New Geography

Category: Policy

  • The U.S. Needs to Look Inward to Solve Its Economy

    Over the past months as the global economy heads for another recession, U.S. lawmakers have done their best to deflect blame by focusing on various external forces including the most popular straw-man of the day: China’s currency.

    Almost every year for the last few years, Congress and the White House have pressed China to revalue its currency, the renminbi. And every time this happens, China responds that it will do what it always does: let it appreciate gradually, at about 5% per year as it has done for the last several years.

    With the APEC Summit in Honolulu last month, Obama and the White House strategically — and perhaps with an eye to the coming re-election campaign —prodded at China and also managed to further deflect America’s problems by focusing attention on the Eurozone Crisis. Timothy Geithner, tailoring his speech for the Asia-Pacific audience, said Europe needs to “move quickly as instability hurts the U.S. and Asia.”

    Geithner, the godfather of “too big to fail” from his days at the New York Fed, is an expert at delivering economic policy speeches that do not address America’s problems head-on. He is the mouthpiece of American weakness and misdirection, and has been recently seen so not only in China, but in Europe where people scoff, understandably, at the very idea of his giving advice to the bedraggled Eurozone.

    The fact is that, right now, the US cannot dictate the conditions of economic gain. Although still the world’s largest economy by far, the US can no longer impose its mantra of ‘free-trade’ on the rest of the world.  Instead it needs to take an honest look at the reality of the 21st Century global marketplace to better assess what it can do to improve its situation. The following suggestions might be a good start:

    Forget About Economic and Political Ideologies

    Many Americans, including politicians, are under the impression that certain ‘isms’ are magic bullets for prosperity while other ‘isms’ hold prosperity back. For instance, conservatives like to use the talking point that ‘socialism’ will destroy America. Similarly, many of those on the left protest against as what they see as ‘capitalism’ leading to widening inequality. Being for or against a particular ‘ism’ does nothing to improve the economic situation but only serves to inflame rhetoric and kill policies that could potentially help the U.S. economy.

    One example is domestic government investment. Conservatives detest any kind of public spending proposal as ‘socialism’, even if public funds would be used for practical things like improving roads or public schools. On the other side, those on the left confuse high-level collusion between the financial sector and federal government with free-enterprise, which it is not.  Geitner is not a capitalist, but a collusionist. He is no more a free-market capitalist than he is a Maoist.

    Stop Blaming China

    Nothing else debunks the validity of mainstream political and economic ideologies better than China’s rise to economic prominence. Still considered a ‘communist’ state by Cold-War minded individuals, China’s development would be best described as a gradual evolution in policy decisions rather than a static, ideologically-based approach. To be sure, the Communist Party desire to stay in power remains paramount. But this leads to policies designed to keep the economic engine humming as a way to maximize social stability.

    Despite its advances, China still has tremendous obstacles to overcome including a still very low per-capita GDP and an environment polluted from industrial development. Yet it is the height of hypocrisy for the U.S. government to call out China on its currency manipulation and intellectual property theft when U.S. companies have benefited enormously from China’s opening up of the past three decades. This also has allowed U.S. consumers buy coveted products at low prices.

    Of course, politicians at the Federal level (and even some Republican Presidential candidates) talk tough on China to score brownie points with voters. But meanwhile local state and city governments as well as prominent business leaders continue to send delegations to China in droves to promote cooperation and trade. Yes, China’s competitive cost of labor and lack of regulations has had a direct impact on the loss of jobs in the U.S. Unfortunately forcing China to float its currency will not reverse this trend as manufacturing jobs move to lower cost locales, and will continue to do so, perhaps to other countries.

    Acknowledge That Not All Regulation Is Created Equally

    Conservatives love to point the blame for economic malaise on government regulation. This argument is only half correct. For one thing there is not enough regulation on large banks in terms of how they divert investments when huge recent profits can be traced largely to fiscal largesse from Washington. Large banks received huge stimulus injections from the Federal Reserve during QE I and II, but did not invest enough of that money into the domestic economy. Instead, investment banks were free to take that money wherever maximum returns were to be had. That’s fine for an investor who has made his own way, but when the bank profits have stemmed from taxpayer largesse, some other priorities should creep in.

    At the state and local municipal levels, regulation is perhaps the greatest roadblock to restoring economic prosperity. Crippling state and local taxes, along with outdated zoning regulations – such as restrictions on something as simple as running a business from one’s own home – slow enterprise formation. This is not to mention the cost of obtaining permits from various authorities and the constant threat of lawsuits. Clearly the pendulum – at least in some states such as California – has swung too far in the wrong direction. Unfortunately, given ubiquitous budget shortfalls across state and local levels, it is unlikely that local governments will be willing to decrease taxes and fees when they are in desperate need of revenue generation.

    Reassess the American Social Contract

    Conservatives balk at any mention of social programs, yet they fail to acknowledge that American corporate institutions no longer play the role they once did in promoting social stability. Across the board, businesses are understandably cutting retirement and healthcare benefits just in order to survive. America’s broken social contract is perhaps the greatest obstacle to restoring prosperity and economic growth.

    Politicians are under the impression that high-taxes and runaway government spending are the primary cause for economic malaise. The reality is that America’s economy lags because individual spending is paralyzed due to increased costs of living across the board. The costs of housing, healthcare, and higher education have all increased in the past 10 years while wages and job opportunities have stagnated. This paralyzes risk-taking and investment in new businesses. Not only that, the presence of large oligopolies in everything from high-tech and cellular phones to food processing work to reduce competition from  entrepreneurial upstarts.

    Conclusion

    The U.S. needs to stop looking at external factors as the source of its problems. Instead, American leaders should look inwards and take an honest assessment of the current problems resulting from the changes in the world over the past 20 years.

    Unfortunately, no one on either side of the political aisle seems willing to step forward and lead the country out of its predicament. The Republican presidential contenders continue to waste time bickering about irrelevant social issues while President Obama jet sets around the world trying to allay doubts about the country’s decline.

    America needs a concrete plan to get up and running again. This will mean more regulation at the macro level and less regulation at the lower levels. It will mean that Americans need to be confident that basic needs like housing and healthcare are taken care of so they can get on with starting businesses and creating employment. Education needs to promote trade skills and remove the stigma that expensive college degrees are mandatory for future prosperity.

    Until these things happen, the U.S. economy will be stuck in its rut.

    Adam Nathaniel Mayer is an American architectural design professional currently living in China. In addition to his job designing buildings he writes the China Urban Development Blog.

    Photo courtesy of Bigstockphoto.com

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  • Central Florida: On the Cusp of Recovery?

    Central Florida is poised at the cusp of a major turnaround, and its response to this condition will either propel the region forward, or drag it backward.  This cusp condition is brought about by a train and a road; neither of which have begun yet but both of which appear imminent.  Sunrail uses existing 19th century railroad tracks as a commuter spine through Orlando’s disperse, multipolar city.  The Wekiva Parkway completes a beltway around Orlando, placing it with Washington DC, Houston and other ringed cities.  Before either gets built, the region deserves some analysis on their combined effect, and how they can be nudged onto a pathway to make the region better.

    Sunrail brings with it mythology  about how trains affect cities.  In what has now become the standard, tired kabuki dance between developer interests and municipal ones.

    Not surprisingly, heavy regulation has entered the scene, with the avowed goal of creating dense urban pockets along even largely rural  train stops. This has sparked rising property values which may end up  frustrating the dream of transit-oriented development (TOD).  Affordable dwellings and meaningful employment within a half-mile of a train stop must be created in order to make this development work, but unless Central Florida can spark this, the new train will likely suffer from the same fate as the vast majority of its sunbelt counterparts:  low ridership and increasing tax subsidies.

    Inserting TOD into 17 locations in Central Florida is a bold experiment. In order for it to work, the rising costs of housing will need to be addressed, and Central Florida can take advantage of this ambition to succeed.  Orlando home sales are coming back, thanks to the mild climate and desirable lifestyle. That is very different, however, from guaranteeing that the economics of the rail commuter will make it worth discarding the single-family detached American Dream in favor of a relatively new model that has an unproven track record.

    Orlando also seems to be blithely going about the business of creating another ring of traffic around itself, descending into the same level where Atlanta’s Perimeter, the DC Beltway, and other like-kind roads live.  The Wekiva Parkway, long considered unneeded, is now being designed to complete the ring around Orlando, and will cross 25 miles of pristine wetlands that is a vestige of once-vast water resources of the region. 

    The Expressway Authority proposes this ring as an alternative to existing roads to serve the “growth needs of this area,” it conceded recently that this road segment made little economic sense except as a toll road accessing a new suburban single-family home development carved out of the swamps by one of the Governor’s chief fundraisers .  The asset value of this ring road may be more private than in the public interest.

    Traditionally agricultural land interlaced with wetlands, The Wekiva area to the northwest of Orlando has avoided large-scale Florida style bulldozing.  All this will change if the Governor is successful in eliminating water management regulations , freeing up much of Florida, including this corner of Orlando, for speculation.

    The local press, quick to criticize Alaska’s Bridge to Nowhere and always ready to jump on environmental issues, meekly ponders  the need for this $2 billion highway.  Maybe the elevated design, intended to be more ecologically friendly, makes it OK, despite the safety problems and high maintenance associated with this design.  Florida’s history is littered with the drawings of many other elevated highways eventually built on grade to save cost.  Once approved, the Wekiva Parkway may quickly be brought down to earth as well, displacing wetlands and agricultural land.

    The Wekiva Parkway will open up land supply which indeed will allow for more growth.  Done right, the asphalt will make land available that could be useful to the area’s economy.  It will bring traffic to historic, but presently lonely Sanford, potentially infusing the economy of this once-vibrant rail town.  Using principles of scarcity, land values could reflect people’s high desire to live in rural areas with all the services and guarantees that 21st century suburban life offers: fire and police protection, state-of-the-art infrastructure, and free pizza delivery.  It could invigorate neighboring towns that are currently struggling for survival.

    The risk is that such a road will simply allow more investment into Florida real estate without giving Florida much back in exchange.  Florida, already strained to meet its current population needs, should not simply trade another commercial strip for water resources that benefit many species and contribute to the region’s resilience. Rather, development models should emulate the best of America’s conservation development happening in states where water rights are scarce.  Connecting local employers with residential areas will enhance the value of both, and strategically keeping rural agricultural areas intact will preserve the region’s present land use diversity.

    Well managed development that conserves resources and balances broader needs with private interests will elevate the state’s prospects at this critical juncture.  One more bit of the original subtropical wilderness represents an asset for both present and future generations. With the right approach, the Wekiva Parkway can provide an enlightened model of low-density development that respects the value of open space.

    In town, Sunrail presents denser development as an alternative.  The normal pathway, however, seems to pit the profit-seeking real estate developer against ever higher regulatory burdens, which eventually make his product unaffordable to those coming here to escape high costs and regulations in other cities.  Keeping both employment and housing affordable are critical to achieving success with any of these projects.

    Moving product down the value chaindoes not do well current system, which leaves out the very people who Sunrail supposedly will benefit.  Density is one of those characteristics that seems to be about good timing: if you have it today, like San Francisco or New York, this is largely the result of history;  if you do not have it today, like Orlando, it is risky and probably a dubious proposition.

    The road and the train open up land that must be carefully stewarded to create opportunities for meaningful employment and affordable housing, both of which are presently scarce commodities.  The concept of transit-oriented development needs a success story, and Sunrail provides 17 opportunities to find one; meanwhile, the road presents a danger as well as an opportunity for Florida’s wetlands.  As the region slowly recovers from the recession, the two projects together should be carefully considered by the region’s citizens and leadership to truly redefine Central Florida’s identity for the 21st century.

    Richard Reep is an Architect and artist living in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.

    Photo courtesy of BigStockPhoto.com.

  • Public Pensions: Reform, Repair, Reboot

    Ill-informed chatter continues to dominate the airwaves when it comes to California public pensions. It’s a big, complex and critical issue for government at all levels in the Golden State. What makes debate so distorted is that public pensions actually differ from agency to agency — and advocates on the issue often talk past each other. Pension critics often point to outrageous abuses as if they were typical. On the other hand, pension defenders often cite current averages that understate long-term costs. All this fuels the typical partisan gridlock that Californians lament yet seem powerless to change in our state.

    Credit Governor Jerry Brown for trying to overcome the polarization. That’s what most California voters want him to do, according to a new Field Poll, one of the leading opinion research firms in California. His 12-point pension package (unveiled in October) is successfully framing the debate — and enjoys encouraging support from voters. I agree with them. While Brown’s plan is far from perfect (as he acknowledged in presenting it as a way to build consensus) it sensibly tackles some of the most challenging areas where reform is needed. Among the key reforms he’s proposed:

    • Increasing the retirement age from 55 to 67 (with a lower age to be spelled out for public safety workers).
    • Replacing the current “defined benefit” pensions with a hybrid program that includes a defined benefit component, but also a 401(k)-like defined contribution component
    • Prohibiting retroactive pension increases.
    • Requiring all employees to contribute at least 50 percent of the cost of their pensions

    These generally follow the surprisingly strong stand taken by the League of California Cities, which was based on recommendations from a committee of City Managers that I served on. Our work was grounded in four core principles:

    1. Public retirement systems are useful in attracting and retaining high-performing public employees to design and deliver vital public services to local communities;
    2. Sustainable and dependable employer-provided defined benefits plans for career employees, supplemented with other retirement options including personal savings, have proven successful over many decades in California;
    3. Public pension costs should be shared by employees and employers (taxpayers) alike; and
    4. Such programs should be portable across all public agencies to sustain a competent cadre of California public servants.

    Our goal was to ensure the public pension system is reformed, instead of destroyed. Our reform package mirrors Brown’s calls for a hybrid system, raising retirement ages and increasing the portion of pension costs borne by employees. We also backed his bid to base retirements on the top three highest years of pay, curbing the abuses that often artificially raise final year salaries to “spike” pension pay-outs.

    Typical of California’s other challenges, the issue faces long odds in the Legislature and uncertain fate at the ballot box. Partisan Democrats are leery of crossing unions by embracing Brown’s package. Partisan Republicans are demanding more far-reaching changes. Brown hopes to bridge the differences to win majority support by drawing on moderates in both parties. “He hasn’t riled up one side or the other,” noted Field Poll director Mark DiCamillo. “He’s managed to strike the middle ground on a very polarizing issue.” Unfortunately, moderates are hard to find in Sacramento.

    That leaves the roll of the dice that comes with ballot initiatives. Since it takes millions to bankroll a successful ballot measure, few sensible measures get far without support from well-heeled interests.

    In the eternal game of chicken that goes on in Sacramento, the Legislature keeps one eye on those special interests. About the only hope for reform is if a majority is worried that failure to act might spur an expensive ballot box war and an even worse outcome.

    This issue might be the exception, however. Public outrage is real. So is the need for reform. In Ventura, we took an early lead on this issue, first with our Compensation Policies Task Force, then union contracts that established a lower benefit and later retirement age for new hires and increased contributions from all employees of at least 4.5% of their pay. But real reform to level the playing field can only come at the State level.

    Before this issue devolves into another ballot box catastrophe that radically oversimplifies the issues to a “yes” or “no” choice on an initiative bankrolled by special interests, legislators in both parties need to come together on sensible reform. The Governor has put such a program on their desks. Reasonable people can differ on the details. But only unreasonable people want all-or-nothing victories. This is an issue that both sides should be willing to compromise on. The only way that will happen is if voters push both parties toward sensible compromise in the year ahead!

    Photo by Randy Bayne

    Rick Cole is city manager of Ventura, California, and recipient of the Municipal Management Association of Southern California’s Excellence in Government Award. He can be reached at RCole@ci.ventura.ca.us

  • Rethinking College Towns

    As a practitioner in both consulting and local government, I have observed that in local communities nothing seems to prompt productive action better than a local crisis or strongly felt threat like a factory closure. 

    Unfortunately, we are often inclined to take action to close the barn door only after the horse has escaped.

    That may be why “college town economic development” could be considered the ultimate oxymoron.  Higher education has been a growth industry for half a century. As a result, college towns and university neighborhoods have prospered in good times and bad and typically see little reason to pursue economic growth. 

    New realities in the economy and technology, however, mean their admirable invulnerability is no longer assured.  The paradigm of guaranteed growth in college town USA is coming to an end.

    More Debt, Fewer Jobs

    As this is written, the Occupy movement on campuses is protesting high tuition costs and the $25,000 average debt that comes with the diploma, with even the Secretary of Education in a Democratic administration calling upon colleges in a Las Vegas conference November 29 to cut their prices.

    Increasingly, what doesn’t always come with that diploma these days is a job or even a place to live away from mom and dad. Corporate cost-cutting, offshoring, and white collar automation promise fewer jobs for our graduates even beyond the current slowdown.  And the growth of for-profit universities, fast-track degree programs, and lower-cost distance learning offer strong competition to the traditional economic base of college towns that relies on large numbers of students spending four years in their town.

    In addition, there is likely to be a reduction in the number of future college students, as the millennial or “echo boom” begins to pass through their teens and early twenties.    To survive, college towns have to reinvent themselves in order to “find a new way to prosper and thrive” in future years.

    Additional Roles for College Towns

    These various threats to colleges place the economy of the town or neighborhood outside the campus in even greater jeopardy. Thanks to technology, professors can now deliver their services to customers who have never set foot in town. College town barbers and pizza places cannot.

    But happily, the college town has the potential for even greater growth than the university, not being narrowly tied like the latter to instruction and research nor to serving a single age group.

    The key to that growth lies in marketing. But that’s an activity college towns have seldom done well when they’ve done it at all. Colleges themselves have often mystifyingly underperformed in this pursuit.

    Despite the college town’s current prestige and trendiness, there simply won’t be enough high tech to fill the space in every college town with aspirations for a research park. And tech is unlikely to create jobs in places with only small non-research colleges.

    But colleges’ assets can lend themselves to college town success not only as “A Place to Learn” and “A Place to Research” but also as “A Place to Visit” and “A Place to Live.”

    A Place to Visit or Live

    As detailed in The Third Lifetime Place, college towns have significant opportunities to further develop and market themselves to potential visitors as “A Place for Sports and Entertainment,” “A Place to Heal,” “A Place to Meet,” and even “A Place to Vacation.”  The biggest payoff, however, may be from marketing the college town as “A Place to Come Home To” during working years or “A Place to Retire” thereafter.

    College towns are already taking off as retirement destinations. With the now-beginning retirement of the huge Baby Boom generation, a college town with advantages for retirement that doesn’t develop and market them is simply leaving money on the table.

    But the technology that enables telecommuting and the money it saves both corporations and independent entrepreneurs can also make the college town a great place to live for workers who are not faculty or college staff. The advantages of good schools and small town living that so many families pay top dollar for in metropolitan suburbs can be readily found in many college towns and with a smaller price tag.

    A Unique Competitive Advantage

    As places to market for living or retirement, college towns are blessed with a unique competitive advantage: their status as the Third Lifetime Place (TLP) in the lives of thousands of alumni. 

    Most of us have a special place that joins in lifetime significance the place where we grew up — which will always be “home” — and the place where we’re spending most of our adult lives. This third place is or was a pleasurable temporary refuge from both work and home responsibilities.

    The traditional TLP has been the year-after-year vacation spot. Later becoming the location of the second home, the final validation of its TLP significance was its choice for retirement. The most conspicuous success among traditional TLPs has been Florida, which moved from vacationland status to Retirement Central and also a favored place to locate a business, take a job, or hold a convention.

    But as suggested in The Third Lifetime Place, for the  highly college-educated generations that started with the Boomers, the four or more years spent in the college town may make it a more potent TLP than the place at the lake where they spend two weeks every July. 

    The most enjoyable and often most life-changing years of one’s youth were often those spent in the college town. Lifetime devotion to the football team, return trips to campus for reunions, and gifts to the alma mater testify to the strong feelings graduates have about these years.  And emotional appeals are probably the most potent force in marketing anything.

    Obstacles to Overcome

    But despite the powerful TLP marketing advantage, business as usual on campus, in city hall, or in the chamber of commerce office will not be enough to make the economic payoff happen.

    The most daunting impediment may be an “if-it-ain’t-broke-don’t-fix-it” complacency, the consequence of a seemingly bulletproof prosperity. Another is a left-of-center activist political climate that is characteristically anti-business and anti-growth which commonly results in high local taxes or high levels of regulation.   

    Unfortunately, a long history of dominating the provision of a universally popular product like higher education no longer assures places perpetual prosperity. The poster child for that reality is Detroit.  The Motor City once figured it would keep riding high so long as Americans continued to buy cars. But that’s not what happened.

    Per the Chinese character that designates both “danger” and “opportunity,” the effects of changes in higher education on college towns will depend on how our towns respond to them.  And that will depend to a large degree on the quality of their business, civic, and political leadership.

    John L. Gann, Jr., President of Gann Associates, Glen Ellyn, Illinois–(800) 762-GANN—consults, trains, and writes on marketing places to grow sales, jobs, property values, and tax revenues.  Formerly with Extension at Cornell University, he is the author of How to Evaluate (and Improve) Your Community’s Marketing published by the International City/County Management Association.

    E-mailed information on The Third Lifetime Place: A New Economic Opportunity for College Towns is available from the author at citykid@uwalumni.com.

    New Paltz, NY photo by Flickr user joseph a

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  • California: Codes, Corruption And Consensus

    We Californians like collaboration. Before we do things here, we consult all of the “stakeholders.” We have hearings, studies, reviews, conferences, charrettes, neighborhood meetings, town halls, and who knows what else. Development in some California cities has become such a maze that some people make a fine living guiding developers through the process, helping them through the minefields and identifying the rings that need kissing.

    Here’s an example. This is a (partial?) list of the groups who will have a say on any proposed project in my city, Ventura:

    • City agencies (Planning, Engineering, Flood Control, Traffic, Building & Safety, Utilities, Police, Fire)
    • Historic Preservation Committee
    • Parks and Recreation Committee
    • Design Review Committee
    • Planning Commission
    • City Council
    • School District
    • Neighborhood and Community Councils
    • No-Growth Citizen Groups
    • Chamber of Commerce
    • Ventura Citizens for Hillside Preservation
    • California Department of Fish and Game
    • United States Department of Fish and Wildlife
    • Ventura County Local Agency Formation Committee (discretionary authority regarding annexations)
    • Los Angeles Regional Water Quality Control Board (new MS4 Stormwater Permit issues)
    • Ventura County Environmental Health
    • California Coastal Commission (for some projects within the Coastal Zone)
    • California Native American Heritage Commission and Designated Most Likely Descendant of local tribe
    • United States Army Corps of Engineers
    • Natural Resources Defense Council, Surfrider Foundation, Heal the Bay, other environmental groups
    • And all parties who have requested to be on notice, as well as the general public and other agencies, will be informed of any California Environmental Quality Act (CEQA) document.

    I didn’t pick Ventura because it is the most difficult. It’s not. I think Ventura is pretty typical for a coastal California city, actually.

    The result of having all these stakeholders is that, in many California communities, particularly those in coastal and upscale locations, everyone has a veto on everything. At the beginning of a project the developer faces a huge amount of uncertainty about what the project will look like once it gets past the gauntlet and about the cost of the development process. Add to that uncertainty about who will demand what, how long the approval process will take, market conditions and the regulatory environment when the project is completed, if it is completed.

    This is where the corruption connection comes in.

    In economics, we teach that there are two types of corruption, centralized and decentralized. Decentralized corruption is the more pernicious of the two.

    Think of a city where organized crime has a successful protection racket. This would be centralized corruption. The mob is going to collect from everyone, but it has an incentive not to collect too much. It doesn’t want to draw too much attention to itself or chase the business out of town.

    By contrast, decentralized corruption consists of a bunch of independent gangs, each trying to collect all they can before the next group of thugs comes along. Each gang of thugs will demand and collect too much, and chase the business out of town.

    Of course, if you want to develop a property in California no one will hold a gun to your head and demand money, and everyone is way too polite to call it extortion. Certainly, no group thinks of itself as a mob of corrupt gangsters. Instead, the members think of themselves as stakeholders, and they hold delays, lawsuits, or project denial to your head. The results are the same.

    First, you have to meet everyone, and everyone wants something in return for support, or for refraining from opposition. Groups will demand “mitigation fees,” delays, studies and more studies, and changes in the project. You will meet their demands, or you will be sued, or the project will be denied.

    Time spent on meetings, studies, and negotiations is expensive. The cost of the local “guide,” necessary to get through the local maze, is expensive. The “mitigation fees” are expensive. Delays are expensive. Studies are expensive. Changes in the project are expensive. Lawsuits are expensive. And risk is expensive.

    Eventually, the project is no longer profitable. No wonder California’s unemployment rate is 30 percent above the United States unemployment rate.

    The current climate provides California’s local governments with their best economic development opportunity: Eliminate the legal extortion by guaranteeing a project’s prompt approval if it meets existing general plans, specific plans, zoning, building codes, and adopted design criteria. Any community that did this would see immediate increased economic activity. To steal a phrase from a famous economist, it is the closest thing to a free lunch.

    A city does outreach before it develops its zoning and community design plans. It only adds to the cost of development to require builders to go through the entire process again, fighting the same battles, every time a project is proposed.

    The best thing about this idea is that it has been tried, and it works. The City of San Diego has seen an amazing-for-California energy since its redevelopment agency implemented such a plan several years ago. In the worst economy in 50 years, San Diego has been building and providing commercial and housing projects for all economic levels in its downtown area. It is time for the rest of California to get on with it.

    Bill Watkins is a professor at California Lutheran University and runs the Center for Economic Research and Forecasting, which can be found at clucerf.org

    Photo: Two Tree Hill, Ventura California by Joseph Liao (Chowee).

  • Let’s Level the Inter-generational Playing Field

    With President Obama’s speech in Osawatomie, Kansas decrying the growing economic inequality and lack of upward mobility in America, the issue has finally arrived at the center of this year’s campaign debates. While most discussions of this growing inequality focus on the gap between America’s poorest and richest citizens, a recent report by the Pew Foundation highlights how the same economic trends over the last two and a half decades have also widened the wealth gap between the oldest and youngest Americans to the highest levels in history.

    In a time of great political unrest and economic anxiety, this inter-generational wealth gap has the potential to throw gasoline on an already white hot fire. Only by understanding the sources of this increasing disparity can the country develop policies that will help to close the gap and create a fairer, less economically stratified society.

    Drawing on data provided by the U.S. Census Bureau’s Survey of Income and Program Participation (SIPP), Pew documents the tectonic shifts that have occurred in households’ net worth based upon age between 1985 and 2009. During this time, the average net worth of households headed by those under 35 fell from $11,521 to just $3,662, a drop of 68%.  During the same period, the net wealth of households, as measured by adding up the value of all assets owned minus liabilities such as mortgages or credit card debt associated with those assets, headed by those over 65 increased by 42%, from $120,457 to $170,494 (all figures are expressed in 2010 dollars).

    Of course younger households have always been less wealthy than older ones, since the heads of those households haven’t had a lifetime to acquire wealth. In 1984, this effect of age on household wealth meant that senior citizen households had, on average, ten times the wealth of those headed by people younger than 35. However, the enormous generational shift in household wealth that occurred in the intervening twenty-five years meant that, by 2009, the net worth of senior citizen households was 47 times greater than younger households. The resulting disparities in economic well-being are reflected in each generation’s perception of its own economic situation.  

    Those Americans over 65 in 2009 are members of what generational historians call the Silent Generation. Only 25% of Silents expressed any dissatisfaction with their personal financial situation that year, a percentage that did not increase in the next two years of the Great Recession.

    By contrast, 36% of people under 35 in 2009 – mostly members of the Millennial Generation – expressed dissatisfaction with their individual finances in 2009, a number that rose to 39% in 2011. But the biggest jump in dissatisfaction with personal finances between 2009 and 2011 occurred among the next older cohort, who are considered to be members of Generation X. In 2009, only 30% of Xers felt dissatisfied, a number that shot up to 42% in 2011.  Finally, 32% of the Baby Boom generation, born from 1946 to 1964 and approaching their retirement years in 2009, were dissatisfied with their personal financial situation, a number that rose only to 39% by 2011.

    One of the reasons behind this disparity of financial and economic concern among generations lies with the different impact the nation’s housing market has had on each generation between 1985 and 2009.  The great housing price collapse that began in 2008 had little impact on Millennials, only 18% of whom currently own their own home. By comparison, 57% of Gen Xers own their own home. Three-fourths of them bought after 2000 when housing prices began to soar. As a result, about one in five members of Gen X now say their home mortgage is under water, with the balance owed greater than the value of the house. By comparison, only 13% of Boomers and a miniscule 4% of Silents, most of whom bought homes well before the crash, report having under water mortgages. In fact, if it weren’t for the overall rise in housing prices since 1984 that Silents were able to take advantage of, that generation’s net worth would have fallen by a third in the twenty-five years since, instead of rising by 42%. Clearly, to improve Gen X’s attitudes toward the economy and reduce the inter-generational wealth gap, something must be done to fix the nation’s housing market.

    For older generations – Boomers facing retirement and Silents already enjoying their new life – housing is not an especially large concern. Retirement savings based on stock market valuations and/or interest rates and the certainty of pension payments are clearly a much bigger issue with these generations. Almost two-thirds of Boomers believe they may have to defer their retirement beyond 65 because of the decline in their savings and net worth, with about one in four now expecting to work until at least 70. While the stock market has almost fully recovered from the 2008 crash, for those counting on a more interest-oriented set of retirement payouts from bonds or CDs, years of rock bottom interest rates, designed by the Federal Reserve to stimulate the housing market and help the economy recover, have made these investments problematic at best. In some ways, economic policies that are designed to help Gen X with their housing challenges offer older generations scant comfort, and in certain instances actually exacerbate their concerns over their personal finances.

    Millennials diminished sense of economic opportunity remains focused almost entirely on the job market. About two-thirds of Millennials are employed but only slightly half of those are working full-time. Almost two-thirds of Millennials without a job are looking for work. Unemployment among 16-24 year olds rose to 19.1% by the fourth quarter of 2009, a full eight points higher than in 2007 before the crash. For all other generations, unemployment has gone up on average by only 5 points during the same time period. It seems too obvious to be worth stating, but the best way to increase Millennials’ wealth is to create an economy where they can all find jobs.

    Anxiety that the nation’s economy is only working for the wealthiest drives much of  the overall feeling of fear, uncertainty and doubt that pervades the nation’s political debate.  But an examination of household wealth suggests the remedy to this disease varies by generation.

    Senior citizens turned out in record numbers in the 2010 election to decry the policies of the Obama administration, but it would appear from both the economic and attitudinal data that most of them are more interested in fighting to hang on to what they have or in resisting other societal changes than in expressing any dissatisfaction with their own personal financial situation. Boomers complain about what has happened to their plans for retirement, but it is hard to see how fixing entitlements by raising the retirement age, or cutting the overly generous pensions of public employees will do anything to impact their own retirement prospects directly. To really close the generational wealth gap, policies should be adopted which raise the economic well being of America’s two youngest generations, rather than focusing on those who are already relatively better off. 

    To bring up the least wealthy of the nation’s households to levels closer to those more fortunate would require taking much more aggressive steps than Washington has so far been willing to consider.  This might require expanding the scope and size of government, something older generations especially are steadfastly resisting. This inter-generational debate over the nation’s “civic ethos,” driven by the differing economic circumstances of each generation, will be and ought to be the fundamental issue of the campaign – precisely where President Obama’s speech in Osawatomie, Kansas placed it.

    Morley Winograd and Michael D. Hais are co-authors of the newly published Millennial Momentum: How a New Generation is Remaking America and Millennial Makeover: MySpace, YouTube, and the Future of American Politics and fellows of NDN and the New Policy Institute.

  • Durban, Reducing Emissions and the Dimensions of Sustainability

    The Durban climate change conference has come to an end, with the nations of the world approving the "Durban Platform," (Note 1) an agreement to agree later on binding greenhouse gas (GHG) reduction targets by 2020. The New York Times reported: "Observers and delegates said that the actions taken at the meeting, while sufficient to keep the negotiating process alive, would not have a significant impact on climate change."

    Not surprisingly, not all are pleased by the largely toothless agreement. Nnimmo Bassey, chair of Friends of the Earth international, told The Guardian:"Delaying real action till 2020 is a crime of global proportions." Todd Stern, the United States representative, signed on to the deal but noted that "there is plenty the US is not thrilled about."

    There is general agreement that any program to reduce GHG emissions must do so in the most efficient (least expensive) manner. The United Nations Intergovernmental Panel on Climate Change (IPCC) has concluded that sufficient emissions reductions can be achieved for between $20 and $50 per ton. Any cost above that must be considered wasteful and likely to reduce economic growth, while increasing poverty.

    Yet, researchers often leap from identifying a strategy to reduce GHG emissions to recommending its implementation, without ever examining the cost.

    Often  missed for instance, is that reductions in some sectors may prove less expensive than in others. The European Conference of Ministers of Transport has noted that "It is important to achieve the required emissions reductions at the lowest overall cost to avoid damaging welfare and economic growth." Across-the-board targets would misallocate resources, unnecessarily reducing economic growth and increasing poverty. This is particularly important in transport, because IPCC data indicates the potential for cost effectively reducing GHG emissions from this sector is considerably less than its contribution to emissions.

    GHG Emissions from Automobiles: In the United States and other high income nations, however, mandates are being pursued that would impose far higher costs. Our new report, published by the Reason Foundation, Reducing Greenhouse Gas Emissions from Automobiles reviews two general approaches. The first is behavioral approaches, the favorite of policymakers, that would force people to leave the suburbs to live in higher densities ("compact city" or "smart growth" policies) and discourage personal mobility. The second is facilitative approaches, which would reduce GHG emissions through technological advances, minimizing the necessity for command and control mandates over people’s lives.

    Behavioral Approaches: In what passes for the conventional wisdom, current thinking would require densification for virtually all new development, while trying to force people out of cars to travel by transit, bicycle or walking, all characterized as "sustainable" transport modes. Further, these strategies would seriously impede personal mobility by increasing travel times and reducing access to employment. This reduction in accessibility to jobs would be a backward step for any nation interesting in longer term economic growth (Note 2).

    The behavioral strategies are described in two principal US reports: Driving and the Built Environment which was produced by the National Research Council and Moving Cooler, by a consortium of organizations led by the Urban Land Institute and Cambridge Systematics. Each of these reports provides detailed estimates of the GHG emission reductions to be expected from land-use and mass transit strategies by 2050 in the United States.

    The reductions are relatively modest, averaging less than 5% from the early 2000s to 2050 .  Driving and the Built Environment indicates that the drafters did not agree its most aggressive scenario was achievable. Moving Cooler was soundly criticized by the American Association of State Highway and Transportation Officials and on these pages by leading transport consultant Alan E. Pisarski (see: ULI Moving Cooler Report: Greenhouse Gases, Exaggerations and Misdirections).

    These proscriptive policies focus on housing and land use even thought nearly all of the improvement in GHG emissions would result from automobile fuel economy improvements, not compact city policies. Depending upon the scenario, between 89% and 99% of the reduction in GHG emissions from cars by 2050 (Figure 1) would be the result of fuel economy improvements, rather than from compact city policies (based on comparison base year, early 2000s, fuel economy).

    Moreover, even the modest 1% to 11% reduction (5% average) in GHG emissions due to compact city policies are likely high because of greater traffic congestion, which neither report considers. Higher density urban areas, such as compact city policies would require, would spark greater traffic congestion. This means that cars travel slower and in more erratic traffic conditions. This, ironically, increases fuel consumption and GHG emissions per mile or kilometer. Thus, as noted here before, under these policies, GHG emissions from cars could actually increase.

    Neither Driving and the Built Environment nor Moving Cooler report considers the economic impact of compact city land rationing, which drives up housing prices and could thus be expected to impose higher costs on households. The economic literature is virtually unanimous in associating higher land and thus house prices with smart growth type land rationing policies. The increased costs could be many times the IPCC $20 to $50 per ton of GHG emissions removed.

    Even the popular assumption that suburban housing produces materially greater GHG emissions is questionable. Most US research fails to capture the common GHG emissions from elevators, heating, air conditioning, lighting, etc. in larger multi-unit housing, which are costs attributed to the building itself (landlord or condominium building) as opposed to  household energy bills (simply because there are no data). Yet, research in Australia indicates that common GHG emissions render higher density multifamily housing more GHG intensive than either townhouses or detached housing. Also escaping many researchers is the fact that carbon neutral housing is being developed, which could remove any GHG emissions differences between housing types.

    Compact city or smart growth policies have little potential to reduce GHG emissions and would do so at exorbitant costs that are well beyond those identified by the IPCC. This is not surprising, since compact city and smart growth policies have been widely touted long before the general concern over climate change. Denser cities have been pushed as a means to improve “community,” spur economic efficiency,   reduce air pollution and deal with such ephemeral – given recent massive energy finds – notions of “peak oil”.

    Facilitative Approaches: Any achievable program to reduce GHG emissions must be multi-dimensional and focus primarily on achieving that goal in the most economically and socially beneficial manner and not be based upon tired policies designed long ago to serve other agendas. There is no need for expensive and draconian compact city approaches. A report by McKinsey and the Conference Board concluded that substantial and cost effective GHG emission reductions were possible, “while maintaining comparable levels of consumer utility,” which was defined as “no change in thermostat settings or appliance use, no downsizing of vehicles, home or commercial space and traveling the same mileage.” In other words, there is no need to interfere with people’s lives or preferences (Note 3).

    The most promising approaches involve improvements in fuel economy. For example, Volkswagen has developed a two-seater car that achieves 235 miles per gallon (US) of gasoline or petrol (1 liter per 100 kilometers). With current fuel economy averaging little over 20 miles per gallon (12 liters per 100 kilometers) in the United States, the frontiers of fuel economy improvement have barely been approached.

    Moreover, substantial GHG emissions reductions can be achieved at levels far below 235 miles per gallon. The United States Department of Energy, Energy Information Administration (EIA) forecasts that even if driving increases 29% from 2005 to 2025, GHG emissions from cars would be reduced by 7% (Note 4). If, as is demonstrably possible, the EIA forecast fuel efficiency improvements were to continue to 2050, the reduction would be 19%, despite an increase in driving of more than 60%. At a slower driving growth rate more consistent with more recent trends, the reduction could be 33% (Figure 2).

    Further, if the US light vehicle fleet (cars and sport utility vehicles) were to achieve the current fuel economy performance of the best hybrid vehicles, the reduction in GHG emissions would be between 55% and 64% by 2050. Matching European performance forecasts would reduce GHG emissions even more.

    A substantial increase in the fastest growing sector of commuting, working at home (often telecommuting), could also help. Nothing can cut emissions more thoroughly than working at home, which produces zero GHG emissions. Yet, this innovation – which already surpasses transit use in most American metropolitan areas – inexplicably receives little or no attention from planners intent on herding people into higher densities and travel modes that take longer.

    The great advantage of facilitative approaches is that, as the McKinsey-Conference Board report indicates, people are permitted to live their lives as they prefer even as emissions are reduced.

    The Dimensions of Sustainability: Perhaps the greatest problem with behavioral approaches is that they may not be sustainable at all. Sustainability is multi-dimensional. Compact city and smart growth policies lack financial sustainability because they spend far too much per ton of GHG emissions. They lack economic sustainability because they would impose substantially higher costs, especially on housing prices. Ultimately, unless humans radically change their demonstrated preferences, compact city and smart growth policies may not be politically sustainable because people are likely to resist them either at the ballot box, or by moving – as demonstrated in the latest census – even further out from the urban core or to smaller, less regulated and less dense regions. All three dimensions of sustainability, financial, economic and political, must be prerequisites to material GHG emissions reductions.

    Notes:

    (1) Reuters provides an early summary of the Durban Platform.

    (2) The strong connection between economic growth and minimizing urban travel times is identified in research such as by Prud’homme and Lee at the University of Paris and Hartgen and Fields at the University of North Carolina, Charlotte.

    (3) The McKinsey-Conference Board report was co-sponsored by Shell, National Grid, DTE Energy and Honeywell, as well as environmental advocacy organizations, the Environmental Defense Fund, the Natural Resources Defense Council (NRDC),

    (4) Proponents of compact city policies sometimes claim that fuel efficiency improvements cannot reduce GHG emissions because the increase in driving neutralizes their impact. EIA projections indicate otherwise, as is shown here.

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life”

    Photograph from BigStockPhoto.com

  • Tilting at (Transit) Windmills in Nashville

    As in other major metropolitan areas in the United States, Nashville public officials are concerned about traffic congestion and the time it takes to get around. There is good reason for this, given the research that demonstrates the strong association between improved economic productivity and shorter travel times to work. As Prudhomme and Lee at the University of Paris and Hartgen and Fields at the University of North Carolina Charlotte have shown, metropolitan areas tend to produce more jobs where employees are able to access a larger share of the jobs in 30 minutes.

    Ahead in Identifying the Problem: Moreover, Nashville officials are somewhat "ahead of the curve," since traffic congestion is far less severe there than in many other metropolitan areas. Among the 100 largest metropolitan areas in the United States, Nashville ranks 39th in the intensity of its traffic congestion, according to data compiled by INRIX, a traffic information firm. Nashville’s traffic congestion is even better compared to large Western European metropolitan areas .

    This favorable traffic situation is despite the fact that Nashville has among the lowest overall transit market shares in the United States or Western Europe (less than 0.5 percent of travel in the metropolitan area). The key to this success, like that of other American metropolitan areas in relation to their international peers is low density and decentralization of employment and other commercial locations.

    Missing the Point on Solutions: Yet, it is clear from an editorial in the Nashville Ledger that officials are inclined to embark on an expensive program of transit expansion. Judging from past experience, this   offers virtually no hope for reducing traffic congestion or for improving economic productivity in the Nashville metropolitan area.

    There are significant misperceptions among local officials about the potential outcomes of proposed commuter rail and bus rapid transit lanes. Perhaps the most important is the assumption that commuter rail and bus rapid transit will reduce travel times. In fact, at the national level, commuting by transit takes approximately twice as long as commuting by single occupant automobile, according to the Census Bureau’s American Community Survey for 2008 to 2010. Rail systems, such as subways (metros) and light rail do little better than transit in general, taking 95% longer than driving alone and two thirds longer than travel by car pools. There is thus virtually no hope that building new transit lines will reduce travel times.

    As often happens when costly new transportation programs are proposed, boosters often resort to erroneous information. The Nashville Ledger cites sources that indicate, for example, that suburban Franklin (in Williamson County, to the south of the Nashville-Davidson County core) has one of the longest work trip travel times in the nation. The reality is quite different. Franklin has an average work trip travel time (23.2 minutes), which is less than national average (25.3 minutes) and little more than Nashville-Davidson County (23.0 minutes).

    Nashville officials need look no further than their own eastern suburbs for evidence of the inability of new rail systems to reduce work trip travel times. In 2006, Nashville began commuter rail service from Lebanon, in Wilson County to downtown Nashville (the Music City Star). Currently, the Music City Star is locked in an intensive (and successful, according to the latest data) competition for last place in the number of riders among the nation’s commuter rail systems, just edging out Austin’s new lightly used system. Despite being the only first ring county with commuter rail service, Wilson County work trip travel times are longer than in the other first ring counties. Door-to-door travel times, which are the only travel times that count, have not been reduced by the rail line.

    Transit is About Downtown: Transit cannot be a comprehensive metropolitan transportation solution remotely competitive with automobile travel times, except to downtown. This is because the quicker, direct transit services from throughout the metropolitan area that are necessary to attract automobile drivers must focus on the most dense and largest employment center, which is downtown. The radial routes that may be capable of serving downtown effectively simply cannot be afforded for other areas of employment. Our research has indicated, the annual cost to provide automobile competitive transit service throughout an urban area in the United States would consume a huge share of the gross domestic product of any such area.

    In Nashville, downtown represents little more than 10% of the metropolitan area employment. Moreover, downtown Nashville represents a declining share of private sector employment in the metropolitan area. According to the Census Bureau’s County Business Patterns, the core Nashville ZIP codes that are served by shuttle buses from the commuter rail station lost 11% of their private sector jobs between 2000 and 2009 (latest data available). At the same time, private sector employment grew 4% in the balance of the Nashville metropolitan area (Note 1).

    Transit to Suburban Destinations: A Non-Starter: There have been proposals to require new suburban office development to be near transit stops. This would accomplish little, because transit access in areas other than downtown is so sparse. Among major metropolitan areas, nearly 65% of major metropolitan area workers are within walking distance of a transit stop, according to research by the Brookings Institution. But being near a transit stop does not mean that transit provides practical mobility to anything like 65% of jobs. The reality, according to the Brookings Institution data,  is that only 6% of jobs in the average metropolitan area of more than 1 million population can be reached by transit  by the average resident  in 45 minutes, a travel time nearly double that of the average commuter in the Nashville metropolitan area (Note 2). It seems likely that 30 minute transit access for commuters would be as low as 3% at the national level. This demonstrates the so frequently repeated fallacy equating access to a transit stop with usable access to the metropolitan area.

    Transit’s Large Downtown Niche Market: There is no question about the effectiveness (though not the cost efficiency) of transit in providing mobility along the most congested corridors to the nation’s largest downtown areas. This transit niche market accounts for nearly 75% of commuting to the Manhattan business core south of 59th Street, and more than 40% to the downtown areas of Brooklyn, Chicago, San Francisco, Boston and Philadelphia. Yet even in these metropolitan areas, where transit mobility is so important to downtown, transit work trip market shares to areas outside downtown are more akin to the national average of 5% (Figure), except in New York.

    Of course, Nashville’s downtown is not among these large transit-oriented cores. In 2000, census data indicated that 4% of employees commuted to downtown by transit. Even if all of the ridership on the Music City Star is made up of new downtown transit commuters, that figure would be little changed.

    The Need for Stewardship: Before Nashville commits hundreds of millions or billions of tax dollars to expensive transit projects transit in hopes of reducing traffic congestion or travel times, local officials should consider reality. Reducing traffic congestion and travel times are objectives generally beyond transit’s capability. Further, new lines can attract only a small share of commuters, because such a small share of jobs are downtown.

    —-

    Note 1: County Business Patterns provides employment information that largely excludes government employment. According to Bureau of Labor Statistics data, 53 percent of metropolitan Nashville’s increase in employment was government jobs between 2000 and 2009.

    Note 2: Calculated from Brookings Institution data.

    Photograph: Downtown Nashville from BigStockPhoto.com

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life”

  • Illinois: State Of Embarrassment

    Most critics of Barack Obama’s desultory performance the past three years trace it to his supposedly leftist ideology, lack of experience and even his personality quirks. But it would perhaps be more useful to look at the geography — of Chicago and the state of Illinois — that nurtured his career and shaped his approach to politics. Like with George W. Bush and Texas, this is a case where you can’t separate the man from the place.

    The Chicago imprint on Obama is unmistakable. His closest advisors are almost all products of the Windy City’s machine politic: ConsigliereValerie Jarrett; his first chief of staff, now Chicago Mayor, Rahm Emanuel; and his current chief of staff, longtime Chicago hackster William Daley, scion of the Windy City’s longtime ruling family.

    All these figures arose from a Chicago where corruption is so commonplace that it elicits winks, nods and even a kind of admiration. Since 1973, for example, 27 Chicago Aldermen have been convicted by U.S. Attorney of the Northern District of Illinois.

    That culture of corruption affects the rest of the state as well. Both Gov. George Ryan (who served from 1999 to 2003 and  and his successor Ron Blagojevich have been convicted a major crimes. So have four of the state’s last eight governors. Blagojevich’s felonies are part and parcel of a political climate that also includes the also newly convicted  Antonin “Tony” Rezko, a real estate speculator and early key Obama backer, sentenced late last month to a ten-year prison sentence.

    Crony capitalism constitutes the essential element of what the legendary columnist John Kass of the Chicago Tribune has labeled both the “Chicago way” and the “Illinois Combine”, not primarily an ideology-driven movement. The political system, he notes, “knows no party, only appetites.”

    Just look at the special favors granted to vested interests while the state has imposed a 65% boost in income taxes for middle class citizens. Companies like Boeing and United, which have head offices in Chicago, get tax breaks and incentives, while everyone else pays the full fare. This game is still afoot.  Even as the state deficit persists, other big players such as the CME group, which operates the Chicago Mercantile Exchange, the Chicago Board of Options and Sears are threatening to leave unless their taxes are also lowered.

    Thus it’s not surprising then that cronyism has become a hallmark of the Obama administration. Wall Street grandees, a key source of Obama campaign funders in 2008 and again now, have been treated to bailouts as well as monetary policies that have assured massive profits to the “too big to fail” crowed while devastating consumers and smaller banks.

    The evolving scandal over “green jobs” — with huge loans handed out to faithful campaign contributors — epitomizes the special dealing that has become an art form in the system of Chicago and Illinois politics.  Beneficiaries include longtime Obama backers such as Goldman Sachs, Morgan Stanley and Google. Another scandal is building up around the telecom company LightSquared. This company, financed largely by key Obama donors, appears to have gained a leg up for a huge Pentagon contract due to White House pressure.

    If the Chicago system had proven an economic success, perhaps we could excuse Obama for bringing it to the rest of us. Most of us would put up with a bit of corruption and special dealing if the results were strong economic and employment growth.

    But the bare demographic and economic facts for both Chicago and Illinois reveal a stunning legacy of failure. Over the past decade, Illinois suffered the third highest loss of STEM (science, technology, engineering and math-related) jobs in the nation, barely beating out Delaware and Michigan. The rest of the job picture is also dismal: Over the past ten years, Illinois suffered the third largest loss of jobs of any state, losing over six percent of its employment.

    The state’s demographic picture also is dismal. In the last decade, Illinois lost population not only to sunbelt states such as Texas and Florida but actually managed to have negative migration even with places like California and New York, net losers to virtually everywhere else. In fact, Illinois had a positive net migration with only one major state, Michigan.

    Chicago and its Daley dictatorship has been much celebrated in the media – particularly after Obama’s election in everything from the liberal New Yorker to Fast Company, which named Chicago “city of the year” in 2008. The following year, the Windy City was deemed the best city for men by Askmen.com, for offering what it claimed was “the perfect balance between cosmopolitan and comfortable, combining all of the culture, entertainment and sophistication of an internationally renowned destination with an affordable lifestyle and down-to-earth work hard/play hard character.”

    Well, you can make that case, unless you happen to be searching for a job. Over the past decade, “the Chicago way” has proven more adept at getting good coverage than creating employment for its residents. In NewGeography’s last cities rankings greater Chicago ranked 41st out of the 51 largest metropolitan areas. Between 2001 and 2011 it actually lost jobs. Since 2007 the region has lost more jobs than Detroit, and more than twice as many as New York. It has lost about as many jobs – 250,000 – as up and comer Houston has gained.  In NewGeography’s recent survey of high-tech growth, the Chicago region stood at a dismal 47th among the nation’s 51 largest metropolitan areas.

    Overall, Chicago Loop Alliance reports that private sector employment in the Loop, the core of the Chicago downtown area, fell from 338,000 to 275,000 between 2000 and 2010. Chicago’s core has fallen further behind, in capturing high end employment than its traditional rival, New York.

    This weak hand is also evident in the region’s strongly negative migration. According to the last Census, Chicago lost more than 200,000 people during the last decade. People are leaving the Chicago area not only for Sun Belt havens but to rising Midwest competitors like Indianapolis and Minneapolis, which offer better business climates, lower housing prices and cleaner governments, says local urban analyst Aaron Renn. Even perennial losers like Los Angeles and New York are net gainers with Chicago.

    Given this economic and demographic track record, it’s no big surprise that the City of Chicago and the State of Illinois face enormous fiscal pressures. The city is facing a deficit of about $650 million and the state’s unfunded future liabilities are upwards of $160 billion. The  new taxes are on tap for state residents, according to Illinois Public Policy Institute, will cost the average Illinoisan a whole week’s earnings.

    One might hope this disastrous record might make President Obama consider taking a different path to governing our country.  Yet sadly it appears that acknowledgement of failure is not part of the “Chicago way” — a denial that may cost us dearly in the years ahead.

    This piece first appeared at Forbes.com.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Official White House Photo by Pete Souza.

  • Wall Street Plays Occupy White House

    Wall Street is disdained in the court of public opinion — detested by the tea party on the right and the Occupy movement on the left. The public blames financial plutocrats for America’s economic plight more than either President Barack Obama or former President George W. Bush. Less than a quarter of all Americans, according to Gallup, have confidence in the banks, which vie for the lowest spot with Big Business and Congress.

    But these angry voters are unlikely to get satisfaction in next year’s presidential election. In fact, things are looking up for the financial elite — which donated more to Washington politicians than almost any other sector of the economy over the past two decades. Wall Street can look forward to a bank-friendly administration if Obama is reelected — and perhaps even better conditions if either of the two leading GOP contenders, Newt Gingrich and Mitt Romney, wins the White House.

    Despite his occasional remarks that decry “fat cat”’ bankers, Obama has effectively serviced the financial bigwigs. Bank prosecutions have declined markedly under Obama — to levels not seen for more than 25 years. Obama has even tried to derail aggressive bank prosecutions pursued by state attorneys general, most of them liberal Democrats.

    This is remarkable since a considerable number of people on Wall Street should likely be in the dock — or in jail — for systematically ruining the national, and even global, economy. Instead, financial powers have enjoyed several big bonus years and have been on a spending binge at overpriced New York restaurants and tony boutiques. Struggling homeowners of middle America may be happy to know that the Manhattan luxury apartment market is running low on inventory.

    Even while trying to exploit the Occupy Wall Street movement for political purposes, Obama still leads in financial sector donations, according to the Center for Responsive Politics. He has secured more cash from the financial elite, at this point, than all the GOP candidates combined. He has even raised twice as much as they have from Bain Capital, the venture firm co-founded by Romney. Why not give up on the white working class when you can sew up the Harvard and Wharton business school constituency?

    Nor can we expect this pro-Wall Street tilt to shift in a second term. Obama’s virtual toadying to Wall Street is long-standing. He was the finance industry’s favorite against Hillary Clinton and then-GOP nominee Sen. John McCain (R-Ariz.). He may call them “fat cat” bankers, but Obama has been a kitten when dealing with financiers.

    The president might not have much interest in conventional energy, manufacturing and industry — economic sectors that really create wealth and high-paying blue-collar jobs — but he has performed wonders to make sure the financial elite does well.

    With his enablers, Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke, Obama has pursued low interest rates and easy money, policies favorable to large financial institutions. They get essentially free cash, which they then lend to the government and others at substantially higher rates. Now, to save the European banks, we hand out more money — not so much to save the old continent or our industries but our banks’ exposure to them.

    Yet even Obama’s record of largely obsequious behavior is not enough for some Wall Street powers. Many financiers are now signing on with Romney. No doubt, the former investment banker seems a safe choice. He is, if you will, to the manor born and is expected to view things as the ultra-rich prefer. To him, the Occupy Wall Street movement has been largely looking for “scapegoats.”

    Romney is a strong defender of the Troubled Asset Relief Program and the financial bailouts. He has even talked about lowering capital gains — though for only the smaller investor. Wall Street would likely be safe with Romney in the White House.

    Gingrich is, as usual, harder to categorize — having said and done so many often contradictory things over the past few decades. Typically, after decrying the TARP bailout as “socialism,” Gingrich supported the bailout legislation. He also received compensation of more than $1.6 million in consulting fees from Freddie Mac, one of the big Washington institutions at the core of the financial crisis.

    As a congressman, Gingrich consistently supported another key source of the meltdown — the wholesale deregulation of the financial industry. He has continued to play to Wall Street’s tune, opposing more stringent regulations. Gingrich symbolizes, as much as anyone, the interplay of the financial elite, Washington lobbying and politics.

    More radical Republican challengers — those perhaps more likely to break the Wall Street consensus — seem to have self-destructed. The shifting tea party favorites — Rep. Michele Bachmann (R-Minn.) and Texas Gov. Rick Perry — have been undermined by their own demonstrated ignorance and a fatal attraction to the far-right social conservative agenda.

    On the left, no one is likely to run against Obama. Politicians are perhaps unwilling to challenge the first African-American president — though many Democrats have grave misgivings about his gentry-friendly economic policy.

    Next November, populists on both the left and the right are unlikely to get satisfaction from whoever wins the White House. In contrast, one faction or another of Wall Street is likely to win big.

    The more traditionalist financial wing favors the GOP policies of greater deregulation, which allow for ever increasing risk-taking and agglomeration of assets. The “progressive faction” — which includes many Silicon Valley venture capitalists — tends toward Obama, who has favored its members with more than $14 billion in subsidies for green ventures and supports their status as arbiters of the future economy.

    Yet those who seek a radical shift in economic policy, whether on the right or left, should not give up. Eighty-one percent of Americans are dissatisfied with the status quo, according to Gallup. Their trust in large economic and political institutions stands at the lowest ebb in a generation.

    This anger could fuel a prairie fire that would force the restoration of competition to capitalism and reduce the power of the bipartisan patrician caste.

    What is needed is some sort of tacit agreement among Americans — independents, tea partiers or Occupy Wall Street — for a break with the Wall Street-first policies of the political leaders of both parties. One crucial component could be a reform of the tax system — with flatter rates and capital gains equalized with income taxes, a policy that now overwhelmingly benefits the top 0.1 percent.

    This does not necessarily mean more regulations — which the financial industry can easily game, in any case. We must instead make bankers more accountable for their failures. Let them feel the pain, and not allow them to prevail with the help of bailouts or to slip into their golden parachutes.

    The whole concept of “too big to fail” — which puts smaller community-oriented banks at a severe disadvantage — should be eliminated. We also need to curb all the cozy special deals concocted for banks, energy companies, green ventures and other well-connected businesses.

    Sadly, such reformist impulses won’t get any more support from a President Romney or Gingrich than from Obama. A break with the bipartisan Wall Street consensus will have to be forced on the unwilling financial plutocrats by a public fed up with the financial hegemon’s overweening power and destructive influence.

    This piece first appeared at Politico.com.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Photo by BigStockPhoto.com.