Tag: middle class

A Racially Polarized Election Augurs Ill for Barack Obama’s Second Term

President Obama, the man many saw as curing the country’s “scar of race,” won a second term in the most racially polarized election in decades. Overall, the Romney campaign relied almost entirely on white voters, particularly in the South and among the working class. Exit polls showed that almost 60 percent of whites voted for Romney. The former Massachusetts governor even won the majority of whites in California and New York.

In previous elections, including 2008, such a performance would have been enough to assure a GOP victory. But America’s demographics are shifting, with racial minorities constituting upwards of one quarter or more of the vote, and growing.

Essentially, Obama’s margin of victory was made up not only by a strong base of African-Americans but also Latinos, who appear to have voted for him more than two to one, a slight improvement from his 2008 performance. And for the first time, Latinos accounted for one in ten voters, up from 8 percent four years ago.

But—despite his poetic, inclusive victory speech—this alliance of people of color could create a potential tragedy for our democracy. This is not because of the final result, but because it suggests that, unless there is some massive change in GOP politics, we may see a re-hardening of politics along racial lines.

The election showed the efficacy of the new racial politics. Appeals to Latinos paid off massively, even though it may have cost the president some white votes. If Latinos remain solidly Democratic, the new racial outcasts will increasingly be middle- and working-class whites.

The Democrats will continue to press race, as some Republicans did in the past (remember Willie Horton?), because it works. The president’s race-conscious campaigning this year was assisted in part because the media did not stress his ties to abrasive reverends like Al Sharpton and Joseph Lowery. He also did well with his Latino gambit since, once again, the media, including many conservatives, were sympathetic to amnesty.

So where does this go from here? Political revolutions—particularly successful ones—tend to shift rapidly into excess. With the recalcitrant white vote seemingly neutralized, the Obama team can now ever more openly embrace a multicultural politics of the kind Bill Clinton was careful to avoid. One sure voice pushing for race-centered politics will come from Attorney General Eric Holder, who largely embraces the idea that affirmative-action policies should be continued until Latinos and African-Americans achieve social and economic parity with whites.

Affirmative action and other race-sensitive policies—promoted even by ersatz minorities like new senator Elizabeth Warren—could characterize our politics for the next decade or more. These divisions are already evident among millennials, where whites, particularly evangelicals, have become increasingly alienated from the president. White millennials, who backed Obama in 2008, went with Romney this year 52-44, according to an exit poll—a particularly troubling shift. The gap between white and minority millennials this year appears to be as high as 30 points—a bad augur.

And racial divisions may become worse if the economy continues to sputter. President Obama may be beloved among Latinos and African-Americans, but his economic policies have not been friendly to them. This is particularly true, ironically, for blacks, who, as Walter Russell Mead among others have pointed out, have fared worst of all in the recession. This situation could be exacerbated by growing financial stress in cities and states, whose governments have traditionally been major employers of black white-collar workers.

Unless growth comes back, this means minorities, particularly African-Americans, could become ever more strident in their demands. Their appeal to an administration—particularly now that it faces no new elections—that at times seems sympathetic to a racialized agenda could be stronger than could be imagined just a few years ago. This could end badly. In the long run, history has shown, groups that look too much to government (the Irish, for example) do not fare as well as those, such as yesterday’s Jews and today’s Asians, who look more to education and entrepreneurship.

Alienation among whites is also likely to increase. Like its minority counterpart, the white working class—including millennials—has also suffered in the recession, and suffers double-digit unemployment. Although this entire generation can be considered screwed, young whites—and young white males—are particularly so. Not only have many been left behind by the economy, but they have been deemed less worthy of assistance by the emerging new ruling class.

In many ways, this has ominous implications. To date America’s white working and middle classes have not drifted toward the kind of nativist movements that have risen in France, Germany, and, most recently, Greece. Yet a group that feels ignored by the establishment, and feels increasingly like second-class citizens in their own country, can drift in that direction.

The great tragedy here: the major challenges facing America are not primarily racial. They include stimulating economic growth for the broadest portion of our population. We need better jobs, roads, and bridges and less symbolism or redress for past sins. If politicians think the way to success is to open the scar of race, we will create the kind of politics that will undermine hope for our future success.

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

This piece originally appeared at The Daily Beast.

Voter sign photo by Bigstock.

November 7, 2012
Despite the Great Recession, Obama’s New Coalition of Elites Has Thrived

The middle class, we’re frequently told, decides elections. But the 2012 race has in many ways been a contest between two elites, with the plutocratic corporate class lining up behind Mitt Romney to try and reclaim its position on top of the pile from an ascendant new group—made up of the leaders of social and traditional media, the upper bureaucracy and the academy—that’s bet big on Barack Obama.

As recently as 2008, the Wall Street plutocrats were divided, as Obama deftly managed to run as both the candidate of hope and change and the candidate of the banks. But this year, the vast majority of the corporate ultra-rich have backed Romney, who after all is one of their own, his top five sources of donors all financial giants: Goldman Sachs, Bank of America, Morgan Stanley, Credit Suisse, and Wells Fargo. As The Wall Street Journal memorably noted, in 2008, no major U.S. corporation did more to back Obama than Goldman Sachs—and in 2012, none has done more to help defeat him. Those titans, along with the powerful and well-heeled energy sector, have placed most of their bets on the Republican.

But don’t mourn too much for Obama, who’s held his own in the cash race by assembling a new, competing coalition of wealthy backers, from the “new hierarchies of technical elites” that Daniel Bell predicted in 1976 in The Coming Of Post-Industrial Society. For that group, Bell wrote, nature and human nature ceased to be central, as “fewer now handle artifacts or things” so that “reality is primarily the social world”—which, he warned, “gives rise to a new Utopianism” that mistakenly treats human nature as something that can be engineered and corrected by instruction from their enlightened betters. This approach, although often grounded in good intention, can easily morph into a technocratic authoritarianism.

Along with Hollywood, Obama’s big donors have come from the tech sector, government, and the academy—with his top five made up of the University of California, Microsoft, Google, the U.S. government, and Harvard. Tech heavyweights such as Craigslist founder Craig Newmark and Facebook COO Sheryl Sandberg have given maximum donations to the president, as have Eric Schmidt and four other top executives at Google.

These idea wielders make fortunes not through tangible goods but instead by manipulating and packaging information, and so are generally not interested in the mundane economy of carbon-based energy, large-scale agriculture, housing, and manufacturing. They can afford to be green and progressive, since they rarely deal with physical infrastructure (particularly within America) or unions or the challenges of training lower-skilled workers.

There is a growing synergy between science, academia, and these information elites. Environmental policies pushed by the scientific community not only increase specialists’ influence and funding, but also the emergent regulatory regime expands opportunities for academicians, technocrats, and professional activists. It also provides golden opportunities for corporate rent seeking, particularly among those Silicon Valley figures involved in a host of heavily subsidized “green” ventures, most famously Solyndra.

In many senses, we are seeing a “progressive” version of the unlamented John Edwards’s two Americas. Much of the U.S. is struggling, but the Clerisy has thrived. Between late 2007 and mid-2009, the number of federal workers earning at least $150,000 more than doubled.

As government has grown even while the economy staggers, the direct and indirect beneficiaries of that growth have hitched their carts to the administration. Many professors have been protected by tenure, even at hard-hit public institutions. Foundation and NGO heads, financed by philanthropy—much of it from often left-leaning Trustifarian inheritors—have remained comfortably secure, as have their good workers. And Federal Reserve chair Ben Bernanke’s money policies have funneled cash from return-starved investors into the coffers of tech and social-media companies.

There’s an old name for this new group of winners: the Clerisy, which British poet Samuel Coleridge defined in the 1830s as an enlightened educated class, made up of the Anglican church along with intellectuals, artists, and educators, that would school the rest of society on values and standards.

But in many ways the New Clerisy most closely resembles the First Estate in pre-revolutionary France, serving as the key organs of enforced conformity, distilling truth for the masses, seeking to regulate speech and indoctrinate youth. Most of Obama’s group serves, as Bell predicted, a “priestly function” for large portions of the population.

This post-industrial profile has shielded the post-industrial elite from the harsh criticism meted out to Wall Street grandees and energy executives by green activists, urban aesthetes, and progressive media outlets. Steve Jobs, by any definition a ruthless businessman, nevertheless was celebrated at Occupy Wall Street as a cultural icon worthy of veneration.

There are of course libertarians and even traditional conservatives in academia, the media, the think-tank world, Silicon Valley, and even Hollywood. But they constitute a distinct minority. For the most part, the members of the groups that make up Obama’s Clerisy, like any successful priestly class, embrace shared dogmas: strongly secular views on social issues, fervent environmentalism, an embrace of the anti-suburban “smart growth” agenda, and the ideal of racial redress, of which Obama remains perhaps the most evident symbol.

As befits a technological age, the New Clerisy also includes now orthodox portions of the scientific community—figures such as President Obama’s science adviser John Holdren, NASA’s James Hansen, and the board of the U.N.’s Intergovernmental Panel on Climate Change. These secular clerics have been extraordinarily influential about global warming, primarily advocating limited consumption by the lower orders.

Energy marks the clearest demarcating issues between the plutocrats and the Clerisy. The regime of ever higher energy prices with its inevitable immediate impact of slower growth—long preferred by environmentalists and openly espoused by Energy Secretary Steven Chu—represents no real threat to the Clerisy and presents a boon to the “green” capitalists. Yet the rising hyper-regulatory state threatens to slow the overall economy, as it has in California, and to wreak havoc on the largely suburban, exposed middle and working classes.

But energy is not the only issue dividing the two elites. The Clerisy—as can be seen clearly in the secular mecca of California—also seeks to impose mandates on more and more of private decision making, whether shaping college admissions and the composition of corporate boards, as well as basic choice in everything from housing types to food consumption.

The Clerisy often employs populist rhetoric, but many of its leading lights, such as former Obama budget adviser Peter Orszag, appear openly hostile to democracy, seeing themselves as a modern-day version of the Calvinist “elect.” They believe that power should rest not with the will of the common man or that of the plutocrats but with credentialed “experts,” whether operating in Washington, Brussels, or the United Nations.

This authoritarian tendency, often perceived as arrogant, has fueled revulsion among large parts of the nation, as evidence by the Tea Party 2010 sweep. The continued hostility of the bourgeois masses to the Clerical agenda appears to be helping Romney solidify his support in the countryside, the suburbs, and smaller cities.

Of course, Romney himself is the very opposite of a populist. As president, he would offer four years of technocratic, corporate power. Yet at the same time, a Romney administration—contrary to the claims of Democratic operatives and at times also the mainstream media—would not embrace the savage worldview of Pat Buchanan, Sara Palin, or even Rick Santorum. It would be establishmentarian in a “sensible shoes” kind of way. Mormonism, as an old friend raised in the faith told me, combines “a Pentecostal theology with an Episcopalian mentality.” Expect something like George H.W. Bush, with a religious twist.

The prospect of four years of plutocratic rule under Romney is no cause for celebration for those who would like to see greater social justice and reduced inequality. But it may prove less damaging to the country than allowing Obama’s new, secular priesthood to wreak damage on the economy that could take decades to unwind.

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

This piece originally appeared at The Daily Beast.

Barack Obama photo by BigStockPhoto.com.

November 1, 2012
The Swaps of Damocles
"Privileged people don’t march and protest; their world is safe and clean and governed by laws designed to keep them happy…." Michael Brock in John Grisham’s The Street Lawyer (Doubleday, 1998).

"There can be nothing happy for the person over whom some fear always looms…” Cicero, Tusculan Disputations 5.62, via Wikipedia.com

If you were fearful after Wall Street decimated your life-savings in September 2008 then you should know that the sword of Damocles remains above your head.

Absolutely nothing of any significance has changed. Not rules, laws or regulations. Not government oversight or external auditing. Nothing. What happened to our financial well-being in the Fall of 2008 can happen again tomorrow. If anything is being done, it is being expertly designed to make things worse for Main Street and better for Wall Street. When the tech bubble burst in March 2000, the Federal Reserve dropped dollar bills from helicopters and inflated the housing market. At least that time around, it was obvious where the next bubble would come. In an effort to hide the inflation this time around, the Fed is pumping money into dark corners of finance where it will eventually impact everything everywhere.

First, a quick recap: During 2007, mortgage-backed bonds began failing faster than actual mortgages. Wall Street wrote bonds faster than Main Street needed mortgages – two bankruptcy judges estimated that one-third of the bonds didn’t have mortgages backing them.

Meanwhile, insurance companies like AIG were writing credit default swaps even faster – some say there were as many as 15 swaps for every bond (by value). In 2008, AIG was unable to pay off on the credit default swaps (like insurance contracts) they wrote for the Wall Street bankers. The bankers had named themselves beneficiaries and they began cashing in – again – when the whole thing went up in flames.

Then-Secretary of the Treasury Hank Paulson went to Congress and said the world would end if taxpayers did not give him $750 billion to bailout the banks. Congress said, “Sure, why not, you seem like a nice guy” and the Wall Street Bailout was signed into law by George W. Bush on October 1, 2008. In the months that followed, we learned that the Federal Reserve topped off the Wall Street tanks with trillions more dollars – a lot of which went to foreigners and private companies not under their regulatory purview. Since then, Federal Reserve Chairman Ben Bernanke has been dropping dollar bills out of helicopters by buying more and more mortgage un-backed bonds from Wall Street because – well, no one is quite sure why he is doing this.

Eventually, Senator Chris Dodd (D-CT) and Representative Barney Frank (D-MA) got their names attached to a new public law, which President Obama signed on July 21, 2010 – about two years after the bailout – that was supposed to reform Wall Street and protect Consumers. Five months after the signing, Sen. Dodd announced his retirement (not long after it was made public that he and several Senators received very friendly terms on a mortgage from sub-prime mortgage bond King Angelo Mozilo of Countrywide). Rep. Frank will not seek reelection in November 2012. Neither Dodd nor Frank planned to be around when the bill is actually effective. You see, a lot of Dodd-Frank was only to require that someone else do studies, write reports and propose rules. Less than half of the rules were required to be written before Rep. Frank leaves office – Dodd left office before any action was required under the public law with his name on it.

Both Dodd and Frank are retiring with full pensions, but the same cannot be said about the public law with their names on it. As of September 21, 2012, about as many Dodd-Frank rules have been proposed as there are mortgages backing those mortgage-bonds the Fed is buying. According to a review by New York law firm Davis Polk (as of September 4, 2012):
- Of the 398 total Dodd-Frank rulemaking requirements:
- Of the 247 rulemaking deadlines that have passed:
So far as I was concerned, the only actual success of Dodd-Frank came from an amendment which required the Federal Reserve to disclose exactly to whom they gave the bailout money – information on 21,000 transactions valued at $16 trillion that Fox News, Bloomberg and Rolling Stone Magazine sued to get after the Chairman and Vice Chairman of the Fed refused to reply to questions from Congress. Turns out the Fed officials went from sins of omission to sins of commission – Bloomberg reported in December that they hid billions of dollars in loans from the mandated reports. Despite now knowing that the Federal Reserve is giving money to unregulated companies with no means of retrieving it, the U.S. public – outside of a faithful few Occupy Wall Street protestors still out there – have failed to notice or react. Hence, nothing has changed that would prevent a repeat of the events that precipitated the 2008 bailouts from occurring again tomorrow.

“But wait! That’s not all!” as they say in late-night TV infomercials. More than ignoring the law, more than delaying the reforms, Wall Street is now actively working to get new laws written to exempt themselves from Dodd-Frank – which, we thought, was specifically written to reform their activities. On September 19, H.R. 2827 was passed by Congress to exempt from any Dodd–Frank rulemaking the very activity that is bankrupting some US cities and states and counties.

The law they are now exempted from is the one that would require them to accept legal responsibility for putting the best interests of the municipalities and taxpayers first – a blanket requirement for fiduciary duty that already exists but is consistently ignored by the “survivors of Wall Street survivors of the financial crisis” as they are called by William D. Cohan, author of the New York Times bestseller House of Cards: A Tale of Hubris and Wretched Excess on Wall Street. Cohan emphasizes that bribing clients like Jefferson County is not new – although it seems evident that the problem may be more wide spread now than ever before in US history. Jefferson County (AL) may be the best known – bankruptcy followed on the heels of bribes and billions of dollars worth of toxic swap deals. The Wall Street banks not only bribe officials to commit municipal taxpayers to financial obligations they can never repay, they also pay competing banks so they can charge higher fees and interest rates. This breaches the simple trust you are entitled to expect even from used car salesmen (in states with “Lemon Laws”) – but no such protection is afforded anyone who has to deal with Wall Street.

In the end, we are all required to deal with Wall Street. This is a danger more real, and more imminent, than anything the world may ever have faced. It is as if we have been told that an asteroid the size of Texas is barreling toward Earth and Ben Bernanke hit the button that launched the nuke — that missed. It’s still coming. Wall Street remains unreformed and consumers of financial services remain unprotected.

Susanne Trimbath, Ph.D. is CEO and Chief Economist of STP Advisory Services. Dr. Trimbath’s credits include appearances on national television and radio programs and the Emmy® Award nominated Bloomberg report Phantom Shares. She appears in four documentaries on the financial crisis, including Stock Shock: the Rise of Sirius XM and Collapse of Wall Street Ethics and the newly released Wall Street Conspiracy. Dr. Trimbath was formerly Senior Research Economist at the Milken Institute. She served as Senior Advisor on United States Agency for International Development capital markets projects in Russia, Romania and Ukraine. Dr. Trimbath teaches graduate and undergraduate finance and economics.
October 23, 2012
Here’s Why People Don’t Think We’re in a Recovery

The most recent jobs report was again below consensus. With fewer than 100,000 new jobs, unemployment fell only because people continue to leave the labor force in huge numbers. People are discouraged, and many don’t believe we are in a recovery. Why would they think that we aren’t in a recovery? After all, GDP is above its pre-recession high, and we hear all the time about how many jobs have been created over the past couple of years.

People think we’re still in a recession because fewer of them have jobs than prior to the recession. Below is a chart showing total non-farm U.S. jobs since 2000. Today, we have millions fewer working than we did in 2007:

People think that we are in a recession because they are poorer than they were prior to the recession. As the following chart shows, Americans’ wealth is down a lot. The average American’s wealth is down $39,000 or about 16 percent from its pre-recession high in 2005 dollars. That is on average every man, woman, and child is $39,000 poorer than they were at the beginning of the recession. An average family of four is $156,000 poorer than it was just a few years ago.

Not only are Americans poorer than they were at the beginning of the recession, their income is down too. Real (inflation adjusted) GDP may be climbing, but all of those gains are a result of increased population. Real-per-capita GDP (the source of income) is still down more than $1,000 in 2005 dollars.

Americans are poorer than they were, and their income is lower, and they are out of work or they know someone who is out of work. Of course they don’t believe we are in a recovery. The real question is that why, when things are this bad, does the chattering class spend its time debating trivial topics, such as which of the presidential candidates mistreats dogs the most?

I think the answer is that the chattering class isn’t out of work, and they don’t know anyone who is out of work. Maybe they know a banker who lost her job, but being a banker, she was probably evil. So, no worries.

This recession has hit sectors like construction and manufacturing disproportionally hard, and people who work in these sectors are not well represented in the chattering class. Small businesses have also been badly hurt, and they too are poorly represented in the chattering class.

Other sectors have been hurt far less. Education, healthcare, government, and professional services have each faced challenges, but these sectors’ job losses have been small compared to the most hard-hit sectors.

One result of the different patterns of job losses across sectors is that we’ve seen an increase in income inequality. Even worse, the increased inequality may be accompanied by declining upward mobility. Income inequality without upward mobility is prescription for social trouble and slower economic growth. Calls for income redistribution are only the beginning.

Huge numbers of young people have failed to find jobs. Many are living with their parents at ages far beyond what was normal just a few years ago. Unemployed and disillusioned young people are another prescription for social trouble.

What are our leaders doing? Not much. Congress is gridlocked and the President is campaigning. The republicans call for tax cuts and spending cuts. The democrats call for increased spending and tax increases. Neither plan will work.

The FED is trying to help. It has instituted QE3, promising to purchase $40 billion in mortgage backed securities every month until economic conditions improve, whatever that means. This will not do anything. The FED has run out of bullets. Policy now is all about convincing themselves and everyone else that they are doing something.

Our deficit is huge. It’s so large that if we were to cut all defense spending and cut all social security spending, we would just about eliminate the deficit. But at what a cost! We’d get rid of every soldier, gun, ship, and airplane. We’d cut Granny off from her monthly check.

We’re not going to do that. We’re not going to cut the budget enough to get rid of the deficit. So, give it up. Budget battles on this scale are disastrous for democracies. Best not to do it.

Government spending is a problem. That’s for sure, but you can’t fix it by cutting the spending. That sounds wrong, I know, but the dynamics of democracy won’t let it work.

Tax policy won’t do it either. You can’t tax yourself to prosperity, and cutting taxes won’t help without a whole slew of complementary policies. Increased spending won’t help. The problem is that government is already too big relative to the economy.

Government at all levels is now about 37 percent of the economy. This is higher than it was during World War Two. It needs to become smaller as a percentage of the economy, but not by cutting.

What we have to do is cap government spending on a real-per-capita basis. We just keep spending what we’re spending per person, even after adjustment for inflation. That way, there are no losers. It should be relatively easy to gain support for a simple cap.

Then, you grow your economy. How to do that is another big topic. But, we know the outlines: Increase immigration. Evaluate regulations for efficiency and economic impact. Restructure the tax code to maintain productive incentives. Restructure the safety net to improve incentives. Restore incentives to education. Remove barriers to trade.

That is a big task, but it is a lot easier than cutting the budget as much as would be required. It’s also a lot easier than suffering through a decade of anemic growth. The benefits would be big too. We’d be setting the stage for persistent prosperity.

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.

Unemployment photo by BigStockPhoto.com.

September 27, 2012
The Hollow Boom Of Brooklyn: Behind Veneer Of Gentrification, Life Gets Worse For Many

After a decade of increasingly celebrated gentrification, many believe Brooklyn — the native borough of both my parents — finally has risen from the shadows that were cast when it became part of New York City over a century ago. Brooklyn has gotten “its groove back” as a “post-industrial hotspot,” the well-informed conservative writer Kay Hymowitz writes, a perception that is echoed regularly by elements of a Manhattan media that for decades would not have sullied their fingers writing about the place.

And to be sure, few parts of urban America have enjoyed a greater public facelift — at least in prominent places — than New York’s County of Kings, home to some 2.5 million people. The borough is home to four of the nation’s 25 most rapidly gentrifying ZIP codes, notes a recent Fordham study. When you get a call from the 718 area code these days, it’s as likely to be from your editor’s or investment bankers’ cell as from your grandmother.

Yet there’s a darker side to the story. This became clear to me not long ago when driving with my wife and youngest daughter to a friend’s house in the Ditmas Park section of Flatbush, one of the finest exemplars of urban renaissance in the country. We encountered a huge traffic jam on the Belt Parkway, so we exited on Linden Boulevard. For the next half hour we drove through an expanse of poverty, public housing and general destitution that hardly jibes with the “hip, cool” image Brooklyn now projects around the world.

A look at the numbers shows this was not an isolated experience. Despite the influx of hipsters and high-income sophisto professionals, Brooklyn is home to one of New York State’s poorest populations, with over one in five residents under the official poverty line, roughly 50 percent above the state average. This likely understates the problem since the cost of living in the borough is now the second-highest in the nation to Manhattan, surpassing even high-tone San Francisco.

Overall, despite some job gains, the borough’s unemployment rate stood at 11 percent this summer, up from 9.7 percent a year ago and well above the national average. Much of recent job growth has been in lower-wage industries, notes Martin Kohli, chief regional economist with the Bureau of Labor Statistics in New York City. Despite a much celebrated start-up scene, some 30,000 of the 50,000 jobs created since the recession have been in the generally low-wage health care and social assistance sector, with another 9,000 in the hospitality industry.

Poverty citywide, meanwhile, has been rising for three years running and the real Brooklyn, roughly half non-white, remains surprisingly poor. Brooklyn’s median per capita income in 2009 was just under $23,000, almost $10,000 below the national average.

So what’s going on here? Urban historian Fred Siegel, a longtime Brooklyn resident, sees a classic tale of two cities. “Brownstone and Victorian Brooklyn is booming,” he says, due in part to uncle Ben Bernanke‘s inflationary policies, which have bailed out the Wall Street banks whose profits are the bedrock of New York City’s prosperity. This money has now spread to those parts of “Manhattanized” Brooklyn closest to the core of the Big Apple, with bankers, lawyers and the like opting to settle in more human-scale neighborhoods.

But lower middle-class Brooklyn “is pockmarked with empty stores,” Siegel notes. With its once robust industrial- and port-based economy shrunken to vestigial levels, opportunities for Brooklynites who lack high-end skills or nice inheritances are shrinking. Some other areas, like Bensonhurst and Sheepshead Bay, have been revived through immigration.

Jonathan Bowles, president of the New York-based Center for an Urban Future, sees a divide between, on the one hand, “the creative class” and some immigrant neighborhoods, and on the other, “the concentrated poverty” in many other struggling areas like Brownsville (where my mother grew up) and East New York. “There are clearly huge swaths of Brooklyn where you don’t see gentrification and there won’t be anytime soon,” Bowles observes.

Part of the problem is structural. Many of Brooklyn’s working-class commuters — particularly in the eastern end of the borough — depend on a transit system designed to funnel people into the giant office clusters of Manhattan. Those left looking for work in the borough, often in low-paid service jobs, face long commutes or have to get a car, a big expense in a city with ultra-high rents, taxes and insurance costs.

Mayor Michael Bloomberg’s administration identifies itself closely with Manhattan’s “luxury city” economy. Focused on finance, media and high-end business services, this approach does not offer much to blue-collar Brooklyn. New York over the past decade has suffered among the worst erosions of its industrial base of any major metropolitan area. Brooklyn alone has lost 23,000 manufacturing jobs during that time.

Inequality in the Bloombergian “luxury city” is growing even faster than in the nation as whole. In fact, the gap between rich and poor is now the worst in a decade. New York’s wealthiest one percent earn a third of the entire city’s personal income — almost twice the proportion for the rest of the country.

So while artisanal cheese shops serve the hipsters and high-end shops thrive, one in four Brooklynites receives food stamps.

We see similar patterns across even the most vibrant of the nation’s urban regions. San Francisco gets richer with trustifarians, hedge fund managers and, for now at least, social media firms. Yet Oakland, just across the bay, suffers severe unemployment, rising crime and high vacancies. The cool bars and restaurants frequented by the creatives get the media attention, but as demographer Wendell Cox notes, roughly 80 percent of the population growth in the nation’s largest cities over the past decade consisted of people living below the poverty line.

High costs and regulatory burdens make changing this reality ever more difficult; what can be borne by Manhattan or an upscale Brooklyn neighborhood like Park Slope can devastate a grittier locale like East New York. A well-heeled banker or trust-funder may find the costs of higher taxes and regulation burdensome but still relatively trivial; such factors more strongly impact a struggling immigrant entrepreneur, or a small manufacturer, construction firm or warehouse operation. Upzonings and subsidies for real estate developers — such as those around the new Nets arena — tend to work to the benefit of high-end chains, rather than smaller, often minority-owned businesses.

Finally for all the talk, in Brooklyn and elsewhere, of a “great inversion” sending the well-to-do to cities, and what my mother would call shleppers to the suburbs, this is not the reality. Immigration and new births have supported Brooklyn’s population numbers, up 40,000 over the past decade, but as rapid outflow of Brooklynites has continued: over 460,000 more residents left than other New Yorkers or Americans moved in between 2001 and 2009, the largest loss of any borough.

These phenomena can be seen in almost every American city; anyone traveling from west Los Angeles to the east side can see the divide between the posh shops and restaurants nearer the beach and greater commercial vacancies, abandoned factories and empty offices further inland. That this is happening as well in “booming” Brooklyn is rarely acknowledged, but worth confronting. We need to learn not only how to hype “hip” cities, but think about how to restore them as aspirational places for those who aren’t members of the privileged and cool set.

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

This piece originally appeared in Forbes.

Brooklyn row houses photo by Bigstock.

September 25, 2012
Barack Obama’s New Chicago Politics Abandon Bill Clinton’s Winning Coalition

While the Democratic convention this week celebrates the party’s new coalition, Bill Clinton will no doubt try to recapture the white middle class that’s largely deserted the Democrats since his presidency ended. But it’s likely his efforts will be a case of too little, too late for Barack Obama—who will have to look elsewhere for his electoral majority.

The gentrification of the Democratic Party has gone too far to be reversed in this election. After decades of fighting to win over white working- and middle-class families, Democrats under Obama have set them aside in favor of a new top-bottom coalition dominated by urban professionals—notably academics and members of the media—single women, and childless couples, along with ethnic minorities.

Rather than representing, as Chris Christie and others on the right suggest, the old, corrupt Chicago machine, Obama in fact epitomizes the city’s new political culture, as described by the University of Chicago’s Terry Nichols Clark, that greatly deemphasizes white, largely Catholic working-class voters, the self-employed, and people involved in blue-collar industries.

The Chicago that Obama represents is more Hyde Park or the Gold Coast than the Daley family base in blue-collar Bridgeport; more faculty club, media shop or Art Institute than the factory culture of “the city of Big Shoulders”.

The traditional machine provided him with critical backing early in his political career, but Obama owes his success to new groups that have taken center stage in the increasingly liberal post-Clinton Democratic party: the urban “creative class” made up mostly of highly-educated professionals, academics, gays, single people, and childless couples. It’s a group Clark once called “the slimmer family.” Such people were barely acknowledged and even mistreated by the old machine; now they are primary players in the “the post-materialistic” party. The only holdovers from the old coalition are ethnic minorities and government workers.

As Clark suggests, the new political urban culture differs in both intent and content from the old one. In the past, say under Richard Daley Sr., Chicago was still a family city where schools, churches, and neighborhood associations were key local amenities. Patronage meant jobs for people who also owned homes, both inside and outside the city, and raised and educated their children, often in Catholic schools. The old Daley machine would no more take on the church on contraception than embrace North Korea as its political role model.

The Chicago that spawned Obama has very different priorities. Clark gives perhaps the best definition—“the city as entertainment machine,” where citizens are preoccupied with quality-of-life issues, “treating their own urban location as if tourists, emphasizing aesthetic concerns.”

This new city, built around the needs of largely childless and often single professionals, focuses primarily on recreation, arts, culture, and restaurants; the resources valued by the newly liberated urban individual. The economy of such places focuses primarily on those jobs done by these professionals, either in the over-hyped social-media sector, traditional entertainment, or as service providers— waiters, toenail painters, dog-walkers—that cater to the gentry of the urban core.

In this urban schema, family, long the basic unit of society, becomes peripheral. The new urban political base—not only in the Windy City but in Boston, New York, Los Angeles, Seattle, Boston and other parts of the core Obama archipelago—is primarily childless, notes demographer Ali Modarres. A majority of residences in Manhattan, for example, are for singles; thus Mayor Bloomberg’s push for 300 square-foot “affordable” micro units that could cost as much as $2,000 a month. Gentrifying Washington, D.C., now boasts the highest concentration of childless adult females in the nation, a mind-boggling 70 percent of all adult women.

With more than half of all American women now single and more than half of all births to women under 30 now occurring outside of marriage—both historic developments—Obama has targeted “single women” as a core constituency second only to African Americans. Democratic pollster Stanley Greenberg has dubbed them “the largest progressive voting bloc in the country.” Singles, though not the most reliable voting bloc, almost elected John Kerry, and helped put Obama over the top.

The new urban political culture Nichols described in Chicago has gone national, essentially gentrifying the Democratic Party and pushing away the predominately white working- and middle-class families whose goals centered around achieving home ownership, basic essentials, and the occasional luxury. These groups have been leaving both the core cities and the Democratic Party for generations. Bill Clinton, former governor of a poor southern state, connected with these voters through his political genius, natural empathy, and his own biography in ways that have proven difficult for President Obama.

By all accounts, the inroads made among the group by Clinton, and, thanks to the economic crisis, Barack Obama in 2008, have largely dissipated now. Polling data suggests that these groups are now among the strongest backers of that eminent and hard-to-like patrician, Mitt Romney.

Recent Gallup polls show Obama’s strongest support, in terms of professions, coming from “professionals,” such as teachers, lawyers, and educators. He does worst among both small businesspeople and those who work in industries such as energy, manufacturing, transportation and construction, where Democrats from Roosevelt to Clinton often won significant support.

The division between the new political culture and the older one can be seen in a host of issues, most notably policies that favor urban density over suburbs, and strict environmental policies that hurt basic industries. An agenda aimed at ending “sprawl,” cars, and carbon-generating industries appeals generally to the unmarried and childless, who don’t have to worry overmuch about the need for extra space, backyards, or mundane tasks like taking kids to school, or to Target.

Ironically, the other key component of the new political culture comes from the other end of the social order: generally poorer, urban-centered minority populations. For all the hype about gentrification of cities, over the past decade the poor accounted for about 80% of population growth in the urban cores of the nation’s 51 largest metropolitan areas. In suburban areas, by contrast, the poor accounted for just 32 percent of population growth.

Ironically, these poor minorities continue to back the new political culture even though it favors policies, such as expensive “green energy” and tight regulations, that essentially force all but the highest value-added businesses from the urban core, leaving what Mayor Michael Bloomberg famously defined as “the luxury city.” As manufacturers and many service businesses leave either for the suburbs or less expensive regions, the historical working and middle class has also exited, leaving behind a largely entrenched poverty population, a post-materialist upper class, and little in-between.

Focused on the “upstairs” part of the new political culture, the administration—confident in minority support—has done very little materially to improve the long-term prospects of those “downstairs.” Minorities, in fact, have done far worse under this administration than virtually any in recent history, including that of the hapless George W. Bush. In 2012, African-American unemployment stands at the highest level in decades; 12 percent of the nation’s population, blacks account for 21 percent of the nation’s jobless. The picture is particularly dire Los Angeles and Las Vegas, where black unemployment is nearly 20%, and Detroit, where’s it’s over 25 percent.

Latinos, the other major part of the Party’s “downstairs” coalition, have also fared badly under Obama. This is true even among the aspiring working- and middle-class. Overall, the gap in net worth of minority households compared to whites is greater today than in 2005. White households lost 16% in recent years, but African-Americans dropped 53% and Latinos a staggering 66% of their pre-crash wealth.

So how does the Democratic Party, in Chicago and elsewhere, maintain its support among these groups? Needlessly exclusionary Republican policies play a role, scaring off potential minority voters, particularly immigrants and their offspring. Obama also has used his own biography to appeal personally to these groups, most understandably African-Americans, as a way to divert them from his economic shortcomings. And well-timed election-year conversions on key social issues like gay marriage and amnesty for young undocumented immigrants have helped him outmaneuver the hopelessly clueless GOP.

The fact that there are few decent middle-income jobs—in fact the jobs that have appeared during the recovery have been vastly worse than those lost during the meltdown—for the newly legalized or anyone else seems, at the moment at least, somewhat besides the point.

Indeed “besides the point” may be the real Democratic slogan for this year. The Democrats in Charlotte need to argue that results—fewer jobs and far fewer middle-income jobs—matter less than the blessings of green politics, urbanism, and racial-identity politics. In today’s Democratic party, having the “correct” sentiments often seem to outweigh even the fundamentals of broad-based economic success.

One can only wonder what Harry Truman would think of Obama’s approach, or perhaps even Bill Clinton in his private moments.

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

This piece originally appeared in The Daily Beast.

Bill Clinton photo by Bigstock.

September 4, 2012
Livable China

Recently, the McKinsey Global Institute published its report ‘The Most Dynamic Cities in 2025‘ in Foreign Policy, a highly respected US journal. On this list, 27 mainland Chinese cities as well as Hong Kong took top spots alongside Shanghai and Beijing, leaving many other world-renowned metropolises far behind.

As a Chinese who has lived through China’s transformation over the past two decades, I was hardly surprised by the results of this report. What really shocked me was the doubt and controversy that this report generated in western media, especially the negativity in the heated discussions published in the very same issue of Foreign Policy.

Among these, I was most taken aback by Mr. Isaac Stone Fish’s article ‘Unlivable Cities’. Having lived in several different Chinese cities over a 7-year period, Mr. Fish should be able to provide an objective prospective about China. Unfortunately, the takeaway from his article, in his own words is: ‘For all their economic success, China’s cities, with their lack of civil society, apocalyptic air pollution, snarling traffic, and suffocating state bureaucracy, are still terrible places to live.’

First of all, when it comes to civilization, there are very few countries where civil society can be traced back 5000 years like China. Today’s China may be in some aspects less civilized compared with the more developed countries, but China has come a long way in creating a more civilized society in recent years. When the People’s Republic of China was founded in 1949, the illiteracy rate was more than 80% in China, but as of today, the illiteracy rate among Chinese born after 1980 is under 1%. In cities, 80% of students go on to post-secondary studies. These highly educated young Chinese will undoubtedly redefine China’s civilization. When it comes to parenting, the 80s generation, now mostly young parents, are studying how to be a parent, which would have been unheard of just a decade ago.

The new Chinese parents are teaching their kids to use polite expressions like ‘thank-you’ and ‘sorry’, something generally neglected in the past. Pioneer cities like Shanghai and Guangzhou opened ‘Manner and Etiquette’ classes in most of their primary and high schools starting in 2006. Our education system is changing as well, gradually switching from being purely exam-oriented, to cultivating students with all around abilities. Our future generations will continue to bring China into a new era of civil society. It is ironic for Mr. Fish to call China ‘unlivable’ by describing China as having ‘lack of civil society’, yet in his own narration later he wrote: ‘Chinese cities have little crime, one can stroll safely through Beijing’s magnificent Temple of the Sun park at midnight’. How many of today’s ‘livable’ and ‘civilized’ North American cities can claim that?

Air pollution is an issue in China, but no different than the smog that hung in the sky in Pittsburgh, London, or Los Angeles when those cities were going through their own vast development phases. China is generating the greatest total greenhouse gas emissions in the world, but its greenhouse gas emission per capita in 2008 only ranks 78th of 214 countries in the world, while Australia ranks 11th, followed by USA (12th) and Canada (15th). China is manufacturing for the whole world, so in a sense it’s a scapegoat for countries that don’t want to or cannot make things for themselves. Yet even with that, air pollution in China never reaches the level described in Mr. Fish’s article. Take Nanjing (300 km northwest of Shanghai) as an example: in the one week Mr. Fish spent there, the only thing he saw was ‘smog the color of gargled milk’.

Having lived in Nanjing for almost 10 years, I do not find Nanjing’s air quality unbearable. On the contrary, I love wondering on the streets of this ancient yet modern city, breathing the fresh air and enjoying the sweet scent given off by the Wutong Shu (Phoenix trees) erected on both sides of the streets. Every morning, citizens go outside to exercise in the mountains and parks. At night time, people take walks outside after dinner. Never would I suggest that Nanjing is an ‘unlivable’ city.

Phoenix Trees in Nanjing

In 2011, 14.5 million cars were sold in China. It has overtaken America as the largest automobile market. This has and will continue to cause significant traffic congestion, a worldwide issue most metropolises face today. However, China is very proactively providing solutions to this problem. In Beijing, Shanghai and Guangzhou, the local municipality limits the licenses plates issued every year in an attempt to relieve the burden caused by new traffic. Of course, China knows better than anybody that nothing will stop its citizens’ desire for car ownership as they get richer, so the only way to prevent future traffic problems is to invest in more quality highways, cleaner cars and better public transit systems.

With China now spending approximately half a trillion dollars annually on infrastructure (9 percent of its GDP), visitors should not be surprised to see numerous highways and subways under construction in most Chinese cities. In 2010, Shanghai had the world’s most extensive subway system (429 km), followed by London (402 km) and then Beijing (372 km). By 2020, the total length of Shanghai’s subway lines will reach 877 km, more than double of New York’s current total length of subway lines. Meanwhile, China provides large subsidies to the taxi and bus industries. On top of that, with the world’s longest rail network, China’s high-speed rail system is changing the way people travel between Chinese cities. The newest bullet train from Beijing to Shanghai can bring passengers to their destination in less than five hours, while flying over the terrain at a maximum speed slightly over 300 km per hour.

Bureaucracy has been rife in China literally for millennia, and the onset of a market economy has not changed that sad fact. Much of the criticism of China relates to censorship. Yet this is less an issue for most Chinese than for either westerners and some Chinese intellectuals. With the fast development of information science and the enormous variety of media available, people can freely choose what movie, play or art show they wish to watch, discuss anything they are interested in with their families and friends, and most importantly live the life styles they want. The ‘pervasive fear of censorship’ described by Mr. Fish literally does not exist for today’s average Chinese citizen.

Mr. Fish also gave specific examples of ‘unlivable’ cities in China. Among them, Harbin, the capital city of Heilongjiang province, was voted the least livable metropolis mainly due to its cold winter. Personally, during my own time there, I was fascinated by Harbin’s characteristic Russian architecture, the massive and astonishingly beautiful ice sculptures, and the fun winter activities that were available. All these temperaments make Harbin an extraordinary city. I am currently studying in Canada, a country justly famous for freezing winters. Constantly hearing Canadians complain about their ‘unbearably cold’ winters makes me realize that if winter temperature is a key criteria to judge whether a city is livable or not, Winnipeg, Manitoba would probably be crowned the most unlivable city in the Western hemisphere. I can only imagine what Mr. Fish would have to say about cities like Oslo, Helsinki, Copenhagen, or Minneapolis.

China clearly is no paradise, yet the world should recognize how significantly the quality of life has improved over the stereotypes of the past. Growing up in 40 square meter (430 square feet) ‘Dormitory Style Housing’ (as Mr. Fish put it), with my parents and grandparents, I remember vividly how our neighbors nearly burst through our door to see our newly purchased color TV, the first they had ever seen. My happiest moment was licking a popsicle to its last frozen drop in the summer heat. Considering my parents’ combined monthly salary about 20 USD in the 1980s, this popsicle was quite a treat. Two decades later, in the same summer heat, my husband and I moved into a brand new three-bedroom condo in Nanjing, fully equipped with the most modern electronic appliances. Our condo is surrounded by a beautiful pond, a gymnasium, a supermarket and a nearby subway station. We make 3400 USD a month, eat out often and travel every year. This is not atypical for most middle-class Chinese people now. The welfare system is improving, people are less worried about getting sick, a retirement fund is in place, people now travel not only domestically but also internationally, and many send their children abroad to receive higher education. Where we are now would have been unthinkable to most people only a few decades ago.

I’m often deeply saddened by the way in which China is so often portrayed in western media. China’s growth and development over the past few decades has been vast, and it possesses potential for a more affluent future. Westerners may refer to China as ‘unlivable’ but for me, and hundreds of millions of people like me, China today is more than simply livable, and it will continue to improve as time goes by.

Lisa Gu is a 28 year old Chinese national who lived in Nanjing, China. She is currently studying at Wilfrid Laurier University in Waterloo, ON, Canada.

Photo by Wikicommons user shakiestone.

August 31, 2012
The Unseen Class War That Could Decide The Presidential Election

Much is said about class warfare in contemporary America, and there’s justifiable anger at the impoverishment of much of the middle and working classes. The Pew Research Center recently dubbed the 2000s a “lost decade” for middle-income earners — some 85% of Americans in that category feel it’s now more difficult to maintain their standard of living than at the beginning of the millennium, according to a Pew survey.

Blaming a disliked minority — rich business folks — has morphed into a predictable strategy for President Obama’s Democrats, stripped of incumbent success. But all the talk of “one percent” versus “the ninety nine percent” misses new splits developing within both the upper and middle classes.

There is no true solidarity among the rich since no one is yet threatening their status. The “one percent” are splitting their bets. In 2008 President Obama received more Wall Street money than any candidate in history, and he still relies on Wall Street bundlers for his sustenance. For all his class rhetoric, miscreant Wall Streeters, particularly big ones, have evaded big sanctions and the ignominy of jail time.

Obama enjoys great support from the financial interests that benefit from government debt and expansive public largesse. Well-connected people like Obama’s financial tsar on the GM bailout, Steven Rattner, who is also known as a vigorous defender of “too big to fail.”

The “patrician left” — a term that might have amused Marx — extends as well to Silicon Valley, where venture capitalists and techies have opened their wallets wider than ever before for the president. Microsoft and Google are two of Obama’s top three organizational sources of campaign contributions. Valley financiers are not always as selfless as they or their admirers imagine: Many have sought to feed at the Energy Department’s bounteous “green” energy trough and all face regulatory reviews by federal agencies.

The Republicans have turned increasingly to those patricians who depend on the more tangible economy. If you make your living from digging coal or exploring for oil wells, even if you don’t like him, Romney is you man. This saddles the GOP with the burden of being linked to one of America’s most hated interests: oil and gas companies. Almost as detested is the biggest source of Romney cash, large Wall Street banks. (In contrast, Democratic-leaning industries, such as Internet-related companies, enjoy relatively high public support.)

With the patriarchate divided, the real action in the emerging class war is taking place further down the economic food chain. This inconvenient reality is largely ignored by the left, which finds the idea of anyone this side of Bain Capital supporting Romney as little more than “false consciousness.”

Obama’s core middle-class support, and that of his party, comes from what might be best described as “the clerisy,” a 21st century version of France’s pre-revolution First Estate. This includes an ever-expanding class of minders — lawyers, teachers, university professors, the media and, most particularly, the relatively well paid legions of public sector workers — who inhabit Washington, academia, large non-profits and government centers across the country.

This largely well-heeled “middle class” still adores the president, and party theoreticians see it as the Democratic Party’s new base. Gallup surveys reveal Obama does best among “professionals” such as teachers, lawyers and educators. After retirees, educators and lawyers are the two biggest sources of campaign contributions for Obama by occupation. Obama’s largest source of funds among individual organizations is the University of California, Harvard is fifth and its wannabe cousin Stanford ranks ninth.

Like teachers, much of academia and the legal bar like expanding government since the tax spigot flows in the right direction: that is, into their mouths. Like the old clerical classes, who relied on tithes and the collection bowl, many in today’s clerisy lives somewhat high on the hog; nearly one in five federal workers earn over $100,000.

Essentially, the clerisy has become a new, mass privileged class who live a safer, more secure life compared to those trapped in the harsher, less cosseted private economy. As California Polytechnic economist Michael Marlow points out, public sector workers enjoy greater job stability, and salary and benefits as much as 21% higher than of private sector employees doing similar work.

On this year’s Labor Day, this is the new face of unionism. The percentage of private-sector workers in unions has dropped from 24% in 1973 to barely 7% today and in 2010, for the first time, the public sector accounted for an absolute majority of union members. “Labor” increasingly means not guys with overalls and lunch pails, but people whose paychecks are signed by taxpayers.

The GOP, for its part, now relies on another part of the middle class, what I would call the yeomanry. In many ways they represent the contemporary version of Jeffersonian farmers or the beneficiaries of President Lincoln’s Homestead Act. They are primarily small property owners who lack the girth and connections of the clerisy but resist joining the government-dependent poor. Particularly critical are small business owners, who Gallup identifies as “the least approving” of Obama among all the major occupation groups. Barely one in three likes the present administration.

The yeomanry diverge from the clerisy in other ways. They tend to live in the suburbs, a geography much detested by many leaders of the clerisy and, likely, the president himself. Yeomen families tend to be concentrated in those parts of the country that have more children and are more apt to seek solutions to social problems through private efforts. Philanthropy, church work and voluntarism — what you might call, appropriately enough, the Utah approach, after the state that leads in philanthropy.

The nature of their work also differentiates the clerisy from the yeomanry. The clerisy labors largely in offices and has no contact with actual production. Many yeomen, particularly in business services, depend on industry for their livelihoods either directly or indirectly. The clerisy’s stultifying, and often job-toxic regulations and “green” agenda may be one reason why people engaged in farming, fishing, forestry, transportation, manufacturing and construction overwhelmingly disapprove of the president’s policies, according to Gallup.

Obama supporters sometimes trace the loss of largely white working-class support — even to the somewhat less than simpatico patrician Romney — to “false consciousness.” A recent Daily Kos article, charmingly entitled “The Masses are Asses,” chose to wave the old bloody shirt of racism, arguing that whites “are the single largest, and most protected racial group in this country’s history.”

Ultimately this division — clerisy and their clients versus yeomanry — will decide the election. The patricians and the unions will finance this battle on both sides, spreading a predictable thread of half-truths and outright lies. The Democrats enjoy a tactical advantage. All President Obama needs is to gain a rough split among the vast group making around or above the national median income. He can count on overwhelming backing by the largely government dependent poor as well as most ethnic minorities, even the most entrepreneurial and successful.

Romney’s imperative will be to rouse the yeomanry by suggesting the clerisy, both by their sheer costliness and increasingly intrusive agenda, are crippling their family’s prospects for a better life. In these times of weak economic growth and growing income disparity, the Republicans delude themselves by claiming to ignore class warfare. They need to learn how instead to make it politically profitable for themselves.

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

This piece originally appeared in Forbes.

Mitt Romney image from Bigstock.

August 29, 2012
Cities of Aspiration

Drew Klacik’s recent post on how he ended up in Indianapolis got me thinking about the unique status of what I’d describe as “cities of aspiration.” Pretty much all cities seem to be reasonably good at attracting people in the following cases:

1. Recruiting someone to a specific career or other opportunity. In this case, the value of the opportunity is really the question at stake. The attractiveness of the community itself is generally a secondary consideration though may have an impact pro or con.

2. Luring residents based on a family connection. This would often be the case for “boomerang migration” – people who left and came back, ordinarily after marriage and children. More broadly we could think of this as retaining or attracting those with a historic connection to a place, such as being born there.

3. Drawing people from a city’s natural catchment area. The size of this area depends on a variety of factors, but pretty much every city has some natural hinterland from which it draws people.

I call this the “normal model” of attraction. Clearly, a place like Indianapolis does well on all of these types of attraction, as do most similar sized cities I’d argue. That’s how Drew ended up in Indy.

However, there’s another basis of attraction. This is what I call “aspirational attraction” – it’s people deciding to move or desiring to move to a city from outside of its natural catchment area despite a lack of a job offer or historical connection. I see this as based in one of three primary motivations:

1. Desire to work in a particular industry that is centered in a particular location. Want to be a country musician? Moving to Nashville helps. Similarly, if you want to be an actor, New York, LA, or Chicago are basically your only options.

2. Desire to live in a particular city for lifestyle reasons. Portland would be the paradigmatic example here. People sure don’t move there for its job market.

3. Desire to live in a city because of its reputation for a rapidly growing economy or superior job market. Many of the Sun Belt boomtowns might fall into this category. They’ve got similar quality of life to many other places, but their robust job markets (and perhaps a bit of nicer weather) draw people in.

Clearly, there are comparatively few places that function as a aspirational cities in a meaningful sense.

Back to Drew’s piece, I don’t want to put words into his mouth, but my impression was that he sees Indianapolis having a strong “normal model” of attraction but not functioning as an aspirational city. I agree. More than 80% of Indy’s net domestic in-migration comes from elsewhere in Indiana, the city’s natural catchment area, and it isn’t hard to believe that specific opportunities and boomeranging account for almost all the rest. Perhaps the implication of his notion of tradeoffs is that if a city like Indy isn’t aspirationally attractive, you have the luxury of compromise since you probably already have a lock on the market you’re currently capturing. That’s a perfectly valid conclusion to reach, IMO.

A very serious question cities that function nearly exclusively as normal attractors need to ask themselves is whether they desire to become aspirationally attractive. If so, then some exploration of the basis of that, and a realistic assessment of whether or not it is possible is important to undertake. Included in this would be the implications of not becoming aspirationally attractive. It seems to me that not having some type of aspirational component to your city’s attractiveness ultimately puts a ceiling on what it can achieve. On the other hand, it is far from clear that it’s easy to consciously create an aspirational value proposition where none currently exists.

Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile, where this piece originally appeared.

Photo: sparktography

August 20, 2012
Is California the New Detroit?

Most Californians live within miles of its majestic coastline – for good reason. The California coastline is blessed with arguably the most desirable climate on Earth, magnificent beaches, a backdrop of snow-capped mountains, and natural harbors in San Diego and San Francisco. The Golden State was aptly named. Its Gold Rush of 1849 was followed a century later by massive post-war growth.

There is no mystery why California’s population and economy boomed after the Second World War. Education in California became the envy of the world. California’s public school system led the nation in innovation with brand new schools and classrooms. The Community College system that fed its universities was free for its students. A college education at the UC and Cal State systems was inexpensive. UC-Berkeley, with its graduate schools, was arguably the greatest in the world while Stanford developed into the Harvard of the West. An efficient highway system moved California’s automobile driven commerce while fertile soil of the Central Valley became the fruit and vegetable basket of the world.

The next wave hit in the 80s as former orchards south of San Francisco morphed into the Silicon Valley. Intel and other chip manufacturers led the computer and software revolution bringing high tech jobs and immense new wealth to the Golden State. The dot-com revolution of the 90s brought more gold to California. Innovators like Google and Apple cashed in by nurturing the Internet era. The next decade heralded the greatest housing and mortgage boom in the nation’s history. Developers from Orange County, south of Los Angeles, invented creative financing vehicles that drove home sales, and profits, to record heights by 2006.

This success has created a problem: Californians, due to their golden history, live unreflective lives. The Tea Party movement generated a political tsunami that swept more than 60 incumbents from political office in 2010, but the wave petered out at California’s state line as Democrats take every elected office in the state.

The state budget, mandated to balance by law, has been billions in the red for ten straight years. Yet Californians re-elect the same politicians, year after year, who produce budgets with multi-billion dollar deficits. California voters rejected Meg Whitman, the billionaire founder of Ebay, in favor of Jerry Brown. California now has a $16 billion deficit which “assumes” that California voters will pass massive tax increases on themselves. If they do not, the 2013 deficit becomes a mind numbing $20 billion. Yet despite the red ink, Governor Brown signed into law a “high speed rail” bill that will spend $6 billion on a train between Fresno and Bakersfield – not LA and San Francisco as promised. Polls turned against the choo-choo, but there remain no outcry from California voters.

California voters rejected Carly Fiorina, who ran Hewlett Packard, for Barbara Boxer in the 2010 Senate race. To protect the endangered Delta Smelt, a fish known better as bait, water has been diverted from Central Valley farms to the Pacific Ocean. Orchards in the Central Valley were allowed to wither and die resulting in unemployment in the Central Valley as high as 40%. Imagine Californians on food stamps, living in what was the fruit basket of American.

California’s business climate now ranks dead last according to 650 CEOs measured by Chief Executive Magazine. Apple will take 3,600 jobs to its new $280,000,000 facility in Austin Texas – jobs that California would have had in the past. Texas ranked first in the same survey. California’s unemployment rate is consistently higher than 10% of its work force, and there are few jobs for college students who graduate with as much as $100,000 in student loans. Despite overwhelming evidence that bad public policy is chasing away jobs, the same state politicians are sent back to Sacramento every two years.

California’s public education system, once the envy of the world, now ranks 46th in the nation in per pupil spending and faces a $1.4 billion cut in the fall. In the last month, three California cities declared bankruptcy. More will follow. Take Poway for example. Its school board borrowed $100,000,000 (for 33,000 students) through a Capital Appreciation Bond. The politicians told the voters there would be no payments for 20 years. What they did not explain was the residents must pay back $1 billion dollars on their $100 million loan. Beginning in 2021, tiny Poway will be forced to pay $50 million per year in bond payments. Huge property tax assessments will be required if homes do not appreciate 400% by then, which is unlikely under foreseeable circumstances.

Rather than stare at themselves in the mirror, Californians should take a look at Michigan. In the 50s greater Detroit was the fourth-largest city in America with 2 million inhabitants and the world’s most dominant industry: the automobile.

Most people had a good paying job. Its burgeoning middle class was the model of the world with excellent public schools and universities. Detroit in 2012 is a shadow of that once great metropolis. Its population has shrunk to 714,000. The average price of a home has fallen to $5,700. Unemployment stands at 28.9%. It has a $300,000,000 deficit. There are 200,000 abandoned buildings in the derelict city. Its public education system, in receivership, is a disgrace producing more inmates than graduates. In 2006, the teacher’s union forced the politicians to reject a $200,000,000 offer from a Detroit philanthropist to build 15 new charter schools. Jobs long ago abandoned Detroit for places like South Carolina and Alabama, with their “right to work” laws and low taxes.

Now Detroit’s Mayor has proposed razing 40 square miles of the 138 square miles of this once great American city returning 70,000 abandoned homes to farmland. Even such a draconian plan may not be enough to save the city. If a hurricane had hit Detroit, more of us would know of this tragedy in our midst, but this fate was man-made and not wrought by nature. Detroit has had one party rule for more than fifty years. Louis C. Miriani served from September 12, 1957 to January 2, 1962 as Detroit’s last Republican mayor. Since that time the Democrats have ruled the Motor City. John Dingell has served region since 1956. His father was the Congressman from 1930 to 1956. Despite the disastrous decline of their city, Detroit voters send him back to Congress twenty-two times.

Like Detroit, California now has one party rule. The Democrats of California did not need a single Republican vote to pass their budget. Governor Brown’s plan is to address the nation’s largest deficit by raising taxes instead of cutting spending. If passed, the deficit would drop from $20 billion to a mere $16 billion. The budget does nothing to cure the systemic problems of a bloated bureaucracy. It does not eliminate one of California’s 519 state agencies.

Caltrans stopped building highways under Brown’s first term, but the people kept coming. Now 37 million Californians are locked in traffic jams each day. Brown was rewarded for such prescience with re-election as Governor. California’s egotistical politicians passed the Global Warming Solutions Act in 2006 (AB32) to “solve” climate change. Dan Sperling, an appointee to the California Air Resources Board (CARB) and a professor of engineering and environmental science at UC Davis, is the lead advocate on the board for a “low carbon fuel standard.” The powerful state agency charged with implementing AB 32 and other climate control measures, claims the low carbon fuel standard will “only” raise gasoline prices $.30 gallon in 2013. The California Political Review reported implementation of these the policies will raise prices by $1.00 per gallon.

Detroit was once the most prosperous manufacturing city in the world, a title later secured by California. Will California follow Detroit down a tragic path to ruin? In 1950, no one could imagine the Detroit of 2010. In 1970, when foreign imports started to make a foothold, the unions and their bought and paid for politicians resisted any change. In the 1990s as manufacturers fled to Alabama and South Carolina, the unions and their political minions held firm, even as good jobs slipped away. No one in Detroit envisioned their future.

Today, California is following Michigan’s path with exploding pension obligations, a declining tax base, and disastrous leadership. Housing prices have fallen 30 to 60% across the state, evaporating trillions of dollars of equity and wealth. Unemployment remains stubbornly high and under-employment is rife. Do our politicians need any more signs?

Governor Brown’s budget will first slash money to schools and raise tuition on its students while leaving all 519 state agencies intact. He apparently will protect political patronage at all costs. Jobs, and job creators, are fleeing the state. Intel, Apple, and Google are expanding out of the state. The best and brightest minds are leaving for Texas and North Carolina. The signs are everywhere. Meanwhile, the voters send the same cast of misfits back to Sacramento each year – just as Detroit did before them.

The beaches are still beautiful. The mountains are still snow capped and the climate is still the envy of the world. Detroit never had that. But will California’s physical attributes be enough? If the people of California want to glimpse their future, they need look no farther than once proud City of Detroit and the once wealthy state of Michigan.

It can happen here.

Robert J Cristiano PhD is the Real Estate Professional in Residence at Chapman University in Orange, CA, a Senior Fellow at the Pacific Research Institute in San Francisco, CA and President of the international investment firm, L88 Companies LLC in Denver – Newport Beach – Washington DC – Prague. He has been a successful real estate developer for more than thirty years.

August 17, 2012