now, be perfectly clear on this first point – this is not Treasury or TARP or Congress that’s spending this money. It’s the Federal Reserve. They don’t have to ask Congress for money, they just print it. The Fed is providing “credit to a broad range of private borrowers.” And by-and-large, they don’t have to tell you who they give the money to, either. Here’s how Yelin put it:

    “It is worth noting that, as the nation’s central bank, the Fed can issue as much currency and bank reserves as required to finance these asset purchases and restore functioning to these markets. Indeed, the Federal Reserve’s balance sheet has already ballooned from about $900 billion at the beginning of 2008 to more than $2.2 trillion currently—and is rising.”

    Notice how easy it is to double our money – they just keep the printing presses running. In fact, the recent expansion is extraordinary. Since 2003 the Fed’s balance sheet averaged only $838 billion. So this doubling has all taken place in the past year. In the last recession, around 2002, the Fed’s balance sheet increased by only 13%. If the current recession started in 2007, and if the Fed’s balance sheet is any gauge, then we’re in for much worse.

    Average Federal Reserve balance sheet

    Year

    Reserves

    % change

    2000

    $625,822,500,000

     

    2001

    $653,774,500,000

    4.5%

    2002

    $740,502,000,000

    13.3%

    2003

    $762,853,509,434

    3.0%

    2004

    $803,004,846,154

    5.3%

    2005

    $843,397,519,231

    5.0%

    2006

    $877,922,692,308

    4.1%

    2007

    $907,023,653,846

    3.3%

    2008

    $1,228,848,679,245

    35.5%

    2009

    $2,175,364,000,000

    77.0%
    2000-2002 are for last 2 weeks only; 2009 is for first 2 weeks only. Data available from http://www.federalreserve.gov/releases/h41/hist/

    Where are they spending all this cash? You probably didn’t hear that the Fed started buying commercial paper through these “private-sector vehicle[s]” created to sidestep an act of Congress. (Commercial paper is the short term debt of corporations.) Another thing you aren’t hearing about is that back in November 2008, the Fed bought $600 billion of mortgage-backed securities from AIG. This action, if taken without subterfuge, would not be legal. The Federal Reserve Act limits the Fed to buying securities that were issued or guaranteed by the U.S. Treasury or U.S. agencies. In order for the Executive Branch to get around a limit placed by the Legislative Branch, the Fed got help from the Treasury.

    Yelin laid it out unabashedly: “Cooperation with the Treasury is necessary because the program entails some risk of loss and, under the Federal Reserve Act, all Fed lending must be appropriately secured. The Treasury has committed $20 billion of TARP funds to protect the Fed against losses on the Fed’s lending commitment of up to $200 billion.” Don’t kid yourself: this is a credit default swap on a national level.

    On June 26, 2008, the Fed used this scheme to buy the assets of Bear Stearns. That money went to JP Morgan. On November 25, 2008, Geithner’s New York Fed bought out the underlying assets for which American International Group had written credit default swaps, saving AIG from having to pay off the swaps when the assets failed. On December 12, 2008, they bought more residential mortgage-backed securities from AIG. Those two bailout packages currently stand at about $73 billion. The big ones are those where the recipients are not being named. On October 27, 2008, they bought commercial paper from “eligible issuers.” On November 24, 2008, they bought “certificates of deposit, bank notes, and commercial paper from eligible issuers.”

    In an odd twist of democracy, you can read all about Geithner’s personal income tax problem but you won’t find anywhere information on who is benefiting from this particular bailout money which Geithner is in charge of passing out. The commercial paper bailout from the Fed (this doesn’t include anything that Treasury is doing or that Congress has authorized) stands at $333 billion.

    They aren’t done, either. According to Yelin, there are plans in place to substantially expand this spree of lending, buying, and guaranteeing to include more kinds of assets issued by more kinds of institutions, like commercial loans and non-agency mortgage-backed securities.

    Senator Chuck Grassley (R-IA) referred to this as Geithner’s participation in “a monstrous act of government intervention and ownership over our financial markets.” While TARP has a Special Inspector General and various congressional oversight duties, similar transparency and oversight does not exist for the bailouts conducted by Geithner in New York. Geithner may be, as Grassley asked him, “the general, drawing on your financial sector expertise, who will marshal the financial troops and assets of the Treasury Department.” But he can’t “lead our nation to prosperity.”

    He couldn’t, in six years, stop the primary dealers in US Treasuries from selling more bonds than Treasury issued. The only way this could go on to the extent that it did, with an average of $2.1 trillion of Treasuries sold but undelivered for seven weeks from September 24 to November 5, is because Geithner did not have the support of the “financial troops” to stop it. In fact, I will suggest to you that this level of abuse, in what amounts to massive naked short selling of US Treasury securities, could only be done with complicity.

    Finally, it is a simple matter to compare Geithner’s activities at the Fed to those of Ken Lay at Enron. Remember all those “partnerships” with cool names derived from Star Wars movies? Geithner’s New York Fed created Delaware Limited Liability Companies with the name “Maiden Lane” which is the Fed’s street address in New York. They are using unregulated companies to make loans and to buy and sell assets completely outside the view of the public. The Senate Finance Committee approved Geithner’s nomination on January 22, 2009 in an Open Executive Session. Geithner has proven he can hide the ball; let’s not let this scheme move to Treasury.

    Susanne Trimbath, Ph.D. is CEO and Chief Economist of STP Advisory Services. Her training in finance and economics began with editing briefing documents for the Economic Research Department of the Federal Reserve Bank of San Francisco. She worked in operations at depository trust and clearing corporations in San Francisco and New York, including Depository Trust Company, a subsidiary of DTCC; formerly, she was a Senior Research Economist studying capital markets at the Milken Institute. Her PhD in economics is from New York University. In addition to teaching economics and finance at New York University and University of Southern California (Marshall School of Business), Trimbath is co-author of Beyond Junk Bonds: Expanding High Yield Markets.

  • Obama’s Friends: Enemies of the American Dream?

    President Barack Obama has rightly spoken positively about the American Dream, how it is becoming more expensive and how it needs to be reclaimed. But to do this, he may have to disregard many of those who have been among his strongest supporters and the dense urban centers which have been his strongest bastion of support.

    Indeed, the American Dream has been achieved by countless millions of households, though many have been left out of this expansion that began following World War II. Home ownership has risen from little above 40 percent to nearly 70 percent. Automobile ownership has become nearly universal, making it possible for urban areas to grown to unprecedented size. The Brookings Institution, the Progressive Policy Institute and others have published studies showing that people in low income households are far more likely to find and hold employment if they have access to cars.

    All of this has been associated with a democratization of prosperity that has never before occurred. Per capita income is now 3.5 times its 1950 level in the United States (see 1929-2007 inflation adjusted data).

    Yet, the American Dream is under serious threat – and this predates today’s faltering economy. A key component lies in the machinations of an urban policy and planning elite contemptuous of the comfortable lifestyles achieved by so many Americans. Instead they propose creating an environment in which households would have to pay more for their houses and spend more of their lives traveling from one place to another.

    Most of those who wish to create this situation come from the political left and consider themselves to be “friends of Obama.” They have achieved positions of power in some urban areas, such as throughout California, Portland, Seattle and a host of other areas. As early as 2007 some saw Obama as the dream candidate – what one called “a smart growth President”.

    This elite group starts by demonizing the very foundations of America’s inclusive prosperity. Having declared “urban sprawl” a scourge, they seek to stop further development on the urban fringe and want virtually all development to be within already developed urban footprints. These and other overly stringent regulations have served to strangle urban land markets, forcing land prices and housing prices higher, in those region where they have been imposed.

    Over fifteen years ago William Fischell at Dartmouth University demonstrated that California’s overly restrictive land use policies had made that state more expensive than elsewhere. Since 2000, with the wider availability of mortgage credit, the new demand drove prices to double or triple historic norms in areas with restrictive regulation. Price reductions have lowered prices, but they are still well above historic norms. This means that fewer households still are able to own their own homes in areas with restrictive land use regulations. Once normal prosperity is restored, the higher house prices of the restrictive land use areas can be expected to resume their increase relative to the rest of the nation.

    This is a problem for some regions now. But many planners are enthusiastic about Obama in part because he is thought to be sympathetic to recreating these conditions throughout the entire country.

    ###

    The automobile plays the role of the Great Satan in this morality play. The goal of many ‘progressive’ urbanists is to force people into transit and stop road building. Transit, of course, has its place. There is no better way to get to your job south of 59th Street in Manhattan, to Chicago’s Loop or to a few other of the nation’s largest downtown areas. But the stark reality is that transit can not substitute for the automobile for the overwhelming majority of trips, except for these niche markets. Further, failing to expand highways to keep up with traffic growth increases traffic congestion (and air pollution) and reduces economic productivity (read: “increases poverty”).

    Higher costs for home ownership and slower commutes to work – and they will be slower because transit commutes average twice as long as automobile – impose significant burdens on people. Fewer people will have houses and fewer will have jobs. Forcing a single parent to take longer to navigate from home to the day care center to the job, whether by transit or by car, makes life more difficult – and for no rational reason. It is the equivalent of forcing people to work harder for nothing.

    Of course, this way of thinking has been around some parts of the country for decades. The new drive to reduce greenhouse gas (GHG) emissions has extended its reach. The typical formulation now is that in order to reduce GHG emissions, Americans need to be crowded into dense urban areas and give up our cars.

    ###

    In reality, nothing of the kind is required. “Green” houses are being developed that can make it possible to substantially reduce GHG emissions while Americans continue their favored suburban life styles (the lifestyles, by the way, also favored by Europeans and Japanese). Hybrid and other advanced car and fuel technologies can make it possible for the personal transportation sector to achieve massive long term GHG reductions. The answer is regulating emissions, rather than people.

    But the planning and urbanist lobbies may not fundamentally be driven by the perceived need to reduce GHGs. They would rather regulate people, just as was the case well before climate change was even on the political agenda.

    Of course, the planners don’t see their strategies as nightmarish. They have worked them all out theoretically in their heads. The problem is that the theory is not and cannot be translated into reality. There is no more comfortable place to live in the world for people – particularly those past their youthful and single years – than the American suburb. There are no metropolitan areas of similar size in the world where people spend less time traveling to and from work than in America. Take Hong Kong, which is by far the world’s most dense large first-world urban area. No other metropolitan area of its size should have such theoretically short trips, because everything is so close together. Yet, average travel time to work is almost double that of Dallas-Fort Worth, with a similar population. Indeed, even in “gridlocked” Los Angeles, so often ridiculed for its automobile-oriented “sprawl,” work trip travel times average nearly 40 minutes less per day than in that ultimate of urbanization, Hong Kong. That adds up to about a week’s worth of extra commuting time each year.

    Rather than trying to constrict the dream, President Obama should work on ways to expand it. This will not be easy. Today, less than 50 percent of African-American and Latino households own their own homes. At the same time, Anglo home ownership is about 75 percent. No program to extend the American Dream can be based on policies that unnecessarily increase the price of housing.

    For the new President, there is a clear choice. He can cast his lot with those whose strategies would extinguish the aspirations of millions of Americans, or he could make it easier for more households in the nation to achieve the American Dream.

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris. He was born in Los Angeles and was appointed to three terms on the Los Angeles County Transportation Commission by Mayor Tom Bradley. He is the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.”

  • President Obama, Bring Us Together

    The election of Barack Obama signaled the beginning of a “civic” realignment, produced by the political emergence of America’s most recent civic generation, Millennials (born 1982-2003). Civic generations, like the Millennials, react against the efforts of divided idealist generations, like the Baby Boomers (born 1946-1964) to advance their own moral causes. Civic generations instead are unified and focused on reenergizing social, political, and governmental institutions and using those institutions to confront and solve pressing national issues left unattended and unresolved during the previous idealist era. The goal of a transition during such realignments has to be to lessen the ideological splits that have divided America during the preceding idealist era and take steps to unify the country so that the new Administration can more effectively deal with the major issues it faces.

    Reducing ideological divisions and unifying Americans to achieve important common goals has been a focus of Barack Obama since even before he announced his presidency. It is one of the key reasons his campaign had strong appeal to the emerging civic Millennial Generation, which he carried by a margin of more than 2:1. When CBS’s Steve Croft asked the then-candidate in a pre-election interview what qualified him, a junior senator with limited governmental experience, to be president of the United States, Obama led off his reply by citing his desire and ability to bridge differences and bring people together.

    Through Your Actions
    One way a civic era president-elect can demonstrate the importance he places on the need for national unity is to name members of the opposition party to his cabinet. The actions of Abraham Lincoln and Franklin D. Roosevelt, the only two other Presidents to preside over transitions to civic eras, demonstrate how this game should be played.

    For all the media commentary on Lincoln’s first cabinet, deemed a “Team of Rivals” by Doris Kearns Goodwin, it should be noted that it contained no one from the discredited Democratic Party, even though it did have representatives that spanned the breadth of opinion within the relatively new GOP. However, Lincoln did add a Democrat, Secretary of War, Edwin M. Stanton, to his cabinet less than a year after taking office. Stanton, a strongly pro-Union Northern Democrat, had opposed Lincoln’s election and had served as Attorney General in the final months of the Buchanan administration. However, Lincoln’s selection of pro-Union Democrat, Andrew Johnson, as his vice-presidential running mate in his 1864 re-election campaign demonstrates that it’s sometimes possible to take even a good idea too far. FDR appointed two Republicans to his initial cabinet–industrialist William H. Woodin, who as Treasury Secretary helped FDR implement his economic and fiscal program at the outset of the New Deal, and Harold L. Ickes, who served as Interior Secretary throughout the entirety of the Roosevelt administration. Both Woodin and Ickes were progressives who had supported FDR in the 1932 election. While neither was a member of the Republican Old Guard, together they demonstrated Roosevelt’s willingness to reach beyond his own party to enlist what today would be called “moderate Republicans” in a unified effort to overcome major national problems.

    Reflecting America’s changing demographics and social mores, Barack Obama has chosen the most diverse cabinet and set of top advisors of any president in U.S. history. Two members of Obama’s larger number of appointees — Robert Gates and Ray Lahood — are not Democrats, the same number for which FDR found room. This represents a greater number of members of the a different or opposing party than were present in the Cabinets of any of Obama’s idealist era predecessors.

    President-elect Obama’s attempt to include a wide range of political opinion and backgrounds in his Cabinet and White House team has generated criticism from the most ideological members of his party, just as FDR and Lincoln faced such criticism from the extreme partisans of their day. Obama’s appointment of many “centrist” cabinet-level officers who previously served in Congress, the Clinton Administration, or as governors suggests to his critics that he is abandoning his pledge to bring about significant change in economic, foreign, and social policy. But as political scientist Ross Baker points out, “In uncertain times, Americans find it much more comforting that the people who are going to be advising the president are steeped in experience. A Cabinet of outsiders would have been very disquieting.” And civic realignments like the present one have come at the most uncertain and stressful times in America’s history.

    Through Your Words
    Lincoln and FDR are also renowned for their ability to use their words to rally Americans to a common cause. Both did so at the very outset of their terms. Both of these great civic presidents’ first inaugural addresses addressed the fears of a nation in crisis with rhetoric that has continued to ring through the ages.

    Lincoln, in another last-ditch effort to forestall secession, told the South that neither he nor the Republican Party would make any attempt to undo slavery in states where it already existed. But he also reminded the South that, while only its actions could ultimately provoke civil war, his “solemn oath to preserve, protect, and defend” the Constitution would require him to prosecute that war if it came.

    Lincoln concluded his address with an appeal to the secessionists to rejoin the Union:

    We are not enemies, but friends…Though passion may have strained, it must not break, our bonds of affection. The mystic chords of memory, stretching from every battlefield and patriot grave to every living heart and hearthstone all over this broad land, will yet swell the chorus of the Union, when again touched, as surely they will be, by the better angels of our nature.

    Roosevelt used his inaugural speech to rally the country to the task ahead by telling it, “the only thing we have to fear is fear itself.” He reminded his listeners that at previous dark moments in our national history vigorous leadership joined with a supportive public to win ultimate victory in the nation’s trials. Perhaps most important, FDR gave clear recognition that the United States and its people had moved from what we have called an “idealist” era of unrestrained individualism to a “civic” era of unity and common purpose:

    If I read the temper of our people correctly, we now realize as we have never realized before our interdependence on each other; that we can not merely take but we must give as well; that if we are to go forward, we must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline no progress is made, no leadership becomes effective.

    Even before President-elect Obama had a chance to utter similarly comforting and inspiring rhetoric, his inaugural plans came under fire for inviting Pastor Rick Warren, a fundamentalist minister and activist in the passage of California’s Proposition 8 outlawing gay marriage, to give the invocation at his inauguration. But the selection of Warren should not have been surprising to careful observers. In his acceptance speech at the Democratic National Convention, Obama signaled his desire to find common ground on divisive social issues such as abortion, gay marriage, and gun control.

    By bookending his inaugural with a benediction from Joseph Lowrey, a minister who favors legalizing gay marriage among other liberal causes, Obama has signaled his determination to put an end to the debates over social issues from an idealist era that is ending and enlist all those willing to join his cause to rebuild America’s civic institutions.

    For in the end, it is the American people that Barack Obama must rally to his side. It is they who will ultimately decide the effectiveness of his transition as a springboard to a civic era Administration. So far their judgment is overwhelmingly positive. A late December 2008 CNN national survey describes “a love affair between Barack Obama and the American people.” That survey indicated that more than eight in 10 Americans (82%) approved of the way Obama was handling his transition, a figure that was up by three percentage points since the beginning of the month. Obama’s approval is well above that of either Bill Clinton (67%) or George W. Bush (65%) at that point in their transitions.

    More specifically, the poll suggests that the public approves of Obama’s Cabinet nominees, with 56 percent saying his appointments have been outstanding or above average. That number is 18 percentage points higher than that given to Bush’s appointments and 26 points above that of Clinton’s nominees. To quote CNN polling director Keating Holland: “Barack Obama is having a better honeymoon with the American public than any incoming president in the past three decades. He’s putting up better numbers, usually by double digits, than Bill Clinton, Ronald Reagan, or either George Bush on every item traditionally measured in transition polls.”

    Of course, the final judgment of the Obama presidency by the American people and history will be based on his performance in office starting on January 20. Still, these polling results clearly suggest that Barack Obama has internalized and put into operation the historical transition lessons provided by Abraham Lincoln and Franklin D. Roosevelt, the presidents who led America’s two previous civic realignments. If his inaugural address comes close to matching their first inaugural speeches, President-elect Obama will begin one of the most important administrations in the nation’s history with an enormous reservoir of political and public support that will serve him well in the crucial early days of his Administration.

    Morley Winograd and Michael D. Hais are fellows of NDN and the New Policy Institute and co-authors of Millennial Makeover: MySpace, YouTube, and the Future of American Politics (Rutgers University Press: 2008).

  • Solving the Financial Crisis: Looking Beyond Simple Solutions

    When presented with complex ideas about complicated events, the human tendency is to think in terms of Jungian archetypes: good guys and bad guys, heroes and villains. The more complicated the events, the more the human mind seeks to limit the number of variables it considers in unison in order to make sense of what it sees. The result is a tendency to describe events in the simplest black and white terms, ignoring the spectrum of colors in between.

    This principle can be seen in the current explanation of the financial crisis. University of West Virginia Professor of Sociology Lawrence Nichols has developed what he calls the “landmark narrative” shaping how the public reacts to dramatic swings in financial cycles.

    As Professor Nichols explains, the narrative described by the landmarks can be a contrived and even inaccurate version of history. By its nature, the shorthand narrative is often unable to describe the detailed reality of an occurrence. Much like an interstate highway, the landmark narrative takes the valley pass, avoiding the mountaintops from which the full view of history can be seen and understood. If we move away from the landmark narrative – beyond the highway for a view from the hilltop – we’ll see more of the landscape: enough to make sense of the complicated events that make up our financial environment.

    There is real danger in limiting our view of events to what can be described by the landmark narrative. It’s like describing New Jersey from the I-95 Turnpike: funny enough for late night television but not particularly useful for problem solving. Basing our view of events on the landmark narrative can, and very well might, lead to “solutions” that could prove as dangerous – or worse – than doing nothing.

    Specifically, reactions to the current financial crisis are making their way into popular consciousness, potentially becoming imbedded in unpredictable and usually indelible ways. In a democracy, our elected officials are bound to respond to these shifts in popular consciousness. The constant repetition of contrived and inaccurate versions of events eventually leads us to suffer what Nobel Laureate Merton Miller called “the unintended consequences [of] regulatory interventions.” Austrian Economist Ludwig von Mises, in fact, warned decades earlier that market data could be “falsified by the interference of the government,” with misleading results for businesses and consumers.

    As Americans, we have repeatedly failed to learn this lesson. Throughout our history, Americans have had an irrational fear of finance. Deemed to be too complicated, the field of finance lends itself easily to description by landmark narrative. Quite possibly to our detriment, the rise of the financial sector has been tied to economic expansion throughout our modern business history. The more robust the flow of finance in capital markets, the more robust is economic activity. Our economy, our livelihood and our well-being are inextricably related to finance at home and around the world.

    So what are the assumptions about finance we see today? It turns out many of the assumptions are often erroneous and usually dangerous. The problems on Wall Street, for example, did not stem from too few laws; rather, it resulted from not enforcing the laws we already have. When I talk to regulators and industry participants about problems with fails-to-deliver in bond and equity markets, they often respond that there is no rule against it. Indeed, there is no specific law that says that the seller of stock cannot fail to deliver the shares on the settlement date (usually 3 days after the trade); there is no specific punishment in place. Yet it seems clear that if someone takes your money and doesn’t give you what they promised, this is stealing and there are laws against it. Look at it this way: there is no specific law that says “it is a crime to hit a person on the head with a hammer.” Yet I assure you that if I hit you on the head with a hammer the police will arrest me for a crime. It will have some other name (like “assault with a deadly weapon”) instead of “the crime of hitting a person on the head with a hammer.” But I will be just as arrested. And it is just as much a crime.

    So the real problem here is not a lack of laws, but a lack of enforcement of what already exists on the books. Our reluctance to act on this reality has serious consequences. First, we don’t focus on punishing the perpetrators. Our government says they don’t have time for “finger pointing” because they are too busy rushing rapidly to fix the problem – a problem they have yet to define. So we pour money into institutions, allow huge bonuses to be paid with public money, lavish retreats on insurance company executives – and then insist what we need is massive regulatory reform.

    This has reached the level of absurdity. The House Financial Services Committee held hearings on January 5 to assess the alleged $50 billion investment fraud engineered by Mr. Bernard L. Madoff. The assumption is that somehow we don’t have the laws on the books to prevent Ponzi schemes; in fact those laws have been there for decades. A rash of new laws to prevent such occurrences is not necessary; we simply need to enforce what already exists.

    Yet rewrite we will, and with what may well be reckless abandon. Opening the session, Congressman Paul E. Kanjorski (D-PA), the Chairman of the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, called for Congress to “rebuild” the regulatory system and commence with “the most substantial rewrite of the laws governing the U.S. financial markets since the Great Depression.”

    But this is the wrong approach. The real question isn’t new laws – although that may make good headlines for vote-seeking congressmen. The more basic question should be: where has the lawman been?

    Hearings like this are an integral part of the “landmark narrative.” Unless we’ve learned our lesson, we will be in for a rash of new rules, regulations and legislation paving the path for a future round of financial turmoil while allowing the perpetrators who created the crisis to avoid prosecution. Remember Sarbanes-Oxley, the measure supposed to prevent ill-doing by Wall Street. Passed in 2002, it didn’t seem to do anything except keep accountants and lawyers busy. In fact, it had the unintended consequence of discouraging small businesses from going public because of the extra cost for the reporting it required. Need more examples? Here’s a speech by an SEC economist that explains how regulations designed “to reduce executive compensation could actually increase expected compensation.” I’ve written in the past about “regulatory chokeholds” that make the failures of financial institutions almost inevitable.

    In 2009, we are presented with a new opportunity to display our capacity to evolve beyond the same old pattern of reaction and spurious law-writing. When dealing with violations of the law by respectable and powerful groups (like bankers), we need to consider using the laws already there; it’s simply time to find someone to enforce them.

    Susanne Trimbath, Ph.D. is CEO and Chief Economist of STP Advisory Services. Her training in finance and economics began with editing briefing documents for the Economic Research Department of the Federal Reserve Bank of San Francisco. She worked in operations at depository trust and clearing corporations in San Francisco and New York, including Depository Trust Company, a subsidiary of DTCC; formerly, she was a Senior Research Economist studying capital markets at the Milken Institute. Her PhD in economics is from New York University. In addition to teaching economics and finance at New York University and University of Southern California (Marshall School of Business), Trimbath is co-author of Beyond Junk Bonds: Expanding High Yield Markets.

  • A Bailout For Yuppies

    The recent call by the porn industry – a big employer where I live, in the San Fernando Valley – for a $5 billion bailout elicited outrage in other places. Around here, it sparked something more akin to nervous laughter. Yet lending a helping hand to Pornopolis is far from the most absurd approach being discussed to stimulate the economy.

    Some influentials close to the administration may even find the porn industry a bit too tangible for their tastes. After all, the pornsters make a product that sells internationally, appeals to the masses and employs a lot of people whose skills are, well, more practical than ideational.

    As such, they may not even qualify for what is best described as a yuppie bailout, poised to extend the welfare state to the highly educated professional set. After all, George Bush’s bailout of Wall Street has already set a precedent, using public money to secure the bonuses and nest eggs of some of the nation’s most elite professionals. Call it the Paulson principle: In bad times, steer help to those least in need.

    A yuppie stimulus differs from the more traditional approach, which aims to get the front-line, blue-collar types back to work. Instead, it would channel public funds away from those grouchy construction workers – some 30% of whom may soon be out of work – to better heeled, and, in their minds, more deserving “creative” professionals. After all, what stake do the netroots have in making things better for Joe the Plumber?

    In contrast, the yuppie bailout focuses on a sure-fire Democratic constituency, the well-educated urban professional. One advocate of such an approach, pundit Richard Florida, has urged President-elect Barack Obama to eschew crude investments in traditional production and a renewed housing market in favor of goodies directed to what he calls “the creative industry.”

    Florida sees any focus on restoring manufacturing and housing as a misguided rescue of the “old industrial economy,” in which Americans actually made things and other Americans consumed them. Instead, he suggests, “the first step must be to reduce demand for the core products and lifestyle of the old order.”

    So let’s stop worrying about what happens to Detroit, or the crisis in the housing market. In Florida’s view, cars, of course, are demonized as woefully bad for environmental reasons and not particularly friendly to the preferred dense urbanity so attractive to advocates of “hip cool” cities.

    Florida even recommends shifting away from the single-family home, which is also, all too often, in the ‘burbs. Instead, we should develop what he calls “flexible rental housing,” so people can move every time they get new jobs. I think that is what they used to do in Chairman Mao’s China, too, albeit without the granite countertops and a Starbucks around the corner.

    In a yuppie bailout, what spending takes priority? More jobs for academics and educators. Florida suggests we invest in “individually tailored learning.” We assume this means neither home-schooling nor basic skills training but something more like painting and acting classes for tots and advanced “creative” navel-gazing for tweens and adolescents. And, of course, lots and lots of new jobs for well-paid, unionized teachers.

    These ideas should not be dismissed out of hand as the impractical meanderings of a lone scholar. In fact, Florida’s views are taken very seriously among influential Obama supporters at companies like Google as well as by politicos such as Michigan Gov. Jennifer Granholm, who is widely identified as a key Obama counselor on economic issues.

    Nor is Florida alone in his views. Bigger feet among the purveyors of conventional wisdom, like The New York Times‘ Thomas Friedman, also think the stimulus should steer more resources into the public pedagogy. Friedman even recently suggested teachers be exempted from paying federal taxes.

    And it’s not just teachers who would benefit from a yuppie bailout. The economic stimulus, Friedman says, should also focus more on high-tech companies like Google, Apple, Intel and Microsoft, all of which enjoy extraordinary valuations. This reaffirms the Paulson principle with a politically correct spin.

    Politically, a yuppie bailout would certainly appeal to powerful Democratic constituencies, not just the teachers’ unions. Select high-tech companies and venture capitalists can count on new subsidies and tax breaks. Greens and “smart growth” advocates will celebrate if money is diverted from hard infrastructure – such as improved roads, bridges, ports and transmission lines – which they insist would create enough carbon to heat the planet like a toaster.

    This “yuppie first” approach certainly would appeal to many mayors, some of whom are already adherents to the Floridian ideology. They may be further encouraged by a new report by the Philadelphia Federal Reserve called “City Beautiful,” which suggests cities should not promote growth through traditional infrastructure but instead invest in frilly amenities. As a Boston Globe article on the report summarized cheerfully: “Make it fun.”

    Here’s another hint of what might be coming in a yuppie bailout. Providence, R.I., located in the state with the nation’s second-highest unemployment rate, wants to sink money into a polar bear exhibit at its zoo – perhaps so we can see them before they become extinct or go on Al Gore’s payroll – as well as make improvements to a soccer field. Miami envisions spending on a giant water slide, new BMX and dirt bike trails at a local park and, of great national import, a new Miami Rowing Club building.

    Even the once-booming but now-hurting ultimate “fun city,” Las Vegas, wants in on the act. Mayor Oscar Goodman is asking the feds to kick in big time for its new Museum of Organized Crime and Law Enforcement. That’s right, taxpayers can participate in building a monument to Bugsy Segal. And with Nevada’s own Harry Reid running the Senate, the project seems well-positioned to get the “respect” it deserves.

    If Goodman, who used to defend mobsters as a criminal defense lawyer, has his way, it could spark a feeding frenzy for every under-funded tourist trap from Cleveland to Cucamonga. Pork used to mean roads, bridges and ports that, at least in theory, made the economy more productive while providing well-paid work for blue-collar workers. Soon these dollars may instead go toward yacht clubs, art galleries, museums and “creativity” training for toddlers.

    A yuppie bailout is likely to hold more money for Boston, San Francisco and other havens of the perennially hip – all of them Democratic bastions. There’s also likely to be less funding for the grotty suburban towns, industrial backwaters and Appalachian hamlets, all of which don’t usually appeal to the artistic set.

    To an old-fashioned Democrat, this all seems to miss the point. Shouldn’t we be stimulating the places already suffering the most from high unemployment, foreclosures and spreading impoverishment? Where do Toledo, Cleveland or Modesto fit in to the yuppie bailout? As Pittsburgh-based blogger Jim Russell says: “Most of the population will continue to live in ‘Forgottenville.’ Should we just forget about them?”

    In spite of all this, the mounting pressure for a yuppie bailout sadly reveals how the supposed party of the people is being transformed into just a second party of privilege. We should desperately try to create new productive capacity and better-paying jobs, especially for the denizens of Forgottenville. It certainly makes more sense than pouring taxpayer funds into new clubhouses, water slides or even better-financed pornographic movies – however much the latter may help property values in my neighborhood.

    This article originally appeared at Forbes.

    Joel Kotkin is executive editor of NewGeography.com and is a presidential fellow in urban futures at Chapman University. He is author of The City: A Global History and is finishing a book on the American future.

  • Advancing Economies by the Power of Industry

    For the last quarter century there has been a growing tendency among policy makers and corporate executives to downplay, and even ignore, the primary importance of the ‘real,’ or tangible, economy. It is now widely believed that the primary engine of wealth creation is the manipulation of symbols and images — ‘the new economy’ of the ‘information/creative age’ — as opposed to the manufacture of tangible products and services.

    This paper challenges these assumptions. Our research in Europe, Asia, Australia and North America suggests that rapid economic and income growth tends to occur most steadily in areas where tangible production has been readily encouraged. Although the successful strategy varies by region and country, the basic fundamentals to propel growth lie in policies that stress the construction of essential physical infrastructure, investments in basic and skill-oriented education, and favorable tax and regulatory policies.

    Increasingly, this also includes the building of what we refer to as ‘infrasystems’, also called regional innovation systems. These are policies that encourage innovation and cross-firm transactions through the development of interlocking regional institutions, such as schools and governments that work closely with local industries. These infrasystems investments represent the cutting edge of progressive economic policies that encourage wealth creation and broad based opportunities for a wide variety of citizens.

    We believe that this ‘back to basics’ approach is particularly applicable during the current global financial crisis. Attempts to ‘create’ wealth through financial manipulation and the hyping of cultural attributes have done very little except create short-lived economic bubbles on the local, national and, most ominously, global levels. The time for a reassessment, and a return to the basic principles of wealth creation, clearly has arrived.

    See attached .pdf file for full report.

    Primary Authors: Joel Kotkin, Delore Zimmerman
    Research Team: Mark Schill, Matthew Leiphon, Andy Sywak
    Editor: Zina Klapper

  • Corporate Sponsorship of the Golden Gate, the Ultimate Sign of Failed Infrastructure

    The most anticipated tourist attraction in the city where I live, The Golden Gate Bridge, is a testament to the lasting utility of a well executed infrastructure project. The world’s most famous suspension bridge still serves as the critical artery connecting San Francisco to the bedroom communities of Marin County to the north, where much of the city’s workforce resides. Remarkably, this marvel of engineering was completed in the late 1930s – a time when the U.S. was coming out of the Great Depression.

    The New Deal brought about an expansion of infrastructure that should inspire us. Yet nearly 70 years after its completion, the sobering reality remains: it’s difficult to imagine a project of that moxie being constructed today.

    One indicator of the distance between then and now can be seen in the story of Doyle Drive – the one-and-half mile southern approach to the Bridge. In 1993, USA Today reported that the elevated portion of Doyle Drive is the 5th most dangerous bridge in America. After years of EIR studies and bickering amongst a myriad of stakeholders and governmental agencies, San Francisco voters in 2003 finally passed Proposition K, a sales tax increase ensuring the city’s funding for an upgrade of Doyle Drive.

    Sales tax revenue generated from Proposition K is slated to cover only $67.9 million of the $1.045 billion estimated cost of the project. State and Federal funding has also been committed for the project, yet there is still $414 million of cost yet to be accounted for. Along with hopes of securing additional funding from the Fed, The Golden Gate Bridge District is responsible for providing $75 million for the Doyle Drive retrofit. To meet the cost of this and other projects, such as the addition of a suicide-prevention net, the Bridge District is seriously considering soliciting corporate sponsorship of the world-famous span.

    The appalling fact that corporate sponsorship is on the table for one of the most iconic pieces of infrastructure in the modern world confirms the failure of the public sector in regards to maintaining an aging infrastructure. For the past few years, politicians at all levels of the government seeking office have beaten the drum of tax reductions in order to secure votes, only to find themselves with budget crises on their hands once elected. With city and state budgets strapped, local politicians often look to the federal government in order to help pay for repairing roads and other basic services, not to mention the huge pensions of public employees.

    The other place local governments look for money to balance the budget is from the private sector. In many cities across America, elected officials have responded to these kinds of crises by partnering up with private enterprise to generate jobs and sales tax revenue by developing ‘convention and retail districts’. Oftentimes these developments will also include hotels, luxury condominiums and even sporting or arts venues. Even before the recent economic downturn, many of these developments were representing white elephants, sitting empty while the issues of sustained job creation and infrastructure repair remain unresolved.

    Examples of infrastructure from the past, such as the ruins of Roman Aqueducts on the Iberian Peninsula and the dams of the ancient city of Petra in Jordan, remind us of the great lengths societies will go through in order to function more efficiently. Although today the concept of infrastructure is primarily associated with industrial economies and modernization in the developing world, the truth is that ever since the earliest agrarian communities humans have been building physical systems that harness the powerful forces of nature and make life more convenient.

    Years from now, the built environment of America will provide one of the primary measurements for historians seeking to quantify 20th Century achievements. Today the vast networks of roads, bridges, ports, airports, power plants and water lines built in the U.S. over the past 150 years remains the standard for nations undergoing industrialization. Yet while other countries are busy catching up to the American paradigm, the U.S. system is falling behind. Entropy is setting in, and repeated policy failures prevent retrofitting and repair to take place at a mass scale.

    With all the current hubris surrounding the “New New Deal” proposed by the incoming Obama administration, discussion about the fundamental role of infrastructure seems to be missing from the conversation. Primary focus about the infrastructure package remains on rapid job creation rather than long term economic health. New Orleans remains a grim reminder of how infrastructural failure can destroy an economy for good, and misplaced investments in convention centers and other ephemera have limited impact.

    There has also been much press about a ‘green revolution’. While looking for cleaner alternatives to powering our society is an important issue, there is almost no acknowledgment that the most sustainable approach lies in fixing and updating what is already in place. Already, speculators are foaming at the mouth at what will end up probably being the next bubble – clean tech.

    In the coming days, it will be critical that careful attention be paid to a basic approach to ensure that stimulus money is not squandered on pork. As state and local governments – as well as big business and special interests – vie for handouts from Papa Fed, the United States government must seek ways to allocate funds for maximum investment in future generations.

    This is not to say such investments should not be bold and even beautiful. I know it’s possible every time I look at, or cross, the Golden Gate.

    Adam Nathaniel Mayer is a native of the San Francisco Bay Area. Raised in the town of Los Gatos, on the edge of Silicon Valley, Adam developed a keen interest in the importance of place within the framework of a highly globalized economy. He currently lives in San Francisco where he works in the architecture profession.