Friday, December 26, 2008

New rules...?

A Rational Exuberance
by Bruce Fisher


Why the collapse of the old ideology could make our new year bright

Before Governor David Paterson published his first budget last week, more than 100 economists signed a letter urging him to erase his budget deficit by raising revenue from a broad-based income tax.

“The reasoning is straightforward,” the economists wrote. “In a recession, you want to raise (or not decrease) the level of total spending—by households, businesses and government—in the economy. That keeps people employed and buying things, and makes it more likely that businesses will want to invest to serve that consumer demand.”

Soon after, Paterson put forward a budget that demonstrates that he is ignoring that advice.

Instead, Paterson’s budget includes a wide array of taxes on consumption.

Besides recommending that any new taxes be income-based taxes rather than consumption-based taxes, the economists said that “almost every dollar of state and local government spending on transfer payments to the needy and for the salaries of public servants providing vital services to our communities enters the local economy right away, generating a greater economic impact.”

Paterson partially accepted and partially rejected that notion. Paterson’s budget still spends more next year than this year. And despite the protests about cuts in spending, Paterson mainly reduced the growth-rate in some state spending that has seen tremendous increases in recent years, especially in education and in healthcare. But in a curious nod to the observations of the Gang of 100, and one they should celebrate, the governor of New York rather courageously increased the basic grant to welfare recipients, which has remained static for the past 18 years.

There’s one true fact about low-income folks: They consumer every last dollar of their income. If your income is so low that you don’t pay income tax, it’s a sure bet that you’re going to spend what you have. Nobody but the most dogged anti-government ideologue can disagree with that observation.

But here’s the problem we’re facing today: Not enough people are spending enough money in our consumption-driven economy. And because consumer spending is such an important driver of every other kind of economic activity, a big contraction in retail sales is going to restrict the ability of the state to keep funding the stuff that works.


Why this is a “reform moment”

Here’s what happens when retail sales suffer: Stores close. Store clerks lose their jobs. Store tenants default on their leases because it’s cheaper to pay the landlord the penalty than it is to keep the lights on. If the landlord receives less rent, then real-estate taxes that the landlord pays to local governments shrink, and the income taxes paid by store-owners and real-estate owners shrink, too.

It’s enough to make one want to write back to the governor and ask him to please quickly take out an eraser on all those pages of his budget that include taxes on consumers, even that special “obesity penalty” of additional tax on sugary soft drinks.

I hope that the New York State Legislature rejects lots of the consumer-burdening tax and fee increases that Paterson includes in his budget. I hope that the legislature instead does the sane thing, and increases the top rate of the state income tax, or puts a surcharge on top incomes.

The big problem for New York State is that neither our governor nor our legislature is taking on the big structural problems that will hit next year and the year after and for the next 20 years, namely:

■ The large and growing share of the population (especially upstate) who are elderly and who will be demanding long-term care that is paid for by taxpayers;

■ The shrinking share of the population (especially upstate) who will need to go to suburban schools;

■ The need to stop sprawl (especially upstate) in areas where there is no population growth; and

■ The urgent need to consolidate local government.

Right now, the messaging from Albany is as follows: The middle class will be paying more little annoying fees and taxes—including higher tuition for their college-age kid in state schools—so that Wall Street can enjoy bailouts and welfare recipients can enjoy higher cash grants.

With only a little bit more bravery, the message could be this: The middle class will get better government and less sprawl, the needy will be treated with dignity, and high-income earners will have to make do with mere BMWs rather than Ferraris.


Happy thoughts for the New Year

The good news is that New York State is in much, much better fiscal shape than California and many other states. While Paterson’s budget does not contain a bold, sweeping plan to change the relationship between state and local governments, it does reflect some recognition that government consolidation at the local level is a worthwhile goal—even if all Paterson is doing is maintaining a small grant program to help those who are already willing to change, rather than investing the power of the office of governor to face a historic challenge.

Here’s what else to be happy about in our fair state: America’s current secretary of the treasury has decided to play Santa Claus to many banks, including M&T Bank, which is headquartered in Buffalo and employs several thousand workers here.

Others may be outraged that the Troubled Asset Recovery Program (TARP) that the United States Congress created last month is being administered by Secretary Paulson such that many Wall Street operations are getting billions of dollars of public money, and spending some of those billions (at least $1.7 billion so far) on executive bonuses.

Not I.

In this season, I want to see retail stores in Manhattan and Westchester County continue to sell expensive watches, jewelry, clothing, handbags, and other luxury items to deserving traders, brokers, deal-makers, lawyers, and to the people they love. I wish that more of the taxpayer-funded boodle would go to American watchmakers and jewelers, but at least some of the money will circulate locally before being exported to Switzerland. And as that money circulates downstate, it will continue to be pumped upstate.

And I understand why Buffalo-headquartered M&T Bank asked for, and received, $600 million in TARP funds. They were, essentially, invited to do so—because it is outgoing Treasury Secretary Paulson’s theory that helping sound, non-crisis-ridden banks to do more deals is a way to keep the economy going.

I applaud the cautious local bankers, who sensibly avoided the junk that took so many big banks down. But I don’t quite understand why it is in the public interest for M&T Bank to receive TARP money in the same week that it is closing its purchase of a Baltimore-area bank. I mean, I understand that that transaction is probably a good one for M&T shareholders, even if a whole bunch of folks who work for the target bank in the Baltimore area will probably lose their jobs because of the takeover. I don’t know why my tax dollars should pay for this; having a bank-eats-bank fund is a lot harder to understand as critical to our country’s national interest than is having a domestic automobile industry.

But I am cheerful in this thought: that everything we have been told about the “rules” of the free market since the days of Ronald Reagan is now proved wrong. We are awakening from our three decades of sleepy trust in the beneficence of the Unseen Hand. Lurching unsteadily forward, nowadays it seems that nobody in power is talking about slashing public spending—even if we are not quite there yet in hearing public figures endorse the progressive taxation of income. And even in Albany, even if tepidly, from our anything-but-radical governor, we are hearing some tentative endorsement of the notion that restructuring, smart-growth, and sprawl-control are worth funding even in a budget crisis.

I will be delighted to read, as I’m sure I will, the annual report of M&T Bank Corporation this coming year, in which the chairman will reverse himself on all the harsh supply-side, free market fundamentalist notions contained in his earlier reports, in which he has ever condemned the high cost of government, now that M&T has received its $600 million of taxpayer funds.

Change, folks. It’s coming. What a gift! Merry Christmas, Happy Hanukkah, and Happy New Year to us all!

Wednesday, December 17, 2008

Investing in beauty

Current Issue: Artvoice v7n51, week of Thursday December 17 » back issues
News

A Bright Future?
by Bruce Fisher


How to seed hope as the trends stay sour: dedicated funding for parks and culturals

If you know anybody who is still rich, please let them know that I’d like that person to endow a new award for the thinker whose book, article, or speech contains the year’s most elegant proof of the obvious.

My nomination for the 2008 Obvie is a dynamic duo, Gerald Carlino and Albert Saiz. One works for the Federal Reserve and one works for the Univeristy of Pennsylvania. Together they wrote a paper full of the most difficult-looking mathematics you’ll ever see, in which they prove the daring hypothesis that every reader of this newspaper already takes as true anyway: that making cities beautiful and fun results in more people wanting to live in them.

“Cities around the world (such as Barcelona and Bilbao in Spain; Glasgow in Scotland; and in the U.S., Oklahoma City, OK; Camden, NJ; and San Antonio, TX) have attempted to leverage public investments in leisure spaces and beautification to spur demographic change and economic development,” wrote Carlino and Saiz.

“Do these natural or man-made differences in leisure activities really matter for urban economic development?” they asked. Their answer: (drumroll please, let the suspense build…): YES! Culture and parks and entertainment work.

(You can find the report at http://www.philadelphiafed.org/research-and-data/publications/working-papers/2008/wp08-22.pdf.)

Here’s what that means here and now, and for the next many years: This community needs a reliable source of funding to sustain “public investments in leisure spaces and beautification.” Notwithstanding the many studies that have found that public investment must be part of the mix, and notwithstanding a very large participation—as board members, as funders, as customers and as fans of these community assets—our community does not have a permanent source of funding for arts, parks, libraries and attractive public spaces. We need one.

Here’s what the economists say happens when those investments are made and made well and on large scale:

In Bilbao, Spain, the government and local leaders enticed and invested in a huge new Guggenheim art museum. Bilbao is in Basque country, which has had a worldwide reputation for terrorism and mayhem. The advent of the art museum seems to have helped Bilbao rebrand itself. Police work ended the criminal conspiracy that sustained the terrorism.

In Glasgow, Scotland, the government and local leaders invested in a broad cultural enterprise that has actually driven a new economy. The expert on this transformation is none other than Eddie Friel, who now teaches tourism at Niagara University. He was the principal engineer of a world-class arts, music, theater, and cultural product that turned gritty Glasgow into a World Heritage site, a major site of festivals, and a tourism magnet for the British, mainly, but also a re-branding opportunity for a very badly deindustrialized urban region.

In Oklahoma City, the government and its university made a world-class rowing facility out of what had been a channelized stream. I don’t really care about anything else they do there, but the rowing is supposed to be fabulous.

So the evidence here and abroad is confirmed: If a troubled city/region creates a distinctive world-class attraction, good things happen. We now not only have the evidence of all the chambers of commerce; we now have an academic paper whose highly credible authors observe that cities grow best if there’s a reason for talented people to come and live there.

So now, thanks to the preservationists who saved the Commercial Slip and the historic street pattern of the old Erie Canal Harbor district, and thanks as well to a government commitment for infrastructure, the community has the beginnings of a distinctive new place that could help with a very tough project—namely, reversing the decline of Western New York.

The Canal Side project is not a Guggenheim museum, like Bilbao got. It’s not a world-class cultural heritage site that will draw attention from around the planet. Positive? Absolutely. Cross the ocean to go there? Not likely, unless another marquee attraction arrives that is something other than a big store that is of declining cultural relevance to the Great Lakes. The lesson of Bilbao, Glasgow, Oklahoma City, and the other places the authors cite is how widespread the popular endorsement of so-called elite culture is, and how economically powerful it works out to be.

Let us not, however, allow the perfect to be the enemy of the good. If the new Burchfield-Penney Gallery, plus Canal Side, plus all the recently restored and refreshed architectural and parks assets help bring new folks here, that will confirm what this year’s Obvie winners Carlino and Saiz said. (And I don’t think we have to worry about their observations about one cost of gentrification, which is that when cities get to be nicer, there’s some displacement of minorities. The reason we don’t need to worry: Displacement occurs in markets where the housing supply is tight. The housing supply here is not tight; there is, sadly, a huge oversupply.)

Let’s understand what this study really means, and locate it in place and time.

The analysis was published in September, before the collapse of the stock market. At that time, as now, Buffalo was still on Forbes magazine’s list of the top 10 dying cities, along with five places in Ohio and a couple of brain-dead places in California.

The economists say that government needs to invest in arts, parks, entertainment, and quality-of-life amenities.

It would seem, then, an opportune time to remind elected officials in this region that this particular study is exclusively about public funding.

The good news is that at least the Erie County Legislature shows evidence of understanding the fundamentals. The bad news is that we do not have a county executive who does.

It has to be the county, because the City of Buffalo stopped funding arts, and radically reduced its support for parks, under Tony Masiello—and Byron Brown has no money in his budget either.

Breaking with both Republican Joel Giambra and his Democratic predecessor Dennis Gorski, Erie County Executive Chris Collins put forward a budget that reduced public support for organizations that provide music, visual arts, theater, and other cultural programming that have a substantial, measureable positive economic impact on the community. He gave no reasoned rationale; he did not measure the economic impact. He just cut.

The Erie County Legislature endorsed most of that budget, with minor modifications; to their credit, the legislators added back some of the funding that Collins cut, especially in parks.

But we will be in recession for years to come. And depopulation of Erie County and of upstate New York in general will continue. How do we not lose what we have?

The simple answer is that public officials have to act before the next Erie County budget is put forward by the county executive who has diminished what had been a bipartisan, multi-administration, county commitment to the public amenities that keep this community livable.

It’s time for the legislators to step forward and secure these community assets. It’s time for the Erie County Legislature to enact a dedicated funding bill before Collins cuts again.

Bruce Fisher is visiting professor of economics and finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.

Wednesday, December 10, 2008

How to spend New York's federal tax money

Let's put it into trains, trolleys, and sewers


by Bruce Fisher



I miss Daniel Patrick Moynihan, our late senator. For 23 years, he put forth the annual publication that always came to the same disturbing conclusion: that New York State taxpayers paid many billions of dollars more into the federal treasury than we ever got back.

While he was living, even the mendacious creeps who today say they hate taxes but forever clamor for public projects used to have to follow Moynihan’s methodology. In 2001, for example, an outfit called the Public Policy Institute of New York State, Inc.—which says it offers “private-sector insights on New York State government and politics”—reported that New Yorkers paid $166.5 billion in federal taxes but that New York State got only $126.9 billion in federal spending—leaving us with a net loss of $39.5 billion.

So who got our money? Sarah Palin’s Alaska. North Carolina and South Carolina, too. Arizona, Arkansas, Idaho, Kentucky, Louisiana, Maryland, Mississippi, Tennessee, and of course West Virginia, home of champion pork-barreling Senator Robert Byrd. New York’s contribution to fiscal federalism was to fund it.

That is, of course, as it should be. Our Constitutional system superseded the go-it-alone Articles of Confederation. It is not surprising that places with more military bases than New York, or post-Katrina New Orleans, or post-hurricane Florida, should benefit from the common national pool of federal tax dollars.

But even standard-issue neoclassical economists like Harvard’s Edward Glaeser understand that when there’s fiscal distress in a once-rich place, the once-rich place should get federal help. New York State is now such a place.

When Governor Paterson goes to Washington to ask for some help closing New York’s budget gap, he needs to take these facts with him. Sadly, however, he’s going to have to use old reports—because nobody at Harvard’s John F. Kennedy School of Government produces these annual reports any more. The Public Policy Institute hasn’t produced a Moynihan-like report on the fiscal imbalance (which means the out-migration of New York’s taxpayers’ tax dollars) since 2001; the message that New York is being short-changed is not convenient for a group that prefers to say that New York State government spends too much.

It will take some time to crunch today’s numbers (and I’ll assign some graduate students to work on this), but somehow, I strongly doubt that our $39.5 billion deficit of 2001 has done anything but grow in the past eight years.

So let’s make like Bob Wilmers’s bank, or a Wall Street brokerage house, or a Detroit automobile company, and let’s go to Washington and get some stimulus money. The distinction, of course, is that New Yorkers already paid it in.



This chart from Moody’s Economy.com estimates return on investment for different kinds of federal stimulus spending.


What a smaller New York should ask for

The worst thing to do with free money, of course, is to waste it. But we have to ask for the right things, and reject any politicians or moguls who ask for the wrong stuff. The Peace Bridge plaza is the wrong stuff. Subsidies for retail stores, for hotels, and for waterfront condominiums, that’s the wrong stuff. More suburban roads—obviously the wrong stuff.

We should pay attention to people like former Milwaukee Mayor John Norquist and his Congress for a New Urbanism, and brand-new Nobel Prize-winner Paul Krugman, and New York State environmental commissioner Pete Grannis, and make sure that when we get some of our New York State taxpayer money, we buy the right stuff.

We should buy streetcars, sewers, and high-speed trains.

Streetcars: We need a regional electric-powered streetcar or surface light-rail plan for the year 2020. In an urbanized region so compact as ours, and with fewer of us projected to live here in 2020 (today’s Erie County population of 920,000 will shrink to 820,000), we should still travel around in an economically and environmentally sensible way.

Using New York State taxpayers’ funds, tax-eaters in Phoenix, Arizona live in one of the many North American cities that is embracing light rail (not subways, which are too expensive for all but the biggest and most dense urban areas).

When we get some of our money back, we should make a similar investment—and within a few years, we should be able to ride a streetcar to the airport, to Transit Road, all the way from the Niagara River down Sheridan to Transit, all the way down Transit to Orchard Park, from Orchard Park to Hamburg and the Lakeshore, back downtown to the connector that can take you to the Tonawandas and Niagara Falls. Connecting the University Station of the existing metro to the Main Campus of UB has always been the right thing to do, but let us understand the rest of the picture, too.

The total cost of Portland, Oregon’s light-rail surface system is $26 million per mile. The projected cost of Charlotte, North Carolina’s system will be $44 million per mile. The potential for comparatively cheap solution for the Buffalo area is real because so many miles of existing rights-of-way already exist. A touted alternative—so-called dedicated buses, or “bus rapid transit”—does not work. Little Kenosha, Wisconsin (population 90,000) did its light-rail system for $3.5 million per mile. Our price tag: Call it $1 billion, but it could be far less.

Trains as fast as France’s or Japan’s: There is no technological obstacle to building a high-speed rail network that can connect New York City to Toronto with stops in downtown Syracuse, downtown Rochester, downtown Buffalo, downtown St. Catharines, downtown Hamilton, and then in Toronto, with the express option from every stop. California just passed a budget item issue for almost $10 billion to get their own inter-city high-speed rail system going, so that you could get on a fast train (still slower than a Japanese “bullet” train or a French “tres grand vite” train) and go from LA to San Francisco in under three hours. Why not a three-hour trip from New York to Toronto? Price tag: call it $10 billion, including Loonies.

Sewers for clean lakes: We urgently need a 10-year watershed-by-watershed approach to wastewater management so that all the water of both Lake Erie and Lake Ontario is as clean as it needs to be in order for the Great Lakes to be clean again. The Brookings Institution published a book on the economic benefits of a cleanup, including the payback schedule. Price tag: $26 billion for the whole Great Lakes, about the same for all of New York State’s problems, or $583 million for Buffalo.

Add it up. If New York State got the entire enchilada, including all the money to fix all the sewer systems in this state, it still wouldn’t add up to one year’s worth of the $39.5 billion more that New Yorkers paid into the federal exchequer in 2001 than New Yorkers got back.

The realities: shrinkage, opportunities

New York State taxpayers are dwindling in number. As the Census just reported again, the Buffalo-Niagara metro region’s population dropped again. The number of people who live in the three cities, 25 towns, and 16 villages within the boundaries of Erie County is a smaller number than it was in 2000. (The fact that population still sprawls into Lancaster and Clarence does not mean “growth,” people: We have 10,000 fewer people in Western New York than we did 10 years ago.) Economists at the Wharton School at Penn project that by 2020, most urban regions that are like Buffalo—including Syracuse, Rochester, Erie, Cleveland, Detroit, and Milwaukee—will also shrink by an average of 10 percent.

So the last thing we need to do, when we succeed in fetching some of our money, is to waste it on make-work road projects. We have more roads than we need already—we don’t need a plan that will give us a sugar high for a construction season rather than an infrastructure boost that just might make our community greener, more connected, more livable, and more able to handle folks 10 and 20 years from now.

It comes down to one’s worldview. I believe that the “bones” of Upstate New York and the other Great Lakes communities are quite good. We have urban centers worth saving, mature transportation networks that need refreshing, sewer systems that need replacing, and, overall, a quality of life that can attract new residents. Appropriate public investment could turn upstate cities into communities that are better able to sustain themselves; right now, our skewed system of incentives for sprawl and for urban abandonment—common to all Great Lakes cities—make us poorer than we should be.

What worries me about the Obama folks is that they are a little too ready to listen to local politicians about what will work as economic stimulus—when what we need is long-term investment for a long-term turnaround. That’s why transit-oriented development that the Congress for a New Urbanism advocates, and Great Lakes wastewater cleanup that the Brookings Institution studied, should be the way to go.

It’s all about where we want to be in 2020. A casino won’t get us there. A bulldozed neighborhood next to the Peace Bridge will, at best, further pollute our air even as truck traffic stagnates or declines. And since when were retail tenants that sell Chinese-made merchandise ever going to turn around a downtown in a shrinking region?

Our path to the future is to get connected within our region, to get better-connected to Toronto, and to be clean, green, and smart. All our paths—and trolleys and trains too—should connect us to what makes us smarter. So let’s go get some of our own money and get going.

Bruce Fisher is visiting professor of economics and finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.

Friday, December 5, 2008

Albany Times-Union, Sunday November 30, 2008

Region's survival depends upon support for reform


By BRUCE FISHER AND WILLIAM A. JOHNSON JR.
First published: Sunday, November 30, 2008
New York is shrinking. The Empire State has continued to diminish in rank and influence over the past 30 years, as first California and then Texas surpassed it in population and political status.
Between 1970 and 2007, the two largest states had combined population growth of 28.9 million, while New York increased by a meager 1.06 million. Florida, Arizona and other Sun Belt states have also had exponential growth.
By 2020, upstate New York may be unrecognizably smaller. A recent county-by-county analysis of population trends in all 50 states tells the story.
The Wharton School's Peter Linneman and Albert Saiz predict that by 2020, every county outside the New York City metro area will lose population. Chautauqua County, despite its strong tourism base, agriculture and tradition of entrepreneurship, will lose tens of thousands of residents. The counties in the Mohawk Valley between Albany and Syracuse will fare the worst. Cayuga County, near Syracuse, will lose 60 percent of its people. The immediate Rochester area won't lose much, but that's not saying much — because it won't grow, either. New York's second-largest metro area, Buffalo, will shrink another 10 percent.
Pennsylvania, Ohio and Michigan look about the same in the Linneman-Saiz model. But the situation for New York is particularly difficult. It's time for state government to shed illusions about upstate's ability to turn itself around and accept four facts:
Until the Sun Belt fills up and runs out of water, we won't grow.
Our local government structure is unsustainable even now. By 2020, it will be completely dysfunctional.
Many local governments count on state aid to balance their budgets. According to the state comptroller, more than $4.1 billion was distributed to counties, cities, towns and villages outside of New York City in 2005, and an additional $9.8 billion was spent on school aid. Given the $47 billion projected state deficit over the next four years, it will be nearly impossible to sustain these levels of state support.
Our land-use practices undermine our economic sustainability.
As our population grows older, smaller and poorer, and the state's financial crisis escalates, we need to radically restructure local government, re-think our land-use practices and use new technology tools to manage government services regionally.
State government, at both the executive and legislative levels, has to get engaged in proactive ways uncharacteristic of its past hands-off approach. The status quo is no longer acceptable.
Since 1990, three gubernatorial commissions have advocated the same thing: Restructuring local government is long overdue, and very achievable.
Former Lt. Gov. Stan Lundine led the latest commission, which made numerous recommendations to modernize antiquated structures, share services with adjoining jurisdictions and consolidate structures whose autonomy is no longer justified by expense or practice. Gov. David Paterson generally endorsed the findings last spring, but his attention has been distracted by the larger fiscal crisis.
The secretary of state has grant funds that help local governments pay for whatever technical assistance they need to do merger or shared-service agreements. The 21st Century Demonstration Project Fund, which evolved from the work of the Lundine Commission, promotes "large-scale, transformative change in municipalities … that can be used as living laboratories for municipal innovation." The first of these grants, which will give incentives for creativity and risk-taking, should be awarded next spring.
Unfortunately, too many state and local elected officials and the special-interest groups that control the flow of business in Albany resist any change in the status quo. As the recent aborted special legislative session demonstrated, leaders continue to punt in the face of impending fiscal ruin.
Land-use practices, which are dictated by local home rule preferences, continue to impair the state's ability to re-position itself. In Monroe County, for example, the three largest development projects, each estimated to cost more than $250 million, involve two that aim to restore downtown Rochester's economic viability, and a third to transform a nearly abandoned inner-ring suburban mall into a mixed retail, entertainment and commercial project.
All will require huge public subsidy, and all will compete in a county with a declining population and challenged tax base.
Other retail and commercial projects are being proposed within this same shrinking metropolitan region, without regard for duplication or need. The same situations are in play elsewhere in the state. A regional land-use policy would rectify these intolerable redundacies.
If these trends are to be changed, the governor, Assembly speaker and Senate majority leader must:
Identify which of the Lundine Commission recommendations they can collectively, or individually, embrace. Those items must take priority for enactment in 2009.
Educate the populace about the need for local government reform. The public must be able to envision how restructured local governments will look and perform. This is where technology can be useful, using the tools of GIS, social networking, and other sophisticated modeling and distance-communication tools. One picture is worth a thousand words.
Help create an environment in which all key constituent groups understand that the only way New York will ever successfully compete against the Sun Belt is through radical transformation of all of our municipal structures, not mere tinkering with a few of them.
New York can no longer rely on Wall Street to foot 20 percent of the state's revenues. Neither can it rely on the upstate tax base.
We simply do not have $130 billion (see chart) to fund archaic, inefficient and duplicative local governments. With population shrinkage and a humbled Wall Street, we won't have that kind of money tomorrow, either.
That's why the budget crisis must result — at the very least — in implementing the Lundine Commission report. Even if we somehow do come up with the funds to sustain local government as currently organized, our experience tells us that we shouldn't. Why should we continue to rely on downstate taxes to subsidize upstate dysfunction? More efficient, consolidated and regionalized local government could, in a conservative estimate, yield a 10 percent savings.
That $13 billion in annual savings is about equal to the projected deficit facing Gov. Paterson. That's money that should either be saved or invested, not spent as it is now — if we're going to survive past 2020.
Bruce Fisher is the director of the Center for Economic and Policy Studies at Buffalo State College and a former Erie County deputy county executive. William A. Johnson Jr. is distinguished professor of public policy and urban studies at Rochester Institute of Technology. He previously was mayor of Rochester.

Cost of government
In 2005 (the last year for which the state comptroller's reports are available), the cost was more than $240 billion.
$110.3 billion State government
$69.8 billion NYC government and schools
$30 billion 698 other school districts
$18.7 billion 57 counties
$6.3 billion 932 towns
$3.8 billion 61 cities
$2.3 billion 556 villages
These figures don't include billions more in spending by 2,403 special purpose districts and public authorities in the state.

Wednesday, December 3, 2008

Should he stay or should he go?

Current Issue: Artvoice v7n49, week of Thursday December 4 » back issues

Cover Story

Paterson's Choice


Governor Paterson, The Clinton Succession, and the Albany Crisis

New York State just lost another major employer last week when another Wall Street titan was laid low. The state comptroller has a new report out that suggests that the current recession will see more than 200,000 jobs lost in New York City alone. Meanwhile, trend lines in upstate communities are structurally negative, as out-migration and aging-in-place accelerate, and even the sophisticated, relatively dense city of Rochester has the dubious distinction of having made the list of cities in which so-called “structural” poverty has overtaken another one of its ZIP codes.

Depending on who’s counting, the New York State budget is either $6 billion or $13 billion to the bad this year, and will be $47 billion short over the next four years—and New York State, like every other state I know, is constitutionally mandated to balance its budget. Legislative leaders who met with Governor Paterson before Thanksgiving await his executive budget, due out in January, but didn’t give him a single suggestion as to how they might work with him on the major items—namely, Medicaid ($45.2 billion of the $120 billion budget) and schools (another $21.4 billion.)

For most folks, these numbers make the eyes glaze over.

For the business lobbyists who fund Republican campaigns and for many newspaper editorial boards, there is a simple and obvious solution to New York State government’s money woes. The chorus has arisen, and you have all heard it: Cut, cut, cut.

Governor Paterson is loaning his voice to that choir. Go to his budget crisis Web site (www.reducenyspending.gov) and you will see that Paterson presents the issues very thoroughly, but with a very straightforward and unapologetic bias toward cutting. There is even an interactive calculator, where you can try your hand at reducing spending for big categories of programs.

Curiously, you’re not allowed to increase revenue (i.e., raise taxes) to pay for any of these programs.

And nowhere on Paterson’s Web site is there any reference to the discussion he had back in March with Nobel Prize-winning economist Joseph Stiglitz, who summed up his advice in a letter explaining how it’s a really bad idea to cut government spending during a recession. Neither is there any reference to the proposals for “fiscal stimulus”—also known as federal government spending on infrastructure, unemployment, and Medicaid—that could generate either more tax revenue from wages or budget relief by direct federal subsidy of programs into which the recession is now driving more people.

In sum, there isn’t a good solution to Albany’s trouble. Paterson can’t run a deficit, because the state constitution prohibits it. Paterson can’t instantly cut Medicaid, because claims are rising. Paterson has a legislature whose Republicans won’t cut suburban school aid and whose Democrats support their union allies, who don’t want to hear about forgoing the raises to which they are entitled by contracts they negotiated.

You can bet that the state will curtail reimbursements to county governments—which is why, a couple of weeks ago, I was so upset that the Erie County Legislature was not acting to create a dedicated fund for libraries, parks, arts, tourism and the Cornell Cooperative Extension, all of which will be squeezed out of existence unless the county executive from Clarence offers to raise taxes in next year’s election-year budget.

So what’s a governor to do?

I have a suggestion: Paterson should re-think his pledge to appoint someone other than himself to the United States Senate. If Albany is too much for him, this might be a great time to get out of Dodge.

While the getting’s good

A quick consultation with a senior expert in public law confirmed that it is the governor’s sole power and privilege to appoint someone who meets the US Constitution’s standard—i.e., being alive and not less than 30 years of age—to the unexpired term of a vacant Senate seat. The governor can appoint whomever the governor decides to appoint. The appointment is good until the next even year.

So ask yourself: If you had a choice between with the above-described nightmare versus going to Washington to work with Barack Obama, his new cabinet and the massive Democratic majorities in Congress, wouldn’t you choose the shining City on the Hill over the Mess on the Hudson?

I can’t think of a better time to be a senator than now. I can’t imagine a worse time to be governor than now.

Unless…

Unless Governor Paterson wants to seize the day and make this state an interesting, dynamic, and forceful place once again.

I’m sort of tired, in this crisis, of all the old-think I keep seeing. The Buffalo Niagara Partnership just put forward its annual catch-as-catch-can wish-list of federal and state handouts, bailouts, and rule-revisions. This anti-tax, anti-spending group wants lots of tax breaks and new spending so that old-style crony capitalism can continue to flourish here at the Western Door.

I see that United State Senate prospects Mayor Byron Brown and Congressman Brian Higgins, along with the county executive from Clarence, both endorse the Seneca Gaming Corporation’s Buffalo casino—which the Senecas say they won’t build because it won’t make money—as an economic development bonanza.

And I see that onetime regionalism advocate Kevin Gaughan now spends his time on the a curious crusade not against the existence of sprawl-inducing, duplicative town governments, but rather in an effort to pinch a town board member here and there, leaving town governments intact, intransigent and in the way of meaningful regional governance.

The only bright lights in this part of the state are UB President John Simpson and his visionary UB 2020 plan, Buffalo State College President Muriel Howard and her largely unheralded stewardship of SUNY’s only urban college, and Assemblyman Sam Hoyt and his steady advocacy of high-speed rail, green jobs, and smart growth.

Paterson ought to sit up and take notice: The only way to get through this mess is to get radical.

Revenue, reform, and restructuring

As former Rochester mayor and fellow brand-new professor Bill Johnson and I wrote last week in the Albany Times-Union, Paterson ought to get going right now on putting every single one of the Lundine Commission reforms into his next budget.

Here’s what that means: The governor needs to drive the boat on consolidation and regionalization of expensive, duplicative local government, and use the savings to invest in the stuff that will stimulate the economy.

Why should Simpson’s UB 2020 plan starve so that the county executive from Clarence can continue to subsidize sprawl-inducing roads out in towns whose governments are obsolete?

Why should Muriel Howard’s campus—which brings thousands of students (and their money) up to Buffalo from the New York metro area—face cuts while millions of dollars are lavished on those duplicative, unnecessary administrative structures called suburban school districts? (Hint: New York City has one school district for eight million residents living in 300 square miles. There are 29 school districts within Erie County. Hello?)

Why should Sam Hoyt’s bipartisan leadership of a drive to invest in engineering the next steps of high-speed rail be under-funded so that localities can continue to collect—by last count—more than $4 billion in various state subsidies?

And why should the control boards that allegedly report to the governor continue to soak up staff resources, salaries, consulting and attorney fees without advancing the functional integration of governments—building on Erie County’s national-award-winning computer system?

Paterson is going to have to do a deal with the state legislature that will involve—gasp—revenue, which is the dainty word for tax increases. The state income tax rate will be raised. Paterson is going to have to do a deal with Congress, and soon, if he’s going to get more Medicaid money to meet the rising costs here.

There’s nothing like a good crisis to show what a leader is made of. A good leader does deals that exact a price. So if Paterson is going to get more money from taxpayers, then he should change how it’s spent. If he’s going to get more money from Congress, then he should make sure that it gets to the right healthcare system. There’s no time like the present to stop subsidizing dysfunction.

Now that Paterson has sung the “cut, cut, cut” aria, it’s a good time for him to lay out his agenda for restructuring and for the stimulus that his SUNY leaders, his legislative allies, his president, and his Nobel Prize-winning economists are all advising him to do.

In the alternative, he could just punt and head down to Washington on the 150 mile-per-hour Acela train.

Take it from a visitor, the kind we get here in Buffalo from time to time. Home for the big meal last week, a wistful native found it easier to leave, she said, because “somehow it doesn’t feel any more like Rockefeller’s Empire State.”

That’s true. What our current governor does in the next month will determine how folks feel for years to come about Paterson’s Empire State.

Bruce Fisher is visiting professor of economics and finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.

Thursday, November 27, 2008

Also a WBFO-FM commentary 11/25/08

Artvoice v7n48, week of Thursday November 27 » back issues

News

The Urban President


Obama’s metro focus long overdue

There’s a new advocate for regionalism in America. His name is President-elect Barack Obama.

It didn’t get much attention during the campaign season, but our next president has put forward a very detailed agenda to renew America’s cities and metropolitan regions. He is committed to creating a brand-new White House office of urban policy.

Go to our new president’s Web site and see for yourself. There you will see how serious he is about fixing cities, but also about fixing regions, including older suburbs that in too many cases are facing the same problems as our troubled older cities. The president-elect says, “many federal programs inadvertently undermine cities and regions by encouraging inefficient and costly patterns of development and local competition.”

That’s a genuine regionalist talking.

I, for one, am delighted. For all the years we worked on regionalism in county government—drafting a law to merge Buffalo and Erie County; building a computer system that could handle all the back-office operations of all the cities and towns and villages; building the public safety campus to handle all the e-911 calls from Cattaraugus Creek to Tonawanda Creek—we still had a big problem called federal policy. The federal government and the state government still treat city governments and town governments and county governments as if they can all go it alone, as if they were on separate planets rather than side by side in the same metro region.

For example, when it comes to Homeland Security funding, the federal government hands out money jurisdiction by jurisdiction, as if a terrorism threat, or a snowstorm for that matter, would start or end at a municipal boundary.

The same with sewers. Federal project money comes not to regional watersheds but to individual districts.

The good news is that we now have a president who gets it—that we are a nation of metropolitan regions. Our metropolitan economies cross municipal boundaries. Our wastewater needs and our public transit needs do, too, and so do our problems of crime, poverty, and land-use. They all happen to regions, not just individual municipalities.

Let’s be clear. The White House has a lot of power, but old habits and old local laws have a lot of power, too. Old boundaries won’t just fade away.

And don’t hold your breath waiting for some federal laws to fade away, either. Those terrible 1970s Supreme Court decisions that mandated desegregation within the narrow old boundaries of cities—they won’t suddenly be overturned.

Home rule will still rule.

And here in New York State, if we want regionalism, it’s not going to take a village or a town or a county or a city. Even if we have the president, it’ll still take a governor.

Because state law is where regionalism either happens or doesn’t.

Governor David Paterson has a fiscal crisis on his hands. I say, let’s not waste the crisis—let’s put consolidation and merger and regionalism on the table when the three kings of Albany meet in their closed room. Why should Albany stick us with control boards that won’t force regional management of basic services? Why should our president say “metro” and our governor say “retro”?

We’ll see about Paterson come his budget next April. But in the meantime, on January 20, we’re going to have the Obama White House and its new office of urban policy.

The days of cities pitted against suburbs for road funds and sewer funds and police funds could be numbered, and I’m excited.

Imagine—a policy office that is driven by the mentality that cities and suburbs are in it together.

Wow. We voted for change. Apparently, we’re going to get it.

bruce fisher


Reader Comments


Frederick Harriman
26 Nov 2008, 19:59
My handy copy of the NATIONAL RESPONSE FRAMEWORK issued by the Department of Homeland Security this January states in it's Introduction on page 10 that "Effective UNIFIED COMMAND is indispensable to response activities and requires a clear understanding of the roles and responsibilities of each participating organization. Success requires a UNITY OF EFFORT, which respects the chain of command of each participating organization while harnessing seamless coordination across jurisdictions in support of common objectives." So there it is. Even the "real Americans" who did not vote for our President Elect are being told by the current Administration of "real Americans" to coordinate across jurisdictions when it comes to Homeland Security. Let's hope that the wisdom of this concept for Homeland Security can be also translated by all Americans, real or ... unreal...(?) into a Regionalism for a resilient economy (aka "common objectives") as well.

Wednesday, November 19, 2008

Middle-class sensibilities

Current Issue: Artvoice v7n47, week of Thursday November 20 » back issues

News

Mainstream Radicalism


Why Paul Krugman wants us to be a middle-class nation again

Of all the smart and successful people who have written campaign-year books, Paul Krugman is so far the best writer. He gets lots of practice, what with his twice-weekly columns for the New York Times. But sometimes it’s the material. Even I could be a good writer were I to quote Franklin Delano Roosevelt as early, often, and extensively as Krugman does—and to good effect, because it’s hard not to be thrilled by what a smart, glib, and radical man our last patrician president really was.

Krugman published The Conscience of a Liberal (W.W. Norton) last year, before the economic calamities of the mortgage crisis, the credit crisis, and the George W. Bush stock market swoon had hit—and before Krugman was awarded the Nobel Prize in Economics this October.

I like his book and it’s an easy read. It’s economic history for non-mathematicians, and it’s political analysis that is well reasoned and utterly without the smug self-righteousness that sometimes tarnishes most of the arguments I happen to agree with. It’s the book to read if you want to clear the supply-side claptrap out of your head. It’s also a yardstick by which to measure the adequacy of policies that will be coming from our next president and our next Congress.

In broad strokes, that is.

But let’s let FDR do some talking.

When he was first elected in 1932, Roosevelt launched a radically different way of governing. His first 100 days—the subject of a new book by Newsweek senior editor Jonathan Alter—brought America many of the federal programs and agencies that we think of as part of the permanent structure of Washington.

There wasn’t always Social Security. There wasn’t always a law that prevented bankers from gambling your deposits on the stock market—which is the law that in 1999 confused Democrats and anti-government Republicans revoked, and which revocation Bill Clinton signed, and that has been justly blamed for the insane speculation that caused the credit-liquidity crunch currently killing our economy.

Roosevelt stopped the gambling. FDR took on his own social peers and earned their hatred in so doing. His was courage in the face of calamity. Under FDR, America saw the re-birth of governing in the public interest, but in a much more sophisticated form than that practiced by his relative and predecessor Theodore Roosevelt.

When he was running for re-election in 1936, President Franklin Roosevelt was famously straightforward about who his political enemies were: He called them “malefactors of great wealth.”

Roosevelt said that he’d had to struggle with “the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.” Translation: hedge funds, credit-default swaps, Karl Rove, the politics of racial code words, Halliburton…

Before his election, Roosevelt said, these people “had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

“They are,” he said, “unanimous in their hate for me—and I welcome their hatred.”

Holy cow. That was a sitting president, folks.

Cooler rhetoric, but similar policy?

What we don’t yet know is whether electing Barack Obama means that the new president’s Rooseveltian moral sense will ever see enactment by a Congress that remembers 1994 more than it understands 1932. (1994 was the year Democrats went into a crouch after having voted for Bill Clinton’s big tax increase—the tax increase that killed the George Herbert Walker Bush deficit, but which Republicans campaigned successfully against.)

And it’s not just jiggly members of Congress who may lack FDR’s spine. I wonder, I speculate, I hazard, and I guess that Obama is surrounded by folks who have been, well, to be blunt like FDR was, pretty darned comfortable all their lives, and thus not so crystal-clear on what FDR was really up to.

Paul Krugman wrote The Conscience of a Liberal because he wanted to remind folks of how aberrant the recent Republican ideology truly has been—and precisely how FDR’s great achievement, which was the empowerment of folks of modest means, was achieved: through big public spending projects financed with steeply progressive taxation. In short, FDR taxed the rich and spent the money.

But Krugman is not an ideologue. He is not just a newspaper columnist, either. Krugman is a precise analyst of economic issues who is a professor at Princeton, author of many books, and the winner of many prizes bestowed on him by his fellow economists.

So when he writes that America’s next president needs to create a European- or Canadian-style national single-payer healthcare system, it’s because he has done the math. (See his lengthy but very easy-to-understand 2006 argument for a national healthcare plan in The New York Review of Books at www.nyrb.com.)

When he writes (as he did in his blog last week) that Obama needs to enact a $600 billion stimulus package, he is proposing policy based on a calculation about what he sees as the dangerous drop-off in consumer demand and, now, in US exports.

Krugman saw great value in the nearly 40 years of FDR’s policies, mainly that they created and sustained a middle-class society. He calls the impact of the New Deal “the great compression,” because the extremes of the very rich and the very poor were compressed toward the middle.

Of course poverty remained in those decades. And of course there were astoundingly wealthy people. There wouldn’t have been a War on Poverty, or Rockefellers, had the “great compression” succeeded universally.

But until the great disruptions of the 1960s, when Republican political operatives undertook the emotional wedge issues—and when Ronald Reagan and his operatives like Pat Buchanan picked up the race card and played it as the ace—economic uplift, and unions, and Social Security, and financial stability, were all part of the fabric of life.

Now, in wanting those pre-Reagan days to come around again, Krugman writes that “[t]o be a liberal is in a sense to be a conservative—it means…wanting us to go back to being a middle-class society.”

But do the kids coming up into power have any sense of this?

Sensibilities, experiences

What troubles me is that the very experience of Washington, New York, Chicago, Boston, and the other sophisticated metros whence many thought leaders hail is an experience of great sophistication, and of very high living.

I just don’t hear young politicos talking about progressive taxation as a key part of the policy agenda. When I read the blogs, I see more about issues of gender and human rights than about economics. I see no fiery advocacy of national healthcare.

But the tax issue especially is lacking. From FDR’s time in the 1930s through Lyndon Johnson’s years in the 1960s, the top marginal tax rate (not the average tax rate, but the rate one pays on the next dollar of income) was well above 70 percent. Estates were taxed heavily, and by design, because we had a consensus in this country that we did not want a permanent, hereditary, moneyed aristocracy. There is a reason why all the old mansions on Delaware Avenue and on Old Lake Shore Road now house not-for-profit agencies—it’s because the rich old families that owned them had to sell them or donate them for taxes.

But today, when everybody with a law degree wants to drive a Lexus, even after the nonsense on Wall Street—even now, could a Krugman’s desire to return America to being a middle-class country come true?

Something has changed since the late 1970s and early 1980s, which was when the cult of money took hold, and when Democrats and even the AFL-CIO did a deal with Ronald Reagan to reduce the top tax rate to half what it was under John F. Kennedy. Democrats got scared by Republican rhetoric about being anti-business—even though the greatest expansion in American prosperity, power and international prestige occurred when taxes on rich people were far, far greater than at any time after Ronald Reagan was elected.

I agree with Krugman’s ethos, but I wonder and I wonder and I wonder.

In Washington these days, everybody white looks rich. Lowly congressional aides now live in restored classic apartment buildings equipped with brand-new workout joints and first-floor grocery stores that have unbelievable selections and prices to match, and with an air of prosperity that makes anyplace else look tired and dim. In the place where our policies will be made, the gulf between young, educated folks and the working poor yawns almost as wide as the gap in experience, outlook and prospects as between nobles and peasants of old.

Barack Obama has personal knowledge from a childhood of food stamps, cheap apartments and bad smells outside. Later, when he worked on the South Side of Chicago, he knew genuinely poor folks who had been lied to by the corporate hit-men at Wisconsin Steel on 95th Street.

But how many blow-dried members of Congress ever grew up without their own bedrooms? How many senior aides to the next Secretary of the Treasury have any experiential connection with a lost job, a missed paycheck, a long wait in a health clinic?

Paul Krugman has a rare insight. I hope that views like his, and not the more cautious tendencies of the permanently comfortable, will shape policy.

Friday, November 14, 2008

The automobile economy on the North Coast

The right kind of stimulus


How will Obama get it right?

Permit me to make a modest request of everybody who lives north of the Ohio River: If it’s not too much trouble, could you please, if you are still employed, just quickly get your coat on and go buy a Chevrolet Malibu, a Ford Focus, or a car made by Chrysler? Please.

Because if we all buy a new American-made car soon, then maybe America won’t slide from recession into depression, and maybe there will still be some people left alive in the area north of the Ohio River a few years from now.

I’m calling for a patriotic act of automobile consumerism because of recent scary events, and because some recent elite political discourse is even scarier.

Earlier this week, when a German banker suggested that the actual value of General Motors Corporation was zero, the entire stock market fell off a cliff.

Meanwhile, down in Washington, some of our most respected think tankers seem to be confused about whether the American automobile industry needs to stick around.

Let me point them to a guide for the perplexed.

A study published last week by the Center for Automotive Research (www.cargroup.org) took a look at what could happen if the 239,341 people who work for GM, Ford, and Chrysler were to be laid off as a result of their companies shutting down.

If there were a “rapid termination of Detroit Three U.S. operations in 2009,” as some predict, CAR estimates that there would be a loss of $298.2 billion in personal income over the course of three years. Worse, there would be a loss of 2.9 million jobs in 2009, with a slight recovery for a third of those workers over the next two years as they find jobs elsewhere—including at Honda and Toyota. Losses of state and federal tax revenue would be more than $156 billion over three years.

Most of the unemployment would occur right here on the North Coast—upstate New York, Pennsylvania, Ohio, Wisconsin, and of course Michigan. Most of the fiscal distress at the local level would occur here, where the picturesque snow has just begun to fall. In most of these communities, there are already large-scale problems with housing foreclosures, credit contraction, persistent unemployment, outmigration, urban abandonment and a couple of other tough issues, including sick folks with inadequate or non-existent health insurance who keep showing up at emergency rooms for the most expensive kind of care there is.

In the Buffalo area, another 10,000 or so unemployed people would cause significant strain on overstretched county and state services that our genius elected officials want to cut even further, immune as they are to the news that Obama won the presidency on a promise to raise the revenue he wants to invest in our future.

The key to that program will be how its parts fit together—yet some intellectuals still quibble. If now isn’t the time for a federally funded effort to restore some economic stability, and a large-scale federal program to address healthcare, infrastructure, and environment, then when, pray tell, would that time be?

The good news is that President-elect Obama wants the Detroit Three to stick around long enough to make energy-efficient cars—specifically, plug-in hybrids—and get them into the market. The other day, Obama asked George W. Bush to direct toward this purpose some of the $700 billion that Bush and Congress have made available to rescue Wall Street.

Some say that no amount of “stimulus” from Congress or the president can help the Detroit Three unless their CEOs and boards of directors join the two million newly unemployed—to which I say, Hallelujah, throw them all out. And smack the United Auto Workers upside the head, too, for having bargained for bullshit work rules and stupid stand-alone benefit plans that should all be subsumed into a national Medicare system. Andy Stern of SEIU should invite the UAW in for coffee and explain to them that it’s time to get on board for single-payer healthcare.

Detroit has saddled America with the problem of decades of infamously bad corporate and union decision-making. With automobile choices like Toyota, Honda, Kia, and the Europeans all available with lots of good prices, there is also the problem of who precisely is going to want to buy Chevy or a Ford or a Plymouth or a Jeep when all the balloons and banners at the dealership scream “This Company Is Bankrupt”?

Nevertheless, stimulus is the talk of the town.

This week in Washington, many highly-accomplished and truly smart people are convening at the several think tanks to hold forums on the transition from Bush to Obama. It is a festival for policy wonks that hasn’t been held since Bill Clinton was elected in November 1992.

I was there in 1992, and I hope to keep participating this year, too. The great difference between then and now is the level of specificity in all the policy papers—and the air of confidence that the smart folks exude about our policy choices.

I line up with the interventionists. Brand-new Nobel Prize-winner Paul Krugman says that Obama and the Democratic Congress have to do something huge. Comparisons to the New Deal are everywhere. “Barack Delano Obama” is their man of the hour.

But one gets the feeling that the permanent mandarinate in Washington, the old establishment, prefers speaking in broad, broad strokes, and that nobody important quite understands the specific stresses of the places where we live.

It’s real simple up here where the streets are paved with rust. The automobile industry must be kept afloat. A large change in healthcare financing has to be engineered pretty quickly so that the stressed-out North Coast states don’t go bust and so that the stimulus-packaged Detroit Three don’t waste their stimulus credits on the stupid “legacy” benefits packages.

And federal guidance as well as fiscal help has to flow to state and local governments, because if they are left to their own devices, state and local politicians will undermine federal stimulus plans by cutting the hell out of their workforces just at the very time when the stabilizing impact of public workforces is most needed.

It really is time for Barack Delano Obama. But it’s awfully hard to get this stuff right.

Thanks to the visionary leadership of my old boss, dozens of aged Buffalo Public School buildings are being renovated with New York State matching funds that Albany has hinted it wants to cut. Imperfect though this spending is, it’s imperative that the spending continue.

Joel Giambra, the former Erie County executive, saw a regional economic and social benefit to putting up regional (county) tax dollars in order to leverage Albany’s dollars and get Buffalo’s Joint Schools Construction program going. The $1 billion project underway is putting 21st-century technology into the urban core.

The Ciminelli construction firm has a massive public contract that employs engineers, architects, and construction workers. The local economy is benefitting with the high wages being paid. And Lou Ciminelli is a good corporate citizen: He has put up more than a million of his profits to endow the Buffalo Philharmonic Orchestra.

What’s not to like about the Joint Schools Construction program? Equipping schoolhouses in the urban core with state-of-the-art technology means investing in the stuff that helps prepare children to compete in the competitive world. This is precisely the kind of “high-return investment” that economists like Nobel Prize-winner Joseph Stiglitz call for. Even Edward Glaeser, who warned Buffalo against more infrastructure-focused investment, still insists that it’s inputs into people that matter—especially education.

But a lack of coordinated policy means that we’re not getting the bang for our buck that we could and should be getting.

Every day, to get to school from the subway stop, my daughter and her classmates walk past at least half a dozen derelict, abandoned houses, including two directly across the street from her school.

Buffalo State College geographer Dr. Wende Mix has used GIS to make maps of the neighborhoods in Buffalo where the vacancy and abandonment rates are insanely high, up to 26 percent in the Masten Park area, anywhere from six percent to 15 percent in most of the rest of Buffalo. Even where schools are being renovated, the abandonment rate is nuts. And wherever houses are vacant, the context for these schools means that they are islands rather than what they should be—resources for community uplift.

The stimulus of the school reconstruction project is great, but the urban core’s fundamentals have not changed. Abandonment of old houses, depopulation, persistent poverty, teenage girls who follow the practice of Sarah Palin’s daughter and get pregnant without benefit of spouse…there are forces at work here that are greater than any stimulus package can address.

So even after the Obama version of the New Deal is enacted (if it is enacted), we will need a president bold enough to attack the structural problems that have impoverished the North Coast.

The racial antagonism that led to white flight in the 1970s is abating, but the cities are still abandoned, the sprawl continues, and the think tankers still don’t understand that not all road money is money well spent.

Let us hope, though, that the outgoing Bush administration, the incoming Obama administration, the permanent mandarins of the think tanks, and the Congressional majorities all come together so that we get an adequate stimulus package—so that we shall still have the choice to purchase a GM, Ford, or Chrysler product in the coming years, preferably the plug-in hybrid that Obama wants them to make.

Thursday, November 6, 2008

Energy and possibility

Current Issue: Artvoice v7n45, week of Thursday November 6 » back issues

Cover Story

The President for Cities


Eisenhower shaped America for 50 years. Will Obama?

If he is bold enough, the politician known as the president of the United States can influence social and economic history for decades to come.

president-elect Barack Obama

Here’s what President-elect Obama’s task could be:

He could so shape federal policies on energy, infrastructure, transportation, housing, and environment that the 60-year trend toward suburbanization could change, such that the city once again becomes the focus of human activity in this country.

Cities are about density. Density fosters creativity. Density requires civility. Density enjoys efficiency. Density stimulates innovation, a sense of shared purpose, distinctive regional identities, and creates wealth, too.

It’s a tall order for a mere politician. Few American presidencies have actually mattered to American culture and American economics as much as have wars, technological changes, and Supreme Court decisions like Roe v Wade and the one that said, essentially, that municipal boundaries will limit desegregation orders.

But sometimes, a visionary president actually changes America for decades to come.

Truman and Eisenhower changed America. Harry Truman created the engine of American prosperity—the college-educated middle class—by funding the GI Bill, which let veterans go to whatever college accepted them. Dwight D. Eisenhower literally reshaped the American landscape with his commitment to the interstate highway system. Both Truman and Eisenhower endorsed another policy that had a transformative impact: subsidized mortgages for veterans.

Ronald Reagan, as Obama has recognized, was a transformative force. Reagan endorsed the upward redistribution of income and the polarization of society by wealth, and when he pulled Jimmy Carter’s solar panels off the White House roof, Reagan explicitly committed this country to 30 more years of fossil-fuel dependency and the petro-capitalists’ dominance of American politics.

Obama needs a focus for his own transformative agenda. His focus should be the city.

To what end energy independence?

Obama has said that his policy priority will have to be energy independence.

Wonderful, laudable, necessary, and intelligent, that. Oil tycoon T. Boone Pickens is already at work on his $2 billion west Texas wind farm. A compelling study of the potential economic impact of Great Lakes wind-turbine development (http://www.glc.org/energy/wind/presentations/Flowers.pdf) lays out that achieving even a 20 percent threshold of electricity production via wind-turbines would mean tens of thousands of jobs for the Rust Belt, plus great ecological benefit.

Obama has also endorsed a national infrastructure initiative. Bravo, bravissimo—especially if that infrastructure investment is focused on wastewater. A Brookings Institution study says that the price tag for cleaning up the sewer systems in the Great Lakes watershed will be about $26 billion, including a $600 million project for the Buffalo area. It’ll be money well spent: Thousands of jobs will be created and the long-term habitability of the North Coast will be enhanced. The mammoth cost for the rest of the country will have to be met too, because clean water means life everywhere.

But an ambitious president should be ambitious enough to create a framework for these efforts.

What are we really after? If we think about 2020 or 2050—if we think in the longer-term perspective that a transformative leader must have—then the key instrumentalities of our daily lives must serve our civilization, and not just enable our current culture.

Our current culture, which is built on energy overconsumption, is depleting the capital bequeathed to us from several centuries of a civilization that was city-based and city-centered.

We are, to use an old Joe Biden phrase from his first presidential campaign in 1987, “eating our seed corn.”

In our current culture, our suburban lives depend upon a level of individual overconsumption that is unsustainable—and that does not happen in cities. But getting folks to make the connection between energy efficiency and city life, between American energy independence and the need to live more densely, will require that the rewards for city living will have to go up, and the subsidies for less-dense, more sprawled-out life will have to disappear. In short, if energy efficiency is going to be a part of the policy march toward energy independence, then the economic incentives for suburban life will have to change.

But true change will be a huge problem. As UCLA economist Matthew Kahn wrote in Green Cities: Urban Growth and the Environment, there has long been an association between rising gasoline consumption and rising income. Of course there is—because Eisenhower’s highways, Truman’s mortgages, and Supreme Court Chief Justice Berger’s desegregation decisions, plus empowered little-box local governments, have both prodded and financially incentivized middle-class folks to “escape” cities.

Their escape, however, has made everybody poorer—and when I say everybody, the climate scientists agree. Greenhouse gases from widely-dispersed settlements, car exhaust, and other inefficient energy usage are contributing to climate change, which means that everybody on the planet will suffer if we persist in our ways.

So when Obama talks about bringing America together, there is a national security rationale for that goal, an energy rationale, a climate-change rationale—but overall, a civilizational rationale. We have to begin the march toward an urban-focused 2050 on Barack Obama’s inauguration day.

We need our new president to understand that the chief political obstacle to creating our new civilization is the highly visible, highly intractable, ugly, ongoing problem of the urban drug trade. So as confident as I am about Obama’s understanding of the need for new energy and infrastructure policies, the true radicalism ahead may well be contained in the policy direction of the federal government on drugs. What direction will that be? I don’t know.

To quote Kahn: “…suburbanization has greatly increased the physical distance between the middle and upper middle class and the poor. Consequently, it is much easier and less risky for wealthier taxpayers to ignore the problems of those who are less well off.”

That’s the great divide that afflicts America today. The map of that divide is the map of cities that are isolated from suburbs.

Density and the definition of cities

A recent University of Wisconsin-Milwaukee study of unemployment among adult black males stated (some say overstated) a problem—that 50 percent of black males in Milwaukee and Buffalo and Detroit aren’t in the workforce. Overlooked in most news accounts was another finding in that study: that over 35 percent of white males in those cities aren’t in the workforce, either.

Poverty among working adults in cities has gone up greatly just in the last eight years. This past summer, Alan Berube of the Brookings Institution study found that Rochester now has two ZIP codes dominated by folks in poverty. Of 58 large metropolitan areas studied, 34 experienced increased rates of concentrated poverty among working adults, with older industrial metro areas suffering the greatest increases, but Sunbelt metros doing less badly.

Buffalo State College urban geographer Wende Mix has a more profound finding that should shape federal policy for as long as it takes to fix it: that in metro areas where the city is a small part of the overall land area of the urban region, the poverty is more concentrated and folks are worse off than in metro areas where more of the land is “city” land.

Sunshine matters, but so do bad old legacies that people less powerful than God can actually change. Everybody knows that old industrial areas are expensive to fix, but that they can be fixed. Policy-makers understand dealing with the physical hangovers of old policies, such as brownfields. But what’s really hard to deal with is political hangovers from the bad old days—especially old municipal boundaries.

Author and activist David Rusk remains right after almost 20 years: The “little boxes” he excoriated in his seminal book Cities Without Suburbs really do screw the old urban regions of the North Coast. The poor get isolated inside municipal boundaries. A whole metropolitan political infrastructure gets calcified and reinforced, as city mayors yelp for federal and state handouts for their municipal islands, while suburban town boards do go-it-alone zoning, go-it-alone budgeting, and go-it-alone educating, and Eisenhower-minded, suburb-oriented governors from Albany to Harrisburg to Columbus to Madison leave Home Rule ruling.

The federal Environmental Protection Agency has designated Superfund sites, the worst of the worst brownfields. But the toxic waste of old municipal separateness is what lingers on and on. It is so toxic that even the bright minds who advise Obama advise him not to try to trouble with it. The Metropolitan Center at the Brookings Institution has not engaged—nor, I believe, will it ever engage—the question of metropolitan-wide governance, because to do so would be to enter into the quicksand of localism, and to challenge an American political culture empowered by the suburban mentality that has come to dominate our culture.

But it is that culture that must give way to a new civilization.

And the Obama drive for energy independence offers the federal government a framework within which to confront this enormous problem—for in order to achieve the goal of energy independence, energy efficiency has to be achieved. And energy efficiency is not just a matter of the how of technological advance—smarter engines and cleaner motors for end-users, local production, wind turbines, and other eco-friendly sources on the supply side—but also of the where of energy use.

Must the where of energy use be set forever in America by Eisenhower’s highways? Because where we use energy determines how well we use energy, and how much we use.

Infrastructure stimulus that helps cities

From the Economic Policy Institute’s October 29, 2008 testimony before the US House of Representatives Committee on Transportation and Infrastructure, a list of projects identified as ready-to-go that will stimulate the economy and promote urban density:

Transit projects: 246 ready-to-go projects totaling more than $3.6 billion, could be implemented within 90 days of federal funding.

New transit projects: Approximately 400 projects totaling $248 billion proposed, with 58 of those—totaling $25.2 billion—far along in the planning process. Most of those 58 projects have already completed the environmental process and could begin within four months to a year.

Highway: 3,000 ready-to-go projects totaling $18 billion.

Bicycle/pedestrian projects: $325 million in ready-to-go projects.

Fleet greening: $3.9 billion for clean vehicles, and retrofitting existing vehicles with green technology.

Wastewater treatment projects: $4 billion in ready-to-go projects.

The wisdom of teenagers

Localtion, location, location. The city must once again be the value proposition for our culture. For young people, it may already be.

In my city, as in most, the swankiest private and most demanding parochial and public high schools are located where the tycoons, the bishops, and the social reformers of the 1900s built them: in the central city. The Eisenhower- and Truman- and Berger-enabled suburbs tend to supply most of the kids for these private and parochial schools. That means that their classmates who live in the city, like mine, have a constant stream of weekend suburban visitors.

The suburbanites have a rationale for pestering us about sleepovers. I hear it every Friday: “There’s nothing to do where I live.”

In the interest of domestic harmony, city-dwelling parents have become bed-and-breakfast hosts. That’s how we’ve learned so much about how domicile shapes expectations and behavior.

The most obvious difference between city and suburban classmates is that the city kids are less scheduled than their suburban friends, even though every last one of them is involved in after-school activities. That’s because the city-dwellers get around on their own. They walk. They take the bus or the subway. They do their music, sports, or clubs, and they don’t need the Mom & Dad taxi service.

That’s why city kids are more spontaneous about social gatherings. They are more likely to congregate suddenly at the art gallery, or on a whim to bike en masse over to the Rose Garden in Delaware Park, or to text-message each other about meeting at a certain used bookstore or joining in a pickup ball game.

Spontaneity. Diversity. Knowledge of geography. Mobility without cars. The diversity of these city kids is racial, but it’s also about income, school-affiliation, and interests. And the middle-class kids from educated families have figured out about how to stay safe from the kids who are in the drug trade. Nobody has any illusions. Nobody walks alone.

Jazz critic Nat Hentoff said the same thing decades ago: He raised his son in Manhattan so that the kid could learn how to handle himself.

The president for 2050 needs to be the president who understands that kids need to grow up knowing how to handle themselves. Technology already enables elites to live wherever they want to live. It is imperative that the next elite be comfortable living next to poor people, so that everybody, at every income level, understands our shared destiny.

The segregation by income, by race, and by individual cul-de-sac was enabled by a foreign policy totally focused on petroleum for sacrosanct automobiles. What energy independence and energy efficiency can mean—if federal policy on what gets subsidized changes—is an trend toward an end, over the next few decades, of the inefficient, polarizing, atomizing, civilization-destroying dispersal away from cities.

A presidency that explicitly focuses on energy independence will implicitly refocus policy on cities—but it won’t happen naturally. The divisive culture of suburbia must, and can, be shifted to become the inclusive civilization of the city, but only if explicit infrastructure and land-use policy steps are taken.

This won’t be identity politics, or the narcissism of those who wanted a president or a vice-president “who’s just like me.” Civilization needs a leader, a transformative force, an unapologetic advocate for that form of human organization that has lasted millennia: the city.

Bruce Fisher is visiting professor of Economics and Finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.

Thursday, October 30, 2008

Innovation and courage: there, not here

Get Ready


Predictions for 2009:

Prediction #1: The radicalism we need. A single-payer healthcare system should now be possible.

I have accused Senator Barack Obama of being a pragmatist.

That’s why I hope that he will seize the day and assign his policy leadership to get cracking on a new national healthcare system. The best approach would be for our existing Medicare system to be expanded to cover everybody.

Medicare for all would turn America into an insurance risk pool of more than 300 million “covered lives,” rather than the dysfunctional patchwork of some who have great health insurance, some who have spotty health insurance, and almost 50 million who have no health insurance at all.

There’s a way to do nationalized Medicare such that bureaucracy is contained and the free exercise of consumer preference is unimpeded—but the bogeyman that the Right will conjure up already has a name or two. It is variously called “socialized medicine” or, for short, “Canada.”

Nobody should be afraid of a Canadian-style healthcare system here. Why? Because the Canadian system works. It meets the test of policy, what I call the John Stuart Mill test, of achieving the greatest good for the greatest number. With some slight modifications, it would work here.

Canadians spend aroundeight percent of their gross domestic product on healthcare. We in the United States spend more than 15 percent of our gross domestic product on healthcare. Life expectancy is higher in Canada than here. Infant mortality is lower. It is true that there are some annoying cases of delay—what the Canadians quaintly call “queuing”—which is a problem that Americans simply won’t tolerate, and for which there is a logical market solution.

A very sane group of American physicians has long endorsed the Canadian approach because these fundamental issues of longevity and mortality are better managed there than here. The Physicians for a National Health Plan (see www.phnp.org) has 93 co-sponsors in the House of Representatives for H.R. 676, introduced by John Conyers of Detroit.

The need for radical change is quite urgent. That’s because the health-related debt is the hidden financial crisis that lurks behind the mortgage crisis. Why don’t folks have the wherewithal to pay their mortgages? Too often, it’s because they owe huge amounts of money for having had the misfortune of getting sick.

Even Bush Administration people get it. Mike Leavitt, head of the US Department of Health and Human Services, recently said, “If we had any idea how many mortgages were foreclosed because people were crowded out by medical issues…Health-care costs are at the heart of many of the things happening.”

According to the Commonwealth Fund, as much as 41 percent of working-age adults—72 million people—have medical debt or are struggling to pay medical bills. This is a sharp rise from 2005, when the problem faced 34 percent of adults (about 60 million people).

I was never very impressed by Obama’s proposed mandate for employers to insure their employees. Why shouldn’t everybody be in the same risk pool? The patchwork approach is not as sensible a solution to this problem as the Physicians for a National Health Plan approach.

Prediction #2: Democrats are about to screw this community.

Because the Erie County Legislature refused to enact dedicated funding for parks, the arts, and libraries, get ready to kiss them goodbye.

No matter who is elected president, and no matter what economic stimulus package is enacted in Washington, the government in New York State—and that includes our city, our towns, our county, our school districts, and more—will have to raise taxes and cut services.

Governor Paterson will have about a $10 billion hole in his 2009-10 budget. After November 18, when he calls the New York State Legislature back into session, we will have a better idea of how he means to plug the multi-billion-dollar gap in the current budget year. Sharp reductions in revenue from Wall Street will mean severe cuts soon. And then next year, the pain will get worse.

Meanwhile, back here in Erie County, the county executive from Clarence has just proposed a budget that will stay balanced for about a month before it runs out of money.

Democrats in the County Legislature want the blame to fall upon Collins. They theorize that they can run for re-election in 2009 by blaming him for raising taxes and cutting services, even though legislators who cut services will themselves be blamed for…cutting services.

Nevertheless, observers predict three possible scenarios:

1. Democrats in the Erie County Legislature will rush to enact a zero-tax-increase budget before November 17 so that they can say they are against tax increases.

Notwithstanding the fact that county taxes are low, Democrats won’t raise them to fund services. (The New York State constitution allows local governments to raise up to two percent of the assessed value of real property. The value of real estate in Erie County is about $37 billion, which means that Erie County could conceivably have a $740 million tax levy. Today, the tax levy is around $200 million, every nickel of which goes to pay Medicaid. The average homeowner in Erie County pays $500 a year in county taxes. Collins proposes to raise that tax by $20 a year.)

If the Legislature’s Democrats go for Scenario #1, they will abandon libraries, culturals, parks, the Cornell Cooperative Extension, the 4-H agricultural-training program, and various youth- and senior-assistance programs because they believe that no taxpayers will tolerate even a $1.50 per month increase in County taxes.

In the alternative:

2. Democrats in the Erie County Legislature could rush to enact a modified budget that protects libraries, culturals, parks, and the rest, but will warn that County Executive Chris Collins has failed to adequately budget reserves against the coming storm of new state mandates that Governor Paterson will put in his own budget.

Could this happen? Maybe, if the lobbying gets intense. There is strong momentum for Scenario #1. But there is a third possibility:

3) Democrats in the Erie County Legislature will sit in total paralysis until the second week of December, and allow the budget County Executive Chris Collins proposed to go into effect by default.

Here’s what any of those scenarios mean to this community:

If you run a cultural organization in Erie County, get ready to see your County allocation whacked—which will happen starting in January. Don’t expect a nickel in county funding. Why? Because after January, the massive changes in state budgets will come into effect, and wipe out all of Erie County’s ability to write checks to cover non-mandated services.

Culturals should remember that there is no place to go for taxpayer support other than Erie County. Under former Mayor Anthony Masiello, the City of Buffalo cut out any funding for culturals. The current county executive reduced the $5.6 million that former County Executive Joel Giambra budgeted, and then reduced it more.

And why are county elected officials willing to cut funding for the quality-of-life programs and amenities that make this community liveable?

The answer is quite simple: Against the evidence of the presidential campaign now underway, in which the tax-raiser is winning, Democrats in the Erie County Legislature believe that local taxpayers will not vote for any elected official who votes to raise taxes for any reason. Nor do the three Republicans in the Erie County Legislature, even suburban pork king Mike Ranzenhoffer, but that’s not surprising.

Legislature Democrats killed a 2007 proposal for creating a dedicated revenue—basically, a property-tax set-aside—so that community assets would be funded.

Fully funding the library system at about $23 million a year, the culturals at $6 million a year, the Cornell Cooperative Extension and a handful of other items for $1 million a year, plus $6 million a year for capital and operations costs for the county-wide parks system (including all the City of Buffalo parks, the Olmsted Conservancy, plus the more than 10,000 acres of parkland and forests and preserves in the suburbs and exurbs) would cost, at the most, about $36 million a year.

Erie County has the second-lowest county property tax rate in New York State. The county property tax now raises about $200 million a year, all of which goes to pay the Medicaid bill.

If the average county homeowner paid a $35 annual surcharge to a dedicated fund that could not be raided for other purposes, then the libraries, the culturals, the parks, and the rest could all stay open. That price is about 10 cents a day, or $3 a month.

That’s the price. What’s the cost of doing without it?

Ask a Democratic legislator—because if the libraries, culturals, parks, and the rest are cut, it’s because they did the cutting. And remember: There are 12 Democrats in the 15-member Erie County Legislature. That means that they have a veto-proof majority.

Bruce Fisher is visiting professor of Economics and Finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.


Reader Comments


dyerluke
30 Oct 2008, 10:24
In my opinion, the Canadian solution to health care would not be acceptable to the majority of Americans. While on vacation in Toronto a few years ago on Dominion Day (July 1) my son had an allergic reaction to something. My wife called 911 for assistance. Unfortunately, there was a doctor's strike underway and most of the hospitals were closed and locked up. When we found an open emergency room (which took 2 hours with police assistance) it took 45 minutes to convince the triage clerk to find a doctor. Then we had the standard wait for treatment.

I realize the American system is not perfect, but it is better than the Canadian alternative.

A better reform would be to enact an any willing provider law. This would eliminate the power of HMO's and health insurers to duplicate the functions of state licensing boards. It would eliminate 1800 companies credentialing departments, reducing expenses and broadening access to care by forcing them to pay any provider willing to accept their fee schedule.

This would not address the uninsured issue. Unfortunately, in my opinion, the vast majority of uninsured in NY are that way by choice. Medicaid, Healthy NY, Family Care Plus and Child Care Plus make health insurance cheaper than smoking cigarettes for middle class families, and free for families in poverty. I know people who smoke who say health insurance is too expensive. Sigh...

Bruce Fisher
30 Oct 2008, 10:49
My shorthand was too short! I agree with the writer, and so do the Physicians for a National Health Plan. The proposed legislation is about creating a single payor, which is the benefit of the Canadian system. That's why the best model here is Medicare -- an established system that allows provider flexibility and consumer choice. Our healthcare financing problem is that today, we force employers to carry the burden, or to shift it -- thus empowering gatekeepers like HMOs, which spend zillions on administration and marketing, and make their money by saying NO to care, even while burdening physicians intolerably. Nobody needs that. The PNHP bill is a good solution.

Peter A Reese
30 Oct 2008, 11:10
The Leg is a slippery slope, because, Marinelli needs Republicans to hold on to her chairmanship.

Scenario #1 won't happen because the Leg would have to take responsibility for the resulting cuts and decide what to cut.

In the absence of Leg staff and expertise necessary to deliver Scenario #2, it is also unlikely. Bruce, you were a member of the executive branch. Those guys have all the budget mod talent.

Therefore, Collins is correct. Scenario #3 is the most likely outcome.