Friday, November 20, 2009

Killing the majority?

Left and Right Converging

Published on Artvoice Blog
November 20, 2009

Filed under: News, Presidential Politics — Tags: 2010 elections, Bailout, Barack Obama, George W. Bush, Henry Paulson, Levy Intitute, stimulus, Tea Party, Timothy Geithner — bruce @ 5:08 pm

AV columnist Bruce Fisher sends in this reflection on How Treasury Secretary Tim Geithner’s bad economics could turn Blue states Red in 2010:

Jim Hightower, the former Texas politician and veteran political wit, was fond of excoriating political moderates as he was of skewering Republicans. “Ain’t nothin’ in the middle of the road but yellow lines and dead armadillos,” he’d say. In the Blue states, the curious phenomenon of middle-of-the-road economic policy in 2009 may turn politics Red in 2010. That’s because trillions of American tax dollars spent on “stimulus” spending have gone into bailing out banks rather than into buying America any new jobs. And the political effect is terrible for Congressional Democrats, who are getting angrier and angrier, just like their constituents. By the time of the next Congressional elections in 2010, the political impact of the economic policy decisions of George W. Bush’s and Barack Obama’s Treasury Secretaries, Henry Paulson and Timothy Geithner, could destroy Obama’s majority support in Congress.
Treasury Secretary Tim Geithner

Treasury Secretary Tim Geithner

A group of non-mainstream economists has been warning about the wrong-headedness of the Bush-Obama approach to financial stabilization. At the recent international conference of Post Keynesians held at Buffalo State College, the consensus was pretty clear that both the Bush and Obama administrations gave America a policy that will do nothing to prevent the financial instability that gave us the financial collapse and the resulting recession.

Current policy, according to L. Randall Wray and Eric Tymoigne of the Levy Institute, “serves to preserve the interests of big financial companies rather than to implement government programs that would directly sustain employment and restore state finances.”

In one of those rare papers that non-specialists can read, these economists don’t go anywhere near the political question of why it is that first the Bush Treasury and then the Obama Treasury flushed trillions of US taxpayer dollars into propping up banks that are “too big to fail” while doing nothing about the crushing burden of household debt—and still leaving at least 26 million people without a steady full-time job. Unfortunately, Obama’s economic advisory crew is led by people whose views are undistinguishable from Bush’s—the very people who have personally profited from what historian Kevin Phillips calls “the financialization of the American economy.” The Post Keynesians who gathered in Buffalo warned that the incentives for money-manager capitalism have become far, far lucrative than for industrial capitalism, evidenced by the far higher level of profits scored by financial firms than by industrial firms.

The astounding surge of influence of the financial world has been a bipartisan phenomenon. Former President Bill Clinton’s own Treasury Secretary, Larry Summers, was one of the architects (if deconstruction can be called architecture) of the changes in financial regulation that had been in place since the New Deal. Republicans and Democrats alike gleefully went along with all of that and more, raising money from Wall Street hand over fist. They all sang from the same “free market” hymnbook. Markets were supposed to be self-correcting. Indeed, the Republicans who are called “free-market fundamentalists,” like Congressman Ron Paul and Senator Richard Shelby, criticized the Paulson and Geithner bank-bailout policies by making at has least one point in common with the Post Keynesians: They all say that there should be no such thing as a bank or an insurance company that is “too big to fail.”

This past week, Senator Shelby rose in opposition to Senate Banking Committee Chairman Chris Dodd’s legislation that, Shelby says, “significantly expands the federal government’s ability to bail out not only banks, but any large, politically connected company.” The Post Keynesians make the same point.

Thus President Obama is facing a brewing rebellion on the Left as well as the one that has been hammering him from the Right. His bailout of the banks massively swelled the federal deficit without providing a public-works program that resulted in a surge of hiring. As the Christmastime consumer spending-frenzy approaches, there is still double-digit unemployment almost everywhere and no relief in sight. The Congressional Black Caucus is in open rebellion at the Tim Geithner-Larry Summers “brain trust” that still apparently believes that macro-measures of economic output are a perfectly adequate gauge of economic recovery, even while middle-class and working-class household stress is boiling over.

Even worse, the economic pain in 2010 will hit home even harder. The Pew Center on the States reports that most state governments are so strapped for cash that tax increases, layoffs and service cutbacks loom. Brookings Institution economists have issued a dire warning that local governments everywhere will be following suit.

Thus it’s no surprise that Congressional sentiment in favor of a new round of “stimulus” spending seems to be growing—because folks at home, from governors and mayors to households and shopkeepers, are all asking “Where’s my bailout?” Here’s the political problem: the apologists for the “free market” will be happy to bash the proposed financial reforms the same way they’ve bashed the stimulus spending and the healthcare reform—as big-government programs that don’t, haven’t and won’t deliver benefits to the average family. The Levy Institute economists of the Post Keynesian school warn that the free-marketeers, whether they worked for Bush, for Obama, for Ron Paul or Richard Shelby, are dangerously wrong. The average family would benefit tremendously from the policies prescribed by Tymoigne and Wray, policies that include a permanent public-works jobs program at a living wage, plus household debt-forgiveness, plus “a return toward term lending by regulated financial institutions that hold loans and a restoration of incentives to engage in proper underwriting.” Tymoigne and Wray argue that the only way to fix the lending institutions is to give working people a chance to start paying their mortgage payments and their credit-card bills.

That’s sober advice that also happens to have a certain genius about it as political advice, though as non-politicians, they never say as much. Sadly, the political rhetoric of 2010 will likely be dominated by Republicans who will bash the Bush-Obama bank bailouts and also bash the massive deficits that those bailouts caused.

As non-Keynesian and Post-Keynesian economists alike know, though, the most dangerous thing in the world would be to try to enact aggressive anti-deficit measures because of this thing called demand. If deficit hawks get elected in 2010, and succeed in restricting the actually stimulative “stimulus” spending, then unemployment could get much, much worse, and the downward spiral toward the Depression could get going faster than it could be stopped.

So here’s the punchline: If Obama sticks with Bush economic policies, and if his Senate allies like Connecticut’s Chris Dodd push financial non-reforms that institutionalize “too big to fail” for Wall Street’s irresponsible giant firms, then hunger and hurt in the heartland will tip the Blue states toward Red.

There’s already a tax revolt on Long Island and in the Hudson Valley in New York State, and a shrill anti-government movement in the permanently dependent, permanently job-losing Buffalo area. Ohio voters just this month reversed themselves with a vote to legalize casino gambling, which is always a sign that a depressed area has become a desperate area, as study after study has shown that casinos cause deadweight economic loss in addition to criminality and family woe. In Michigan, northern Ohio and elsewhere in the Great Lakes, other automobile-industry centers are already seeing red. Unemployment, housing foreclosures and overall economic stress make those areas prime targets of former Alaska Governor Sarah Palin’s book-promotion tour, where she delivers her anti-government message to some seriously hurting folks.

The Bush and Obama teams delivered for the financial elites on Wall Street, whose bonuses this Christmas will still have them consuming lots of jewelry, high-end watches, designer clothing and imported luxury cars. Meanwhile, a recent Wall Street Journal report shows that sales of low- and moderately-priced items at shopping malls are still depressed. The Target-brand department stores, whose customers briefly became Democrats in 2008, expect lower-than-usual sales because their customers don’t have the money this year.

Thursday, November 19, 2009

Where mom can walk, recession can end

Your Mom, Walking
by Bruce Fisher

How attention to street detail makes or spoils the region

The American cities that are suffering worst in this recession are the ones whose economies are tied closely to General Motors and Ford and their supply chains. A recent survey by the Brookings Institution finds that five of the 21 large metros in the Great Lakes region—Dayton, Detroit, Grand Rapids, Toledo, and Youngstown—rank among the 20 weakest metro economies in the country. Akron, Cleveland, Cincinnati, and a couple of other car-towns aren’t quite as badly off, but that’s rather like saying that someone with swine flu isn’t as badly off as somebody with stage III lung cancer. Freshwater towns like Rochester and Pittsburgh, and to a lesser extent Buffalo, Syracuse, and Madison, are where housing hasn’t collapsed, where unemployment is up but not catastrophically so, and where there is something else other than car-making that undergirds the economy.

We all hope that the current downturn will be resolved soon, but what the economic analysts seem to have a hard time figuring out is whether there is something else, some other factor, that will shape a region’s fate. New research of a wholly different kind suggests that if a place is pleasant and easy to walk in, folks will tend to want to live there, and will find something new to do for a living there, if they possibly can.

New urbanists are hard at work advising real-estate investors to build walkable developments in the growing, sunny parts of America. Up here in the old North, where we not only made cars but shaped our entire lives around them, we face a rather stark test of the theory that walkability could mean community survivability. The test could be as simple as this: If your mom is 75 years old and wants to move to Florida, will she stay if she feels comfortable walking to the drug store, the bank and the branch library? Will she “age in place” if she can get herself to all the other non-supermarket places that make up a city shopping strip or a village center? If so, there is some evidence that, chances are, you and your clever and educated and discerning friends will want to live where Mom feels good about walking.

That means that the sidewalks need to be level and the street-crossing signals functional, and that the house she’s living in has been remodeled, if only a little, to accommodate her ever-more-limited range of motion.

These issues are gelling into an urgent question for Great Lakes metro areas because pretty much every snowy place has the same demographic fate between now and 2030: The population is going to get older, and it’s going to get smaller. So if policy-makers stand by and watch lots of new housing continue to get built, instead of older housing being maintained and retro-fitted, then the old stuff—especially in the old city centers and first-ring suburbs (where the older folks live) will be abandoned. Places with lots of abandonment tend to spiral downward faster. Places with lots of sprawl tend, in all the Great Lakes metro regions, tend to shrink overall. This shouldn’t be hard to figure out, but our state-level policy-makers to figure out, but they haven’t—even though Cassandra after Cassandra cries out a warning.

One of them is the Federal Reserve Bank of New York, which published a very troubling study in 2007 that shows just how unsuitable so many of old houses are for the elders who live in them. Prosaic details of everyday life—like the fact that most pre-1980s houses have only one bathroom, and that it tends to be on the second floor—become literally life-threatening situations. Keeping the homestead is hard when folks have to climb Mount Everest to wash their hands. But even after the remodeling gets done, and the $10,000 retro-fit of the old home allows Pop to avoid moving out to the Sunset Square Senior Ghetto, does he stand a chance negotiating the streets of home?
Rocky or smooth

A new look at the walkability of our urban, suburban, and village neighborhoods in Western New York was undertaken on an arrestingly simple premise: that it was time to test out whether the streets around here are safe for older, slower-moving folks and others, including people who move slowly because they tend to ride in baby carriages, or whether the risk from bad drivers, bad landlords, and bad concrete work make our community a bad bet.

Volunteers and staff from the Healthcare Foundation of Western and Central New York tested sidewalks, intersections, crosswalks, and streetscapes all over Erie County, from Williamsville to Riverside, from Orchard Park to Hertel Avenue, the Frederick Douglass Apartments, South Buffalo and a few other places. (See Walkability Results Report Final.pdf.)

The Tosh Collins Senior Center in South Buffalo is a comfy place, but the volunteers found that crossing the street to get there was a life-threatening experience. Crossing Abbott Road or Cazenovia Street near the park was also a big problem. The NFTA’s bus stop isn’t adequately lit, unleashed dogs roam the Olmsted Park there, and the sidewalk is all cracked. Yet this particular senior center is in an attractive setting, is very well used, and is a popular destination.

Allegedly human-friendly Williamsville Village between Union and Cayuga features a broken pedestrian crossing signal, no signal at all at an apartment building full of seniors, a 20-second crossing time that is fine for somebody 17 but perhaps a bit less than sane for persons even of the mellow vintage of your humble correspondent, much less his mom. Yet the other aspects of the community seem to be sticky enough to keep folks happy to be there.

Overall, though, Erie County is a very unwalkable place compared even to the other snowy towns that are experiencing population loss. UB geography professor Dr. Li Yin said in 2007 that the New York City borough of Queens, by contrast, was one of America’s highest-scoring communities on his “walkability index,” but that Buffalo in particular, especially in areas of high abandonment and bad sidewalk and curb maintenance, scores lowest. Lowest in walkability translates into least likely to work as a destination for investment, commerce, or new or revitalized housing.

When it comes to assessing local government, this is about as basic as it gets: Are the folks whose job it is to maintain the infrastructure making it work, or do you risk tripping on a busted-up sidewalk, getting run down at an unmarked crosswalk, or threatened by wannabe mobsters at an unlit bus stop? It is not hard to understand, then, what seems to be a demographic consequence of this: Population density, and economic viability, is falling in the places where it’s harder to walk.

Sunday, November 15, 2009

How Democratic wimpiness empowers local Palins

Taxes, Rants, & Tea
by Bruce Fisher

Poor Chris Collins. The current Erie County Executive is about to become Joel Giambra, the previous County Executive, and Ned Regan, the one who proposed raising county property taxes over 70%. That’s because the same fiscal circumstances that faced Erie County under Regan and Giambra are returning for 2011 under Collins—a huge growth in the cost of unfunded mandates, insufficient local revenue to cover those costs, and the unavoidable, distasteful task of telling taxpayers that the same choice that faced us before faces us again, a choice between gutting services and raising taxes.

But let’s reduce the emotional temperature by taking away the names, because it’s a structural problem, not a personality issue. Before Christmas, this community could once again see an ugly confrontation between a state-appointed fiscal oversight board and an elected county executive. The messaging will be bad for democracy—because once again, we’ll be told, the people whom we elected cannot be trusted to govern. Once again, we’ll be told that they cannot be trusted to collect the taxes, manage the services and serve as stewards of the community’s assets. Once again, we’ll be told that only “business” people can handle the people’s business.

We got a preview of this message last month, when the Erie County Fiscal Stability Authority (ECFSA) issued its analysis of the County’s four-year fiscal plan. The ECFSA pointed out 8 flaws in the County Executive’s plan—including his assertion that he is going to cut the Erie County library system by 10%, unilaterally pull out of a sales tax-sharing agreement with the towns, and cut staff that do the work that Federal and State law require the county to do. The ECFSA report warns that County property taxes will have to go up at least 28%—and probably much, much more—but nowhere in the County Executive’s plan is the reality of a property tax addressed.

“Only the receipt of approximately $76 million in stimulus funds has allowed the county to produce balanced budgets for 2009 and 2010,” said the ECFSA report.

That report was issued on October 16th. But during the recent election, strangely, no campaigns were run on the issue of President Barack Obama’s $76 million gift running out, nor on the issue of the coming tax increase in Erie County. Nor were campaigns run on the inevitable choice that elected officials will have to make—the choice between keeping libraries, parks, cultural organizations and services to veterans, impoverished single mothers and at-risk children going, or just paying for mandated services, the jail and some roads.

Why the silence?

Balancing pain with gain
Think back to 1994. It was the mid-term Congressional election after Bill Clinton’s great failure of 1993. That was when, in his first year in office, the new President tried and failed to get a comprehensive healthcare reform bill passed. Worse, Clinton’s Secretary of the Treasury and the Chairman of the Federal Reserve had convinced the President, and he in turn had convinced Congress, that the only way to head off the nightmare economics of huge deficits and job-killing inflation was to raise taxes. Clinton and Congress bit the bullet on taxes, but dropped the ball on healthcare.

Political disaster was the result of stifled reform. The voting middle class felt the tax pain but not the policy gain. With the help of then not-yet-Congressman Tom Reynolds and his campaign team’s “morphing” ads, in which individual members of Congress morphed into the image of the tax-raising president, the House of Representatives went Republican—and stayed Republican until 2006. The Democratic National Chairman at the time, David Wilhelm, complained to me at the time that Democrats who abandoned Clinton on healthcare were his biggest headache, because Democrats can’t win when they’re in a fearful crouch.

Democrats locally and across New York State certainly seem to be flexing their knees once again. Instead of running campaigns in defense of public services, and rallying constituencies that all demand public investment, they do a faint version of “me too” when the issue is taxes. Verifiable facts about how our economy gains from public investment go un-mentioned by Labor, by Democratic elected officials and by opinion leaders, while the anti-government, anti-spending rants of the Right are amplified unrebutted in the major media.

Item: the nose-counters New York State Department of Labor say that thousands of jobs have been created in the hospitality industry in Western New York over the past several years, which happens to be the time period over which major public investment went into arts organizations, architectural restoration, fisheries development and bi-national tourism development. There’s a measurable increase in the size of the hospitality-tourism-arts sector of the economy here. Yet none of this stuff is the stuff of campaigning, even as the County Executive cuts the arts budget and has zero plans for increasing investment in attractions.

Item: healthcare in the region, and specifically inside Buffalo, remains a huge employer and economic force. Of the more than 50 organizations testifying before a recent New York State Senate hearing on the state budget, the entities with the biggest requests for state help (i.e., tax dollars) were Kaleida Health, Roswell Park Cancer Institute, Erie County Medical Center Corporation and SUNY at Buffalo—all of which survive principally on public money. Yet the consistent messaging in the news media, especially from the local business community, is that public spending somehow is injurious to the local economy.

Item: A review by the Buffalo State College Center for Economic and Policy Studies shows that public employment in Erie County contributes $3.5 billion of the $18.1 billion in wages paid here, about 19% of the total in 2008. Public employment is paid for with tax dollars, but not all those tax dollars that pay those public salaries are from here. Federal, state and most county workers are paid with imported money—so their wages are a net contribution to the economy here from someplace else! When was the last time you heard public unions host a forum of economists to discuss the impact of public employment on the local or regional economy? When have you heard a banker estimate how many mortgages are held by current or retired teachers, cops, social workers, college professors, sewer workers or firefighters—and what would happen to that bank were those borrowers to disappear?

Item: we read endlessly that a lobbying group in Albany has calculated that local taxes in New York State are 60 percent higher than the national average. Now read this: according to the Tax Foundation, taxpayers in New York State ship over $139 billion a year out of state to pay the bills for federal services in states represented by anti-tax Republicans. According to Citizens for Tax Justice, the total tax rate (measured as a share of income) paid by middle-class New Yorkers is almost the same as the total tax rate paid by the wealthiest New Yorkers. Yet we read again and again that the affluent of New York State are streaming for the exits. Why no clarification? Why no facts in rebuttal?

The cost of going rogue
Sarah Palin’s home state of Alaska receives billions of New York tax dollars in the form of permanent economic stimulus funds—for military bases, national parks, environmental cleanup and subsidies for the various extraction industries. Alaska is one of those “red” states that consistently votes Republican. Some clever political science undergraduate should do a term paper about the correlation between the decibel-level of the anti-tax rhetoric from a “red” state and the amount of our tax money that state gets.

Similarly, out here in Upstate New York, we hear “red” anti-tax rhetoric all day long on certain radio stations, and can read it daily in our daily press—notwithstanding the fact that over 75% of New York State revenue is collected in the New York City metro area, but that only 65% of New York State revenue is spent there. The rest of that dough sloshes over us, here, in the state’s flyover country.

Thus it was no surprise that way away up north in the 23rd Congressional District in the Adirondacks, the pattern holds. Folks in Clinton, Essex, Franklin, Hamilton, Herkimer, Jefferson, Lewis, Oswego, St. Lawrence and Warren Counties pay in $1.23 billion in state taxes but receive $1.86 billion in state disbursements. The $630 million extra that that area gets from Albany (i.e., more than 50% more than those folks pay in) comes from the New York metro area. Grateful to the big city, are they? Nope. The politics there was almost typical of areas that receive more than they give: the Sarah Palin candidate for Congress almost won.

Country music, dog-fighting, big-box churches, anti-intellectualism and anti-tax politics with thinly-veiled anti-Semitic code words all feel like imports from the “red” states, like our current County Executive, but sadly, they are well established in our northern cultural landscape. And sadly, despite the ancient northern tradition of flinty Yankee communitarianism—which gave us institutions like participatory democracy, libraries, forest preserves and other “commons” for the public good—these invasive species seem poised, at times, to overrun us.

Maybe the reality check provided by the Erie County Fiscal Stability Authority, if it once again goes “hard” in December, will be enough to remind the community that we do indeed have a choice between the harsh anti-community rhetoric against taxes and the whimpering of appeasers. Maybe this time when the choice between paying for services and doing without them is put to the community, the community’s leading voices will stand up and start citing some of the facts—facts that reflect the measurable, proven local and regional economic benefit of public investment.

Nobody should be particularly happy, though, about the fact that our taxes have to go higher to pay for healthcare costs that are too high or for maintaining suburban infrastructure that is over-extended and overbuilt. We could have equally effective but much, much more efficient healthcare were it organized the way healthcare is organized in Ontario. Our per-capita infrastructure costs would be more manageable, too, were we to stop the expensive sprawl that our lack of county-wide planning dooms us to.

But we’re never going to get to good public policy until the “public” part of that phrase gets better advocacy. As we await the inevitable tax increases from our anti-tax County leaders, who are just about finished spending Barack Obama’s stimulus funds, we should at least shush the “red” rhetoric and get clear about where public money comes from, where it goes and how it works for us.