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  • Recession Job Losses and Recovery in Midwest Cities

    The Windy Citizen pointed me at coverage of metro area job losses in the recession. Here is how the 12 cities I principally cover in this blog stacked up, sorted in descending order of percentage losses:

    1. Detroit; 139,600 jobs; -7.5%
    2. Milwaukee; 44,800; -5.2%
    3. Cleveland; 54,100; -5.1%
    4. Chicago; 206,200; -4.5%
    5. Indianapolis; 40,200; -4.4%
    6. Cincinnati; 42,200; -4.0%
    7. Louisville; 22,900; -3.7%
    8. Minneapolis-St. Paul; 63,100; -3.5%
    9. St. Louis; 43,900; -3.3%
    10. Pittsburgh; 32,800 – 2.8%
    11. Kansas City; 21,900; -2.1%
    12. Columbus, Ohio; 19,600; -2.1%

    A couple things that jump out of me from this are that Chicago and Indianapolis are doing far worse than conventional wisdom views of their overall economic health. Both regions are getting clobbered. The Pittsburgh story gets some additional ammunition, as does my view that Columbus is the next Midwestern star.

    Recession Job Recovery

    So when will the jobs come back? Nobody knows for sure, but an organization called IHS Global Insight has predicted the year in which employment will match its pre-recession peak in various major US cities (via IBJ News Talk):

    • Kansas City: 2011
    • Columbus: 2012
    • Indianapolis: 2012
    • Louisville: 2013
    • Minneapolis-St. Paul: 2013
    • Pittsburgh: 2013
    • Chicago: 2014
    • Cincinnati: 2014
    • St. Louis: 2014
    • Cleveland: After 2015
    • Detroit: After 2015
    • Milwaukee: After 2015

    Visit Aaron’s blog at The Urbanophile.

  • Healthcare: The Cost Of The Greatest Wealth

    This week and over the coming weeks the media and the nation will once again focus on healthcare. Before we launch into the next phase of the argument, though, we should first dismiss a couple of “Red Herring” claims that we spend too much on health care.

    These claims are the ones based on a view of healthcare spending as a percentage of Gross Domestic Product (GDP), or that look at the increase in healthcare spending over time. Proponents say that spending 14 to 17 percent of gross product on health care is evidence that we spend too much. Or, they say that health care spending is increasing at a far faster rate than the economy is growing.

    So what?

    There is no optimal amount of healthcare as a percentage of GDP. Remember, healthcare is a good thing.

    We live far healthier and longer lives today than we did just a few decades ago. The technology is constantly improving, and marginal improvement is expensive. Life expectancy, both at birth and conditional on age, is constantly increasing; our population is getting older. Our income has been increasing, at least it was prior to the recession, and I’m confident that it will eventually resume growing. All this would imply that we would expect to see increasing healthcare spending. As Virgil said, “the greatest wealth is health.”

    That is not to say that there is no waste in our healthcare system today. We do way too much diagnostic testing in the United States. Our doctors work in constant fear of lawsuits. Consequently, they order far too many diagnostic tests and procedures. The problem is that in a U.S. court — long after the fact and with years to reflect — any test that would have diagnosed the problem always looks as if it would have been the right thing to do. This is true even if not one in a thousand doctors would have performed the test in the same situation.

    In contrast, some countries have special courts for the medical industry. These courts are well-versed in the reasonable procedures and diagnostics that competent, reasonable doctors would perform. Consequently, there are fewer suits, smaller judgments, and less money spent on unnecessary diagnostic tests or procedures. Implementing something like this, or some other tort reform, would lead to potentially huge savings.

    In addition, American healthcare is still a paper-based system. Even after just about every other sector has converted to computer-based record-keeping, the medical sector persists in maintaining paper files. There are estimates that as much as a $300 billion could be saved by digitizing medical records while improving service and health care.

    Arthur Laffer, in an August 5, 2009 Wall Street Journal opinion piece, argued that the problem with US healthcare is that the payer of healthcare services and the user are not the same person or entity. He correctly pointed out that this creates a wedge that enables excessive consumption of healthcare. It’s as if you had a brother-in-law who eats hamburgers, French fries and sodas when he pays his own dinner bill, but orders prime rib and wine when you purchase his meal. He may also be willing to use a generic drug if he is paying for his medicine, but will insist on a more expensive name-brand if someone else is paying. Laffer argues that a private, low-cost, high deductible, catastrophic insurance program would be more efficient. Basically, he wants to let the markets work.

    That’s a great idea. But there is no way we will let markets work. Efficient markets would require that we pay for insurance or medical care or go without.

    It is not going to happen. As a nation, we’re not about to let someone suffer or die because they didn’t purchase insurance, or they can’t pay the deductible, or they can’t afford insurance or medical care.

    A market-driven, high-deductible catastrophic plan would work just fine for many people, but it won’t work for everyone. Some people just can’t afford medical care or insurance, and we have lots of potential ways to help them. A progressive negative income tax could provide a minimal standard of living that included healthcare and an incentive to work, but there are other ways. The government could provide medical care or insurance, or it could simply require that medical providers perform an adequate amount of pro-bono work.

    The real problem lies with people who can afford to purchase insurance, but who rationally may choose to be uninsured—call them the intentionally uninsured. A healthy young person could very well elect to be uninsured, even if we were to allow him or her to suffer the consequences of an uninsured accident or disease. Knowing that we are unwilling to let him face those consequences only makes the decision to be uninsured more attractive.

    How to deal with this incentive problem? Require medical financial responsibility, even though the approach would face some challenges. The result could be something parallel to the requirements California and other states have for automobile drivers. To qualify for a driver’s license, or to register your vehicle, you have to have insurance. Even with these requirements in place, I don’t know of anyone who drives without additional insurance protection for encounters with uninsured motorists.

    Of course, you don’t need a license to live. Knowing that medical treatment is available if needed, many would go uninsured. The question of how we should deal with the intentionally uninsured when they come into the emergency room is a real problem with important implications. These are people who would contribute more than they would consume, and cut the cost to other recipients. It would also increase total spending on health care, as the people would access service more often if they were insured.

    But that’s OK… health care is a good thing.

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

  • American Hobbit Houses

    Soon after President Obama took office, a proposed plan to “develop federal policies to induce states and local communities to embrace ‘smart growth’ land use strategies” was announced.

    This “Livable Communities Program” is intended to save land and clean up the environment. It is seen as encouraging denser housing arrangements to deter automobile use and accommodate the transit industry, according to goals set by the Secretaries of HUD, EPA and Transportation.

    One potential downside to this plan comes from the transit industry’s Moving Cooler study, which argues that the Administration’s greenhouse gas reduction proposals “may result in higher housing prices, and some people might need to live in smaller homes or smaller lots than they would prefer.”

    If you want to see how this might work, look at the U.K., which imposed strict land regulations in the Town and Country Planning Act in 1947. This effectively froze the supply of land for a growing population, leading to soaring house prices, particularly in the area around London.

    With the land available for development frozen, house size decreased as well, leading to new British homes garnering the nickname of “Hobbit houses.” New British homes are a little more than a third as big as new U.S. homes (818 sq. feet compared the U.S.’s 2,303 sq. feet).

    The question is whether or not the Federal government should be granted the ability to limit housing standards. Currently, this responsibility lands in the lap of state and local governments.

    Can President Obama afford to add the President of the (Hobbit) Homeowner’s Association of the United States to his title?

  • Don’t Go Looking for Work in California

    The current economic recession has tarnished the Golden State’s employment opportunities in a major way.

    A report released on Sunday by the California Budget Project says that two of five working-age Californians do not have a job.

    The level of unemployment has not been this high since February 1977. In fact, the study found that “California now has the same amount of jobs as it did nine years ago.” The only difference? In 2000, the state was home to 3.3 million fewer working age people than today.

    The nation is not faring much better, as the U.S. Labor Department reported last Friday that the nation’s jobless rate had climbed to 9.7 percent, the highest since 1983. California’s unemployment stands at over 11 percent.

  • The Curse of my.barackobama.com

    President Obama’s campaign was indeed a revolution, not one of policy, but rather a dramatic change in how candidates communicate with voters. It is a reality that helped make Barack Obama our chief executive, but now threatens his ascendancy as well.

    It all started with Obama’s hiring of Chris Hughes, one of the founders of Facebook, as part of his campaign team. Hughes’ job was to develop an online community for the campaign. He was largely dismissed by seasoned political operatives more comfortable with conventional media and campaign tactics.

    David Plouffe, Obama’s campaign manager, gave an honest assessment saying, “Technology has always been used as a net to capture people in a campaign or cause, but not to organize. Chris saw what was possible before anyone else. I still can’t quite wrap my mind around it.”

    Hughes built for the Obama campaign the ability to create and manage content and conversations with vast numbers of people in mere seconds. With an entry into Facebook, video download, or link to information the Obama campaign could shape the opinions of millions of people across America, answer criticisms, and organize campaign events.

    The results of Hughes work was reported on Fastcompany.com: “By the time the campaign was over, volunteers had created more than 2 million profiles on the site, planned 200,000 offline events, formed 35,000 groups, posted 400,000 blogs, and raised $30 million on 70,000 personal fund-raising pages.”

    Hughes had given Obama the ability to do things in real time. He showed the inherent weakness of newspapers as they were reporting what seemed like yesterday’s news. He was out in front of network nightly news programming. He made the Obama campaign a source of news that rivaled networks like never before in history. In short, he was shaping opinion at its source.

    In some ways this was a departure from the ways campaigns were waged in the past: staging huge armies and fighting battles on defined battlefields. The Obama campaign was more like a guerrilla force whose battlefield was at the time and place of their choosing. It bypassed staging. It ran lean. It organized by word of mouth and “buzz” among a new breed of political “activist” who understood the potential of new technology. Obama provided the opportunity to take the new political technology for a “test drive”.

    Fast forward nine months and the same technology that helped Obama win his election is now serving to undermine his policy initiatives. The ability to go viral was not proprietary of MyBO.com.

    People showed how to take marketing viral, like Mark Hughes in his book “Buzzmarketing”. Hughes engineered the successful takeover of Half.com using “buzz” generated from renaming a town in Oregon. He made ads specifically for YouTube rather than networks. One ad, for the “duckbill” dust mask, went viral and sales shot through the roof. You can still find the ad on YouTube. Hughes understood how conversations were changing. He knew that sending content to someone online could quickly go viral when inserted into that person’s social networks. This is the foundation of “buzz.”

    President Obama won several quick and decisive victories early in his presidency with stimulus, omnibus budget, and “cap and trade” legislation. The President’s goodwill ran high in the early months. His resounding campaign victory using new tactics to reach voters held Members of Congress in awe of both his political and fund raising abilities.

    But, the same technology that Obama developed to win an election just nine months ago is now being successfully used to organize grassroots opposition to his policies. What stated as “Tea Parties” across America has developed into a broad based uprising opposing Obama’s health care initiative. The opposition has found its voice and it is spreading its word virally. These communications are quickly outpacing our political leader’s ability to spin issues.

    John McCain recently commented that there was a “peaceful revolution taking place.” He went on to amplify this point by saying, “There is a grass-roots uprising the likes of which I have never seen. There’s anger; there’s concern about the future. There’s concern about the generational theft that we’ve committed by running up unconscionable and unsustainable deficits.”

    The usual tactics to stem the latest grassroots tide are not working. The more politicians talk down the protesters defining them as “un-American” the more energy it provides. Sarah Palin’s post on her blog that the health care bill contained “death panels” worked virally through networks with resounding speed. The result was the Senate removed the provision (end of life counseling) from its bills rather than risk a protracted fight in cyberspace.

    How is this happening? People are organizing around information in real time. Visit Drudge Report, Huffington Post and Politico every day and you can read and see politics happening in every corner of America. With YouTube you can be there at a town hall meeting hosted by Barney Frank on the left or Michelle Bachman on the right. You can take this content and send it into your social networks like Facebook, Linkedin, MySpace or hundreds of other platforms. Ordinary Americans can now instigate discussions, mold and change opinion and do it all under the radar. This is fundamentally changing our politics.

    President Obama and Congress both now have to deal with the curse of MyBO.com. Social networking has enabled Americans to organize in new ways. Grassroots and community organizing are no longer the sole domain of the political left. In real time every misstep and piece of misinformation works its way into public dialogue on blogs, YouTube and websites where political thought is collected, dispersed and refined.

    The days of politics as usual are over. The Obama team will have to play the game under a set of rules that have not all been written yet. This new era in politics will be much more open and subject to more public scrutiny than at any time in history.

    The same communications tactics that won President Obama an election in 2008 may prove to be his greatest challenge in building public consensus for action going forward. In the age of “buzz” our young President will face challenges like none other. His greatest challenge may be in learning how to tame and control the inherently unruly politics of the information age.

    Dennis M. Powell is president and CEO of Massey Powell, an issues management consulting company located in Plymouth Meeting, PA.

  • Executive Editor JOEL KOTKIN in Forbes regarding green jobs

    “Nothing is perhaps more pathetic than the exertions of economic developers and politicians grasping at straws, particularly during hard times. Over the past decade, we have turned from one panacea to another, from the onset of the information age to the creative class to the boom in biotech, nanotech and now the “green economy.”

    Joel in Forbes

  • Executive Editor JOEL KOTKIN on Politico regarding the culture war

    “Those who argue that the culture wars are over almost invariably conclude, as political scholar Joel Kotkin recently wrote in Forbes, that the battle has ended “mostly in a rout of the right-wing zealots who waged it.”

    Joel on Politico

  • Executive Editor JOEL KOTKIN in the Victorville Daily Press

    ““What happened to Victorville and Apple Valley and those places as a whole is something we have to look at as a way to re-invent themselves and basically look at how you re-align your economy,” said Joel Kotkin, an international authority on economic, global, political and social trends.”

    Joel on VV Daily Press

  • Contributing Editor SUSANNE TRIMBATH interviews on Beyond the Sound Bite

    “My interview with the CEO and Chief Economist of STP Advisory Services includes her libertarian perspectives on the virtuous circle, the risks in the Fed’s exit strategy, key consequences of financial innovation, and the next global financial crisis: public debt. Dr. Trimbath is also the author of ‘Beyond Junk Bonds: Expanding High Yield Markets’.”

    Susanne on Beyond the Soundbite

  • Executive Editor JOEL KOTKIN on Dallas Chamber Blog regarding best cities

    “In another Forbes story entitled World Capitals of the Future, Joel Kotkin writes ‘North America boasts at least three genuine emerging world-class cities: Calgary, Houston and Dallas… Houston and Dallas grew more than any other metropolitan region in the country; over the past decade, their populations have increased six times more rapidly than New York, Los Angeles, Chicago or San Francisco.’”

    Joel on Dallas Chamber Blog