New Geography

Category: Politics

  • Voting and Families: America’s Second Demographic Transition

    It has been widely accepted that geographic areas with more unconventional forms of family formation – cohabitation; children born to cohabitors; postponement of partnership, marriage and parenthood to much later ages; acceptance of interference with fertility through abortion and efficient contraception – would vote for Democrats. Conversely, those geographic areas that retain classic forms of family formation – early marriage and parenthood – and more conventional gender roles would display a preference for Republicans.

    The “Culture War” issues were prominent during the George Bush-Al Gore and the George Bush-John Kerry contests of 2000 and 2004. One of the consequences was that the spatial pattern of the election results, both by state and by county, exhibited a marked correlation with the prevalence of new patterns of family formation The shift to these new demographic patterns is often referred to by demographers as “the second demographic transition,” or SDT.

    One of the criticisms formulated against the theoretical underpinning of the Election-SDT correlation for the US was that this link was only a temporary phenomenon. If economic issues instead of cultural ones would dominate the debate during the presidential elections, critics theorized, this correlation would become unstuck.

    The 2008 elections provided us with a very nice test indeed. Both candidates initially shunned the culture war issues as too divisive, and only with the choice of Sarah Palin as John McCain’s running mate was there a brief revival of this debate. Shortly thereafter, the banking crisis and the resulting economic upheaval took center stage. And very forcefully so.

    Did the link between the maps of the second demographic transition and of election results weaken or vanish as the “It’s-the-economy, dummy-” proponents predicted? The answer is a resounding ‘No,’ as our studies showed empirically.

    We examined the SDT-dimension in an analysis of a set of 22 indicators, all dealing with patterns of family formation. We looked at typical SDT features such as the postponement of marriage, greater prevalence of cohabitation and same sex households, postponement of parenthood, sub-replacement fertility, and a higher incidence of abortion.

    Two maps were prepared for the counties we studied. The first is a classic map with blue shadings for counties that are further advanced on the “second demographic transition” dimension and red ones for those with the slowest shift in that direction. The second map is a cartogram with the counties now drawn proportionally to the size of their population in the 2000 census.

    Now take a look at the scattergrams and correlations at the state level between the SDT-dimension and the Republican vote for Bush in 2004 and McCain in 2008 (Figure 1). The conclusion is obvious: the correlation that existed in 2004 is very largely replicated in 2008, and the relative positions of the states in the scattergram are essentially maintained.

    For those who like details: Indeed, Arizona voted in 2008 for McCain more than would be expected on the basis of its SDT-score, while the reverse holds for Hawaii. Also, Utah had to yield its top position on the Republican vote to Wyoming and Oklahoma, despite its very low score on the SDT.

    Nevertheless, when the correlations between the “second demographic transition” features and the vote for the Republican candidate are calculated for more than 3000 counties, the results are even stronger for the 2008 elections than they were in 2004 (corr. coeff. improves from -.57 to -.65). Moreover, that statistical link remains highly significant after controlling for competing explanations based on the degree of urbanity, income and education levels, ethnic and religious composition, and relative size of immigrant populations. And Appalachian and Southern counties, which were not following the fit so closely in 2004, now conform much better to the overall pattern.

    Hence, the spatial differentiations of the last presidential elections at the levels of states and counties have remained over this period of time. The maps may color darker or lighter, depending on the issues in the period preceding the elections and the themes that dominate the debate, but the position of counties is relatively stable.

    In other words, we cannot possibly predict the winner, but we can produce a pretty good guess when it comes to predicting in which counties each of the candidates will do well or poorly. When it comes to this type of prediction, the SDT-dimension is by no means sufficient, but it is definitely a necessary ingredient of the engine.

    While many western countries have displayed a close connection between voting results and patterns of family formation and fertility, the correlation holds particularly well in the US. The predominance of the two party system, the philosophical link of these parties to the defense of different life styles, and the very wide ideational spectrum particularly contribute. No other developed nation has retained the presence of a vocal and large “religious right” capable of organizing reactions against secular and non-conformist tendencies. The US continues, therefore, to be a textbook example of spatial connections between demographic innovation and political orientation.

    Economic issues definitely played a role in designating the winner in 2008. But the spatial map of the election results is more a reflection of sociological differences in lifestyles and their underpinning ideologies – issues which are captured so well via the “second demographic transition” features.

    Ron Lesthaeghe is emeritus professor of demography at the Free University of Brussels (VUB) and has been visiting professor at the Universities of Michigan (Ann Arbor) and of California (Irvine). Lisa Neidert is senior research associate at the Population Studies Center of the University of Michigan. Relevant materials pertaining to the SDT concept and 2004 election results (maps, cartograms, articles) can be downloaded from our University of Michigan website.

    The map and cartogram of the SDT by county has been produced by Didier Willaert at the Interface Demography Unit of the Free University in Brussels.

  • Will The New Air Pollution Science Choke City Planners?

    Part One of A Two-Part Series

    Not long ago, Michael Woo, a former Los Angeles city councilman and current member of the Los Angeles City Planning Commission, took up a case pending approval by that body: a mixed housing-retail development near the intersection of Cahuenga Boulevard and Riverside Drive. Like many of the remaining buildable sites in the city, the property is right next to a roaring motorway; the windows of some apartments would look right out onto the 134 Freeway. To Angelinos, who have grown up in a car culture, it was hardly a remarkable proposal. But Woo, perhaps one of the brainier members of the city’s political elite—after losing a mayoral race to Richard Riordan in the early 1990s he became a professor of public policy at University of Southern California—had a problem with it, and he couldn’t quite let it go.

    Just a few weeks before, the Commission had witnessed a lengthy presentation by a scientist who’d been studying how living within 500 yards of high traffic corridors—freeways and some particularly busy streets—substantially raises the risk for a number of chronic diseases. “We were all sort of sitting there, looking at this proposal and discussing it through the conventional lens we normally use, when I said, `Wait a minute. Didn’t we just hear a pretty compelling argument about this the other day? Can we talk about that for a minute?’ It struck me that it was impossible to read those studies and then continue approving housing that sits that close to freeways.”

    The Commission then asked for the developer’s point of view on the issue. “As I recall, the only real mitigation that they brought up was almost comic,” Woo says. “Their idea was, you know, we’ve got that covered: We’re going to make sure that residents can’t open the windows that face the freeway.” The project was approved.

    Woo doesn’t particularly fault anyone in the exchange, because the implications of the new science of air pollution—much of it driven by pioneering work at USC, the University of California at Los Angeles, and California Institute of Technology—are utterly mind boggling. No one has quite calculated exactly how much buildable land would be excised from use for housing and schools if this growing body of work were to take hold in the policy realm, but, as Woo said, “We can’t hide from this issue anymore. The hard science on the subject is compelling. It makes you fundamentally rethink some pretty key parts of how, where and why we’re building housing in such locations.”

    For decades, pretty much everyone “knew” that smog—usually measured as ozone, the gas that forms from sunlight’s ionizing effect on air particles—caused all kinds of health problems, principally those associated with the lungs, like asthma. But the truth of the matter is that, until ten years or so ago, no one knew how that happened; they didn’t know the “mechanism of action,” the intricate physiological processes that lead to chronic airway inflammation. Epidemiological data was confounding, because some high ozone communities showed lower rates of asthma than low ozone communities. Also, smog levels—measured as ozone—were going down, while asthma rates were going though the roof.

    One suspect was what researchers called fresh emissions, comprised of ultrafine particles, or UFPs, which are so small that they can penetrate the furthest reaches of the lung’s bronchial branches and set off the systemic inflammation that causes respiratory disease. Thus, it was possible to have lower ozone levels and still have increased levels of inflammation, or as USC Professor Robert McConnell notes, “You could have cleaner horizons but still have increasing inflammation to people who live closer to where the particles are being produced.” McConnell has been leading the federally funded Children’s Health Study in Los Angeles for over a decade. “I tell people that I’m studying how pollution causes asthma, and people look at me and say, `I thought we already knew that,’” says McConnell. “The fact is that we assume risks that aren’t there, and we’re ignorant of risks that are there.”

    What caused the sea change in pollution epidemiology—the ability to link exposure to tail pipe emissions and chronic diseases—is as much a story of ingenuity at the lab bench as it is one of persistence against conveniently indolent regulations. At USC, engineers over the past 20 years have invented ways to concentrate particles from the freeway, assess their specific toxicity in human doses, and then test various theses with lab animals genetically engineered to physiologically respond like humans. They have also developed ways to track real-time daily human exposures to ultrafine particles. On any given day in Los Angeles there are mobile smog units measuring how pollution ebbs and flows on a neighborhood-by-neighborhood basis. There are people wearing “personal ambient pollution” backpacks to track how individuals experience different loads of smog throughout their day, part of which may be spent in a low-pollution environment, part in a high. Through modern genomics, we also now know that several highly prevalent gene mutations make some people more susceptible to pollution, and that others make them less susceptible.

    At all three universities, engineers in the aerosol sciences developed machines that could accurately measure not just ozone—a rather crude measure of air toxicity—but also specific toxins, known as ultrafine particulate matter, or UFPs, of less than 2.5 microns. It is stuff so small that it can reach the bottom of the airways; there, it can over-stimulate the so-called inflammatory cascade of the body’s native defense system and turn it into a disease called asthma. At UCLA, cell biologists, toxicologists and lung and heart specialists have even been able to image what happens to the human cell when it’s exposed to high levels of ultrafine particles. It is the kind of image that can make one utterly despairing, but one that also might clue modern physicians, medical researchers and environmental scientists on how to better focus on the issue and perhaps mitigate it.

    A few examples of new directions within the science:

    Ultrafine Particles, Diesel Exhaust And Asthma: A growing consensus holds that, infants, young children, and expectant women experience substantial elevations in risk for deficits in lung function growth when living near high volume motorways. There is less consensus on the recommended buffer zone, ranging from 75 meters to 500 meters.

    Ultrafine Particles And Heart Disease: A growing body of laboratory experiments and human observational work links heart disease, especially the process leading to atherosclerosis and heart attack, to air pollution. Recent work at UCLA and USC on lab mice parked next to the 110 Freeway has suggested an alarming thesis of causality: That chronic exposure to high levels of ultrafine particles may make us more likely to get heart disease because it makes HDL—the so-called “good,” form of cholesterol that “cleans up” the bad form—dysfunctional.

    Diesel, Ultrafine Particles And Alzheimer’s: Work coming out of Mexico City, increasingly LA’s sister city in the environmental sciences, documents how amyloid plaque, one of two suspect brain proteins associated with Alzheimer’s, increases with exposure to air particles, especially in children and young adults.

    Diabetes, High Blood Pressure And Obesity: A small but growing body of research shows that being fat and breathing smog is really bad for you. Worse, high exposures may accentuate existing diabetes and metabolic syndrome, the perfect storm of high cholesterol, high blood sugar, and high blood pressure.

    Air Pollution, Expectant Mothers, And Infants: UCLA researchers have repeatedly demonstrated a consistent, dose-dependent relationship between expectant mothers living in high traffic-emission-adjacent housing and premature births, low birth weights, birth defects and respiratory diseases. In a recent report, the UCLA Institute of the Environment concluded that the problems were of such magnitude as to “require drastic changes to motor vehicle and transportation systems” over the next decades.

    In Part Two, Critser explores the politics of pollution.

    Greg Critser is the author of Fat Land: How Americans Became the Fattest People in the World (Houghton Mifflin 2003), Generation Rx: How Prescription Drugs Are Altering American Lives, Minds, and Bodies (Houghton 2005), and Eternity Soup: Inside the Quest to End Aging (Random/Harmony 2009).

  • Is the U.S. Capitalist, Socialist or Something In-between?

    During the Presidential campaign, then-Democratic candidate Barack Obama inartfully described his proposed federal income tax cuts for the middle class as “sharing the wealth.” His more strident right-wing opponents – including Vice Presidential candidate Sarah Palin – almost immediately labeled Obama “a socialist,” adding to a litany of alleged infirmities as a presidential candidate that included lacking executive experience; being a closet Muslim; and “someone who pals around with terrorists.”

    Yet in reality Obama’s middle class tax proposal may have been the least “socialist” concept that has been floated and acted upon by a broad array of elected officials and senior-level appointees since four weeks before and four weeks after the Presidential election. This includes not only the huge federal financial bailout and taking of ownership of major investment and commercial banks – something embraced by the establishments of both political parties and the putative ‘capitalist’ business elites – but a series of other proposals, including the bailout of the Big Three American automakers, that are far more socialistic than a tax cut.

    Of course, effective campaigning, like good television advertising, tends to have at least two fundamental characteristics in common – oversimplification and hyperbole – so one might forgive or ignore the campaigns for taking liberties with such terms. Yet the ready and frequent use of the term “socialist” by a variety of sources does raise serious questions as to whether anyone out there really understands either capitalism or socialism as concepts or political constructs. This might help us know how much we should apply either label to the U.S. given the prevailing economic malady and the series of palliatives being offered up by the current and future Administrations, respectively.

    Socialism, of course, places primary ownership of the means of production in the hands of the state, or in some cases, corporate entities controlled by the state. In its extreme cases, such as in North Korea, this reality is absolute; in many other countries, state control is predominant and preeminent but pockets of private enterprise, usually small-scale and concentrated in agriculture or business services, still exist.

    Capitalism is a much more vague idea but essentially reverses priorities, putting the predominant role in the hands of private interests such as investors and corporations. State power in a capitalist country usually focuses on the creation of standards, public health, safety, and welfare, such things as regulating the currency, protecting the environment, and assuring the health of the populace.

    In contrast to the 19th Century, the US already operates on a much-diluted form of capitalism. Our markets are not free; they are highly regulated (and yet many would today argue they are not highly regulated enough). The exchange rates and values of our currency do not float freely but are heavily manipulated through federal government rate-setting activities. Investment decisions are not driven purely by return expectations or classic risk/reward analyses; rather they are incentivized or discouraged by a byzantine system of rewards and penalties affectionately known as the Internal Revenue Code. In other words, the federal government – under both Democrat and Republican Administrations and supported by both Houses of Congress – intervenes routinely in how markets operate and how capital is deployed. In this sense the federal tax code is fundamentally a mechanism for wealth redistribution, so candidate Obama’s statement about his proposed middle-class tax cut simply represented a shift to one set of priorities, much as the Bush Administration’s tax cuts represented another.

    If you accept the premise above that the U.S. already had one foot out the doorway between a more pure form of capitalism and socialism as it is widely practiced in other Westernized countries, it now appears that the U.S. is being pulled at warp speed through that doorway, as a consequence of the myriad plans (schemes would be a more accurate description, given how little thought appears to be devoted to them before rolling them out at press conference after press conference) for bailing out various classically capitalistic institutions.

    Bailing out a completely broken mortgage finance system that rewarded handsomely (some would say shamelessly) myriad private-sector entities and the mortgage industry represents a shift towards socialism. Providing over $100 billion in taxpayer support for AIG is socialism, not capitalism. Providing $200 billion of taxpayer support to prop up consumer credit, so that Americans can return to a false economy predicated upon unbridled, conspicuous consumption, is socialism not capitalism.

    The fact that these and other extraordinary moves by the federal government are undertaken in the name of saving our capitalistic economy and staving off a severe economic depression does not change the fact that we are experiencing – first under Bush and soon under Obama – a powerful drift towards extended state control of the economy. Free-wheeling and unfettered profit-making and corporate greed on the way up, backstopped by enormous government bailouts on the way down, represents in some ways the worst of both worlds .

    We now add to this series of attempts to solve our economic crisis the so-called “New, New Deal” proposed by President-elect Obama the week before Thanksgiving. Focused on fixing America’s infrastructure improvements, technological innovation, and education – as well as the creation of 2.5 million new jobs in the process – the New, New Deal basically supplants a failed, quasi-capitalistic economy with one that is driven primarily by government spending on government projects, in part for the purpose of creating new government jobs.

    There will be two silver linings if all of these government bail-out strategies and the implementation of Obama’s New, New Deal succeed: The U.S. could emerge from this economic abyss in which we find ourselves; and pass, at last, a comprehensive, universal healthcare reform that will not look nearly as socialistic as it may have appeared only six months ago.

    Yet there are some real dangers as well. A massive government program that extends more and more into every aspect of the economy could bring enormous inefficiencies as political decisions overtake market-based decision-making. It is not beyond the pale, for example, that banks may make loans to customers not based on their fundamental ability to pay but their ability to shift their risks to the government. Land use and other decisions once left to markets and localities could be placed in the hands of federal regulators, where the influence of well-connected developers and special interests (including such laudable causes as environmental protection) could be profound.

    Of course, this is a situation that could also change our national geography in profound ways. Parts of the country well-plugged into the new ruling party – the Northeast, coastal California, and most of all Chicago – could be huge beneficiaries. But the real winner, as I have argued before, may be the Nation’s Capital and its environs, whose power over the private economy would be greater than at any time since the Second World War.

    Of course, it may perhaps be both overly simplistic and somewhat hyperbolic to suggest that Washington, D.C. is morphing into “Pyongyang on the Potomac.” However, unless the federal rescue of our fundamentally capitalistic economy and society is not very carefully orchestrated, we may see greater similarities with another centrally planned economy – the one run from Paris. In that case, similarities between Paris and Washington, D.C. may extend well beyond the boulevarded street network and classical scale bestowed upon us by Pierre L’Enfant; we could also end up with something more akin to France’s centrally controlled dirigiste system than anyone could have expected.

    Peter Smirniotopoulos, Vice President – Development of UniDev, LLC, is based in the company’s headquarters in Bethesda, Maryland, and works throughout the U.S. He is on the faculty of the Masters in Science in Real Estate program at Johns Hopkins University. The views expressed herein are solely his own.

  • Can Millennials Turn around the Housing Bust?

    Many of the nation’s youth (and a few of their elders) are expecting a magical turnaround of America’s economic fortunes as soon as their candidate for President, Barack Obama, is sworn in on January 20th 2009. But the Millennial Generation, born between 1982 and 2003, may be more the source of the country’s economic salvation as any initiative the new President might propose.

    Millennials are the largest generation in American history, more than 91 million strong. They are coming of age just in time to join the workforce, enter the housing market, stabilize home prices, and buy the nation’s expanding inventory of durable goods to furnish their new homes. Despite being burdened with student loan debt and graduating just when the job market is shrinking, this group of optimistic, civic-minded young Americans is ready to demonstrate that it is not only capable of electing a President, but also helping to resolve the country’s housing crisis.

    The “helicopter parents” of Millennials constantly hovered over their children as they grew up in order to protect them from anything that might harm their self-esteem. As a result, many older Americans, especially the 27 to 43 year old members of Generation X, think the Millennials’ “can do” attitude will crumble once they are confronted by the “realities of the real world.”

    But this ignores the cyclical nature of generational change. The GI Generation – the Millennial civic generation’s great-grandparents who came of age in the 1930s and 1940s – were raised in much the same way and acquired many of the same values cherished by Millennials. These members of what have come to be called “the Greatest Generation” were able to draw upon a deep reservoir of confidence and determination to lead America’s recovery from the Depression and later win the struggle against both fascism and communism.

    To give Millennials the same opportunity to rescue America, the new Obama administration should give the emerging generation the same attention in its policy initiatives that it expended getting their votes. Certainly the opportunity is there, particularly in rescuing the now devastated housing market.

    One unintended collateral benefit of the rapid drop in housing prices across the nation is to put many suburban homes within reach of first time home buyers, something that has not occurred for at least a decade. Even in pricey California, for example, the ratio between income and cost of housing has begun to drop dramatically, notes a recent paper by Chapman University graduate students Gil Yabes and Jason Goforth, with the ratio between income and mortgages dropping by one half or more in Orange, Riverside, and San Bernardino Counties, close to pre-bubble levels.

    That’s a big opportunity, one that President-elect Obama’s “Home Ownership Initiative” should seize on. The Millennials could well be the demographic that could buy these more affordable homes and staunch the rise of foreclosures threatening the U.S. economy.

    It’s not that these young people don’t want to own homes. A 2004 study of students enrolled in a four-year university, a community college and an historically black college found that about the same 40-percent plurality in each group preferred to live in a “suburban community, single family home,” upon graduation. The second choice of these Millennials was to live in a “rural area, with large lots and open space.” Only about a quarter wanted to live in an “urban setting with mixed housing styles.” Luckily for them, five years later, their preferred housing stock has just become imminently more affordable.

    Now the Democratic Congress and President Obama should enact a significant tax credit incentive for first time homebuyers, many of whom would be Millennials. By rapidly expanding the universe of potential homebuyers, this program would help stabilize housing prices in the critical lower cost housing market. At the same time it would help stem foreclosures among existing homebuyers, whose loss of home equity has made abandoning mortgages more rational economically than keeping up payments.

    In 1934, during an earlier time of far greater economic pain, the Federal Housing Agency (FHA) was created to provide financing for a new type of mortgage requiring a lower down payment with the loan to be paid off over 25 or 30 years. The federal agency’s financing authority was greatly extended through Title II of the Housing Act of 1949, which provided federally guaranteed mortgage insurance and helped a flood of returning GIs own a home. Now it is time for Fannie Mae and Freddie Mac to be given the authority to finance a new mortgage structure for homebuyers under thirty.

    By lowering down payment requirements for this select group of home buyers to 10% and stretching the terms of mortgages to the number of years these young people are likely to be active in the workforce, forty, monthly payments on starter homes could be brought in line with the Millennials‘ ability to pay. Initially, this combination of tax credits and new types of mortgage financing would slow the decline in home prices that triggered the problems in the country’s financial markets. In the longer run, it will make sure that the benefits of widespread homeownership will expand to a new generation of Americans.

    One young Millennial to whom we talked recently was concerned that the hours her retail employer wanted her to work were being cut as holiday shopping continued to sour. She expressed concern that there was still “more than a month before Obama gets sworn in and everything turns around again.”

    Her statement exhibits the kind of economic naiveté that frustrates some older Americans, but does provide an important lesson – political as well as economic – for the incoming administration. The Millennial Generation, whose votes were key in nominating and then resoundingly electing President Obama, want to see things improve rapidly. After all, they lack either the experience or the equity that Baby Boomers have acquired over the years.

    Once in office, President Obama should embrace the impatience of America’s youth as one way to insure that his economic policies are enacted quickly. By making an explicit appeal to America’s largest generation’s desire for homeownership, he would not only take a big step toward ensuring the popularity of his economic program, but its effectiveness as well.

    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), named one of the New York Times 10 favorite books of 2008.

  • Redrawing the Electoral Map? Not so fast.

    With Barack Obama’s historic presidential win there has been much celebratory talk about redrawing the electoral map. Obama himself boasted that he was the only Democratic candidate who could accomplish this feat.

    However, actual voting results suggest the map only shifted slightly at the margins from the 2000 and 2004 elections and that our geographic voting patterns may be more durable than we think. Here is a comparison of the famous red-blue divide:

    Exit polls show that Obama received roughly two-thirds of the non-black minority vote and about 95% of the black vote. On top of that he got more than two-thirds of the 18-29 age cohort. But none of this data captures the electoral geography that drives the Electoral College results. The true shift from red to blue was actually driven by a slight shift at the margins of the divide. The tipping point was in the suburbs where middle and upper class suburbanites congregate and 49% of the electorate resides. These voters shifted to the Democratic candidate and tipped the balance in those swing states of Florida, Ohio, Iowa, Indiana, Colorado, New Mexico, Virginia and North Carolina. They found Obama more convincing on economic matters and fundamental change from the previous administration, but it would be a mistake to assume this means they embrace a radically new governing ideology.

    To examine the results more closely we can compare the demographic characteristics of counties won by Obama and McCain and also compare these to Bush and Kerry in 2004. The following maps illustrate county vote shares in shades from blue to purple to red to show how the underlying vote compares between 2004 and 2008. Not a big difference, is there?


    The following table compares the demographic profiles of 3115 counties and how they voted in the past three presidential elections. We can see that Obama captured more suburban counties outside the urban core than either Gore or Kerry. These counties not only have lower population densities but also higher incomes and more white inhabitants. So much for race.


    This conclusion is confirmed by looking only at those counties that flipped from red to blue (Bush to Obama) or blue to red (Kerry to McCain). Is this case we can see that Obama won more populous, whiter, and richer counties than McCain. Interestingly, the older, female heads-of-household gravitated slightly toward McCain.


    Finally, we can look at an important subset of metro counties, meaning those counties that border the 50 largest metro areas in the country. There are 417 of these counties and they are classified by concentric rings from the urban core outward to the exurbs.


    These data confirm where the major shift took place. Obama had gains of roughly 5-6% over Kerry’s results in suburban counties. Obama won handily in the mature suburbs where Bush and Kerry had evenly split. This is also where much of the non-black minority support for Obama resides. On the other hand, we again see a consistent monotonic relationship between party preference and population density: as we move outward from the urban core voting preferences shift from blue to purple to red. This suggests that the urban-rural split in American politics is still very much with us. This should not surprise us if these political differences are based on lifestyle preferences that do not change from election to election or candidate to candidate.

    *State and county maps courtesy of Mark Newman: http://www-personal.umich.edu/~mejn/election/2008/

    Michael Harrington is a political scientist, policy analyst and writer living in Los Angeles. He has extensively researched the red-blue divide of the past three presidential elections by focusing on county level census and voting data.

  • New Zealand Voters Swing Right: John Key’s Shower Power

    Reason magazine’s Jesse Walker opens his commentary on the New Zealand election by saying: “At least one country is responding to the financial crisis by moving to the right, not left.” This is factually correct but may overstate the case.

    Certainly, New Zealanders elected a conservative National-led coalition government and removed from office a Labour-led coalition which had served three terms of three years. While it is appealing to contrast this move to the right with America’s move to the left, it is probably unwise to claim that these were contrasting responses to the international financial crisis. Indeed, I suspect the analysis of both the New Zealand and American elections is equally flawed.

    The key mood in the New Zealand electorate was simply that it was “Time for a Change”. And given that the incumbent Government was a left-of-centre Government, the change could only be to the right of centre. In this regard, there is a strong parallel with the American Presidential race where the mood was equally that it was “Time for a Change.” In the US this meant a move from the Republican right to the Democratic left.

    The mood for change was probably stronger in New Zealand because for a three-term government (nine years) to win a fourth term is most uncommon here; Helen Clark’s nine years as leader of that Government was a record, and had she won a fourth term as a Labour Prime Minister it would have been unprecedented. The historical odds were against her. On the other hand, all US Presidents must move aside after two terms, so change is thrust upon them.

    Now that both elections are over, the new US president and the new National Government, led by John Key, must face up to the harsh reality of the inevitable recession or depression resulting from the collapse of the housing and financial bubbles that dominated both economies during the last decade. This focus may encourage analysts to believe that the financial crisis was the cause of the electoral outcomes, even if the ideological swings were opposite.

    However, I believe that Barack Obama would have won the Presidential race had there been no financial crisis, and that John Key would also now be Prime Minister of New Zealand. But both their victories might have been less emphatic.

    In both countries voters were faced with a generational change. Obama is a young man in his early prime; McCain is an old man whose mortality worked against him. Helen Clark is younger than McCain (58 vs 72), but because she entered Parliament in 1981, became Deputy Prime Minister in 1989, and has been Prime Minister since 1999, she was seen as one of the old guard. She has stepped down as leader of the Labour Party as part of conceding defeat on election night. John Key is a young man of 47 who has been in parliament only since 2002, and Leader of the Opposition only since 2006.

    The role of the financial crisis in this New Zealand election was an ambivalent one. By law, our full-on election campaign is brief – only three months – compared to US campaigns, and Parliament goes into recess during the whole of the campaign. As it happened, the full impact of the financial crisis on the NZ economy became apparent at about the same time as campaigning began, although the collapse of the housing market had begun somewhat earlier. The campaigning politicians had little time to develop solid policies in response to the threat and, given that Parliament was in recess, could do nothing about it anyhow.

    Helen Clark argued that her Labour Government had successfully managed the economy for nine years and her team had the experience to manage the New Zealand economy through the next three years. John Key argued that his party had more skills in the field, and that the Labour party benches were full of academics and trade unionists, most of whom had never run a business.

    Clark’s response was that the National Party, and John Key in particular, were part of the problem. Her trade union base saw Key as a Wall Street banker and a cause of the problem. Key’s business base saw him as a man who understood the industry and had the skills and know-how to deal with the problem.

    National Party heavyweights included Don Brash, who had stepped aside as Leader of the Opposition to allow John Key to take over. Brash had been Governor of the Reserve Bank for 14 years; since resigning from Parliament in 2007 he had served as an adjunct professor of Banking at the Auckland University of Technology (and Chairman of the Centre for Resource Management Studies). John Key began working as a foreign exchange dealer at Elders Finance in Wellington, then moved to Auckland-based Bankers Trust. In 1995, he joined Merrill Lynch as head of Asian foreign exchange in Singapore. He was promoted to Merrill’s global head of foreign exchange, based in London, and was a member of the Foreign Exchange Committee of the New York Federal Reserve Bank from 1999 to 2001.

    On election night Key’s Centrist but Conservative National Party, (combined with the soft, somewhat libertarian Act Party as a coalition partner) scored a decisive victory – probably about as decisive a victory as is possible, given our system of Mixed Member Proportional representation (MMP).

    There is widespread agreement, at least among the supporters of the new regime, that Labour’s massive defeat was primarily caused by New Zealanders’ rejection of the “Nanny State,” which has increasingly interfered in our daily lives. And here may lie the real lesson for the new President of the USA.

    While the US is a genuine Super Power, and New Zealand is a mere pimple on the global body politic, we always aspire to punch above our weight, and frequently do. Helen Clark had decided that New Zealand would be a world leader in fighting climate change (anthropogenic global warming), and that we would become the world’s most sustainable economy with a carbon neutral footprint. So, for some time, New Zealanders responded with some enthusiasm to this new challenge of leadership on the world stage. We were proud to be Clean and Green, and of our Tourism Board’s promotion of New Zealand as 100% Pure – presumably we are free of even impure thoughts.

    However, as commentators as diverse as the late Aaron Wildavsky and Vaclav Klaus have warned, Global Warming is the mother of all scares because it enables Government to interfere in every aspect of our lives – to claim that no price is too high if necessary to save the planet for our grandchildren. Inevitably, the High Priests of “Sustainability” began to demand that we break our “addiction” to private automobiles and learn to love public transport; that we learn to love high-density apartments and abandon our home gardens; and that we stop doing anything which consumed fossil fuel. It soon became clear to many that the main concern of these New Puritans was that someone, somewhere, might just be enjoying themselves.

    Our unsubsidized grass farmers who pay most of our way in the world began to wonder why our belching cattle should be penalized by Kyoto rules, when subsidized European cattle were not. After all, cows have been belching since the first ruminants walked the earth, and they don’t run on fossil fuel.

    Rodney Hide, leader of the Act Party, began to argue that we should dump the Emissions Trading Scheme and withdraw from Kyoto because the whole Global Warming fear was a massive scam. This was supposed to be political suicide, but the polls showed that Act’s support suddenly increased. Act is now part of the new government, and their extra five seats consolidate John Key’s comfortable majority in the 120 seat Parliament.

    If President-Elect Obama becomes a High Priest of Climate Change, he too may find that 95% of Americans, just like New Zealanders, believe that other people should use public transport so that there will be more room on the road for them. He may also find that while the costs of Kyoto are scary and may drive even more energy intensive industries offshore to non-complying countries like China and India, it is the minor interventions in daily life which are the real irritants that could turn the electorate against him and make him a one term President.

    Because when it comes down to it, John Key’s majority may have been cemented in place by New Zealanders’ affection for taking a shower.

    A few weeks before the election, the Labour Government, largely at the behest of the Green Party on whose support they depended to maintain their majority in Parliament, proposed regulations which would limit the flow of water through a shower head to about 1.5 gallons per minute. The aim was to save both water and energy and thus make our houses more “sustainable”. The standard “low flow” rose in most showers at the time delivered about 3.5 gallons per minute.

    This proved to be the last straw. The grumblings about the proposed mandatory replacement of incandescent light bulbs with compact fluorescents, similar to the rumblings in the US, exploded into a furor on blog sites, talk-back radio and letters to the editor. A popular blogger drew up a list of 85 things the Greens want to ban. People recalled how a Green Party official had endorsed a petition calling for the ban of Dihydrogen Monoxide…which just happens to be water.

    The proposal was not just irksome; it soon became evident that it probably would not even achieve its objective. People would stay in the shower longer or alternatively run a nice deep hot bath. As is so often the case in political campaigns, this single minor proposal came to symbolize a whole range of discontents, and people could use it as a focus for their latent rage and fury against the Nanny State.

    So Jesse Walker’s comment that triggered the request for this commentary on the New Zealand election might more properly have read, “At least one country is responding to global warming alarmism by moving to the right, not the left.”

    Our recent experience in New Zealand should give Barack Obama reason to pause. A stance against Global Warming is popular, right up until it starts to bite. Then the American public too, might just bite back.

    Owen McShane is a Resource Management Consultant based in New Zealand

  • King Bloomberg: New York City Mayor Run Amok

    When Mayor Bloomberg deployed his vast personal and political power to overturn the term limits law, he began to demystify the public relations image he had purchased at considerable expense.

    It was only then that New Yorkers began to recognize the danger of making Gotham’s wealthiest man its chief executive. That recognition is the reason his approval rating slipped by nine points in the latest Marist poll. The public chose a mayor; they didn’t expect an elected monarch.

    The latest furor over his unaccountable power is his unlawful refusal to send out property tax rebate checks that have been due since Oct. 1. “We have no money . .. . this is not a legal issue, it’s a fiscal issue,” he says, an argument that boils down to “I know better.”

    But the cupboards are bare because Bloomberg has emptied them for his own political ambitions. While the stock market was heading south, Bloomberg, one eye on a potential presidential run, raised his approval numbers by expanding the city payroll. Since 2004, he has hired at least 40,000 new city employees, while bringing his own mayoral staff to record levels.

    Similarly, to help clear the way for a third term, Bloomberg has been shoveling out considerable money in the form of newly negotiated union contracts with the Policeman’s Benevolent Association, DC37 and the Corrections Officers that run above the rate of inflation. If it wasn’t above an elegant gentleman such as the mayor to stoop to such measures, you might call this what Tammany Hall did: vote buying. Bloomberg is only too happy to raise property taxes on the unorganized middle class if that’s what it takes to keep the power of the city’s politically well-organized unions in his corner or on the sidelines come election time.

    *

    People assume that because of his successful career in business, Bloomberg is a manager and not a politician. That gets things exactly backwards.

    As mayor, he’s been little interested in management. When the Staten Island Ferry crashed, killing 11 people, the politically well-connected Transportation Commissioner was spared a reprimand, let alone fired. When the mayor was informed that a set of subway switches had burned out and couldn’t be replaced for months or even years, guaranteeing massive delays, Bloomberg nonchalantly said fine, that’s the way it will have to be. He reversed himself only after howls of public protest. When a blackout produced by Con Ed incompetence left more than 100,000 Queens residents without electricity for a week, Manager Mike declined even to visit the affected areas until the press began to hound him. Even then he declared, “I think [Con Ed CEO] Kevin Burke deserves a thank you from this city. He’s worked as hard as he can.” It took 13 construction-related deaths before the mayor was moved to replace the City Building Commissioner.

    Bloomberg touts himself as a CEO who can negotiate the best deal for the city. But part of running the city includes bargaining with people he can neither give orders to, nor buy like the City Council. That’s made Bloomberg a singular failure in Albany, where the mayor tried to steamroll his ill-conceived congestion pricing plan through the Assembly. The plan, which seemed designed as much to provide Bloomberg with a green issue for his presidential campaign as to decongest Manhattan, met with a skeptical response. Bloomberg’s reaction was to blame his defeat on “gutless” opponents. While arguing over whether to reauthorize Off Track Betting, the Mayor clashed with the normally mild-mannered Governor Paterson, whose support is essential for the city; Paterson came away describing the mayor to the Post’s Fred Dicker as “a nasty, untrustworthy, tantrum-prone liar who has little use for average New Yorkers.”

    While Bloomberg has been little interested in management, he has been superbly self-promoting. Early on he sold credulous journalists on the idea that he was a post-partisan mayor, a man who rose above conventional party politics. This is in a sense true. He has been only too willing to buy support from either of the major parties to achieve his own ends. A self-described “liberal Democrat,” he shipped out with the Republicans under a flag of convenience in order to run for mayor in 2001. He then abandoned the GOP to become an independent, and his staff is now exploring the chances of his running as a Democrat for re-election in 2009.

    But talk of party labels misses the point. Bloomberg runs his own personalized political party. He is not so much bi- or non-partisan as his own political pole, one that offers Michael Bloomberg as the sole program.

    *

    The traditional danger with party candidates is that they can be bought up by special interest groups. Bloomberg reverses the old game; he’s won office by buying up the interest groups.

    When in office, Bloomberg – like most mayors – used public funds to keep the organized interests happy while putting the city at fiscal risk. But Bloomberg adds a twist, by dipping into his own vast treasury to buy support through “anonymous” gifts to non-profit institutions.

    For years, our so-called “business savvy” mayor has only one strategy: Spend. In 2007, the city took in 41% more in taxes than it did in 2000. And yet that wasn’t enough to cover Bloomberg’s gargantuan vote-buying spree. During Bloomberg’s first six years as mayor, notes The Manhattan Institute’s Nicole Gelinas, city spending shot up about 50% – from $41 to $62 billion. That meant that even in the midst of an unprecedented boom, Bloomberg’s genius required the city to incur record levels of debt.

    One method of buying support has come in the form of lavish subsidies to his wealthy developer friends. Early in his administration, when Bloomberg was still presenting himself as a reformer, he promised to end the practice of “bribing companies” to stay in New York. Yet that is exactly what he did in the case of developer Jerry Speyer, part owner of Yankees, who is building the New Yankee Stadium, and Fred Wilpon, owner of the Mets. Between direct and indirect subsidies the city is committed to spend nearly a billion dollars on the two very profitable teams in what amounts to a transfer of money from working stiffs into the pockets of the wealthiest New Yorkers.

    The Industrial Commercial Incentive Program, meanwhile, designed to retain business that might flee the city’s onerous taxes, has doubled under Bloomberg. Today roughly 6,000 business received a half a billion dollars in the kind of rebate relief that the mayor now wants to deny to middle class homeowners.

    For those who object to his tax strategy, Bloomberg always has the same response: “we’re just not going to return to the dark old days of the ’70s, when service cuts all but destroyed our quality of life.”

    It’s not clear if this argument is willfully ill-informed or merely self-serving evasion. But it was John Lindsay’s tax hikes in the years leading up to the fiscal crisis that sent the city spiraling down into effective bankruptcy. The upshot was that in the 1970s, the city work force faced major layoffs, which only deepened the downturn. We’re again headed down that path. Even as Bloomberg hikes the wages of senior workers who are crucial to the leadership of their respective unions, and hence Bloomberg’s royal re-election bid, he’s threatening sizeable layoffs for the newest hires.

    The city was only rescued from the Lindsay/Beame policies when the stock market revived in the early 1980s. That was the beginning of the long boom built on highly leveraged financial firms that has now come to a definitive end.

    Bloomberg is so committed to his ideal of the “luxury city” run by and for the wealthy and organized interest groups that the Wall Street collapse took him completely by surprise. Like Lindsay’s successor, the hapless Abe Beame, Bloomberg seems not to understand what’s happening around him. His budget projections are based on the notion that the future economic path will be shaped like a U, but it’s more likely to look like an L.

    New York, which became ever more dependent on Wall Street’s high rollers to create each new job a thousand-dollar meal at a time, is going to have to rethink its economic future. Wall Street as we knew it is never coming back. The high taxes and over-regulation Bloomberg prefers pushes out the small- to medium-size businesses that will have to drive much of our economic growth in the future.

    *

    We’re likely to look back on the Bloomberg years as a time of lost opportunities to build on the gains of the Giuliani years. Between 2003 and 2007, the vast flow of revenues produced a boom that gave the city a chance to dig out from under its massive debt and restructure its labor contracts. Instead, Bloomberg’s agenda added costs that will plague the city long into the future.

    There is no better monument to Bloomberg failures as a CEO – of his arrogant inability to negotiate, of his purchased reputation – than with New York’s education system.

    Bloomberg, who has had whole subway cards plastered with ads and full-page spreads in the newspapers touting his educational “achievements,” has done a far better job of promoting himself than improving the schools. He has nearly doubled the education budget. Yet his “reforms” have created considerable chaos in the schools, which have now been re-organized three times to little educational effect. What the changes haven’t produced, Bloomberg’s vast PR operation notwithstanding, is improvement on the national education tests. His education legacy to date: the debts that will have to borne by a work force ill-prepared for the economy to come.

    Bloomberg says he’s beyond politics. He’s right. We’re living in his monarchy, subjects to his unwavering faith in himself.

    This article appeared originally in the NY Post.

    Fred Siegel, senior fellow of the Manhattan Institute’s Center for Civic Innovation, is writing a book on the making of modern liberalism.

  • Understanding the Geography of the 2008 Election

    Scholars as well as pundits and politicians will study this remarkable election exhaustively. Many, including me, will use county data, because they are convenient and available. From a statistical point of view, counties are lousy units, because of huge variation in size and excess internal variability. But we can’t resist, so here are some at least suggestive findings.

    First, what correlates with the percent voting for Obama? By far the strongest variables are negative – characteristics associated with voting Republican: a county’s share of husband-wife families (-.64), the rate of home ownership (-.55), percent working in craft occupations (-.52), and religious membership (-.51) all work against Obamamania. Other high negative correlations were with percent rural (-.48), with percent white (-.47), other positive were median rent (.45) and percent foreign born (.45). These are not at all surprising, and are what the exit polls told us.

    The highest positive correlations for Obama lay in percentages of non-family households with 2 or more persons (partners, roommates, .50), percent in urbanized areas (.49), or using public transit (.48), and percent with a BA or higher degree (.46). What these figures highlight is the continuing basic polarization between large metropolitan (+ variables) and non-metropolitan (- variables) areas, and simultaneously between the more modern and diverse character of the big city and the more traditional and conservative values of much of non-big city America.

    But, you may protest, we thought race, ethnicity and age played a big role in this election? Indeed, they did, but the correct dependent variable should be the degree of change in the share voting Democratic. In other words, what helps distinguish the 2008 from the 2004 results? The largest effect, of course, is simply the quite large 5-6 percent shift in national sentiment because of economic uncertainty and disillusionment with the Republican regime.

    But beyond that, the pro-Obama variables tend to be the percent of women in the labor force, percent with a BA degree, median household income (yep, time to toss out the traditional wisdom of Republicans being the party of the ‘rich’), non-family households, professional-managerial occupations, and, yes, percent Hispanic, percent Black and percent aged 25-34. In contrast variables leading to a lesser shift, no shift, or even more Republican, were again church membership, percent rural, percent in crafts jobs, and percent 45-64 or over 65, and percent with less than a 9th grade education.

    Overall, education, occupation, age, race and ethnicity help us understand Democratic strength in large metropolitan America and also in rural and small-town American Indian, Black and Hispanic areas, especially in parts of the South and West. But areas and regions with a less educated and professional populace, with higher rates of religious persuasion, with fewer women in the labor force, and with older populations remained loyally Republican. This helps us understand the resistance to Obama and the Democrats in Appalachia and across the border South, from WV, through KY and TN, AR, LA and OK.

    An interesting geographic phenomenon should be noted: the emergence of Chicago and the upper Midwest as part of the new Democratic coalition. Metropolitan Chicago provided Obama with a margin of almost 1.5 million votes, more than New York or Los Angeles. This presaged a gigantic increase in Democratic margins throughout the upper Midwest, including IN, IL, MI, WI, IA, and MN. In this one part of the country more than 150 counties moved from the Republican to the Democratic column. In addition to the big shifts on the coasts, this is where Obama gained the most ground.

    If this pattern continues, the Democrats may well have achieved a critical mass in their core support, adding a powerful upper Midwest base to their almost total control of both coasts. These would leave the GOP with little more than the heart of the Old Confederacy – even that is threatened in places like North Carolina and Virginia by modernization – as well as more socially conservative regions such as Appalachia and parts of the Great Plains. It’s not a pretty picture if you are a Republican.

    Richard Morrill is Professor Emeritus of Geography and Environmental Studies, University of Washington. His research interests include: political geography (voting behavior, redistricting, local governance), population/demography/settlement/migration, urban geography and planning, urban transportation (i.e., old fashioned generalist)

  • California’s Inland Empire: Is There Hope in the Heart of Darkness?

    Few areas in America have experienced a more dramatic change in fortunes as extreme as Southern California’s Inland Empire. From 1990-2008, the Inland Empire (Riverside & San Bernardino counties) has been California’s strongest job generator creating 20.1% of its employment growth. The area also consistently ranked among the nation’s fastest growing large metropolitan areas. However in 2008, the mortgage debacle has sent this area, which had not seen year-over-year job losses in over four decades, into a steep downturn. Understanding what happened and how to put the region back on its historical growth path offers an important public policy perspective not only for the Inland Empire but for other once fast-growing metropolitan areas.

    The Economic Problem. The California Employment Development Department (EDD) reported an Inland Empire loss of 17,900 jobs from August 2007-2008. The bulk of this was directly tied to the housing meltdown. Within shrinking sectors, the loss was 32,600 with 82% (26,800) tied to the demise of residential construction. This included construction losses (-16,000); non-vehicle manufacturing (mostly building materials: -5,600), non-vehicle retail sectors (mostly furniture or home supplies: -3,200); and financial groups like escrow, title, insurance and real estate (-2,000). By September 2008, unemployment was 9.1%, the highest in 49 metropolitan areas with over 1,000,000 people.’


    Note: EDD’s report is an underestimate as more accurate U.S. Bureau of Labor Statistics data show the area began 2008 with job losses 61.7% higher than EDD’s estimates.

    Housing Market Creates A Recession. Some history is necessary to understand how the housing sector got into trouble and set off the inland recession. The last housing downturn ended in 1996. Analysts agree that from 1997-2003, California’s many building restrictions prevented housing supply from matching demand by families needing homes. Prices rose to chase away excess potential buyers:

    • Seasonally adjusted homes sales rose from 13,227 quarterly units in early 1997 to 25,328 by late 2003, an annual rate of 10.1%.

    • In this period, median price increased from $105,643 to $246,807, an annual rate of 12.9%.

    Starting in 2004, speculators began wanting to capitalize on these 12.9% gains by buying and flipping homes. Simultaneously, foreigners awash in dollars from U.S. trade imbalances started flooding investment markets with cash looking for “safe” returns. A belief that home prices never fall led to the development of variable rate mortgages with extremely low “teaser” rates and loose underwriting standards, plus AAA rated mortgage backed securities based on them. The low rates financed the speculators and convinced many families to buy over-priced homes or borrow newly found “equity.” Thus:

    • Median home prices increased even more aggressively from $246,807 in late 2003 to a $404,611 peak in third quarter 2006, up at a 19.7% compound rate.

    • Seasonally adjusted sales increased from 25,328 in late 2003 to a peak of 29,670 in fourth quarter 2005, up a modest 2.29% compound rate.

    • However, by first quarter 2006, volume began declining as affordability reached just 18% and even speculators no longer saw much upside.

    • By the price peak in third quarter 2006, seasonally adjusted sales were down 27.6% to 21,478 units.

      Once the fall in demand became evident, median prices started down. The descent began slowly. However, by mid-2007, with the myth of ever-rising prices debunked:

      • Housing demand plunged.

      • Housing supply took-off as sub-prime mortgages began resetting from teaser to market rates with investors and homeowners trying to sell homes they could no longer afford.

      • Price declines thus accelerated causing ever more homeowners to be upside-down on their homes.

      • Unable to sell, many houses entered foreclosure and were aggressively marketed by the lenders, further accelerating price declines.

      By 2008, the market began changing:

      • Supply, with 60% of inland activity from foreclosures, continued to overwhelm demand with prices falling to a median of $237,784 by third quarter, equal to the mid-2003 level.

      • Demand hit a trough in late 2007 at 11,398 units. By third quarter 2008, lower prices caused it to rebound to 18,453, up 61.9%, equal to volume in 2001.

      • Demand rose as inland housing affordability reached 50% (assuming 3% down, 6.19% mortgages, 1% taxes, $800 property insurance, 0.5% FHA insurance, payments 35% of income).

      Crucially, by third quarter 2008, home construction all but halted as price competition from foreclosures caused developers to lose money on every unit built -even with land treated as free. Hence, the steep downturn and a 9.1% inland unemployment rate. In the short run, conditions will worsen as office construction stops once existing projects are completed. Already, the loss of tenants in fields like escrow and finance has pushed vacancies from 7.0% to 19.9%.

      The Routes Out? With the Inland Empire’s construction sector shutting down, economic hardship has spread far beyond those whose terrible decisions created the crisis. This is also is true in numerous markets, particularly in Arizona, Florida and Nevada.

      Until national action reduces the rising flow of foreclosures into the supply side of the nation’s housing market, supply will continually overwhelm demand sending prices downward. Residential construction will not return until markets see fewer foreclosures and prices move to higher levels. Two strategies are available:

      • Mortgage servicers can lengthen the term of mortgages and reduce rates. allowing families to afford staying in homes. However, given the principal owed, they will not be able to move until prices return to recent highs. Many are thus walking away.

      • Servicers can reduce the principal owed, allowing families to refinance and both remain in their homes and have equity in them.

      Modern housing finance has generally barred the second and more effective strategy. When banks originate mortgages, they typically sell them to Fannie Mae, Freddie Mac or investment houses to get their money back and make more loans. They are paid to service loans they no longer hold. Meanwhile, secondary mortgage holders often formed them into groups and then sell “mortgage backed securities” (MBS) worldwide. Both the originating bank and those creating MBS’s signed contracts barred them from harming investors. Unless a servicer owns 100% of a mortgage or MBS, they cannot lower mortgage principals.

      Unless national policy can convince secondary mortgage holders and/or MBS investors to allow the principal owed them to be reduced, the foreclosure crisis and residential construction depression will persist … prolonging the recession. The state attorneys general, Congress, some major banks and the FDIC have tried to lure mortgage investors to allow this or to buy them out. The results have been very mixed. The idea of allowing bankruptcy judges to lower principals has been offered as a club to force this result. Yet this raises fear of long term damage to international belief in the consistency of U.S. contract law.

      Finally, at the local level, officials could favorably impact construction costs through the developer impact fees imposed on new homes. These are justified by the need to build the infrastructure required by population increases. Inland Empire fees are $40,000 to $50,000 per home. An analysis shows that at today’s low prices, a fee holiday of 80% by local agencies and 40% by schools would put the industry profitably back return to work. The re-imposition of fees could be tied to an index like median existing home prices.

      So far, the reaction of local decision makers has been that this is legally, programmatically and politically impossible. Their traditional worry is not having the money to build the infrastructure needed as new homes cause population growth. However, for construction dependent economies like the Inland Empire, the choice appears to be temporarily foregoing such funding, or finding a broader source of infrastructure financing. Otherwise, they must face the reality of a multi-year deep recession with double digit unemployment.

      John Husing, Phd. is president of Economics & Politics, Inc. based in Redlands, CA

  • Up Next: The War of the Regions?

    By Joel Kotkin and Mark Schill

    It’s time to throw away red, blue and purple, left and right, and get to the real and traditional crux of American politics: the battle for resources between the country’s many diverse regions. How President-elect Barack Obama balances these divergent geographic interests may have more to do with his long-term success than his ideological stance or media image. Personal charm is transitory; the struggle for money and jobs has a more permanent character.

    To succeed as president, Obama must find a way to transcend his own very specific geography – university dominated, liberal de-industrialized Chicago – and address the needs of regions whose economies still depend on agriculture, energy and industry. In the primaries, most of these went to Sen. Hillary Rodham Clinton.

    The geographic concentration of manufacturing prepared by Praxis Strategy Group presents a particular complex roadmap for the new president. Although Indiana and Wisconsin top our list of states most dependant on manufacturing employment, the next four are either in the Great Plains, Iowa, or in the south, Arkansas, Alabama and Mississippi. In fact eight of the top 13 industrial states on a per capita basis are located in the South; only one of these manufacturing hotbeds, North Carolina, supported the new president.

    In terms of industry, the auto industry represents the most difficult challenge. Great Lakes political leaders, like Michigan’s clueless Gov. Jennifer Granholm, now a top Obama advisor, will twist the new president’s arm to bail out the crippled U.S.-based auto manufacturers, essentially socializing the industry. Yet in bailing out Detroit, Obama could undermine a thriving, growing auto complex developing in the old Confederacy and along the southern rim of Midwest.

    Although also hit by the recession, companies like Toyota, Honda, Hyundai, Mercedes and BMW have brought unprecedented prosperity to these areas, which include some of historically poorest regions of the country. This is also where many of the most fuel-efficient “green” vehicles in America are being produced. The workers they employ may not belong to the unions so influential among liberals, but their interests matter mightily to Democrats as well as Republicans who represent them.

    Energy issues may be even more challenging from a regional perspective. The nation’s fossil fuel resources are heavily concentrated in the west and South, led by Wyoming, Alaska, West Virginia, Oklahoma, Louisiana, New Mexico, Texas, Montana, North Dakota and Kentucky. Sen. Obama only took one of these states, New Mexico. The new president’s statements against coal and other fossil fuels were not popular in areas where these provide not only reliable low cost energy but also well-paying jobs.

    Not just oil-riggers, heartland miners and coal companies have an interest in an expansive approach to energy policy. If enacted, Obama’s “cap and trade” proposals could raise the cost of Midwestern energy, largely coal-based, by between 20 to 40 percent, according to a recent study by Bernstein Research. This would create yet another disadvantage for U.S. manufacturers, particularly against largely unregulated competitors in developing countries.

    In contrast, reliable and affordable domestic energy supplies from all sources – including from nuclear facilities – would be a major boon manufacturers across the country. Obama must recognize that many states with coal and oil reserves also possess strong wind and bioenergy potential. He should favor expansion of both. The resulting lower cost electrical power could boost an incipient electric car industry that may be the last, best hope for hard-pressed General Motors.

    Here’s another case where regional politics could prove sticky for Obama. Any attempt to boost non-renewable energy supplies would run into opposition from the largely coastally-centered green lobby. These groups generally oppose virtually any fossil fuel development, and most remain hostile to nuclear power. While well-intentioned, increasingly restrictive environmental regulations on manufacturing could push production to parts of the world with dirtier industries and over reliance on shipping long distances. The net reduction in carbon emissions, as a result would seem somewhat ephemeral.

    The current recession and falling energy prices could provide political cover for Obama to shift his energy policies. Hard times have already eroded support for strict curbs on greenhouse gases in Europe and strong advocacy for carbon taxes clearly hurt the Liberals in the recent Canadian elections. A similar reaction could also emerge in this country, excepting the deepest blue coastal enclaves.

    Finally there remains one other regional constituency that must be addressed, that of the financial community. Our analysis shows securities and commodity trading industries to be regionally concentrated, with the largest clusters in greater New York, vice President-elect Biden’s home state of Delaware, followed by New Hampshire and Illinois. They are all now bedrock “blue states” and backed Obama generally by large margins.

    Yet this presents yet another regional dilemma. Simply put, the rest of the country detests Wall Street. They see the bailout benefiting big players in cities like New York or Chicago, but doing little for smaller banks who do much of the lending outside the big money centers. This sentiment cuts across party lines, particularly in the West and South, as the initial anti-bailout votes in the House show.

    All presidents face such regional challenges in governing this vast and diverse country. The weak politicians, like George W. Bush, tend to fall back on an ever-narrower band of regional alliances that, once threatened, easily break apart.

    Transformative leaders, like Franklin Roosevelt and Ronald Reagan, learn to extend their appeal to as many industries and regions as possible. In the next four years, we will get to see what kind of leader Barack Obama intends to be.

    This article originally appeared at Politico.com

    Joel Kotkin is a Presidential Fellow at Chapman University and executive editor of NewGeography.com. Mark Schill, a strategy consultant at the Praxis Strategy Group, is the site’s managing editor.