New Geography

Category: Politics

  • Manhattan Moment: Two distinct groups make up ‘Occupy’ protesters

    Strange to say, but there may be something valuable going on among some of the Occupy Wall Street protesters.

    Until now, two narratives have defined both the press coverage and public discussion of the Occupy Wall Street demonstrators camped out in lower Manhattan’s Zuccotti Park.

    The first depicts a collection of buffoonish, semiliterate juveniles engaged in a seeming left-wing version of a college prank. There is, to be sure, something to this story.

    In last week’s Zombie Parade the protesters, giddy with their cleverness, portrayed themselves as the living dead whose lives had been sucked from them by unnamed corporations.

    One of the pre-Halloween costumers was asked why she had chosen to dress up like a zombie who looked like Marie Antoinette, the French queen guillotined by the revolutionaries of 1793. She replied that she had no idea of who Marie Antoinette was but just liked the look of the costume.

    The second narrative sees the protesters as ripe to be harnessed by the labor leaders who hope to tap into their energy on behalf of the Obama 2012 campaign.

    Watching New York Federation of Teachers President Mike Mulgrew prance about, speaking in the name of the protest, you might think Occupy Wall Street had signed on to a campaign to raise teachers’ salaries in a city whose budget shortfalls are already producing layoffs.

    But both of these explanations presume that there is a single, largely unified group of people in Zuccotti Park. There isn’t. The exhibitionists, lost souls and zanies acting out tend to congregate in the Western stretch of the block-long park.

    To their east, where anti-Obama placards outnumber those supporting the president, a more cerebral group of protesters is gathered. Their organizational skills have kept the encampment running in reasonably good order for these past three weeks.

    Some of them, carrying anti-Obama placards, are standard issue leftists who, like the New York Times editorial board, think that the president’s problem is that he has been too moderate and thoughtful.

    But others are caught up in the practical details of self-government on a small scale. They are doing their best not to be co-opted, which is why, despite the hoopla from labor leaders, they haven’t signed on to the union campaign. Like Students for a Democratic Society in the early 1960s, they are grappling with a paradox.

    On the one hand, they insist that corporations ineffectively run the government; on the other, they want more government regulation to control the corporations.

    By contrast, the Tea Party has a ready and plausible answer as to how to restore self-government and break the grip of the crony capitalism that ties the Obama administration to Wall Street. They want to drastically reduce the size of government.

    The protesters have no such view. Like their 1960s predecessors, they’re chasing their tails trying to imagine procedural reforms that will allow the demonstrators to govern themselves, while also curbing the power of those greedy capitalists.

    It’s too easy to dismiss the protesters, with their "Eat The Rich" signs, as just spoiled "trustafarian" misfits. They see themselves as the American equivalents of Egypt’s Tahrir Square protesters who brought down President Hosni Mubarak, but they haven’t noticed that it’s the Islamists who are inheriting the Arab Spring.

    Mocking them is easy; but here at home, the problem of crony capitalism is in fact eating away at our civic entrails. Leftists willing to grapple with this malignancy should be welcomed, if only for the potential seriousness of their efforts.

    As the more thoughtful 68ers eventually discovered, the idea of reforming government by expanding it is a circular dead end.

    This piece originally appeared at The Washington Examiner.

    Fred Siegel is a senior fellow at the Manhattan Institute and scholar in residence at St Francis College in Brooklyn.

  • Obama’s Off-target Class War

    For many conservatives, the notion of class warfare that President Barack Obama now evokes is both un-American and noxious — a crass attempt to cash in on envy among the masses. Yet the problem is not in class warfare itself — but in being clear what class you are targeting.

    In this sense, Obama’s populism is little more than a faux version. He is not really going after the privileges of the super-rich — that would involve actions like removing the advantages of capital gains over earned income or limiting dodges to nonprofit foundations or family trusts. Rather than a war against plutocrats, Obama’s thrust is against the upper end of the middle class, whose income is most vulnerable to higher taxes.

    The president is within his rights to use these class warfare tactics; it’s just too bad he is aiming at the wrong target. Exploiting class divisions, in fact, has long been a part of American politics — from the Jacksonian era through Abraham Lincoln, the New Deal and even Bill Clinton. Obama’s sudden tilt toward class warfare may thrill left-wing commentators such as The American Prospect’s Robert Kuttner. But it’s no real threat to the real ruling classes.

    Though the president’s rhetoric focuses on “millionaires and billionaires,” his proposals do less harm to the ultrarich and their trustifarian offspring than to the large professional and entrepreneurial classes, whose members are earning more than $200,000 a year. More affluent than most Americans, these members of the upper middle class hardly constitute oligarchs. Ninety percent of the targeted class earns less than $1 million annually. Only a tiny sliver, or .01 percent, are billionaires.

    Senate Majority Leader Harry Reid’s proposal to raise the target income level closer to $1 million is a concession to political common sense — but still avoids the big distinction between investor and income earner. Meanwhile, the administration’s rhetorical gambit of using Warren Buffett as the class warfare poster boy reveals its fundamental disingenuousness.

    Many rich do avoid high taxes through dynastic trusts concocted largely to avoid the Internal Revenue Service. Others, like Buffett, put vast amounts into foundations — in his case, the Bill and Melinda Gates Foundation, where it sits tax free. In addition, the patrician class, because its members tend to be more active investors, also pays less, largely because its capital gains earnings are taxed at a low 15 percent rate, less than half that paid by high-income professionals.

    Obama’s biggest problem with class is that his policies have made a bad situation worse. During both the Clinton administration and most of the George W. Bush years, the rich prospered. But so, too, did middle- and working-class homeowners, professionals and construction workers.

    Today, however, only the high-end housing market, roughly 1.5 percent of the market, is flourishing. The vast majority have seen their property values shrink — down 30 percent since 2006. Markets, like Manhattan , which is increasingly dominated by foreign investors, have surged — the average price of a New York condo or co-op has topped $1.4 million, a nifty 3 percent increase over last year.

    But to a large degree, this reflects those who are the biggest beneficiaries of the largesses of Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke: hedge fund managers, investment bankers, the corporate aristocracy and officials of “too big to fail” banks. For these financiers, the time since the economic collapse has been very fat years — at least until the European debt crisis.

    The situation, however, has been far worse for small businesses — with serious consequences for job creation. The number of start-ups with employees — the traditional source of new jobs — has dropped 23 percent since 2008. Most entrepreneurs, according to the National Federation of Independent Business, expect the job market to weaken and unemployment to stay high for the foreseeable future.

    “Corporate profits may be at a record high,” said Bill Dunkelberg, chief economist of the National Federation of Independent Business, “but businesses on Main Street are still scraping by.”

    Obama’s phony class war also carries considerable political risk. As Mark Penn, the former Clinton adviser, and others have pointed out, the newest Obama tax strategy most penalizes the professionals who flocked to his cause in 2008 . These voters — concentrated largely in high-tax, high-cost blue states — are also particularly vulnerable to any reduction of write-offs for mortgage interest and state taxes.

    Obama’s left turn also fails to address the America’s biggest problem: how to ignite broad economic growth.

    It should now be clear to all but the most deluded that the administration’s bankrolling of massive solar projects and embrace of hopeless causes like high-speed rail have not reaped much of a bonanza. Indeed, in many places where the administration’s “green” agenda has been adopted most fervently, like California, unemployment rates now surpass even Michigan’s.

    Obama’s misguided economic notions can be seen even when he looks to solve our critical jobs shortage. In addition to the “green jobs” fiasco, the president is looking to Silicon Valley and the information economy — which have lost jobs since 2006. Facebook, Apple, Google and the rest may be swell representatives of American ingenuity — but employ relatively few people in America, and mostly the best educated and thus least vulnerable.

    In contrast, the administration displays relatively little support — and passion — for the many middle-income Americans who depend, directly or indirectly, on industries like oil and gas, warehousing, construction and, except for the bailed-out auto firms, manufacturing. In these sectors, only the fossil-fuel industry has done well — adding more than 500,000 generally well-paying jobs since 2006, despite the Environmental Protection Agency’s best efforts to slow its progress.

    Workers in the energy field – in which salaries average more than $100,000 annually — reasonably fear their jobs could be threatened if Obama is reelected. This could damage his appeal in states like Ohio and Pennsylvania, where many working-class voters are now counting on new oil and gas finds to spur the growth of high-wage employment.

    So how best to confront America’s growing class division? With serious economic growth beyond Wall Street. A flatter tax system with fewer exemptions, limiting trusts and foundations and ending the preference for capital gains would force the wealthy to re-engage the economy. They would have fewer ways to hide their money. Sweep aside both subsidies for oil and gas companies and the renewable industry, regulate sensibly and market forces can drive exploration and development.

    Will Republicans support this approach? Many seem almost incapable of acknowledging the threat to democracy and our social order now posed by the growing concentrations of wealth that eerily recall the 1920s. Others prostitute themselves to fossil-fuel industries — the way the Democrats kowtow to rent-seeking green capitalists. Meanwhile, with Obama’s once strong support on Wall Street weakening, they seem all too eager to dance to big money’s tune to fill their own coffers.

    It’s time to finally acknowledge that the whole “trickle down” from Wall Street approach has been discredited — and with it the current regime of class privilege. You don’t have to be a member of Occupy Wall Street to doubt that what’s good for the top investment bankers is necessarily good for the vast majority of the country.

    Neither mindless budget-cutting nor politically motivated redistribution can solve the growing economic divide or create new wealth. Instead, we need a tax and policy regime that stops favoring financial insiders and instead focuses incentives on the grass-roots hard work and ingenuity that have long been America’s greatest economic asset.

    This piece originally 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 of protected Wall Street bull by hunter.gatherer.

  • The Chicago Machine’s Favorite After School Charity

    One of the great scams of modern political life is the charitable contributions of tax-exempt foundations associated with politicians.  A perfect illustration is one charity associated with former Chicago Mayor Daley which has received some attention.

    The charity, After School Matters, set up by Maggie Daley (former Chicago Mayor Daley’s wife and sister-in-law of White House Chief of Staff William Daley) has received more than $54 million from the financially troubled city.   The Chicago Tribune explains that

    “days before Emanuel took office, the Daley administration awarded the nonprofit a one-year, nearly $6.5 million contract to oversee summer jobs efforts and after-school programs.

    The group is housed in city offices near the Cultural Center, where it pays no rent and uses city computers and phones."

    The Tribune article provides some rather unusual facts. Three full time city of Chicago workers labor full time for the private charity.  It also benefits from corporate contributions, as The Chicago Sun-Times’ ace investigative reporter Tim Novak explains:

    "After School Matters – founded and run by Maggie Daley – raised more money in a single year than 97 percent of the 12,757 charities in Illinois filing reports with the IRS"

    How this corporate support “materialized” is now coming into question. Long time Chicago media critic Steve Rhodes points out that this appears to be a shakedown racket of those who do business with the city of Chicago.

    In 2008, After School Matters became prominent news because of its donor list. Prominent corporations like J.P Morgan Chase and Motorola gave significant contributions to Daley’s charity, and all received City of Chicago contracts.  

    This isn’t just a story about a local charity with conflicts of interest. Federal taxpayers are giving federal stimulus dollars to the Daley charity. Even Mayor Rahm Emanuel, the Chicago Sun-Times reports, admits “the city should not be dictating which charities recipients of city subsidies should donate to.”

    Former Mayor Daley is upset that anyone would think that his wife’s charity isn’t fully dedicated to helping children. The Chicago Sun-Times reports:

    Former Mayor Richard M. Daley on Monday denounced as “disgraceful” and a “personal insult to my wife” an internal audit concluding that recipients of city subsidies were told to donate to Maggie Daley’s After School Matters program.

    The former mayor insisted that no arms were ever twisted to produce donations to the charity that his wife founded to occupy and educate Chicago teenagers.

    Daley’s response is textbook Chicago media spin. When confronted with facts, claim outrage and avoid the specifics.   

  • Australia’s Carbon Tax Battle: Where it Fits into the Global War

    Next week Australia’s Parliament is set to pass a carbon tax that has proven so divisive it may bring down the Labor-Green government. By setting a low price on carbon, returning the money raised to industry and consumers, and relying so heavily on offsets, the legislation is further proof of the iron law of climate policy. A better way forward would be for Australia to impose a modest fee on coal mining and use the money to support its advanced manufacturing industries and innovation to make clean energy cheap. Below is our take on the legislation in Australia’s news magazine, Crikey.

    As two Americans watching from the sidelines as Australia tears itself apart over a carbon tax, it is impossible not to be reminded of our own country’s self-destructive battle over cap and trade in 2009 and 2010. And little wonder why: the Left and Right parties in Australia have adopted virtually wholesale the positions taken by Left and Right parties in America.

    The Labor Party has borrowed from American Democrats the strategy of giving out money to win over consumers, powerful industries, and unions. The Liberal Party has borrowed from American Republicans the strategy of attacking climate scientists and mobilising a populist backlash.

    Of course, the great difference is that while Democrats did not get their cap and trade law, it now seems that the Australian Labor-Green coalition will get its carbon tax. But Australia’s populist backlash against the legislation will, at minimum, slow its implementation and, at most, result in a change of government and its ultimate repeal.

    Not that its rapid implementation would have any effect on emissions. The carbon tax will be far too small to make clean energy cost-competitive with coal. And the government has announced it will give back to consumers more than it collects through redistributive tax policies. As in Europe, Australia can meet its emissions targets only by purchasing dubious carbon offsets.

    While the Liberal Party has, like the Republican Party, behaved badly and rejected good science in reaction to bad policy, the real blame for the inevitable policy failure lies with the green movement. In Europe, the US and Australia, environmental NGOs and the center-left generally has grossly oversold the impact of pricing carbon, the readiness of renewable energy, and the political sustainability of their schemes.

    Though some greens try to fudge the numbers, no climate or energy analyst today can credibly claim that renewables are cheap enough to compete broadly with fossil fuels. Solar is three to five times more expensive than coal, and that’s not counting the high cost of storage and transmission. No nation — not Australia, not Germany, not China — will raise carbon prices significantly enough to make solar and wind competitive with coal, much less natural gas.

    For this reason, every framework to mandate emissions reductions — whether Europe’s Emissions Trading Scheme (ETS), cap and trade, or Labor’s carbon tax — contains numerous loopholes designed to rebate or otherwise blunt higher energy costs to industry and consumers, greatly lowering the effective carbon price.

    The right-wing everywhere blusters that efforts to price carbon will destroy the economy. This is nonsense. Everywhere the carbon prices have been too low to have any discernible impact. Australia’s carbon price would cost households less than $5 per week more in groceries. Many households will get back in assistance more than the carbon tax costs. If the plan applied to petrol, it would raise the cost per litre by a few cents. In any case, in recent years the price of most fossil fuels has already increased by much more than any proposed carbon tax, and we still see economic growth coupled with increasing use of those fuels.

    Climate analyst Roger Pielke, Jr. calls this “the iron law of climate policy.” Governments might impose a carbon tax, but never high enough to actually send the “market signals” the Labor-Green alliance has come to believe it will. That would be political suicide.

    Europe has convinced Labor and the Greens that it has reduced its emissions, but it can only make this claim because it arranged for Kyoto to count reductions beginning in 1990, not in 2000, when the treaty was implemented. This allowed Britain to count as part of its reductions its move to natural gas and Germany to count the closure of inefficient Eastern Bloc coal plants — both of which happened for reasons that had nothing to do with global warming.

    To avoid the economic pinch, the carbon tax legislation will allow half of emissions reductions to come from offsets. But it is hard, after more than three years of investigative reporting and reports by independent auditors, to conclude that carbon offsetting is little more than an elaborate scam — some companies and landowners get paid for doing what they would have done anyway, and others game the system.

    Advocates for the carbon tax defensively insist that, though Australia’s contribution to global emissions is, for all practical purposes, nil, it is important to join up with the international community.

    But the international community is more divided than ever, with China, the world’s largest emitter and energy user, insisting that only rich countries should be required to reduce its emissions, so it supports extending the Kyoto protocol, which exempts China from making any reductions. Europe mostly sides with China on extending Kyoto, but Japan and Canada side with the United States on the need for any agreement to include China.

    These differences will not be resolved in Durban, later this year. The idea that the United Nations will oversee shared economic sacrifice through higher energy prices — the idea that captivated greens in the developed world over the last decade — is dead.

    While the carbon tax allows the Labor-Green coalition to show Australia’s cosmopolitan face to the world, the loopholes and carve-outs reveal the reality of Australia’s mining economy. Australia exports more emissions every year in the form of coal sent to Japan, China and elsewhere than it generates domestically. Given the importance of coal to the Australian economy, it’s little wonder that Labor will allow coal exports to double over the next 10 years.

    But Labor need not worry that Europe will make note of its hypocrisy. The German environment minister famously boasted that the great thing about carbon offsets is that they allowed Germany to keep building coal plants. Over the last decade Germany has brought 11 gigawatts of coal-fired generation online, about six times the electricity it gets from its much-vaunted solar panels. Today, having shut down its nuclear plants in a reaction to Fukushima, Germany’s dependence on fossil fuels will only deepen.

    There is a better way. Instead of trying to make fossil energy more expensive, Australia should work to make clean energy cheap. This can be done through a concerted R&D and innovation push funded by the government. A much smaller fee levied on coal production could generate $10 to $20 billion a year for Australia to spend on research labs, prizes, and procurement contracts with private firms, all aimed at getting the technological breakthroughs needed for renewables to be in a position where they can compete with fossil fuels. Such a strategy might also help Australia reduce its dependence on mining and start to engage in more advanced technology manufacturing and innovation.

    The climate war between greens and skeptics will rage on, but there is no reason a reasonable bloc of centrist thinkers inside and outside of the Labor and Liberal parties cannot put forward a new, more pragmatic approach. Perhaps Australia can be the first to move the international focus away from unrealistic dreams and economic sacrifice and toward technological innovation and economic opportunity.

    Shellenberger and Nordhaus are co-founders of the Breakthrough Institute, a leading environmental think tank in the United States. They are authors of Break Through: From the Death of Environmentalism to the Politics of Possibility, and will be appearing at the Adelaide Festival of Ideas, which runs Oct 7 – 9. Check out the full festival program here, most sessions are free.

    Photo by Jarrod Carruthers

  • Are We Headed For China’s Fat Years?

    Chan Koonchung’s chilling science fiction novel The Fat Years — already an underground sensation in China — will be published in the U.S. January 2012. The book, first published in Hong Kong in 2009, is partly so chilling because it reveals a scenario that is all too plausible. Set in 2013, it takes place after a second financial crisis  (euros, anyone?) that all but destroys the Anglo-American economies and ushers in “China’s golden age of ascendancy.”

    The nation that leads the world in The Fat Years is less bleakly dystopian than the Stalinist state portrayed in George Orwell’s 1984 or the biologically controlled society of Aldous Huxley’s Brave New World. Yet it is supremely authoritarian — harassing and even executing the rare dissident and putting drugs in the water supply to inflate a sense of well-being among the masses.

    This all-powerful Chinese state looks very familiar. It pursues a commercial strategy of plundering resource-rich regions around the world, often working with the most despicable of regimes such as Zimbabwe. And it harnesses and promotes information technology while maniacally censoring the Internet, rendering cyberspace just another outlet for propaganda.

    It is also increasingly self-confident. As one character — a highly placed party cadre in the story — suggests, this new Chinese model represents “the best option in the world as it really exists.”

    Many in the West already accept this notion. According to a recent Pew survey, nearly half of all Americans believe China will surpass America as the world’s leading power. The same poll found that roughly two-thirds of Britons — and many Europeans — believe similarly.

    The higher circles in Washington and New York generally view the Anglo-Saxon democracy as unable to compete with the more ordered, authoritarian Chinese model. Thrilled by what he sees as “China’s green leap forward,” New York Times columnist Thomas  Friedman proclaims the greater advantages of “one-party autocracy.” After all, Chinese autocrats can adopt “policies needed to move a society forward in the 21st century” without needing to check in with the voters. Even conservative pundit Francis Fukuyama, once a believer in the inevitable triumph of market liberalism, feels that “Anglo Saxon capitalism” has squandered its historic moment. “Democracy in America,” he notes, “has less than ever to teach China.”

    Former Obama Management and Budget chief Peter Orszag is the latest to endorse the down-with-democracy movement. Concerned with our inability to deal with our fiscal problems, climate change and rebuilding the economy, Orszag proposes shifting power from Congress to more “independent institutions” made up of unelected policymakers.  He argues that democracy can be “too much of a good thing.”  Comfortably ensconced at bailed-out Citigroup, Orszag has benefited from a financial system that increasingly resembles China’s, with its intimate ties between the state and banks. Crony capitalism, on both sides of the Pacific, it appears, has its rewards.

    Yet perhaps it is too early for the English-speaking democracies to throw in the towel.  Many who now espouse Chinese supremacy previously argued that Japan, and even Europe, was destined to dominate the world.  Yet Pax Niponica never got past the early 1990s; one former inevitable global hegemon has been downgraded to the sick man of Asia.

    Like Japan, China faces many great, if often overlooked, challenges. There’s a devastated environment, growing social unrest and rising competition from other countries, notably the Indian subcontinent. Labor force growth is slowing rapidly, and the country now has up to 30 million more marriage-age boys than girls, an all but certain spur to political unrest. Misallocation of resources by both central and local authorities threatens to create a major property bubble.

    Throughout modern history authoritarian and more centrally controlled countries have proved very good at playing “catch up” and impressing journalists. China’s Communist regime can order investment into everything from high-speed trains to green technology and massive dam construction. The results — like those previously seen in Nazi Germany and Soviet Russia — are often as physically and technologically impressive, although often cruel to both the environment and people stuck in the way.

    But once a country reaches a certain plateau of development, as Japan did in the 1990s, the nature of the competition changes; it becomes harder to target industries that are themselves in constant flux. Workers who have already achieved considerable affluence tend to be harder to bully or motivate.

    Take the battle for cyberspace. Japan’s ballyhooed bureaucracy sought to conquer this frontier through traditional channels. This allowed the internet to become a competition largely among relative young U.S. companies such as Apple, Amazon, Google and Facebook. The much-feared Japanese takeover of the computer and cultural industries back in the 1980s now has petered out into a historical footnote.

    And despite the recent, often spectacular gains of China , the primary English-speaking countries — the  U.S., U.K., Canada, Australia and New Zealand — still control a quarter of the world’s GDP, compared with 15% for the Sinosophere. Their combined per capita income is six times higher.

    Critically the U.S. and its closest cultural allies — New  Zealand, Australia and Canada —  also have enormous physical advantages. These four countries all stand among the eight largest food exporters in the world.  Recent discoveries on the energy front have made North America, particularly the Great Plains, a potentially dominant force in the global oil and gas industries. China lacks the water, and likely to resources, to match up.

    But the real edge lies with culture, particularly the English language, which has decimated all its traditional competitors — French, German and Russian — over the past two decades.  Difficult to learn, Chinese is not likely to replace English any time soon as the dominant language of culture, air travel, science and technology.

    This cultural dominion can be seen in the media as well. The U.S. and its English-speaking allies account for roughly half of all the world’s audio-visual exports. To an extent never seen before, Anglophones dominated how people think, dress and recreate.

    Arguably our biggest advantage lies in the very thing our upper echelons increasingly disdain — our messy multicultural democracy and our addiction to the rule of law. “The secret of U.S. success is neither Wall Street or Silicon Valley but its long-surviving rule of law and the system behind it,” Liu Yazhou, a Chinese two-star general, recently said. “The American system…is designed by genius and for the operation of the stupid.”

    The stunning lack of such constitutional guarantees is just one reason why many of China’s entrepreneurial elite seek to immigrate to the U.S., Canada or Australia.   Indeed, among the 20,000 Chinese with incomes over 100 million Yuan ($15 million), 27% have already emigrated and another 47% have said they were considering it, according to an April report by China Merchants Bank and U.S. consultants Bain & Co.

    To be sure, the U.S. and its allies need to change in order to compete.  Greater incentives for savings, investments and productive industries must supplant those that promote asset speculation and financial manipulation. But we can do this without importing Asia’s   hierarchical structures. Rather than trying to outdo the Politburo in developing crony capitalism we should seek to reinvigorate our diverse, grassroots economy.

    In any competitive race you do not win by emulating your rivals but by building on your intrinsic strengths.  The best way to avoid the scenario laid out in The Fat Years lies not in abandoning the very strengths that drove our historic ascendancy, but by tweaking and enhancing them so that they propel us in the coming decades.

    This piece originally 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.

    Shanghai photo by flickr user Sprengben

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  • For High-Speed Rail It Looks Like the End of the Line

    With its vote on September 21, the Senate Appropriations Committee ended the rail boosters’ hopes of getting a meaningful appropriation for high-speed rail in the new (FY 2012) fiscal year. It probably also dealt a decisive death blow to President Obama’s loopy goal of "giving 80 percent of Americans access to high-speed rail."

    By including only a token $100 million for high-speed rail as a "placeholder" in their FY 2012 budget recommendations (a sum that is likely to be further cut in the House-Senate negotiations on the FY 2012 appropriations), Senate appropriators have done more than merely declare a temporary slowdown in the high-speed rail program. They have effectively given a vote of "no confidence" to President Obama’s signature infrastructure initiative. Along with their House counterparts who had denied the program any new money, the Senate lawmakers have sent a bipartisan signal that Congress has no appetite for pouring more money into a venture that many lawmakers have come to view as a poster child for wasteful government spending.

    Their posture is understandable. After committing $8 billion in stimulus money and an additional $2.5 billion in regular appropriations, the Administration has little to show for in terms of concrete results or accomplishments. Aside from an ongoing project to upgrade track between Chicago and St. Louis (a $1.1 billion venture that promises to offer a mere 48 minute reduction in travel time between those two cities), no significant construction has begun on any of the authorized rail projects.

    In the meantime, the Department of Transportation has rushed to distribute the balance of the authorized HSR dollars, lest Congress decides to rescind any funds that remain unobligated. Continuing its practice of scattering money far and wide rather than focusing it on one or two worthwhile projects, the Federal Railroad Administration approved in September over $480 million worth of planning, engineering and construction grants "to improve high-speed and intercity passenger rail service" in 11 states. The beneficiaries are New York, Texas, New England (Maine, Vermont, Rhode Island, Connecticut), North Carolina, Virginia, Washington State, Oregon and Pennsylvania. The awards range from $149 million to New York State to as little as $13 million to the state of Oregon, and they average under $40 million per individual grant. It remains to be seen how quickly the recipient states will put these funds to work—and what kind of service improvements these grants will bring about.

    From an examination of the grant announcements it becomes clear that none of the grants will help to bring true "high-speed" rail service to America. At best, they will permit modest incremental improvements in speed and frequency of existing Amtrak services by helping to upgrade railway tracks of Class One railroads on which Amtrak runs its trains. The U.S. Department of Transportation (DOT) has implicitly acknowledged to have revised its program objective.  It has dropped its earlier rhetoric that high-speed rail "is just around the corner" (Secretary LaHood’s words) or that "80 percent of Americans will have access to high-speed rail" (repeated assertions by LaHood and DOT press releases).  

    Instead, the DOT (through its Federal Railroad Administration) is trying to lower the expectations by stating that "the true potential of high-speed rail will not be achieved or realized overnight." (FRA’s "vision statement") It’s a welcome sign that the Department has abandoned its quixotic goal of revolutionizing rail travel overnight. It may also signal the Administration’s realization that it cannot unilaterally force its vision upon a fiscally conservative Congress, a largely indifferent public and a skeptical, risk-averse investment community. If high-speed rail is eventually to find its place in America, it will be because market conditions will create a favorable climate for its development and acceptance – not because Washington in its wisdom has decided that the country needs it – and needs it now!    

    California’s Bullet Train beset by mounting political and financial problems

    Meanwhile, the one true U.S. high-speed rail project – California’s LA-to-San Francisco bullet train – is beset by mounting political and financial problems.  Nearly three years after the passage of the enabling Proposition 1A and less than a year before construction is scheduled to start on the first line segment in the Central Valley, construction costs have doubled the 2008 estimate. There is no evident source of where the additional funds to complete Phase One (LA-SF) system will come from since the prospect of both further federal money and private risk capital is remote. As one recent report put it, the project is being pursued "in the confident hope of a miracle."

    The systems’ first stage – a $10-14 billion 160-mile line segment in the Central Valley from Bakersfield to Merced – has run into determined opposition from local residents and farming interests during the ongoing environmental impact review. The possibility of lengthy court challenges could delay construction, thus increasing costs, eroding political support and putting federal money at risk.

    At the policy level, the project has been subject recently to several analyses. First came a critical report by California legislature’s fiscal watchdog, the non-partisan Legislative Analyst’s Office (LAO). It questioned the Rail Authority’s cost estimates and its decision to build the first segment in a sparsely populated region where travel demand is not expected to be sufficient to cover operating expenses. The LAO concluded that if the total cost of building the Phase One system were to grow as much as the revised Authority estimate for the Central Valley segment (an increase of 57%), the whole system would cost not $43 billion as originally estimated, but $67 billion. Concern about escalating costs and overly optimistic ridership forecasts were echoed by an independent Peer Review Group and numerous newspaper editorials. Even some of the state former legislative supporters, such as state Senators Joe Simitian, Alan Lowenthal and Mark DeSaulnier, have begun to express reservations and urge the Authority to rethink its direction. (See, "California’s Bullet Train – On the Road to Bankruptcy," InnoBriefs, May 31, 2011).

    A more recent challenge to the project’s financial credibility came from a team of respected independent experts, Alain Enthoven, William Grindley and William Warren, who cooperate with a citizen watchdog group, the Community Coalition on High Speed Rail. The team has concluded that without further federal aid (which almost certainly can no longer be counted upon) the project stands no chance of meeting its legislative requirements and the conditions of the enabling bond initiative (Proposition 1A). Nor is reliance on private financial participation a credible option.  In the authors’ judgment, private risk capital hasn’t to date and will not come in the future without revenue guarantees (aka public subsidy).

    The authors conclude: "With highly questionable prospects for federal grants or private ‘at risk’ construction funds, but the certainty that costs will continue to increase, the logic for continuing the largest project in California’s history is highly questionable."  (Alain Enthoven, William Grindley and William Warren, The Financial Risks of California’s Proposed High-Speed Rail Project, September 14, 2011, www.cc-hsr.org ). (Note: The report’s financial analyses and conclusions have been reviewed in detail and verified by high ranking California State officials, according to reliable sources.)

    But politically the most damaging blow to the project has come from a just released opinion survey. According to this poll, nearly two-thirds of California’s likely voters (62.4%) would stop the bullet train project from proceeding further. Virtually the same number said they are unlikely to ever travel on the train between Los Angeles and San Francisco, thus casting doubt on the Authority’s optimistic ridership forecasts. What is more, the project came in dead last (at 11%) in a list of voters’ spending priorities, according to the Irvine-based Probolsky Research polling outfit (as reported in The Sacramento Bee, September 29, 2011). With declining public support as evidenced by this poll, and with the State coming to a point where it will have to prioritize future public spending, enthusiasm for the project among politicians in Sacramento could evaporate.

    Given the possibility of the California bullet train’s demise, the attention and hopes of high-speed train advocates probably will (and should) turn to the Northeast Corridor – the nation’s most likely travel corridor where high-speed rail can eventually succeed and prosper.

    Ken Orski has worked professionally in the field of transportation for over 30 years.

    ~~~~~~~~~~~~~~~~~~~~
    Note: the NewsBriefs can also be accessed at www.infrastructureUSA.org
    A listing of all recent NewsBriefs can be found at www.innobriefs.com

  • Los Angeles Downtown Stadium Cloaked in ‘Green’ Snake Oil

    AEG’s downtown stadium in Los Angeles isn’t just a playground for really big guys or just another site for really rich guys to consume conspicuously in luxury boxes. If you believe the chorus of hype, Farmers Field also grows good jobs, solves the city’s debt crisis, transforms downtown Los Angeles into a nicer version of Manhattan, and builds strong bodies eight ways. It may even cure cancer.

    But the downtown stadium – if it’s built – isn’t going to be particularly “green” in ways that matter.

    According to a report by David Futch in the L.A. Weekly:

    AEG has promised to build a “carbon-neutral” Farmers Field football stadium that will add no extra emissions to the current load in polluted downtown Los Angeles. But there’s no way to accomplish that, according to environmental lawyers, climate researchers and traffic engineers who’ve seen it all before.

    Claiming “carbon neutrality” for a massive construction project that will have a usable life measured in decades is beyond the ability of good science (and common sense), but it sounds good in press briefings. “Most labels are nonsense, dreamed up by marketing departments,” Konstantin Vinnikov, a University of Maryland climatologist and atmospheric scientist, told Futch.

    In defense of green nonsense, the state Legislature has put on Governor Brown’s desk SB 292, a special bill that would permit the city of Los Angeles and AEG to declare Farmers Field a model of environmental sensitivity while shutting out critics of the project, whose ability to force a real review of the stadium’s environmental impact would be severely limited.

    Under SB 292, legal challenges would have to go directly to the state Court of Appeals, where bringing suit is much more expensive.

    In exchange for giving AEG a fast track to judicial review in a favorable setting, the downtown stadium would have to show zero net emissions of new greenhouse gases from automobile trips and achieve a ratio of automobile trips to attendance that is at least ten percent lower than other NFL stadiums.

    Since nearly all NFL stadiums are not in downtowns but at the suburban fringe, where tailgaters gather in massive parking lots, this last criterion is essentially meaningless.

    But AEG has another out. If cutting more automobile trips isn’t “feasible” (a very slippery term), AEG can buy carbon credits to reduce emissions somewhere else – even in another state – rather than cut the stadium’s emissions downtown.

    Certifying that AEG’s trip reduction measures have met the goal of greenhouse gas emissions (to the extent “feasible”) is the responsibility of the city – not the state agencies that currently oversee air quality. In fact, all of the mitigation measures promised by AEG are equally squishy, hedged with qualifiers that permit AEG and the city to quietly waive costly mitigations and allow others to be achieved without measurable improvements. That’s just standard operating procedure at city hall, which explains why state regulators are cut out of the process.

    Santa Monica environmental attorney Doug Carstens reminded Futch, “When developers (like AEG) start shedding mitigation like crazy, then instead of revoking approval, public agencies tend to forgive and forget.”

    SB 292 is almost certain to be signed into law. And it’s so perfect a model of environmental duplicity that other developers demanded and a got a companion bill – SB 900 – that gives every big project in California generally the same benefits. SB 900 is sure to be signed into law, too.

    Farmers Field won’t be environmentally neutral in the context of downtown’s crowded streets and neighborhoods and, say many experts, can’t possibly be “carbon neutral” overall. As one traffic engineer asked, “Do they include the carbon dioxide emitted by all of the additional motor vehicles, buses and trains serving fans going to and from the games? Do they count the carbon dioxide emitted by the power plants supplying the electricity for the billboards?”

    Actually, AEG doesn’t have to count anything, except the profits it intends to make. And the only green that will wrap Farmers Field will shine from its gigantic LED billboards.

    This piece originally appeared at KCET.org.

    D. J. Waldie is a contributing editor at the Los Angeles Times and a contributing writer for Los Angeles magazine. He is the author most recently of California Romantica with Diane Keaton. He blogs for KCET TV at http://www.kcet.org/user/profile/djwaldie.

    Photo by Pete Prodoehl

  • First Step for California: Admit There’s a Problem

    The October 29, 2009 issue of Time Magazine had an article titled “Why California is America’s Future.”  I sure hope not.  California is fast becoming a post-industrial hell for almost everyone except the gentry class, their best servants, and the public sector.

    We only need a few numbers to demonstrate that California is clearly on the wrong track:

    • California’s unemployment rate is over 12 percent, about a third higher than the United States.
    • Only eight of California’s 58 counties have unemployment rates in single digits.
    • California has lost jobs in four of the past six months for which we have data, while the United States has gained or had no change in jobs in each month over that period.
    • California’s poverty rate is 16.1 percent compared to the United States 15.1 percent.  The rate goes way up when adjusted for the cost of living.  For example, the respected Public Policy Institute of California estimated that Los Angeles County’s 2007 poverty rate increased 11 percentage points from 15 to 26 percent, when adjusted for cost of living. 
    • Two California cities, Fresno and San Bernardino, are among the ten poorest American cities with populations over 200,000.  In fact, San Bernardino’s 34.6 poverty rate is the second highest of these cities, exceeded only by Detroit.
    • Unemployment among college educated is 34 percent higher in California than in the United States, while Los Angeles’s college educated unemployment rate is almost a whopping 80 percent above the United States’ rate.
    • According the California Department of Education, California’s public colleges and universities graduate over 150,000 students a year, while California’s Economic Development Department is forecasting less than 50,000 openings a year for jobs that require a college degree.

    Of course, that’s not the future that Time was selling.  Time’s future was a “dream state,” a magical place where enlightened pioneers, guided by their superior vision and funded by venture capital, would lead the world in innovation and environmental bliss.  California firms, like Solyndra, would lead the competition to a competitive new green economy.  No kidding, they named Solyndra:

    "It’s (California) building massive power plants for utilities, as well as roof panels for big-box stores, complete subdivisions and individual homes. Prices are plummeting, and competition is fierce, most of it from California firms like BrightSource, Solar City, eSolar, Nanosolar and Solyndra." 

    Along the way to this brave new world, there would be a new, “green” gold rush “beckoning dreamers who want to cook Korean tacos or convert fuel tanks into hot tubs.”

    That vision turned out to be about as real as Disneyland – but not as profitable. 

    Time wasn’t alone.  Brett Arends had a similar piece, The Truth about California, in November 2010, and the ever-optimistic duo of Bill Lockyer and Stephen Levy had a December 2010 piece, California isn’t Broken.

    Visitors can be forgiven for seeing California as a bit of paradise on earth.  It is.  I  am a native myself who could not wait to return from my job at the Federal Reserve in Washington, DC.  I remember going to Santa Barbara in October for my UCSB job interview.  Santa Barbara was magical to me, after enduring weeks of dreary and increasingly cold East Coast weather.  Santa Barbara was warm and sunny, and people were wearing the minimum legal requirements, and State Street was alive and vibrant with a happy energy I hadn’t seen since I’d left California for my East Coast job over a year before. 

    I wanted that job.

    You can still have that experience in certain spots in California.  There’s no doubt, California has abundant charms.  It can seduce almost anyone. 

    But there is a lot of California that visitors don’t see.  They don’t see the many communities in California’s central valley where unemployment rates of over 15 percent are typical, where people live in substandard housing and face the prospect of a lifetime in an ignored underclass.

    Well, they are not exactly ignored.  They receive food stamps and other subsidies, but they are denied opportunity, social mobility, or the confidence and pride that come with self-sufficiency.

    You don’t have to leave Santa Monica or Santa Barbara to see poverty without opportunity though.  Just blocks from Santa Barbara’s State Street or Santa Monica’s Third Street Promenade, over-crowded units , packed sometimes by several families, are the norm, because Coastal California’s housing prices are not related to the local economy. Statewide, 28 percent of California’s children live in crowded housing.  This is the highest rate in the nation, tied only with Hawaii. 

    When you live here, you can’t avoid the signs of California’s decline.  Beaches I walked with High School dates are no longer safe at night.  Water lines in Los Angeles burst with alarming frequency.  Our roads are approaching gridlock and are littered with potholes.  Electrical cutbacks are common in hot weather.  Water is increasingly scarce, except in very rainy years.  Our primary schools are clearly in decline.  Even California’s higher education system, once the envy of the world, has passed its prime. Places like the University of Texas or University of North Carolina are now real competitors.

    It wasn’t always this way, and it doesn’t have to be in the future.  When I started my career, California was a place of opportunity.  One could have a career, own a home, and raise a family. 

    Not any more – not unless you have a trust fund or a secure pensioned public employee job. 

    That’s why California’s middle class is leaving, looking for opportunity and affordable housing.  The evidence is in the migration data.  Domestic migration has been negative for over a decade.  Perhaps even more telling, only 23 percent of U.S. illegal immigrants are coming to California today, down from about 42 percent in 1990.  Even the lowest skilled newcomers know there’s shrinking opportunity here.

    California has a problem, and it’s high time the political class accepted the fact.

    Two steps need to be taken before any problem can be solved.  You need to recognize you have a problem.  Then you need to identify the problem.  Unfortunately, it appears that among Sacramento’s leadership, only Gavin Newsom even recognizes that California has a problem.  Governor Brown gives lip service to jobs, but like Schwarzenegger before him, identifies the failed command and control policies of the green movement as the source of the new jobs.  Solyndra has become the poster child for this fantastical policy failure.

    California’s economic future is pretty grim, until Sacramento takes off the blinders and admits it has a problem. Until then, things are likely to get much worse before they get better.

    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 illustration by krazydad/jbum.

  • Comparing Perry’s Texas to Romney’s Massachusetts

    Republican primary front-runners Rick Perry and Mitt Romney are each basing a large part of their campaigns on their economic track records. So who is better when it comes to jobs and the economy — Romney or Perry?

    Let’s put each of their states under the microscope to see what the data says. In this exercise we will use Analyst, EMSI’s web-based labor market analysis tool, to help us see the ins and outs of the Massachusetts and Texas economies.

    Notes:
    1. All data, graphs, and tables are from Analyst’s 2011.3 dataset, which is based on BLS, Census, BEA, and nearly 80 other sources.

    2. As an economics firm we want to stress this point — businesses and economic activity create jobs, not politicians.

    3. Gov. Perry (2000-current) and Romney (Massachusetts Governor from 2003-2007) do not have perfectly overlapping times in office, so we are going to consider the 10-year time frame and then look at how the states have performed during the recession, which would tend to reflect the legacy of each politician (e.g., politicians always inherit the blessings or curses of the previous administration).

    4. Performance during the recession is the key point of data we want to look at. Which state is strong when tough times arise?

    TEN-YEAR TRENDS
    Right off the bat we see that the Texas economy is the clear leader. The state grew by 18%, or about 2.2 million jobs, in the last 10 years. Over that same time period Massachusetts grew by 2%, or less than 100,000 jobs.

    (click images to enlarge)

     

    Almost every industry sector in Texas grew from 2001 to 2011. Agriculture, information, and manufacturing were the only ones to actually decline. The big leaders were health care (43% growth, 421,000 jobs), government (17% growth, 282,000 jobs), oil and gas (111% growth, 257,000 jobs), finance and insurance (38% growth, 216,000 jobs), and professional and technical services (29% growth, 210,000 jobs).

    NAICS Code Description 2001 Jobs 2011 Jobs Change % Change 2011 Earnings
    62 Health Care and Social Assistance 985,667 1,407,160 421,493 43% $49,118
    90 Government 1,679,431 1,961,341 281,910 17% $59,455
    21 Mining, Quarrying, and Oil and Gas Extraction 231,809 488,494 256,685 111% $136,302
    52 Finance and Insurance 575,109 791,054 215,945 38% $69,091
    54 Professional, Scientific, and Technical Services 713,722 923,621 209,899 29% $74,784
    72 Accommodation and Food Services 789,913 987,746 197,833 25% $19,814
    56 Administrative and Support and Waste Management and Remediation Services 744,446 932,960 188,514 25% $33,979
    53 Real Estate and Rental and Leasing 410,363 559,112 148,749 36% $31,946
    81 Other Services (except Public Administration) 592,116 708,981 116,865 20% $28,597
    23 Construction 849,097 950,903 101,806 12% $54,438
    61 Educational Services 148,927 214,526 65,599 44% $36,378
    55 Management of Companies and Enterprises 41,840 105,073 63,233 151% $102,137
    71 Arts, Entertainment, and Recreation 171,298 230,177 58,879 34% $24,422
    44-45 Retail Trade 1,350,407 1,400,681 50,274 4% $30,803
    48-49 Transportation and Warehousing 506,512 553,486 46,974 9% $60,395
    42 Wholesale Trade 508,024 552,876 44,852 9% $80,704
    22 Utilities 52,813 55,870 3,057 6% $118,804
    11 Agriculture, Forestry, Fishing and Hunting 345,303 319,410 (25,893) (7%) $20,912
    51 Information 299,481 227,513 (71,968) (24%) $73,610
    31-33 Manufacturing 1,066,622 871,533 (195,089) (18%) $79,460
    Total 12,062,901 14,242,517 2,179,616 18% $53,493
    Source: EMSI Complete Employment – 2011.3

    Massachusetts’ growth sprung primarily from health care (24% growth, 111,000 jobs), professional and technical services (10% growth, 37,000 jobs), educational services  (19% growth, 35,000 jobs), and real estate (27% growth, 34,000 jobs). A big thing to note is that nine industry sectors — utilities, government, transportation, retail trade, management of companies, wholesale trade, information, construction, and manufacturing — lost jobs from 2001-2011.

    NAICS Code Description 2001 Jobs 2011 Jobs Change % Change 2011 Earnings
    62 Health Care and Social Assistance 468,668 579,523 110,855 24% $60,616
    54 Professional, Scientific, and Technical Services 363,592 400,919 37,327 10% $96,534
    61 Educational Services 184,644 220,002 35,358 19% $56,621
    53 Real Estate and Rental and Leasing 125,313 159,096 33,783 27% $32,018
    72 Accommodation and Food Services 249,024 277,782 28,758 12% $22,995
    81 Other Services (except Public Administration) 179,165 203,904 24,739 14% $33,199
    71 Arts, Entertainment, and Recreation 84,064 105,900 21,836 26% $28,814
    52 Finance and Insurance 232,356 253,578 21,222 9% $115,262
    56 Administrative and Support and Waste Management and Remediation Services 212,872 213,893 1,021 0% $39,572
    21 Mining, Quarrying, and Oil and Gas Extraction 2,604 3,398 794 30% $148,741
    11 Agriculture, Forestry, Fishing and Hunting 20,552 20,373 (179) (1%) $33,359
    22 Utilities 12,332 11,383 (949) (8%) $135,669
    90 Government 432,156 426,859 (5,297) (1%) $66,827
    48-49 Transportation and Warehousing 124,887 111,495 (13,392) (11%) $52,693
    44-45 Retail Trade 406,859 393,365 (13,494) (3%) $32,842
    55 Management of Companies and Enterprises 72,884 58,796 (14,088) (19%) $125,760
    42 Wholesale Trade 150,660 134,602 (16,058) (11%) $91,749
    51 Information 122,543 100,471 (22,072) (18%) $100,676
    23 Construction 219,882 195,324 (24,558) (11%) $66,726
    31-33 Manufacturing 398,839 264,887 (133,952) (34%) $94,358
    Total 4,063,896 4,135,549 71,653 2% $63,647
    Source: EMSI Complete Employment – 2011.3

    Since much of the discussion in the Republican primary has to do with the nation’s more recent economic turmoil, let’s refocus our analysis to 2007 – 2011.

    MASSACHUSETTS FACTS
    The current population of Massachusetts is 6.6 million with 4.1 million jobs. The unemployment rate is 7.6%, and average earnings in the state are more than $63,000 per year. The gross regional product (GRP), which is the value of all goods and services produced in a region by all industries, is $378 billion per year.

    In Massachusetts, nearly 80% of the population is White, Non-Hispanic. The age demographics tell us the state is pretty balanced, and educational attainment is high.


    Massachusetts ’07-11

    From 2007-2011, jobs declined by 1% (overall loss of 34,000). All things considered — not bad. The biggest losses were felt in construction and manufacturing (total losses of 82,000 jobs). The biggest gains were in health care (45,000 jobs), educational services (11,000 jobs), professional and technical (11,000 jobs), and accommodation and food services (10,000 jobs).

    NAICS Code Description 2007 Jobs 2011 Jobs Change % Change 2011 Earnings
    62 Health Care and Social Assistance 534,634 579,523 44,889 8% $60,616
    61 Educational Services 209,184 220,002 10,818 5% $56,621
    54 Professional, Scientific, and Technical Services 390,170 400,919 10,749 3% $96,534
    72 Accommodation and Food Services 267,731 277,782 10,051 4% $22,995
    52 Finance and Insurance 245,717 253,578 7,861 3% $115,262
    81 Other Services (except Public Administration) 196,358 203,904 7,546 4% $33,199
    71 Arts, Entertainment, and Recreation 98,450 105,900 7,450 8% $28,814
    22 Utilities 10,653 11,383 730 7% $135,669
    21 Mining, Quarrying, and Oil and Gas Extraction 2,854 3,398 544 19% $148,741
    11 Agriculture, Forestry, Fishing and Hunting 19,934 20,373 439 2% $33,359
    51 Information 100,643 100,471 (172) 0% $100,676
    90 Government 427,688 426,859 (829) 0% $66,827
    53 Real Estate and Rental and Leasing 162,635 159,096 (3,539) (2%) $32,018
    55 Management of Companies and Enterprises 62,367 58,796 (3,571) (6%) $125,760
    48-49 Transportation and Warehousing 116,671 111,495 (5,176) (4%) $52,693
    44-45 Retail Trade 404,423 393,365 (11,058) (3%) $32,842
    42 Wholesale Trade 148,614 134,602 (14,012) (9%) $91,749
    56 Administrative and Support and Waste Management and Remediation Services 227,964 213,893 (14,071) (6%) $39,572
    23 Construction 236,308 195,324 (40,984) (17%) $66,726
    31-33 Manufacturing 306,523 264,887 (41,636) (14%) $94,358
    Total 4,169,521 4,135,549 (33,972) (1%) $63,647
    Source: EMSI Complete Employment – 2011.3

    Also, here is a view of 6-digit (NAICS) industries that grew and declined from 2007-11. In the table above we looked only at 2-digit NAICS. When we use the 6-digit sectors we can see much more specific industry detail. Portfolio management was the highest growing industry from 2007-11 in Massachusetts.


    Here is a list of occupations that grew and declined from ’07-11. These are 5-digit occupations (SOC codes). Consistent with the industry data, the fastest-growing occupation is personal financial advisors.


    TEXAS FACTS

    Texas has a total population of 25.6 million with 14.2 million jobs. The average earnings is $53.5K per year, and the unemployment is 972,000. The unemployment rate is 8.4%, which is a tad higher than Massachusetts’. The state’s GRP is $1.2 trillion per year.


    In terms of demographics, Texas is 46% White, Non-Hispanic, 36% Hispanic, and 11% Black or African American. Educational attainment is lower than Massachusetts. Texas also appears to have a slightly younger population when compared to Massachusetts.


    Texas ’07-11

    From 2007-2011, the Texas economy grew by 3% (391,000 jobs gained overall). The state had huge job gains in oil and gas extraction (56% growth and 175,000 jobs), health care (14% growth and 171,000 jobs), and government (7% growth and 125,000 jobs). Other sectors like finance and insurance, accommodation and food, professional and technical, and educational services all had decent gains. Losses occurred in construction and manufacturing (about 192,000 jobs), retail trade (41,000 jobs or -3%), information (35,000 jobs or -13%), transportation (24,000 jobs or – 4%) and wholesale trade (13,000 jobs or -2%).

    NAICS Code Description 2007 Jobs 2011 Jobs Change % Change 2011 Earnings
    21 Mining, Quarrying, and Oil and Gas Extraction 313,502 488,494 174,992 56% $136,302
    62 Health Care and Social Assistance 1,235,840 1,407,160 171,320 14% $49,118
    90 Government 1,836,081 1,961,341 125,260 7% $59,455
    52 Finance and Insurance 717,799 791,054 73,255 10% $69,091
    72 Accommodation and Food Services 943,336 987,746 44,410 5% $19,814
    54 Professional, Scientific, and Technical Services 892,977 923,621 30,644 3% $74,784
    61 Educational Services 192,643 214,526 21,883 11% $36,378
    55 Management of Companies and Enterprises 83,783 105,073 21,290 25% $102,137
    81 Other Services (except Public Administration) 689,944 708,981 19,037 3% $28,597
    71 Arts, Entertainment, and Recreation 215,084 230,177 15,093 7% $24,422
    22 Utilities 50,935 55,870 4,935 10% $118,804
    11 Agriculture, Forestry, Fishing and Hunting 317,762 319,410 1,648 1% $20,912
    56 Administrative and Support and Waste Management and Remediation Services 934,474 932,960 (1,514) 0% $33,979
    53 Real Estate and Rental and Leasing 564,471 559,112 (5,359) (1%) $31,946
    42 Wholesale Trade 565,616 552,876 (12,740) (2%) $80,704
    48-49 Transportation and Warehousing 577,467 553,486 (23,981) (4%) $60,395
    51 Information 262,342 227,513 (34,829) (13%) $73,610
    44-45 Retail Trade 1,441,632 1,400,681 (40,951) (3%) $30,803
    23 Construction 1,025,977 950,903 (75,074) (7%) $54,438
    31-33 Manufacturing 989,430 871,533 (117,897) (12%) $79,460
    Total 13,851,095 14,242,517 391,422 3% $53,493
    Source: EMSI Complete Employment – 2011.3

    Here is a look at 6-digit industries and 5-digit occupations that grew and declined at the largest clip in Texas from ’07-11. As you can see, oil and natural gas extraction is a very big driver for the state. Under Perry, the state also picked up quite a few local government jobs during the recession.



    CONCLUSION

    Based on job numbers, both candidates do have legitimate claims that their states have done well through the recession. In this comparison — Texas really benefits from the huge grow within oil and natural gas. See this recent interactive display to better visualize this trend.

    When looking at data like this, it is important to keep in mind that the economies of states (and these two states in particular) are quite different in terms of total population, demographics, and industry composition. Both states have some strong qualities, but based on raw numbers, Texas is the obvious choice.

    Rob Sentz is the marketing director at EMSI, an Idaho-based economics firm that provides data and analysis to workforce boards, economic development agencies, higher education institutions and the private sector. He is the author of a series of green jobs white papers. Email Rob with questions at rob@economicmodeling.com.

    Lead illustration by Mark Beauchamp

  • The Demise Of The Luxury City

    The Republican victory in New York City’s ninth congressional district Sept. 13 — in a special election to replace disgraced Rep. Anthony Weiner — shocked the nation.  But more important, it also could have signaled the end of the idea, propagated by Mayor Michael Bloomberg, of New York’s future as a “luxury product.”

    For a decade, the Bloomberg paradigm has held the city together: Wall Street riches fund an expanding bureaucracy that promotes social liberalism and nanny-state green politics. Indeed, Wall Street’s fortune — guaranteed by federal bailouts and monetary policy under both Presidents George W. Bush and Barack Obama — has been the key to the mayor’s largely self-funded political success. Under Bloomberg, Wall Street’s profits allowed city expenditures to grow 40% faster than the rate of inflation. Bloomberg was also able to buy political peace by bestowing raises two to three times the rate of inflation on the city’s unionized workers.

    Now this calculus is falling apart. Layoffs are mounting on Wall Street, while bonuses — the red meat that fuels everything from high-end condos to expensive boutiques and restaurants — are expected to drop 30% from last year.

    The newly Republican ninth district — stretching from south Brooklyn through the upper-middle-class strongholds around Forest Hills, Queens — reflects growing unease in the non-luxury parts of the city. The area is decidedly middle class, but with a median income of $55,000 it is the city’s least wealthy white district. For the most part, its residents have not benefited from Bloomberg’s management nor from Obama’s economic policies.

    Rather, the district reflects the kind of anxiety that is sweeping middle class areas across the country. “These people are worried about their kids and their future,” says Seth Bornstein, executive director the Queens Economic Development Corp. “The fire may not be in the backyard, but it’s around the corner.”

    Like many native New Yorkers, Bornstein sees Manhattan — the epicenter of the “luxury city” — as something of a “fantasy land,” inhabited by those who, despite living in Gotham’s historic core, are “not really New Yorkers.” Most Manhattanites, he notes, did not grow up in New York, and a majority live in single households. They largely either go to school, work in media or Wall Street, or make their livings servicing the rich.

    The ninth district is different socially as well. It is family-oriented. Barely one-third live in single households, compared with a near majority in Manhattan. Unlike the tony Upper East Side or trendy Soho, there are few celebrities or multi-millionaires. Although some of the ninth district’s inhabitants do work in the financial sector, many are tied to industries such as garments, work as professionals, such as doctors or accountants, or own their own small businesses.

    Some Democrats like California Rep. Henry Waxman have another explanation for the vote: greed. “They want to protect their wealth,” he explained, “which is why a lot of well-off voters vote for Republicans.” You almost have to admire the chutzpah of such views from a man who represents Beverly Hills.

    Waxman, of course, is wrong. This election was driven not by desertions of the rich but by the shift to the GOP among largely middle or working class voters. In many ways this election followed the pattern established by Sen. Scott Brown’s stunning 2009 Massachusetts victory, which came largely from middle-income voters. The ninth district’s new representative, Bob Turner, won big in modest Middle Village and South Brooklyn, while losing decisively in the wealthiest precincts such as Forest Hills and some minority, immigrant-oriented enclaves.

    The big story here, as Bornstein suggests, lies in the growing unease about the national and New York economies among large sections of the city’s beleaguered middle class. Despite the enormous wealth generated on Wall Street, New York’s middle class has been fleeing the city at breakneck speed for decades.

    According to the Brookings Institution, New York has suffered the fastest declines of middle class neighborhoods in the U.S.: Its share of middle income neighborhoods is roughly half that of Seattle or the much maligned Long Island suburbs. Twenty-five percent of New York City was middle-class in 1970, but by 2008 that figure had dropped to 16%.

    Even the young, who so dominate parts of lower Manhattan and Brooklyn, do not appear to be hanging around once they get into their 30s, particularly after their children reach school age. One reason: Bloomberg’s much touted school reforms have been, for the most part, ineffective in turning the bulk of the city’s public schools around.

    Ultimately, the basic truth is this: Bloomberg’s luxury city has failed most of its citizens. Despite its self-celebrated “progressive” image, New York has the most unequal distribution of income in the nation. The bulk of the job growth has not been on Wall Street, where employment has declined over the decade, but in hospitality and restaurants, which pay salaries 60% below the city average. In fact, restaurants are now the largest single private employers in Manhattan, with more people serving tables than trading equities.  As the New York Post quipped: “If you can make it here, you can make it anywhere — as a waiter.”

    It gets worse for the poor. One in five New Yorkers lives in poverty. Black male joblessness hovers at around 50%. Overall, New York’s household income, based on purchasing power, ranks 21st in the nation, behind not only such rich areas as San Francisco or Washington, but also places like Houston, Dallas, Indianapolis, Kansas City and even Pittsburgh.

    Ultimately, suggests Jonathan Bowles, president of the Center for an Urban Future, the future of New York’s middle class depends on reducing dependence on Wall Street.  The city needs to focus on industries and niches outside finance, including education, health, design, high-tech services, media and smaller businesses, many of them owned by immigrants.

    Bowles suggests diversification needs to speed up particularly now that Wall Street, the very engine of the “luxury” economy, is sputtering. Such a change will require a new political climate.  Voter engagement and political choice in New York have atrophied under the Medici-like Bloomberg, who has managed to pay off many interest groups with a combination of his own and the city’s money. Combined with a union-financed get-out-the-vote, the choices offered by the city’s once contentious politics have become increasingly constricted.

    But something is stirring in the boroughs.  The district’s voters not only embarrassed their civic betters by voting Republican, but they also demonstrated that New York’s middle class, politically quiescent under Bloomberg, may need to be taken seriously again.

    This gives hope for what Bornstein calls “the real New York” — a place that is neither particularly glamorous nor severely bifurcated between the rich and those who service their needs. With a more diversified economy and family orientation, this unexpected rebellion could represent the first step toward restoring New York’s roots as a city not of luxury but of aspiration.

    This piece originally 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.

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