The Fisher Variations

Buffalo Billion

2012-01-05T10:04:00.002-05:00

January 4, 2012

Cuomo’s billion: Pay careful attention to the language

Filed under: Development,Local Politics,State Politics — Geoff Kelly @ 8:35 pm

AV columnist Bruce Fisher sends in this dispatch on Governor Andrew Cuomo’s State of the State promises to Buffalo:

A newly revised version of a Penn State study of the powerful positive impact of locally owned businesses was released just before New York Governor Andrew Cuomo announced a $1 billion economic development package for Buffalo. Citing the persistent poverty and population decline of Buffalo, Cuomo announced an unprecedentedly large set of inducements for the area, specifically targeting out-of-town investors.

“We know from experience that large investments in growth industries can pay substantial dividends,” said Governor Cuomo in his second State of the State speech on Wednesday. “We saw great results from a substantial, sustained state investment,” he said, citing the recent history of growth in high-tech industry in Albany. The state-funded Center for Excellence in Nanotechnology is one of the most often-heralded success stories.

Penn State economist Stephen Goetz earlier this year published his study of the impact of locally owned, stand-alone firms with between 10 and 99 employees compared to large, remotely headquartered firms that employ more than 500 workers. He found that the small firms create a much greater overall economic impact, including paying higher wages, than the large, out-of-town firms.

Goetz and his co-authors, who report their findings in the current issue of Economic Development Quarterly, studied data from the Edward Lowe Foundation on the economic growth and residence status of business owners in 2,953 US counties, including both rural and urban counties. “This is really a story about startups,” said Goetz. “Many communities try to bring in outside firms and large factories, but the lesson is that while there may be short-term employment gains with recruiting larger businesses, they don’t trigger long-term economic growth like startups do.”

Cuomo said in his speech that he will look to the recently-empaneled Buffalo Regional Economic Advisory council, co-chaired by UB President Satish Tripathi and Larkin District entrepreneur Howard Zemsky, for advice. “Let’s empower the Buffalo Regional Council to develop a viable plan to create thousands of jobs and spur at least $5 in new investment and economic activity.”

“Today,” said Cuomo, “I say to national and global industries: Come to Buffalo. The State of New York is ready to invest $1 billion in a multi-year package of economic development incentives,” he said, in order to leverage a five-to-one return on investment. Cuomo also announced major initiatives in energy, including seeking increased hydropower from Quebec, increased “fossil fuels” from Western New York for Downstate users, and a plan to create more Buffalo-area access for renewable energy, including hydro and solar, that is generated regionally.

Buffalo Mayor Byron Brown responded to the governor’s statement by stating that developments like Canalside and the Buffalo Medical Campus were already underway and should receive further state investment. The recent recommendations of the Regional Economic Council, however, made no reference to Canalside, focusing instead on workforce investment, technology development and various anti-sprawl initiatives.

IDA blues

2012-01-05T10:02:00.000-05:00

Time to Change the Rules

by Bruce Fisher

(photo by Alan Bedenko)

Can Mark Poloncarz stand up to real-estate developers and the politicians they fund?

As a regional economy that is far away from Wall Street and even farther from Washington, the Buffalo metro area greets the new year hopeful, as ever, that if we get our own house in better order, we’ll have a better chance of living through whatever new calamities Wall Street and its Washington handservants engineer. Fortunately, the new Erie County executive has a strong electoral mandate. He also speaks calmly and firmly about stewardship, government’s role as a protector, and about how this region has suffered from poor private-sector leadership. Unfortunately, that same private-sector leadership, which thwarted a previous county executive’s electoral mandate to create a strong regional government, is still in power here.

When Mark Poloncarz took the oath of office for Erie County executive on New Year’s Day, he wasted no time in reminding us that he intends to do what he can to change the region’s economic development agencies, which have been the playthings of the bankers and real-estate developers here. These industrial development agencies were established throughout the northern USA during the era of the rapid deindustrialization of the northern USA, when highly mobile capital searched, and found, places where workers would accept lower wages and communities could be forced to tolerate pollution. Well-documented histories show that steel, chemical, automobile and other heavy industry, followed by manufacturers of consumer goods from pencils to shoes to baseball hats, moved first to the southern US, then to the Mexican border zones, then further away, to China, Malaysia, Indonesia, Central America, Haiti—wherever labor was cheap. Between 2000 and 2010, the New York State Department of Labor reports that the state lost 294,000 manufacturing jobs. That left these “industrial” development agencies to cope with a globalized production and shipment structure that they remain ill equipped to challenge. But once established, these entities remained empowered to do something to justify their existence. So they became fee-driven enablers of real-estate development schemes.

Poloncarz campaigned with a critique of the fractured, duplicative, competing local industrial development agencies that have produced no net new employment. He refined and amplified a well-reasoned critique of their practice of keeping their staffs and their vendors paid by financing real-estate deals that always include multi-year giveaways of taxes on the promise, never fulfilled, of economic growth and renewal. Because of other forces, the regional economy does indeed continue to grow in overall output: The federal Bureau of Economic Analysis data show that inflation-adjusted output in the Buffalo-Niagara Falls metro area has actually grown over the past decade to over $40 billion annually, though the workforce here shrunk from 554,600 to 532,700 between 2000 and 2010, a 3.9 percent drop. The population shrunk 3.3 percent.

According to “Money for Something,” a new national survey of economic development agencies, the numerous programs in New York State deliver much less than they promise. The Washington, DC group Good Jobs First rated New York’s agencies 43rd out of the 50 states and the District of Columbia when comparing the cost of the tax breaks to the actual jobs created.

The Bureau of Labor Statistics and the New York State Department of Labor do indeed report that there are fewer jobs here today than there were three years ago, five years ago, 10 years ago. (There have been no net new jobs added in the Buffalo-Niagara Falls metro since November 2010.) The population is smaller, there are more people on Food Stamps, and fewer children in school. In 2010, the federal government sent over $8 billion in grants to individuals and governments within Erie County, over $5.1 billion of it in direct payments to named persons, which is a big chunk of the $43.4 billion in personal income the federal government reports here for that year. My 2009 analysis showed that New York state government annually sends more than $1 billion more to Erie County individuals and governments than is collected in state taxes here; a new Rockefeller Institute analysis of 2010 data shows that same trend continuing.

Economic development agencies alone cannot be expected to reverse that dependency. Large forces have been at work here for decades—most famously, the departure of the massive heavy-metals industry, the change in the geography of Great Lakes freight transport when the St. Lawrence Seaway bypassed Buffalo, and the decision, in the 1960s, to isolate the State University of New York’s campus on an island in suburbia rather than to achieve the agglomeration economics that sustain and renew every great city on the planet, i.e., by siting the university within the city. Ed Glaeser, the celebrated Harvard economist who in 2007 criticized the ongoing massive make-work projects that have failed to turn Buffalo around, says in paper after paper, and in his new book on cities, too, that the critical advantage that cities have is that information gets shared where the population rubs shoulders, and doesn’t where it doesn’t. The economic literature is full of examples of resilient regions that have adapted best to the stresses of globalization by retaining their core institutions in or close to their cores. Buffalo didn’t, and the region has suffered as a result.

But now there is a regional political leader who has a mandate to address at least the issue of what our economic development agencies ought to be doing. He did so in his first speech on his first day in office. The county executive does not, however, have unilateral authority to consolidate the industrial development agencies in Amherst, Clarence, Concord, Hamburg, and Lancaster with the Erie County IDA. When then-County Executive Joel Giambra set out in 2000 to consolidate the six IDAs into one, he went up against town-level politicians who serve on the Erie County IDA board and who influence their own town IDAs, and against the real-estate developers who fund those town officials’ political careers. Giambra’s campaign for IDA consolidation was also undermined by the regional chamber of commerce, the Buffalo Niagara Partnership, which is a lobbying organization controlled by the bankers and real-estate developers who feed off the current system.

If a new Erie County executive is going to succeed in consolidating IDAs, he will need support from New York State elected officials to enact a statute that stops town-level IDAs from making abatements of state and county taxes—a change that would put the town IDAs out of business. The new executive will need legislative assistance, too. The Erie County Legislature in 2005 was complicit in doling out an additional $12.5 million in regional revenues to town governments, a sum which, coincidentally, is about the size of the current budget shortfall of the public transportation agency upon which low-wage workers, students, and the city-dwelling elderly rely. Towns, the truly redundant level of government in New York State, annually devour tens of millions of dollars of county revenues for suburban roads, and issue building permits in a frantic intra-regional poaching process that beggars all. No executive can expect cooperation from town governments stuck in that paradigm, especially if that executive is committed to the most radical change in policy a regional leader here can have—namely, to reorient development theory, and practice, toward the poorest, most rapidly-shrinking, and most distressed area of the region, namely, the city.

Institutionalized corruption?

Just before Christmas, newly elected State Assemblymember Sean Ryan dramatized the urgency of IDA reform when he criticized the Amherst Industrial Development Agency for granting tax abatements and other public subsidies to a big liquor retailer to subsidize its move from Delaware Avenue in Tonawanda to Sheridan Drive in Amherst. As Ryan said in his critique of the deal, he was not out to blame the liquor store’s owners, because nobody who’s any good at business is going to turn down the freebies these IDAs offer. The problem, Ryan said, is a system that subsidizes businesses that already exist, that aren’t growing or adding jobs, that aren’t moving out of the area, and that are in competition with other local businesses that don’t get the goodies.

The cynical response from real-estate developers here is that public subsidies are necessary not only for attracting businesses but also for retaining existing businesses. But it’s a wonder that developers would trouble to say anything in their own defense. They don’t really need to, because they own both political parties outright.

The main beneficiaries of the system in place today are the suburban real-estate development firms that preserve their access to subsidies by handing out massive campaign contributions to politicians of both parties, at both the state and the local levels, who preserve the status quo. A few minutes’ worth of browsing the New York State Board of Elections databases of campaign contributions tells a depressing tale. Plug in the names of the major commercial real-estate developers around here and you get the picture right quick: Hundreds and hundreds of thousands of dollars go to town board members, town supervisors, county legislators, and state legislators who leave the cynically misnamed “industrial development” agencies to do what they do.

This dynamic of subsidies for reshuffling established businesses from one place inside Erie County to another place inside Erie County is repeated all across New York State. And all across New York State, except in the immigrant-rich New York City metro area, the population trends range from flat-lining to precipitous shrinkage. Since 2000, the Upstate region overall has lost both population and employment despite localized successes, and has grown more dependent on Gotham’s largesse. The question lurking within the problem of dependency is how in the world—literally, how in the globalized economy—the economic wheels will keep turning here if Wall Street falters.

Political contributions by real-estate developers

Carl Montante, Uniland Development

Personally: $83,425

Through Uniland companies: $156,590

Michael Joseph, Clover Management

Personally: $76,474

Through Clover companies: $46,832

Dennis Penman, formerly of MJ Peterson, moving to LP Ciminelli

Personally: $25,525

Ciminelli family

Personally: $305,172

Through Ciminelli companies: $92,026

Patrick Marrano, Marrano Homes

Through Marrano companies: $47,518

Figures are taken from campaign finance disclosure filings with the New York State Board of Elections, as attributed directly to individuals and the primary companies with which they are associated. They do not take into account contributions attributed to subsidiary companies, such as LLCs created for the ownership of individual properties.

Allies for sustainability

A newly empowered wave of thinking among economists is that growth per se is the wrong goal, and that we should instead be thinking of sustainability. That would seem just about the correct framework for Buffalo and other Rust Belt metros. As the birth rate is falling, and as every fourth resident of Erie County will, by the end of Poloncarz’s first term, be over 60 years of age, and with immigration pretty much limited to college students and the 1,500 or so refugees sent here annually by the State Department, chances are that population growth here will not happen anytime soon.

But that’s no reason for pessimism. It’s about time our frame of reference shifted, and our policy response with it. If it is true that the region will have more old people, then the region needs to figure out how to employ some of those newly arrived, English-challenged refugees as home health aide workers, which is a successful strategy now underway in Minneapolis, so that our elderly in Cheektowaga and West Seneca and Tonawanda can benefit from the bravery and resilience that helped Somalis, Burmese, Bhutanese, and others get here in the first place. Helping the International Institute with a big new effort to teach these folks English could help meet the growing demand for this specific kind of labor.

The potential for growth in home health aides illustrates an important fact about the region, which is that it is changing, not dying, and that the economic development agencies are engaged in activities that are irrelevant to the changes underway.

That’s why this mismatch of current projects is so galling. Tens of millions of dollars are being spent on the construction of reflecting pools on the site of the old Aud to support a new, retail-oriented downtown center in a region that is already massively over-retailed, that has shrinking disposable income and a median household income that is at least $8,000 less than the statewide median. Why? Once again, it is because of the pervasive influence of the suburban real-estate development industry.

Alternatives, meanwhile, go begging. There’s an economist at Ohio State University who has calculated that there’s sufficient vacant, cultivatable land in Cleveland that, if farmed, could supply that city with all the vegetables it currently consumes. His models should be tested here, where there are at least 1,500 acres of parcels that altogether, in 2010, were assessed at under $10,000 apiece, acreage that could be purchased for a total of $43 million. Our state economic development apparatus is spending twice that amount on reflecting pools, structured parking, and a developer subsidy for a retail “anchor tenant” in Erie Canal Harbor, while the 1,500 acres of recoverable, or farmable, or homesteadable land, collects snow.

The adaptive re-use of the Statler Hotel, the Lafayette Hotel, the Larkin warehouse complex, and other sites in Buffalo use some of the same tools that the suburban store-and-office subsidizers use. A shrinking region should absolutely re-convene in its center, and the cost-benefit analysis—demolishing the Statler would have trimmed taxpayers at least $16 million, while helping redevelop it will cost less—actually favors re-use. Where there is a measureable public return-on-investment, the numbers should dictate the input.

But the reality for all real-estate projects, city or suburban, is that they all still need tenants. Today, prospective tenants come only from existing buildings. The law firm that will move into the state-owned 1962 downtown office building named for General William “Wild Bill” Donovan, the South Buffalo war hero who helped to found the CIA, is not moving in from out of town, but rather from the HSBC tower just a few hundred yards away. At tremendous expense to the public purse, a hero’s monument will be adapted to shift an existing downtown tenant’s address one city block. The developer benefits. The tenant benefits. The economic “development” agency staff benefits. The excess taxes paid by downstate New Yorkers fund all this.

None of our economic development apparatchiks has ever advanced a plausible plan to make of Buffalo the adult destination for post-adolescent college students in the area, over 50,000 of whom are here already. These kids, who will increasingly arrive in Buffalo from Downstate because Upstate doesn’t make as many babies as it used to, are a wasted potential workforce if all the public resources for economic development are shunted into retail projects that employ nobody new. Elsewhere in the US, even in the Rust Belt, public funds are being invested in green infrastructure, housing reclamation, energy efficiency, and other developments that employ young people, including young people with college degrees. Not here.

Why? So far, it’s because refocusing on these new opportunities would mean taking the subsidies away from the developer class that pays the politicians. It’s not a matter of money: Thanks to the gushing fountain of tax revenue that gets sent here from the world-wreckers on Wall Street, there is money galore. What has been lacking is the political will to take on the developer class that currently funds the political class. What’s needed, beside a sane set of plans that actually address the region’s challenges, is the mentality that the late Democratic boss of California bluntly described to a newcomer as essential equipment for a public official. Jesse Unruh, the California Democratic legislator and boss who ran unsuccessfully against Ronald Reagan for governor in 1970, said it this way: “If you can’t eat their food, drink their booze, screw their women and then vote against them, you have no business being up here.”

Or wish-lists?

2011-12-08T08:41:00.001-05:00

Plans and Lists

by Bruce Fisher

US lobbyists, Chinese five-year plans

The international consulting firm McKinsey & Company sent a note out to its corporate customers this past summer, urging them to sit up and pay attention to China’s new five-year plan. McKinsey looked at the potential impact of Chinese government policies on 33 industries, and recommended likely winners for foreign investors. China’s leaders want more urbanization, greener energy to replace their horrific dependency on coal, more public transportation, more consumer goods, and “greater social harmony.” Their 12th five-year plan “targets a 13 percent increase in minimum wages each year, along with a more modest annual increase in household income (about 7 percent).” China will avoid inflation because costs will probably increase as a result of new policies for pricing energy, raw materials, and water; tighter environmental regulations; and enhanced consumer protection, and their soon-to-be-richer consumers will just have to pay those costs. And along the way, the Chinese planners unapologetically plan to “incubate” (i.e., subsidize and protect) technologies that have the potential to become “national and global champions,” specifically in alternative energy.

Back home in Buffalo, we have plans, too. Western New York’s Regional Economic Development Council just last week submitted its recommendations to Governor Andrew Cuomo for $74.5 million worth of projects that have a lot in common with the Chinese plan. The council’s wish-list is about intellectual capital, green infrastructure, urbanization, and helping low-skill workers become higher-skill (and presumably higher-wage) workers.

But there was another wish-list or plan released here in November, the one by the lobbying group called the Buffalo Niagara Partnership. Although the staff of the Partnership was included in Cuomo’s Regional Economic Development Council, the Partnership came up with a very different list of projects it wants government to fund. The Partnership list doesn’t have an overall price-tag, like the council’s list does. The Partnership list doesn’t present any discussion of regional population dynamics or income trends or industry analysis, as the council list does, and as do the documents that any city or county or other government entity provides whenever it goes to Wall Street seeking to borrow money for a specific piece of infrastructure. Instead, there is a seven-page list of projects, some with price-tags, some without, and there’s no context, and precious little explanation. Some of the Partnership’s “regional agenda” asks are huge: There is an ask for “gubernatorial approval of the plan to relocate the UB School of Medical and Biomedical Sciences to the Buffalo Niagara Medical Campus,” which is at least a $350 million project in construction costs alone. (The intellectual capital that the UB medical school needs is not addressed at all.) The Partnership regional agenda list is rich in other site-specific details for some speculative projects, too. There is a $2 million ask for an agribusiness park “that can be marketed for value-added food preparation and processing projects.” There is a $3 million ask for an “complete infrastructure build-out” for the North Youngman/Riverview Industrial Park “to make these sites shovel-ready and attractive to potential solar technology production projects.” That particular ask was released in Buffalo even as Republicans in Washington slammed the Obama administration on solar-technology producer Solyndra, which defaulted on a $500 million government loan, largely, most say, because government-subsidized Chinese solar-technology producers have become completely dominant in the growing world market for solar technology. What’s striking about the Partnership request for $3 million for a specific site for this specific industry is the global context, and the lack of detail as to why $3 million will do something here for a yet-to-be-named producer when $500 million wasn’t enough for a producer with a factory, capital, staff engineers and staff scientists, and the endorsements of two US presidents.

The two Buffalo plans that were put forth in November have been put before the region’s elected officials just a few months after the Partnership hosted a two-day Accelerate Upstate conference, which also produced a document with eight broadly drawn recommendations that it called an “action agenda.” That agenda—which included non-controversial items like calls for more venture capital, better coordination of workforce-training programs, and better Upstate-Downstate coordination—were framed in the positive, unlike the harshly negative rhetoric of the Partnership’s “Unshackle Upstate” campaign. One of the items on the “Accelerate Upstate Action Agenda” is this statement: “All levels of government in both Canada and the US must work together to protect, and create industries around, one of Upstate’s most attractive assets—the fresh water resource of the Great Lakes.”

Curiously, there is not a word in either the Partnership 2012 “regional agenda” nor in the Western New York Regional Development Council report about that particular issue. In August, the Great Lakes Restoration Initiative, water quality, the crisis of combined sewer overflow, the toxic algae blooms in Lake Erie, the fish tumors in the Buffalo River, the four billion gallons of raw sewage that flush into the Niagara River, and other component issues underlying the Accelerate Upstate Action Agenda were under discussion in Buffalo. The document that cited “Fresh Water” as one of eight action items was released not sometime in the 13th century in a language other than English, but rather only a few months ago, in Buffalo, by the same people who participated in producing both the Partnership and the Council lists, which overlap on several items. But not on this.

Plans, lists, and anti-planners

The Partnership endorsed Chris Collins, the county executive who vetoed legislation to create a countywide planning board. The Partnership has a history of actively undermining regional governance initiatives, including the Greiner Commission’s plan, which endorsed former Erie County Executive Joel Giambra’s administration’s plan to create a Buffalo version of the “unigovs” that run Indianapolis, Nashville, Hamilton, and Toronto. There are six industrial development agencies in Erie County today in large part because the Partnership has consistently thwarted efforts to unify them.

Nobody has bothered even to attempt a campaign to unify the 28 school districts in Erie County into a single countywide school district, with regional resource-sharing, which is the system that has succeeded so admirably in places like Raleigh, North Carolina, specifically because concentrations of poverty are broken up by regionalization.

The Buffalo metro area still has three cities, 25 towns and 16 villages, plus three separate water utilities, six sewer districts, 19 separate police forces, 26 public safety answering points (Monroe County has one; New York City has one; Los Angeles has one), and dozens upon dozens of special districts—all for an area that has shrunk from 1.1 million in 1970 to just over 900,000 today. Regionalization and consolidation, regional planning and regional thinking, are disempowered here because the Partnership opposes them.

By 2025, the population of Erie County—including Buffalo and all those towns and villages—will be about 800,000. One would think that, given the prospect of further regional shrinkage, someone in leadership, in business or in academia or in elected office, would sense the urgency of making a plan to deal with the fact that fewer taxpayers will be left to foot the bills, just as the Chinese sense the urgency of making a plan to cope with a rate of economic growth Americans can only fantasize about.

The current crisis in funding the metro Buffalo regional transportation system, which moves low-wage workers and students on the buses and trains, and high-income travelers and Canadians at the airports, is only the latest warning sign about the consequences of bad planning—or, more accurately, of inadequate, uncoordinated planning. Apparently, the Buffalo metro’s economic thinkers are oblivious to the current reality that oil prices have once again topped $100 a barrel, and are projected by responsible energy analysts to rise to $150 a barrel over the next few years. Therefore, there is a need to do infrastructure planning such that workers can get to work other than in oil-powered personal vehicles that many can’t afford today. What is the point of asking New York State to fund moving a medical school and building speculative industrial parks for yet-to-be-identified industrialists when the transport system for workers and students, which will need retooling anyway, is in a jam?

Where, in short, is our version of the Chinese five-year comprehensive plan for energy, water quality, transportation, worker training, increasing the minimum wage, and what they call “social harmony”?

The plan is to have a plan

The answer, of course, is that we won’t have one. Americans lack the cohesive leadership class that understands the concept of national purpose the way that Chinese, Russians, Brazilians, and even Canadians understand it. Our WASP aristocracy has long since given way to the hegemony, both cultural and political, of the Wall Street speculators and oil-industry thugs who are deal-focused and globalized. While the Chinese build bullet trains on a quick-step, and muscle their solar-energy and wind-turbine technologies and products into the global market, our financial and petroleum elites fund a message machine with roots in the anti-regionalism of the Kennedy School of Government at Harvard, and in the right-wing fever-swamps of Washington and in the Republican Party, that promote an anti-planning creed. They ever cite the gospel of economist Friedrich Hayek, whose anti-modernism seemed bizarre and even pathological to his contemporary John Maynard Keynes.

That doesn’t mean, however, that we should throw our hands up. Public money will continue to be spent. The question is not whether, but how, and to what effect.

That’s why the August work of the Partnership, and the November work of the Regional Development Council, should both trump the latest Partnership regional agenda—the one that mixes all sorts of unexplained and unpriced mega-asks of government with the sensible thinking of the far less grandiose, much more contextualized thinking of the Regional Development Council. The Partnership asked lots of the right questions in the summer, but gave many irrelevant answers in the fall.

Let us not, however, forget some of the fundamentals that neither of these groups adequately addressed. First, there is no regional or even countywide planning entity here, and there needs to be one. Second, the regional workforce’s transportation needs, current and future, cannot be addressed by reducing the NFTA’s petroleum-dependent services today when those services need not only to be enhanced, but to be re-based on an energy source that won’t skyrocket in price and, preferably, that can be produced within the region. Third, the water-quality question that the Accelerate Upstate Action Agenda asked in August needs to get back on everybody’s agenda. Fourth, the best defense against expensive decline is for the region to reconvene at its core, where the unit cost of basic services, from libraries to parks to transport to utilities, will always be smaller than where people are spreading out, farther and farther from one another.

Urbanization, environmental quality, green energy, and efficient public services—all of these should be achievable for our region without asking the Chinese Communist Party to come in and run it for us. A better aristocracy than the one we’ve had, however, would probably be useful, and a few elected officials with the will to stand up to the speculators and petrocrats would help too. But without some enduring regional framework that can outlast individual personalities, or some public, transparent structure that can actually govern with a long-term, integrated plan that addresses energy, environment, transportation and land-use, we will have a new plan every couple of months, and lots of little school districts and municipalities and police forces and PSAPs, and dirty water, and a shrinking tax base.

Like now.

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

Cuomo's Dilemma

2011-11-18T09:14:00.001-05:00

News Analysis
Cuomo's Dilemma
by Bruce Fisher

Regional councils need funds he doesn’t have

Last week, the astounding occurred. It wasn’t that an economic development committee chaired by a university president and a heavy-hitting civic leader announced a list of projects they want the governor to fund. So far, no surprise: Everybody around here wants Albany’s money. Governor Cuomo announced last year that he would put a billion dollars on the table for economic development projects, and he appointed broad-based councils for each of the Upstate regions and Downstate, too. He tasked them to work cooperatively, and then he went off by himself to do what governors do—he attended a ribbon-cutting where, once again, a multi-billion-dollar state subsidy for a peripatetic international technology corporation got announced, and hailed, as a breakthrough.

That’s long been the paradigm. It’s because capital crosses borders at the direction of Wall Street bankers to whom public officials have to stand and deliver if they want some of that capital to stay here at home. That’s why nobody expected much from the regional economic advisory councils except more of the same—more handouts to powerful insiders, more taxpayer shakedowns for established companies, more cynically empty promises from comfy bureaucrats of jobs, jobs, jobs.
That’s not what happened, and the usual insiders are not happy. The committee led by UB President Satish Tripathi and civic heavy-hitter Howard Zemsky put forward a set of requests for stunningly atypical investments based on a stunningly realistic assessment of where the five counties of Western New York are and where they’ve been going unless we change. Tripathi and Zemsky ask for money for job training, for two hard-science projects at Roswell Park and Hauptman-Woodward research institutes, for some transportation infrastructure for downtown Buffalo, for tourism assistance for the tourism hub in Niagara Falls, and for help for the city centers of Jamestown and Olean.
They did not ask for real-estate subsidies for the “medical corridor,” but rather for support for the scientists already working there and for training the people who should one day work there. They did not ask for more money for buildings to replace buildings recently reconstructed at the UB South Campus, but rather for some long-needed infrastructure for getting people to work at the crossroads of the region in downtown Buffalo. Downtown Niagara Falls could use better tourist amenities, and the Tripathi-Zemsky committee endorsed that ask. And since it is a regional committee, help for Jamestown and for Olean was framed as helping those struggling small cities to revitalize their centers, specifically citing findings that restraining sprawl means avoiding higher infrastructure and maintenance costs for a shrinking tax base.
Unlike what has come out of the developer-driven committees of the past, this plan is reality-based. The final document the Tripathi-Zemsky group produced looks quite different from the first draft, but only in one aspect: Instead of leading off with a portrait of a region that is dramatically shrinking in overall population and specifically in its cohort of young adults, those data got move to the back of the book. But each proposal the committee entertained was subjected to a three-part test that was rooted in consideration of those data. They asked whether a project would create, retain, or fill jobs; whether it will maximize return on investment; and whether the project was ready for implementation.
Participants report what the document shows: that the leaders were focused intently on Western New York’s regional population loss, on the economic costs of sprawl, and on making the promise of the state university system meaningful specifically because of this region’s need to do a better job of retaining and attracting talented young people—or any young people. The report calls for $74.4 million in direct state assistance for 20 projects. (That number has a history here: From 2009 through 2011, Erie County government under just-defeated Chris Collins received $74.4 million in federal “stimulus” funding from the 2009 American Recovery and Reinvestment Act, funds which Collins stored in the county’s fund balance rather than using them for economic stimulus.) The $74.4 million in New York State funds that the committee asks would leverage a total of $284 million in other investments.
The new voices in the room
The report, available online from Empire State Development Corporation, is much heavier on process improvements, civic engagement, and identifying actual trends in the regional economy than on financial asks. It is the first participant-shaped strategy document whose participants were more than the usual local insiders—which is probably why the first “ask” in the document is for a car-repair training center, and also why the document is focused on smart growth and the potential infrastructure cost savings if smart growth principles are endorsed rather than ignored—even though one member, Tom Kucharski, the president of Buffalo Niagara Enterprise, objected, in full earshot of the media, expressing his utter disdain for focusing investment in downtown Buffalo, downtown Niagara Falls, downtown Jamestown, downtown Olean. The choice of projects—so clearly focused on human capital and on ending sprawl—indicates that the previous hegemony of the self-styled economic development class here has been challenged.
The other stunner in this document, besides the project recommendations and the frank footnoting of demographic decline, is the positive, hopeful tone about the “unique opportunities” that the region has. The Tripathi-Zemsky approach was to bring every community segment into a room that was heretofore barred to labor, community activists, technocrats, and micro-entrepreneurs. In this room, data mattered more than muscle, and the prospect of creative problem-solving now looks much more real. The negativity of Buffalo Niagara Partnership and Unshackle Upstate propaganda is missing entirely.
But will the developer-driven, insider-focused process that has so dominated the economic conversation here, and Empire State Development Corporation’s previous practices, change? That’s a fair question, because today, the developer-focused, insider-subsidizing, parking-ramp extravaganza called Erie Canal Harbor—which is still all about creating more dollar-sucking retail in one of the most over-retailed areas of America—has cash on hand, actual cash money, with a total of $153 million getting drawn into projects that will help our regional economy about as much as a Mars bar helps a starving man whose fields are salted and whose herds are gone, and for about as long.
How will Andrew Cuomo meet the Tripathi and Zemsky request for $74.4 million now that our governor has just announced a $350 million current-year state shortfall?
Cuomo’s golden handcuffs
Wall Street, which spent the last generation redirecting industrial capital away from places like Upstate New York, is currently sputtering, which is a principal reason why New York State faces a revenue shortfall. In the last year for which data from tax returns are available, tax revenue from Manhattan alone constituted about 25 percent of total New York revenue. Most of that money is attributable to Wall Street, including its absurdly outsized bonuses and salaries, but also all the money that got spent on the 300,000 people in the financial services sector. As New York State Comptroller Thomas DiNapoli warned in an October 2011 report, that sector is shrinking—and with it, the tax revenue it produces. Undergraduate students of public economics learn that when a state budget has to be balanced, there are approximately four tools available: cuts, taxes, loans, or sales. Andrew Cuomo presented a budget this past spring that cut significantly, avoided tax increases (most notably on Wall Streeters), pulled back on loans, and divested the state of some property. Now, in the middle of his budget year, he has a problem: how to balance a budget that relies so very heavily on Wall Street.
Wall Street speculators have been amassing enormous wealth from steering investment capital away from companies that make things in New York State. Returns to capital have long been higher from goods-producers in China, and from boondoggle housing schemes here, than from investments made here. But the rest of New York State has been receiving services and investments paid for by the taxes collected from the people who, every day, put on their designer suits and Swiss watches and drive their foreign-made luxury cars down to Wall Street to do it to us some more.
The sad irony is that tax collections on the Wall Street wreckers are down just as the Tripathi-Zemsky committee delivers its well-reasoned, smart, and positive recommendations on how to get Western New York off Wall Street’s dole.
Governor Cuomo needs to find the money to get the Tripathi-Zemsky process from document to action. The $74.4 million project list is reality-based, in sharp contrast to Erie Canal Harbor Development Corporation’s $153 million agenda, which is focused on a fantasy of rich or at least employed people willingly parting with large chunks of discretionary disposable income in taxpayer-subsidized restaurants and retail stores. The proper place to go for the revenue to fund the Tripathi-Zemsky plan is Wall Street, because Wall Street speculators are not “job-creators,” in the current Republican consultant-speak—they are speculators, and their actions have injured the American heartland’s ability to become sustainable, self-funding communities.
But Cuomo has reiterated that it won’t be he who tries to claw back their gains, for fear that they will leave New York. If not he, then who? If not now, then when? Upstate’s long-overdue plans for economic sustainability and renewal depend on someone from Albany meeting the challengeRead more: http://artvoice.com/issues/v10n46/news_analysis#ixzz1e4B2UfL5

A new era?

2011-11-10T09:29:00.001-05:00

Messages From Home

by Bruce Fisher

Can Obama heed the Hochul and Polancarz wins?

Forty years ago, Western New York voters sent a seemingly nice California football star named Jack Kemp to Congress, where he helped Ronald Reagan destroy the social contract, empower the financial services industry, and perfect a cynical politics of racial code words that equated social insurance with handouts to chaotic, fornicating ghetto-dwellers, all to mask a money-grab for oil companies, defense contractors, and any other outfit that can intimidate witless local politicians into agreeing to call such theft “economic development.”

But four decades after putting the happy face on this historical calamity, Western New York voters awakened to the impact of Kemp-Reagan economic royalism by rejecting its newest iteration in the person of Jane Corwin, choosing instead Kathy Hochul, an unapologetic advocate for government. Hochul is the anti-Kemp: She does not endlessly repeat a phrase from a Cliff Notes version of a cranky Austrian economist. She does not offer a single policy nostrum for all policy challenges, as did Jack Kemp when he said that tax cuts could heal the wounds in Northern Ireland. Hochul got elected by bravely calling for ending the special tax treatment of bumptious millionaires who live in exurban cul-de-sacs, wear over-large jewelry, and order takeout from the country club. Jack Kemp and his contemporary epigones refer to those people as “job creators.” Western New Yorkers who voted for Kathy Hochul, in a congressional district that was Republican since Lincoln, know that they are not.

This week, Western New York voters sent that message again. This week, Western New York voters are once again a national vanguard as we were, sadly, in 1972. The message hasn’t quite gelled, but so far we know that the elderly, the Boomers, the moderate-income households in first-ring suburbs, and a solid majority of young voters once again rejected anti-government rhetoric and chose to focus on government as a provider of services that also happens to require the payment of taxes. And voters here, after decades in their sprawling, shrinking fantasy-land of not-getting-richer, have figured out that even those services that Republicans deride as the province of the poor are for them, too—because so many people who were never supposed to be poor recognize that they actually, now, are.

Mark Poloncarz ran as a cautious manager with a dour but not sour manner. His candidacy had little life, however, until the incumbent Republican claimed—against readily available evidence to the contrary—that his superior business experience before he took office was enabling him to create jobs in the here and now. The Democrat and his union allies were effective in using official statistics to show that the Republican’s bizarre and baseless claim was, well, bizarre and baseless. The ads said that there are 13,000 fewer jobs in Erie County since 2008. (The Bureau of Labor Statistics says that there are more like 19,000 fewer jobs here than there were three years ago.) Voters who were polled last summer didn’t actually like the Republican incumbent, but they thought he was doing a good job. But once the Republican claimed that night was day, and then went on to say that sour was sweet—that the economy is on the uptick, with a lower unemployment rate than anywhere else—voters started to become the political equivalent of the little boy at the parade of the Emperor’s New Clothes. Once Collins made that claim in September and again in October, the regional experience of great and widespread economic distress became, for the second time in six months, a political fact.

Facts alone are never enough: They have to be personalized. This column has cited the Food Stamps upsurge in Erie County, which in 2008 went to just over 102,000 people, but today in 2011 go to over 143,000. We have cited the statistics on household income here, where more than 72 percent of the 410,000 households in Erie County report annual incomes of under $49,000, and only a tiny sliver—less than one percent—have incomes above $200,000. The Occupy movement does a great job reminding the people who witness their demonstration that there is the 99 percent, and that we are different from the one percent. But for three and a half years, the Republican who used the phrase “like a business” in every public utterance looked like an easy re-elect. Only when Collins told a job-hungry area that he was creating jobs did the middle class here awaken from its Jack Kemp slumber.

Will Democrats be Democrats now?

The night that Poloncarz won, Ohio voters resoundingly rejected a ballot measure that would have further reduced the collective bargaining rights of public employees. Polls collected by Anzalone Liszt Research, one of President Obama’s consultants, continue to show broad national support for restoring tax rates on high-income individuals at least to the levels in place during Bill Clinton’s presidency. A new study by Bob McIntyre at Citizens for Tax Justice shows, as his study in 1985 showed, that the largest and most profitable US corporations don’t pay taxes at the 35 percent nominal corporate income tax rate that Republicans say is stifling American business; instead, McIntyre shows that the nominal corporate income tax rate is a loophole-ridden fiction, and that the 300 biggest corporations don’t pay any corporate income taxes at all!

Harvard-trained economics professor Jeffrey Sachs, in his hopeful but politically naïve new book The Price of Civilization, says American elites must once again accept what even iconic free-market icons Milton Friedman and Friedrich Hayek accepted—that there is a role for government in the economy, that “public goods” include not only roads and bridges but also a hand up for the unlucky and for the poor. What he imagines is that we will have a new aristocracy step forward, led by somebody like Michael Bloomberg, who can grab the “vital center,” and end corporate welfare, and end rule by the egregious nouveaux riches who flash their dough around, condescend to the middle class, and sneer at the poor from Spaulding Lake.

Yes. And giant lobsters will soon play cards on top of a downtown hotel, just as humor columnist Dave Barry said they would.

The sad political fact is that places like Spaulding Lake exist and keep producing Republican candidates, because suburban cul-de-sacs are full of people who look at you funny when you cite Professor Sachs’s call for “civic virtue” or “public purpose,” and who giggle when you use a word like “fairness,” and roll their eyes when you, or the earnest Sachs, say “sustainability.”

The trouble with the message that Western New York has sent to America this year is that the consultants who shape campaigns are still advising candidates that they have to sound like cul-de-sac favorites Jack Kemp and Ronald Reagan rather than like Franklin Delano Roosevelt or Bobby Kennedy. The genuine aristocrat Roosevelt warned against “malefactors of great wealth.” The aristocratic, Aeschylus-quoting Kennedy warned against soulless materialism.

We are still forming our next political paradigm. Perhaps there is a Bloomberg who can become the philosopher-king by out-spending, out-messaging, and out-organizing the corporations who rent consultant-thugs to run Republican campaigns. But Republicans have been winning Polonia for a long, long time—since at least Richard Nixon’s day. The cul-de-sac crowd defeated civic virtue and public purpose for many years with Cheektowaga’s racial anxieties. In Nixon’s day, Republicans amplified the brand-new tensions of the sexual revolution, equating anti-Vietnam protesters with the betrayed Poland at Yalta, and blaming unions for the massive deindustrialization that made the Great Lakes industrial zone into the Rust Belt.

That technique might have worked again, had the Republicans in Erie County fielded cannier, more sensitive, less self-satisfied candidates. The Republicans here, in 2011, didn’t. Does that mean that the Democrats understand what FDR and RFK were talking about? Will we ever have an aristocrat, or even a person of aristocratic outlook, campaign on what Sachs calls “the price of civilization”? Perhaps. But we’ll only get to that stage if Western New York’s 2011 economic realism and class self-consciousness reshapes American politics as effectively as Western New York’s 1972 status anxiety, racism, and manipulability shaped it.

Solving the Cynthia Wiggins problem

2011-10-20T11:33:00.003-04:00

Street Cars, Kids, and Jobs

by Bruce Fisher

A 10-year-old boy sells newspapers to passengers on a Buffalo streetcar in 1910.

Northern cities plan light rail. Will Buffalo?

Hamilton is so deeply in the shadow of gigantic nearby Toronto that nobody outside the neighborhood knows that it exists. But Buffalo, Rochester, Syracuse, and other Rust Belt cities should sit up and take notice because Hamilton, with its 500,000 or so souls, is walking through some policy changes that have a special resonance in cities that are not likely to become international megacities like Toronto.

A decade ago, Hamilton went regional, merging its city and county governments. It already had a regional school district. Prosaic functions like property-tax assessment were never localized the way they are here. But some of the same patterns of suburban sprawl and suburban self-isolation, and the same kind of sorting of neighborhoods by income, were threatening to leave the old central city a lot like Buffalo, Pittsburgh, Cleveland, and other Rust Belt towns—full of major cultural institutions, and home to the financial and governmental centers, but also home to most of the region’s poor.

It recently dawned on Hamilton that leaving poor kids in schools that serve only poor kids was a recipe for failure for both the kids and the community at large.

For the past two years, a community conversation has been underway in Hamilton, a conversation whose focus has been addressing the persistent reality of poverty in a region that is experiencing the new Canadian miracle of rising incomes, rising population, and rising prospects. Canada’s mix of stability and innovation has put it high up on several lists of business-friendliness. But there’s still poverty—even in a place where the European-style social safety net programs keep the wolf far from the door.

The conversation in Hamilton today is about schools—specifically, how to mix poor kids in with richer ones, so that all the pathologies of poverty get attacked early. But recently, the conversation turned to streetcars. And just as the data that the Canadians are utilizing to drive their policy decision about schools come from US sources, so do the data about transportation come from here. The question for Rust Belt cities is whether Hamilton, which deliberately and quite quickly went regional a decade ago while American policy elites and Rust Belt politicians continue to dither, will once again leapfrog us on a big policy initiative.

A cheap way to go

Streetcars, also known as surface-only light rail rapid-transit systems, are becoming a bigger presence in some American cities because streetcars are relatively cheap to install, power, and maintain. Streetcars share city streets with cars and buses in Toronto, Portland, Charlotte, San Diego, and elsewhere in North America the same as they do in most cities in Europe. Some systems, like the one that connects downtown Cleveland to a couple of its suburbs, run both alongside cars and on their own lanes. The Canadians point to a stack of studies that show that streetcars attract higher-income users than buses, and that they work very well in revitalizing poorer areas if they run many times a day. An hour north of Hamilton in the adjacent cities of Kitchener and Waterloo (the latter is home to a big public university and to Blackberry smart phones), a prospective streetcar line is causing a stir: Carloads of real estate speculators have been spotted inspecting properties along the proposed route.

This past week in Hamilton, community leaders met to map how to go from concept to execution on a new two-line streetcar system for the town they call the Hammer. Plans have been on the books there since 1978, including all the engineering that will be required to get trolleys up “the mountain,” otherwise known as the Niagara Escarpment. One problem the Hamilton folks have: overcoming the nay-sayers who point to Buffalo and say that light rail wrecked our city.

Bloodless engineers and history-innocent streetscape designers like to point out the many benefits of streetcars. Green energy types correctly point out that they run on electricity and that the electricity can be generated by wind turbines and hydropower, neither of which create emissions externalities. But the real issue for Hamilton and for every other city that is contemplating a streetcar system is neither aesthetics nor efficiency. It’s much more profound even than the question of the cost of the new infrastructure that streetcars require wherever they aren’t already in place.

It’s more or less a civilization issue. Should there be public space or will we keep it all private? Public space requires government, closeness, and the mixing of social classes. Streetcars are strands of the fabric of urbanism, which is about conviviality and clustering, not isolation. Oil-powered personal vehicles have made geographic isolation not only the landscape norm but also the psychological and hence the political norm, as suburban voters now vastly outnumber city-dwellers.

And then there’s the uncomfortable problem that so many would like to forget: the Cynthia Wiggins problem.

Poor, urban, and invisible

In December 1996, Cynthia Wiggins died trying to walk across Walden Avenue to get to her cashier job at the suburban Walden Galleria Mall. The scandal was that, at that time, city buses full of city people were not allowed to stop on investor-owned suburban mall property. That arrangement effectively excluded low-income city-dwellers from going there. (The landlord of the downtown shopping mall at Main Place has done his best to shutter most of the retail establishments there, in favor of commercial and utility tenants, thus further reducing retail options for carless city-dwellers.) Buses are now allowed access to suburban malls, but the overwhelming majority of people who go there drive to them—because the bus routes may go there, but Cynthia Wiggins’s bus commute took her 50 minutes to get the three miles from home to work just to cross the great divide from the black East Side into overwhelmingly white Cheektowaga. Buses are efficient compared to cars, but buses are slow: It takes a damned long time, an hour or more, to ride the bus from the Amherst Street Metro to the Galleria.

A new Brookings Institution study of the millions of carless households in the top 100 metro areas finds that America still has a problem called “spatial mismatch.” Let’s call it the Cynthia Wiggins problem: Many of the jobs for low-wage workers are far from where low-income people live, and while there are transit systems (mainly bus routes) in place, the distances are so long that the trip to work is an hour or more one way. If one owns a reliable car, an hour commute in the Buffalo area means you can live anywhere from Cattaraugus Creek to Lake Ontario, or east to the hills of Wyoming County. Don’t have a car? The only real option is to live where there’s public transportation, i.e., in the city.

So long as oil remained affordable, the separation of income groups by highway miles was affordable even to people of very modest means. But now, gasoline purchases as a share of family income have leaped. And since the credit-bubble economy blew up in 2008, the Cynthia Wiggins problem has now spread to the suburbs, where public transit access is much more difficult than in the relatively densely settled city. New data from the Census show that poverty is rising in the suburbs, where the cost of driving is greater because distances are greater. Food Stamp recipients in Erie County went from just over 100,000 in 2008 to over 143,000 in 2011—and you can’t buy gasoline with food stamps.

The big new report from the New American Foundation says that America is going to be seeing more of the same for years to come—which is to say, suburbanized poverty, high unemployment, slow job-growth and not a lot of new disposable income for our consumption-driven economy. The report recommends new infrastructure inputs, specifically transit, because so much household income already goes into gasoline.

Streetcars should be part of that infrastructure for tomorrow. Yes, for job access. Yes, for efficiency. Yes, so that greenhouse-gas emissions can drop. Yes, so that we can connect workers in far-flung suburbs so that they don’t have the Cynthia Wiggins problem.

But the biggest reason, the most important reason, is to meet the great civilizational challenge that our privatization mania created for us, and that burdens us, especially in the north—namely, the spatial isolation of kids whose parents are in low-wage jobs.

The terrible number 77

Of the 32,000-odd kids in the Buffalo Public School system, 77 percent—more than 28,000—are eligible for free or reduced-price school lunches. According to a forthcoming analysis by Ryan Keem, a graduate student in applied economics at Buffalo State College, they constitute almost half the poor kids in Erie County, which last year had about 130,000 kids in school.

Unlike Hamilton, and unlike Raleigh, North Carolina, we do not have a regional or county-wide school system. Keem’s analysis shows that there is a statistical correlation of .77 between low scores on the standardized statewide math and English tests for fourth and eighth graders and high concentrations of poverty. He is looking at black kids, white kids, urban and suburban and rural kids. The correlation is there. It’s not about race. It’s about household income. Where the poor kids are clustered, the poor kids perform below standard. Where they are mixed with higher-income kids, they perform better.

The reality of residential clustering by income is not going to go away. Families occupying 5,000-square-foot manses in well ordered neighborhoods are part of a structure—including a localized school system funded principally by taxes levied on the value of real estate—which needs for their manses to stay valuable. But the lesson of regionalized school systems, like the one in Raleigh, is that kids from low-income households and low-income neighborhoods can be mixed with kids from higher-income households if they get to travel to schools where the mixing by income is made to happen. The evidence is that at everybody wins and nobody loses.

Also good, from the point of view of property-taxpayers, regionalizing the property-tax base for a countywide school system seems to have had beneficial effects for the entire county. As Gerald Grant reported in his book Hope and Despair in the American City: Why There Are No Bad Schools in Raleigh, administration costs are lower, as one would expect, because 28 separate school districts (the number in Erie County) require 28 separate administrative structures. The cost of moving kids around in Raleigh in order to achieve their goal of having no more than four out of 10 poor kids per school is an issue, but no more so than here, where kids are bused already.

Up in Hamilton, they’re trying to connect these dots. The Hamilton Community Foundation’s CEO asked every member of his board to read Grant’s book. They have taken Grant’s analysis to heart, and now they’re moving toward a plan to start mixing poor kids into schools where the family incomes are higher—which means coming up with a good system for moving them around. Connecting transit customers through a faster, more energy-efficient system means investing in a landscape that will refocus private investment into areas that today have a higher proportion of poor people. But American experiences and American data show that mixing kids from different income groups achieves better outcomes, and so does having streetcars. Communities do better when these two things get done in tandem.

If we were to reorganize the way public money is spent on schools and on transportation at the same time, we would fix up the school buildings in the city where the school census has dropped from 45,000 in 2000 to 32,000 today, making sure that state-of-the-art technology is on hand everywhere that technological dysfunction used to be the norm. (The good news is that we just did that in Buffalo, through the Joint Schools Construction Program.) And then we would take the next step—we would make sure that kids and their parents had a way to get to where the new technology has been installed.

“[L]imited job access via transit in most metropolitan areas leaves many jobs out of reach for zero-vehicle households,” say the Brookings researchers. In other words, if you’re too broke to drive, you need a quick way to get there.

We can solve the Cynthia Wiggins problem. Installing streetcars costs about $600,000 a linear mile. Everywhere that streetcars get put in, higher-income people use them as well as the car-less poor. Everywhere that streetcars get put into a shared roadway, that is. Everywhere that there’s a community leadership that understands the desirability of shared public space, that is. Everywhere in North America that doesn’t want to remain the Rust Belt. One wonders: Will any of the new subsidies for new jobs coming out of Governor Andrew Cuomo’s new economic development councils be tied to getting people to the new jobs? We have invested untold billions of taxpayer dollars in going it alone, which has bought us isolation, sprawl, population decline, and pockets of intransigent poverty. Will the next money buy us more of the same?

What's in your capitol?

2011-10-06T09:19:00.001-04:00

Absent Governors

by Bruce Fisher

Withering Rust Belt cities wait for action

Yet another grant-funded think-tank analysis of Rust Belt cities has been published, with findings that are eerie echoes of studies read, written, and cited for decades. The new study, written for the Center for Community Progress by Brookings Institution scholar Allan Mallach and Michigan State economist Eric Scorsone, finds that old, sprawled-out, depopulated former industrial cities can’t make it on their own. State-appointed control boards that seek to impose inside-the-enterprise accounting solutions have no answer to the question of declining tax base, high unit-costs of service delivery, and concentrated poverty. The study’s title frames the problem: “Long-term stress and systemic failure: taking seriously the crisis of America’s older cities.”In a tentative sort of way, Mallach and Scorsone endorse regionalizing, i.e., combining the property-tax bases of cities and their surrounding suburbs. There are precisely three ways to accomplish that objective: incrementally, through a tax-base sharing plan like that devised 20 years ago in the Minneapolis-St. Paul metro by Gary Orfield and laid out in his book Metropolitics; through annexation, which is what Omaha, Nebraska and most Southern and Western cities do because that’s how the law works there; or through state-sanctioned consolidation.

The real contribution that this new report makes is to remind policy-makers that state governments are the key issue, because local municipal governments are creations of, and fiscally integrated with, the state governments that created them.

One expects that this latest restatement of findings known since the 1950s won’t get much attention from urban-policy veterans from Toronto, Indianapolis, Nashville, Louisville and Hamilton—places which, between 1953, 1976, 1977, 2000, and 2004, all answered the question of whether their once-marooned central cities should be governed in unified regional structures. But for the rest of America’s older cities, especially those in areas of stagnant or declining population (i.e., the Rust Belt), the critical question that hasn’t been answered is not whether governance needs to change, but rather this: when will state governments start getting engaged?

A long process

Starting in the 1950s, when the great post-war expansion of North America’s metros began, service after service and function after function, from libraries to hospitals to social-service offices, shifted from being the sole domain of the anchor municipality of Rust Belt regions to being regional responsibilities. Here in the Buffalo area in the late 1950s, the daily newspaper the Courier-Express explained the rationale for regional governance with a year-long series of articles, which were credited with the change of Erie County government from one governed by a board of supervisors to one led by an elected executive and an elected legislature. The express hope, in 1960, was that the next increment of change would be toward a true metropolitan-wide government that would at least unify urban and suburban tax bases and unify land-use planning. Industrialists loved this idea: In 1973, the chairman of Bethlehem Steel Corporation came to Buffalo to ask for unified regional planning, not only because he was tired of footing the lion’s share of the tax bills in Lackawanna but because his executives complained of having to deal with too many jurisdictions and authorities. Regional governance had legs as a political movement in that era, especially in the Rust Belt.

But as Gerald Grant pointed out in his book on the defeat of regionalized school districts in the Rust Belt, Republican President Richard Nixon didn’t want cities and suburbs to be unified, and he appointed his William Rehnquist to the Supreme Court expressly to ensure that keeping black kids out of suburban schools would remain the Rust Belt norm. The 1976 Milliken decision, in which the Rehnquist court found that school-desegregation need only happen within already established district lines, and not across regional or metropolitan areas, made sure that racial segregation and go-it-alone city governance has been the deal wherever the streets are paved with rust.

Study authors Mallach and Scorsone never get to that history, though they do recite the well known roster of facts about what used to be called, in refreshingly plain English, “shrinking cities,” but which now, in the aftermath of a consultant-dominated conference in Detroit earlier this year are more politely called “legacy cities.” In the current discourse of the American urban policy establishment, reference to racial polarization is not just downplayed, but made to disappear. We are reminded that poverty is concentrated in old cities, like Camden, New Jersey, across the Delaware from Philadelphia, where 38 percent of the households are under the poverty level, compared to the very pretty little town of Haddonfield just down the road a bit, where the property tax base is worth 10 times Camden’s. The median household income in Camden is $26,752; the median household income in Haddonfield is $110,316.

And unless the governor of New Jersey dictates that the tax bases of Camden and Haddonfield are combined into a regional tax-base sharing arrangement, or unless the governor of New Jersey makes Camden and Haddonfield unify governance in a structure that will pick up the garbage, fix the streets, put out the fires and pay the public workforce, 45 percent black, 44 percent Hispanic and 5 percent white Camden’s services, infrastructure, and tax base will continue to erode just down the road from where 94.2 percent white Haddonfield’s do just fine, thank you.

“Unless fundamental changes take place to the way in which regional resources are allocated and service delivery boundaries defined, the vision of a stronger, healthier Flint, Youngstown or Rochester may remain unreachable,” Mallach and Scorsone helpfully conclude.

Crossing the great divide

The populations of counties where visible minorities and poverty is concentrated, and where cities are governed alone and their school districts not regionalized, are dropping. More simply: regions with self-governing poor cities lose. Camden County, where prosperous Haddonfield sits near shrinking Camden, is losing population. Buffalo’s Erie County is losing population, 3.3 percent since 2000. Genesee County, home of Flint, Michigan, saw its population shrunk over 2.4 percent since 2000. Mahoning County, Ohio, home of Youngstown, shrunk 7.3 percent since 2000. Monroe County, home of Rochester, actually had a 1.2 percent increase since 2000. But Cuyahoga County, home of Cleveland, shrunk 8.2 percent. Michigan’s Wayne County, home of Detroit, shrunk 11.7 percent. Pittsburgh’s Allegheny County shrunk 4.6 percent. Whether one uses the “legacy cities” moniker or plain English, Rust Belt regions with Rust Belt cities in them are shrinking.

It’s in the political self-interest of ambitious governors to jump into this quagmire because economic outcomes are better when costs are contained and service-delivery mechanisms are consolidated, with one caveat—land-use planning has to be a part of the deal. (The main agenda of the outfit that hired Mallach and Scorsone to write this report is to help communities set up land banks, i.e., inventories of vacant and abandoned parcels in shrinking cities.) But no governors have jumped in—except Andrew Cuomo, whose state is home to America’s most successful example of consolidated, regionalized governance, namely, 300-square-mile New York City. Cuomo carefully assembled opt-in consolidation legislation while he was Attorney General. Communities that want to merge their governance structures can do so. He said, essentially: Here, here’s the tool; use it if you choose.

But of course, local politicians and their financial backers in shrinking communities tend to accept the state-appointed control boards that Mallach and Scorsone scoff at, because control boards don’t disturb the power of the financial and real-estate sectors that thrive from the cities-alone status quo. Control boards also arrive with bags of State cash for strapped municipal governments. Governors in New York State have tended to focus their energies on New York’s growing New York metro area, not on the weak, small, faraway shrinking cities of the north. Prospective presidential candidate Chris Christie of New Jersey isn’t going to tell the rich lions of Haddonfield to lie down with the poor lambs of Camden any time soon. Better to have a control board in Camden, as there was for a decade.

But these broken cities get more and more expensive the more they shrink. And as their regions shrink, the politics of race and sprawl don’t go toward regional solutions unless there’s a political leader with the energy, and the cover, to move things that way.

The most relevant success story in recent times is that of Terry Cooke in Hamilton, Ontario. Cooke campaigned on city-county merger and won both a mandate from his county-wide electorate in 1999 to merge the city and the county, thereafter the suburban townships, too. The critical difference for Cooke: He had the support of his provincial premiere (Ontario’s version of governor) to back the deal. Cooke also moved on this initiative before Hamilton, which was two-thirds of the county’s population, went the way of Buffalo, Cleveland, Pittsburgh, Youngstown, and other Rust Belt towns that shrunk to less than half the population of their metro regions.

Regionalization in the 1950s happened when expanding regional populations, and smart local elites, recognized that library systems, hospitals, public safety and other services could meet new demands if and only if they had new support. Regionalization in the 1970s happened in the state capitols of Indianapolis and Tennessee when bold state politicians convinced capitol-district business barons to create great regional cities out of backwaters. Pittsburgh, with its very rich foundations, its recent downtown-centered mega-developments and its centrally-located universities plural, may be a candidate for revitalization via refocusing. Even Rochester, whose hugely successful three-term mayor Bill Johnson got clobbered running for county executive on a merger platform, could be a candidate for a new regionalization movement based on the resilient strength of its urban core. But absent gubernatorial engagement, regionalization as a solution to Rust Belt decline cannot happen. Witness what happened in Erie County, New York, where in 1999 and again in 2003 a county-wide candidate was elected on an explicit platform of regionalization, and specifically, of Hamilton-style city-county consolidation. Joel Giambra’s administration put together a specific plan, with legislation and a service-by-service implementation program, and a county-wide land-use plan, too, all of which was endorsed by a blue-ribbon commission headed by the late UB President William Greiner and that included Buffalo State College President Muriel Howard, the president of the largest suburban chamber of commerce, the heads of major churches, businesses and philanthropies. They delivered their proposal, and the then-governor shrugged. Everybody in Buffalo looked to the second floor of the State capitol, but the white smoke never issued. No governor, no change. Not in Michigan, Ohio, Pennsylvania, New Jersey, or New York, either.

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

Climate change, engineering and us

2011-08-31T21:23:00.001-04:00

Ready For Our Own Irene?

by Bruce Fisher

Toronto, Chicago, Portland prepare for climate change while we pursue real estate development schemes

While the world’s scientists get closer to unanimity about the human role in catastrophic climate change, the American political process produces a mixture of equivocators like Barack Obama and deniers like Rick “pray for rain” Perry and Michelle “God’s will” Bachmann, with the ever-cautious Mitt Romney boldly staking out a position somewhere between “maybe” and Rush Limbaugh’s bad performance art. There’s no serious money or campaign acumen changing the green movement into an electoral force in America, as it is in Europe and even in Canada, where the New Democrats sound as green as can be even as Canadians enjoy the swell times created by another oil-sands petroleum boom. The $10+ billion cost of hurricane/tropical storm Irene will probably not become a political fact except in Vermont, where the damage was worst, and where the electorate—about the same size as Erie County’s—already embraces the green analysis.

Here in Upstate New York, except in the flooded Mohawk valley and in a few towns along the Hudson, the language of politics and policy ignores environmental concerns. It’s all about economic development up here. That’s why Governor Andrew Cuomo has already endorsed a go-forward approach to horizontal drilling for natural gas in the Marcellus Shale, and has gone the Seneca Gaming Corporation and other Native American groups one better by hinting that the big casino development for the Catskills may well be a state affair. The 2011 storm named Irene is a short-lived phenomenon, but the jobless non-recovery from decades of deindustrialization, capital flight, and the gruesome bank collapse of 2008 grinds on and on.

And despite studies from think tanks and engineers and economists who all conclude that we’d better get cracking on cutting carbon emissions, start more mass transit, start resettling cities, stop sprawling—indeed, that we need action on a long policy agenda to address what the climate scientists say is coming—New York’s language consists entirely of the platitudes and slogans of real-estate-oriented economic development.

Not so elsewhere. An impressive roster of big cities got engaged in 2005 with former President Bill Clinton’s Global Initiative because leading citizens and political actors responded to his call to start taking science seriously as a matter of local public policy. Clinton has gotten 40 city governments around the world to put climate-change action plans together, and every American one I’ve read comes complete with two issues addressed: economic-impact documentation and citizen-engagement plans.

In other words, there’s a cost-benefit analysis that lays out the case for undertaking action. And there’s a chapter in each plan on how to get the word out. In the best documents, there’s evidence that the very process of putting the plan together was a long, deliberative, public process that brought lots of citizens out to lots of meetings, so that the plans represent buy-in by many constituencies. It is great stuff.

One should expect great things from great cities. New York, Toronto, Chicago, LA, Philadelphia, and a few big European, Asian, and South American cities have made some commitments that occasionally make news, as when Mexico City set a modest-sounding but somehow believable one for 2012: reducing carbon-dioxide emissions by 12 percent from the 2008 baseline. It’s a big-city PR effort, to be sure: Chicago’s plan was big news for the year that its committee spent working up its plan, and bigger news when the plan was released in 2008. But what it shows is this: A sufficient number of business people in Chicago figured out that if scientists at the University of Chicago, the University of Illinois, and Northwestern were all willing to say that Chicago’s weather is going to make the place feel like Baton Rouge within a few decades, then they’d better sit up and pay attention—and get with the program of deciding how public money should be spent.

Here’s the program that the business leadership in Chicago, and all these other cities, too, signs off on: more public transit, better insulation of public buildings, more efficient vehicles that burn less carbon-based fuel, plus better solid-waste disposal, an end to flushing raw sewage into the watershed, a big infrastructure investment in better rainwater management, and overall, less energy-wasting. Chicago’s “Climate Action Plan” has a target of reducing greenhouse gas emissions to 25 percent below 1990 levels by 2020, and 80 percent below 1990 levels by 2050.

Stirring the blood?

But of course, money to create sustainable cities—whether for Toronto’s crosstown subway, for Chicago’s clean water initiative, for light rail projects everywhere (set aside for now the issue of high-speed inter-city trains, which China, Japan, and Europe have already)—all must come from taxpayers. The way these projects get done is with public-private cooperation, using borrowed money that taxpayers have to repay. Investment banks would be delighted to lead in lending city governments the money to create all this sustainability and science-driven public infrastructure. That’s why the attendees at the 2011 Sustainable Infrastructure Financing Summit, held earlier this year in Switzerland, included lots and lots of bankers. The figure they kicked around for global sustainable infrastructure investments by the year 2030: $25 trillion. With a “t.”

“Make no little plans; they have no magic to stir men’s blood…Make big plans, aim high in hope and work,” wrote Daniel Dean Burnham, architect of the Ellicott Square Building and planner of Chicago at the end of the 19th century.

Investment bankers love the idea of big projects. So do construction workers, engineers, planners, pipe-makers, concrete fabricators, the folks who drive the lunch wagons—everybody loves big public works projects. Paul Krugman, Joseph Stiglitz, and the post-Keynesian economists all love it, too, because they understand what Ronald Reagan understood: When you borrow money and invest it in stuff that reduces future costs, the jobs created along the way are worth more than the borrowing costs.

The cynical and the free-market fundamentalists assume that the term “sustainability,” and the climate scientists’ consensus, is just a ruse to justify flying off to Switzerland to hear former investment banker Michael Bloomberg embrace the concept of “a new multi-stakeholder approach to infrastructure financing.” Indeed, it’s hard not to conclude that a great many sophisticated people have figured out that there is a whole lot of money to be made in making the switchover from old, oil-powered urban life to a new way. One recalls the massive over-promising of benefit in the late Clinton presidency, when we all went from paper to PC. That was a nice bubble, too, while it lasted. Eric Janszen warns of a green technology bubble.

What’s different, though, is that climate science says ever more consistently that big change is ahead. One may be forgiven for noticing hurricane/tropical storm Irene more than the news that the big 40 cities of the Clinton Initiative are getting new company. This past month, the Kresge Foundation granted the University of Michigan $1.2 million to help some of the Great Lakes cities get ready for climate change impacts—specifically, the massively disproportionate, record-shattering rains that climate scientists expect will be hitting us harder and more often, and the shrinkage of those gigantic pools of 10,000-year-old glacial melt-water, called variously Lakes Superior, Michigan, Huron, Erie, and Ontario, which are evaporating away, shrinking like Great Lakes cities, because global warming has shortened the ice season.

As the scientists say that they are in agreement that the climate is changing, and as the big cities are already at work addressing both the public cost and the potential opportunity that will be caused by climate change, and as the Wall Street people have already figured out how much it’s going to cost all over the world, then the line of questioning in our community should go something like this: Is anybody looking into our situation? Is anybody crunching our numbers? What happens to our costs if we don’t prepare for climate change—and what does spending today on a plan like Chicago’s, Toronto’s, Philadelphia’s mean for “economic development” tomorrow?

None of the 40 cities in the Clinton Initiative waited for the Great Equivocator. There’s no point in waiting for the anti-scientific Rick Perry, Michelle Bachmann, Sarah Palin, or Mitt Romney to make the connection between climate change, new technology, and public cost/benefit calculations. They already have the answer.

Casino nation II

2011-07-05T22:42:00.001-04:00

A Pro-Casino Presidency?	by Bruce Fisher

Slot jockeys: not a pretty sight.

When he was a state senator in Illinois, Barack Obama was skeptical to the point of downright hostility toward casinos. His opposition was still in evidence in the earliest stages of his presidential candidacy.

The Obama administration, however, is anything but. In June, Assistant Secretary of the Interior Larry Echo Hawk, who heads the Bureau of Indian Affairs, rescinded a January 2008 memorandum issued by an outgoing Bush administration official—a memorandum that strongly asserted a policy of limiting the ability of Native American tribes to acquire off-reservation land for the purpose of building and running casinos. “The 2008 guidance memorandum was unnecessary and was issued without the benefit of tribal consultation,” Echo Hawk said. President Obama recently met with tribal leaders, many of whose reservations have seen unprecedented economic benefit from off-reservation gamblers spending money in tribally owned casinos.

On-reservation casinos exist in every state where a federally recognized tribe has a reservation. But at this writing, several state governors are actively opposing plans for off-reservation casinos. Tribes in Michigan, Minnesota, Mississippi, Oklahoma, and California are actively seeking to establish more off-reservation casinos. The Seminole tribe of Florida, which operates a casino near Miami, is seeking to purchase land in Atlantic City, New Jersey, and to run a tribally owned casino there, more than a thousand miles from its home.

New York Senator Charles Schumer hailed the Department of Interior’s policy change in a June 13 statement. Schumer is an advocate for a Catskill Mountains casino, which the St. Regis Mohawks, the Stockbridge-Munsees of Wisconsin, and the Senecas of Western New York have all been interested in developing. None of those federally recognized tribes have federal “trust” or reservation land within hundreds of miles of the Catskills.

The Center for Responsive Politics, a Washington public interest group that tracks political campaign money, found the Seneca Nation of Indians donated approximately $352,000 to federal candidates in 2007 and 2008. Other records show that the Senecas spend heavily on lobbying, legal fees, investment counsel, and underwriting expenses related to bonds issued by the Seneca Gaming Corporation, which recently refinanced over $500 million of outstanding debt. In a recent article in Indian Country, an online publication on Native American issues, Seneca Nation President Robert Odawi Porter is quoted saying that “If anyone wants to be critical of what Indian nations are doing, then they better be critical of the entire system in which money flows through American politicians and political parties.” Indeed, the Senecas’ contributions are dwarfed by those of other tribes that own casinos. In the list of the top 20 casino-based political donors, 15 are Indian tribes. In 2010, they gave over $10 million of the nearly $13 million the casino industry gave to national politicians. Two-thirds of the money went to Democrats.

The question for American policy-makers is whether the economic impact of off-reservation casinos is positive or negative for non-reservation communities. In a recent study of he Seneca Niagara casino in Niagara Falls, Professor Steven H. Siegel of Niagara University was extremely critical of the Seneca Gaming Corporation’s practice of handing out hotel rooms, food and beverage services, and entertainment for free. Using data on the first nine months of 2010 from the filing with the Securities and Exchange Commission, Siegel found that the Seneca Gaming Corporation spent over $42 million subsidizing those items, giving away more hotel room-nights than were sold by Buffalo’s Adams Mark and Hyatt hotels combined, yet still had over $83 million in net revenue. “In my 34 years researching and teaching in the area of strategic management for the hospitality industry,” Siegel wrote, “I have never encountered a competitive situation where one business entity has such a staggering competitive advantage over other entities.”

Official Seneca pronouncements about the Buffalo casino have recently included a pledge that there will be no such hotel. But Seneca Gaming Corporation has proved that the formula of combining hotel beds, restaurants, bars, and nightclubs in one self-contained entertainment complex is hugely profitable. Unless new court action or the July 2008 ruling of Federal District Court Judge William Skretny results in the Buffalo casino being closed, there is no way of predicting whether the Senecas will or won’t duplicate their Niagara Falls operation in Buffalo. The potential impact on existing non-Indian businesses could be huge.

—bruce fisher

Casino nation

2011-07-05T22:41:00.000-04:00

The Judges Obama Ignores

by Bruce Fisher

(photo by Rose Mattrey)

Will casino money trump law in Buffalo?

It has been more than seven years since the Second Circuit Court of Appeals told a judge in Buffalo that he was correct in deciding that the Seneca Nation of Indians had no claim to 19,000-acre Grand Island or any of the other islands in the Niagara River. Back in 2002, Judge Richard Arcara of the Federal District Court here, wrote a 212-page decision that includes a comprehensive history of who has owned or controlled land on both sides of the Niagara as far back as the early 17th century. Arcara’s decision is all the more remarkable because all the parties—including the Senecas, New York State, and the United States—agreed to a set of stipulated facts, among which is that neither Buffalo nor any part of the Niagara River area was ever a part of the “aboriginal territory” of the Senecas. (See note below.) In 2004, Judge Arcara was upheld by the Second Circuit Court of Appeals. In legal terms, that’s about as good as it gets for a Federal District Court judge. But it got even better for Arcara when the United States Supreme Court refused to hear the Senecas’ appeal.

But when it comes to the Seneca Gaming Corporation, the Seneca enterprise that is distinct from the Seneca Nation but that relies on the special legal status of the Seneca people, the law seems to have no meaning. Judges decide things, parties make binding agreements, federal agencies are given their instructions—and business as usual goes on.

That’s what’s happening now in a separate case decided by Arcara’s fellow Federal District Court Judge, William Skretny. Judge Skretny decided in July 2008 that the little “temporary” Seneca Gaming Corporation casino in Buffalo was illegal. Two months later in August 2008, Skretny was irritated with the National Indian Gaming Regulatory Commission, the federal body that he’d directed to act in compliance with his ruling. In July, Skretny said that the casino at Michigan and South Park was “illegal.” In August, Skretny directed the federal agency to act “forthwith.” Further, he said, “[Federal law] mandates that the [gaming commission] take prompt action once it has reason to believe a violation exists,” Skretny wrote. “...The Chairman is directed to take such action as is consistent with the Court’s July 8, 2008 Decision.”

The casino, as of June 23, 2011, is still open.

It has been almost a decade since Judge Arcara denied the Senecas’ claim to Grand Island, which is where the then-minority of pro-gambling Senecas had wanted to put their casino. Back in the early 1990s, when the Senecas had first filed their claim for Grand Island, New York State had been actively debating whether to legalize Class III “gaming,” including slot machines and the card games that up until then had been confined to church picnics and back rooms. All across the USA, especially in the Western states, federally recognized Indian nations had gone into the gambling business after the 1988 enactment of the federal Indian Gaming Regulatory Act (IGRA). The rule was straightforward: With federal oversight, specifically of the Department of the Interior, a tribe could erect a casino on its own sovereign territory. Back in New York, there was no political will in Albany to legalize state-sanctioned casinos: Both Donald Trump and the Mashantucket Pequot Tribe of Connecticut defeated what will there was by lobbying hard to keep the buses full of New Yorkers headed to Atlantic City and Foxwoods. But momentum built for New York State to do a deal with Indian nations here to help them get around the State constitutional ban on casino gambling, even as the province of Ontario, just across the Niagara, jumped into the gambling business quickly. But one of the significant provisions of the IGRA law was that a tribe could, in some very limited circumstances, before a certain date, put up a casino outside the strict boundaries of its reservation or sovereign territory.

The Senecas lost their claim on Grand Island in 2002 after the window had closed on setting up a casino on newly acquired land. But with money Congress sent the Senecas to compensate them for the grossly unfair reservation lease deal in Salamanca, the Senecas purchased land in Niagara Falls, New York. In fact, they purchased the old Niagara Falls Convention Center. With great ceremony, then-Governor George Pataki helped inaugurate the Seneca casino era—even though the land they’d bought had never been “aboriginal territory.” There was an unmistakable New York State stamp of approval on the deal: The state that had refused to amend its own constitution had enacted a “compact” with a sovereign Indian nation, which had used federal funds in manner that Congressman John LaFalce—who’d championed getting the money in the first place—relentlessly asserts Congress never intended.

Then, a few years later in 2005, the Senecas bought land in Buffalo—land that had never been “aboriginal territory,” but that had, between 1794 and 1838, been Seneca land. More recently, the land had been aggregated by Buffalo developer Carl Paladino. The Senecas made no secret of their intention to put a casino there, and the federal government was required by IGRA to ask whether the state, the City of Buffalo or Erie County objected. Governor Pataki didn’t object. Anthony Masiello, then mayor of Buffalo, didn’t object. Joel Giambra, then Erie County Executive, objected. When the federal government went ahead and let the Senecas start a casino in Buffalo, a citizens group sued to stop it. Erie County joined that suit.

The case went before Judge William Skretny in the federal courthouse here in Buffalo. Skretny’s decisions were mixed: he found that the Senecas’ purchase of 9 acres of Buffalo land technically turned that land into “Indian land,” but in a crucial legal distinction, he found that that piece of land does not meet the federal law’s criteria for using it to put up and run an off-reservation casino. So Judge Skretny said, three years ago this July, that the casino should be closed. And then he said it again, later in the summer of 2008. “Forthwith,” he said.

So why is the casino still running three years after a Federal District Court judge said it should close? And why did the current Seneca Nation president issue a press statement just last month that calls the site of the illegal casino “aboriginal land” when his own lawyers agreed that it is not?

The answer is simple: President George Bush’s politicos conspired to change the rules after Barack Obama was elected, and subsequently, Barack Obama’s politicos are not only going along with what the Bush people did, but they’re also ignoring the Federal District Court’s decisions.

The smoking gun

As of Thursday, June 23, 2011, the citizens who challenged the Bush administration are challenging the Obama administration. Their legal papers are filed and they’re ready to go back into Judge Skretny’s court. Citizens for a Better Buffalo is going to court to ask for actual consequences to flow from the decisions the judges make.

And this time, they think they have proof that corruption and insider-dealing is what keeps the Senecas’ Buffalo casino operating.

The political appointees of George Bush who changed the rules to keep the Senecas’ Buffalo casino operating are Buffalo people, the lawsuit alleges. The suit names Mike Rossetti, a former assistant Erie County Attorney and son of a local judge, who first went to work for the Department of the Interior under George W. Bush, then subsequently went to work for a law firm called Akin Gump. The Akin Gump firm is a Washington powerhouse: Its other Buffalo connection is former Republican Congressman Bill Paxon, a partner there who was succeeded by Republican Tom Reynolds. The lawsuit alleges that Mike Rossetti’s mate, Edith Blackwell, a “highly placed lawyer” in the Department of Interior Division of Indian Affairs, was “directly involved in reversing the Division’s long-standing position” on the applicability of the rules that prohibit Indian tribes from siting off-reservation casinos on newly-acquired land.

The killer paragraph in the court papers is this:

At the time of these events, Edith Blackwell was living and sharing a residence with Michael Rossetti, a partner with Akin Gump Strauss Hauer & Feld, LLP, which provides legal respresentation to the SNI [Seneca Nation of Indians] and was receiving hundreds of thousands of dollars from the SNI for that legal representation and for lobbying the federal government on issues affecting Indian sovereignty, among others. The SNI, which holds the Buffalo Parcel in restricted fee, was the sole tribe that stood to benefit from the DOI’s reversal of its position. Edith Blackwell was recused, presumably due to her relationship with Michael Rossetti, from all matters involving the SNI. Yet when the SNI pressed the DOI to reverse is position on the applicability of Section 2719, Edith Blackwell un-recused herself and orchestrated the change.

This lawsuit was filed only a week after New York State politicians and political appointees of Governor Cuomo joined with Seneca Nation President Robert Odawi Porter in announcing plans to make Seneca Gaming Corporation and other Seneca business interests a major part of the future of Buffalo’s publicly funded waterfront development. The very day that the lawsuit was filed, in fact, the Seneca Gaming Corporation involvement in downtown Buffalo was endorsed by the Buffalo News in its lead editorial.

The connection to New York State politics continues. The appointed leader of the Erie Canal Harbor Development Corporation, Jordan Levy, happens also to be a member of the board of directors of Seneca Holdings, Inc., a Seneca Nation entity chaired by Seneca Nation President Robert Odawi Porter, whose job is to invest the profits from gambling into other ventures that will benefit Seneca Nation members. Apparently, it’s now the official policy of the State of New York to commingle the business interests of a separate sovereign nation with those of New York State citizens.

A $600 million local business

As noted in many of the Seneca Gaming Corporation’s filings with the federal Securities and Exchange Commission, the 2002 compact with New York State gives the Senecas “the exclusive right to operate specifically defined gaming devices, including slot machines, within a 10,500 square-mile, geographic area in Western New York, beginning on Route 14, approximately 30 miles East of Rochester, and extending westerly throughout New York State.”

The casinos are extraordinarily profitable. According to the last available annual report, Seneca Gaming Corporation revenues in 2009 were over $568 million from gambling, plus food, beverage and hotel revenues of over $106 million. Earnings before interest, depreciation and amortization were over $250 million. The Seneca Nation is a tax-exempt entity.

And most of the money its casino operations brought in came from residents of Buffalo and Niagara Falls. More than 50 percent of the holders of the special “frequent gambler” cards issued at the Niagara Falls casino are local people.

What now?

A question arises as to the plans of the Erie Canal Harbor Development Corporation, given that its board overlaps with the Seneca Holdings board, which overlaps with the Seneca Gaming Corporation, which apparently has the Washington muscle to get regulations changed and judges ignored. Could there be a plan to move the “temporary” Seneca casino closer to Erie Canal Harbor? Could the former state office building named for General William “Wild Bill” Donovan, World War I and World War II hero, founder of the Central Intelligence Agency and scourge of the Saturn Club, become a new Seneca Gaming Corporation property?

Even before the new lawsuit was filed, it seemed strange that these plans would be going ahead while a Federal District Court judge’s finding that the Seneca Gaming Corporation casino is “illegal” and should be shut down “forthwith” are on the table.

But ignoring the law is now settled practice here. Last month, the Seneca Gaming Corporation’s Buffalo-based public relations firm issued a press release which asserted that the casino that Judge Skretny decided is illegal is sited on “aboriginal” Seneca land. (The contact person on that press release is Stephen Bell, the former managing editor of the Buffalo News.)

This is a key assertion that gets right to the heart of the problem that the Obama Administration evidently wants to avoid—namely, the fact that the huge, well-established, immensely profitable Seneca Niagara Casino in Niagara Falls is in the same kind of non-aboriginal territory whose history was so thoroughly described in the 2002 case Judge Arcara decided.

Here’s why the Obama Administration is now the issue: it is now being sued. When Judge Skretny decided in 2008 that the Buffalo casino was illegal, the Seneca Gaming Corporation did not appeal the case to the Second Circuit Court of Appeals for a resolution. Instead, the Seneca Gaming Corporation went to the Bush Administration’s Secretary of the Interior for a ruling on its pending application for permission to operate a casino—because under the federal Indian Gaming Regulatory Act, the Secretary of the Interior is the administrator, and his lawyers, and the commissioners in the Indian Gaming Regulatory Commission, are in charge.

Literally hours before Barack Hussein Obama took the Oath of Office to become the 44th President of the United States, the outgoing Bush Administration appointees granted the Seneca Gaming Corporation brand-new permission to operate their casino.

And everybody ignored Judge William Skretny’s order of July 2008. No federal marshal went in to lock the doors. No higher court said “Skretny’s wrong, let the games continue.” Political appointees of the President Bush gave their permission. And today, political appointees of the new president continue to ignore Skretny and to do as Bush’s politicos did.

Today, President Obama is going to have to go to court to defend the activities of Mike Rossetti and Edith Blackwell. The names have changed since then. But the illegal Buffalo casino is still operating.

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

Yes he did.

2011-05-08T20:07:00.001-04:00

Unity After Victory

by Bruce Fisher

President Barack Obama delivers a statement in the East Room of the White House on the mission against Osama bin Laden, May 1, 2011. (Official White House Photo by Pete Souza)

The moment Bush squandered could be Obama's opportunity

It was Professor-in-Chief Barack Obama who killed Osama bin Laden. The day before the Navy SEALs went in, Obama the Lecturer finished his one-liners at the White House Correspondent’s Dinner with an admonition to his guests to stay focused on serious business. What he did not explain to them Saturday night became known on Monday morning: that success in taking bin Laden out was not the result of a technological magic act or a drone strike, but was only achieved through extraordinary patience, discipline, inter-agency coordination, and tight secrecy.

This should be the great clarifying event in American politics. The Republican attack machine might well still try to market doubt about Obama’s American identity, doubt about the role of government in our lives, and doubt about whether the country’s economic future is secure. But now, with a definitive military success—after almost a decade in Afghanistan and Iraq in which nothing definite seems to have been achieved except Saddam Hussein’s demise—Democrats might have a chance at unity. And so may the country.

It may be that Obama will be the first president since Jimmy Carter to ask the country for shared sacrifice in confronting a national crisis. We can hope that a national call to action will come about without Osama bin Laden’s disciples first taking some ugly retaliatory action. But if there is such an event, you can double your bet on Obama’s call coming.

What he should ask for

Immediately after the Western democracies dug into their treasuries to bail out the big banks and thus stabilize the global financial system, American financial elites began funding the Right. Investment bankers and hedge-fund managers have recently made no secret about their antipathy to Obama for his call, now renewed, to raise taxes on high-income individuals. Mega-speculators are especially incensed that there has been talk, even in Obama’s deficit-reduction commission, about taking away the preferential treatment of capital gains, which is what happened back in the 1986 tax reform. The highest tax rate on ordinary income today is 35 percent. But the highest tax rate on income from the sale of stocks, bonds, real-estate, or other assets—including the portfolios of hedge-fund billionaires—is 15 percent. Obama has said that he wants to change that. The speculators like Republicans better, because the GOP line, endlessly repeated, is that the 15 percent capital gains rate is all about “small business.”

Taxing the richest people in America might seem disconnected from issues of national security. But of course these issues are intimately connected. America has no draft, so the burden of fighting these long, protracted, undeclared wars in Afghanistan, Pakistan, Iraq, and now Libya falls squarely on the working-class boys and girls who see military service as the surest pathway to economic security in their deindustrialized country. That’s how the “volunteer” armed forces recruit, and that’s what recruits want. They’re the only people in America, besides unionized public-sector workers, who get the benefits that Canadians, Britons, and other European members of our NATO alliance get as a matter of national birthright: publicly funded healthcare, education, and job training. In our country, there is a war of the investor class—a war waged by Republicans and often by Democrats, too—on the class whose sons and daughters fight our wars. Making a national policy of getting the investor class to foot more of the bill for those wars would be a gesture toward spreading the burden to those who can best afford it.

Obama, surprisingly, is willing to take on that fight. What makes him a prospect for being the first president since Jimmy Carter to ask for shared sacrifice is that he is willing to ask rich investors to pay more taxes to fund our wars, like the one he just won against Osama bin Laden. But the ask should not stop there—for why have these wars been fought? You know the answer: America has been engaged in wars to secure energy supplies. We and our NATO allies fight oil wars. The next presidential ask should be for the country as a whole to get busy on many fronts, immediately, with a renewed sense of urgency, on what Carter asked us to do more than 30 years ago—to declare what he called “the moral equivalent of war” on imported oil.

Energy conservation, renewables, and alternative low-carbon sources of power will cost everybody. Not only are there no guarantees of success, but the prospects of failure are everywhere. Worse, because government programming will be involved in getting these alternative energy sources going, there will inevitably be corruption and waste and stupidity. The ethanol program is the best example of all three—ethanol being such an egregious fraud that even the Wall Street Journal opines against it.

A consensus to strive for

Obama was patient about bin Laden. He was also patient in trapping Republicans. After the 2010 elections, Obama sent a political message that drove progressives crazy: He conceded and conceded and then he pre-emptively conceded some more. Some of us sought deep-seated psychopathologies as the reason Obama caved in on extending the Bush tax cuts on America’s richest two percent. Some opined that Obama was terrified, as a mixed-race person, of conflict that might make him lose his temper, so that he would go from being the man of the center to a man of the fringe. Some of us missed just how subtle and smart and tough-minded this guy really is, because what he seems to have done is the following: He gave the appearance of abandoning his Left base, which emboldened the adventurers on the Right to burst forward with their over-reaching budget plan, which pledged even more tax relief for the haves and the have-mores, explicitly at the expense of Medicare and Medicaid—and then he pounced. Obama waited until the Republicans trapped themselves with their own votes. One does not have to be all that well versed in politics to understand that old white people, whose votes Obama did not win in 2008, are now part of his coalition. Tea Party adherents who loathe him for being black need only be reminded that it is Republicans who are on the Congressional record as being out to wreck their Medicare; chances are better than ever that they will either support Obama because he supports Medicare, or that they will simply not vote, thus depriving Republicans of their once-reliable base.

By being disciplined and patient and lucky, too, in having arrogant opponents with tin ears, Obama won the opinion war, such that moderate- and low-income seniors now want the rich to pay more taxes. By being disciplined and patient and surrounding himself with smart people instead of ideologues, Obama got Osama bin Laden.

The 2012 agenda is in formation before your very eyes. Social Security will be untouched. Medicare may require an additional tax in order to keep it solvent, but if solvency is described as shared sacrifice, it will win. The higher tax rates on millionaires, and a restored estate tax, are now, for the first time in a generation, emerging as consensus items. Consensus on ending the foreign wars encompasses everybody from Ron Paul on the looney Right to Lockport’s own Stephanie Miller on hilarious Lefty radio. Republicans will be left to plead the cases nobody wants to hear: cutting Medicare by turning it into a voucher program, cutting student grants and loans at a time when family income is stagnant or falling, cutting taxes for investors when super-majorities want them to pay more.

What the national unity consensus agenda lacks is an aspirational item. That item needs to be energy. The sooner Obama offers it, the better—because it’s the issue that can credibly be said to save us from worry about the next bin Laden. And though local and state politics always lag the national trends, 2011 elections for local offices, and statewide campaigns by governors, could set the stage for 2012 in exactly the way that the special election to fill Pennsylvania’s open Senate seat set the stage for Bill Clinton in 1994, The aspirational issue then was healthcare reform. It motivated Democrats in Pennsylvania and alerted them nationwide. Democrats all over, had they but a president to lead them, could spend 2011 pushing progressive agendas on energy, green infrastructure, tax progressivity and the local equivalent of funding National Public Radio. The moment is upon us. Let’s hope that the coming appeal to national unity is bold enough to inspire, for as the comedian at the White House Correspondents Dinner had it, the only candidate who could beat Obama 2012 is Obama 2008.

Home Economics

2011-05-02T09:37:00.001-04:00

Why a green infrastructure agenda makes economic sense for the region

http://http://artvoice.com/issues/v10n17/news_analysis

Sales Tax and community assets

2011-04-08T22:04:00.000-04:00

The Disconnect

by Bruce Fisher

How WNY's tax politics miss the future

If the New York State legislature doesn’t re-authorize the 1.75 percent “extra” sales tax, then Erie County government, the three cities, the 25 towns, and the 29 school districts in this county will be short a couple of hundred million dollars. Discussions are underway about whether state elected officials should just rubber-stamp County Executive Chris Collins’s request to keep the sales tax going without any further ado or whether Assembly Democrats and Republicans should do to Collins what they did to his predecessor and make approval of this revenue conditional on Collins and the Erie County Legislature, dedicating some of the sales tax for some specific purposes.

In 2006, when Joel Giambra wanted the sales tax reauthorized, state legislators commanded him to “share” $12.5 million with town governments. Nowadays, the supporters of cash-starved libraries and cultural organizations are nudging state leaders to do a version of that same command. Albany should tell Erie County to take, say, the last quarter-percent of sales tax revenue—which will be about $36 million next year—and create a fund for regional assets whose budgets Collins has slashed but that lived before his tenure and need to live after he leaves. The Buffalo area’s libraries and culturals, under both Dennis Gorski and Joel Giambra, used to get about $31 million in County revenue. This year, Collins budgeted them both at a total figure of under $25 million, thus wiping out funding for dozens of theaters, dance troupes and other small organizations entirely, notwithstanding evidence that County cultural spending of $6 million leveraged more than $240 million of economic activity. Collins slashed culturals and libraries after he politicized the previously sacrosanct Erie County Cultural Resources Advisory Board. Advocates of the culturals are scrambling to plug the $2 million hole. Librarians, meanwhile, are circulating their resumes anywhere but here. A library board member has rather queasily inquired whether the board may have any legal recourse to the 20 percent cut libraries have already sustained and expect to recur.

Sales tax receipts grow at about three percent a year, so dedicating some of the sales tax to keep libraries, culturals and, say, parks, funded within historic budget parameters, would be an act of sensible stewardship. Faced with a county leader who will destroy the community’s inherited assets in order to save his own job, maybe the sales tax discussion will go somewhere among his potential challengers.

But there’s hesitation. “Culturals don’t poll well,” said one elected official at a recent coffee klatsch. “Collins might just wipe them out entirely this coming year,” said another. The discussion went on: “Anything Albany makes Collins do will give him an excuse to spend $500,000 on TV ads complaining about more Albany mandates,” was the rejoinder. “But if Albany does nothing, even the Albright-Knox, the Philharmonic, and the big culturals might get zeroed out,” said a person who knows Collins’s thinking.

More on the dithering later. This little drama is about a big question in a democracy: Do local voters, who get to answer the question of how they want to shape their collective future, actually want to do so any more? Voter turnoff was so high in the special election held last week in Rochester that three out of four voters stayed home. A populist, pro-regionalism former mayor with broad labor support got 10,000 votes; a former corporate lawyer who took a $10 million golden parachute from the utility company he ran got 12,000 votes. The Green Party candidate got 2,000 votes. Democrats were the overwhelming majority of participants; a plurality of them chose the corporatist over the populist, and the progressives splintered.

A shared future?

Don’t blame the Rochester weather for the low turnout. Yes, turnout in the frosty March special election was only 25 percent. But the last time Buffalo held a race for mayor, in sunny September 2009, only 24 percent of eligible voters bothered. By contrast, Barack Obama versus John McCain in 2008 brought 80 percent of eligible voters out.

Will that happen again? Perhaps. But enthusiasm for Obama waned considerably in the 2010 midterm elections, as evidenced by the number of Democrats who got, in Obama’s word, “shellacked.” Even in the hotly theatrical race for governor last year, with provocative Carl Paladino stirring interest in his home county, turnout here was only 54 percent. Without a very strong, definitive candidacy that is all about hope and uplift and transformation—if folks have not soured on those notions—voters, especially at the local level, voters act more like money-grubbing dwarves than like noble Nibelungs.

So when a pallid, tepid, squeamish Democratic candidate runs for Erie County Executive in 2011, the folks who came out of their hidey-holes to vote in 2008 probably can’t be counted on doing so in a race that is actually going to decide the community’s quality of life for years and years to come.

That leaves policy-makers with a choice: Given that no candidate for Erie County Executive is going to boldly commit to funding the libraries, culturals, and other community assets, should Albany exercise its power to command a local elected official to do so? Albany was there in 2006 to spank Joel Giambra and hand out extra county sales tax revenues for the town governments that thwart regional cohesion: Will Albany be there in 2011 to protect a dispirited, leaderless community from an Alberich?

Meanwhile, up north

Last week, the Conservative Party mayor of Toronto joined with the Liberal Party premiere of Ontario to announce an eight-year, multibillion-loonie plan to build a 15-mile-long crosstown subway that will connect Toronto’s east and west sides through the middle of the city. Folks who dream of a streetcar-enabled renaissance in greater Buffalo, listen up: There are new streetcars coming to Hamilton, too. It’s true that the population in Greater Toronto has been growing and will continue to grow, per official estimates, as immigrants flock in and babies get made. The subway is an acknowledgement that they need to cope with traffic congestion that already leaves some Toronto workers and students with oppressive commutes. Visitors looking for Little Italy or the cluster of Portuguese restaurants and bakeries on the west side of town are best advised not to drive or take a trolley at rush hour. But at every other time of day, the combination of subways, trolleys, electric buses, cars, and bikes works without delay. The crosstown subway is all about the future, but it’s also about a continuity of vision about how a city should work. Toronto was either too smart or too poor a few decades ago when it had a chance to do what Buffalo did, which was to rip up its streetcars and replace them with buses. Now those streetcars are one of several transportation options, and even the Conservatives salute the idea of adding to them.

The new consensus about the subway is a bow to Toronto’s new reality: It is, in the words of two scholars from the Wharton School, a “superstar city,” which is how they describe big, rich cities that keep getting bigger and richer. Some rents are indeed high in Toronto; in some neighborhoods, modest 2000 square-foot bungalows that look like 1950s Tonawanda or West Seneca go for $700,000, though there is still a lot of immigrant-friendly, cheap, kinda un-pretty housing right next door downtown. Density is by design: The skyline is crowded with construction cranes as even more condos and apartments are being built. In-migration is regional as well as global, as several of the less-attractive cities and regions of northern Ontario are losing out to the allure of the biggest, most polyglot and most sophisticated place between New York and Montreal—or, as Toronto folks are wont to think, between New York and the Arctic Circle.

Public policy guides this change: Toronto’s success was not inevitable, any more than Buffalo’s decline was. In Toronto today, there may be vigorous discussion of options on how to fund things like subways, and indeed, everything is on the table: fare increases, property taxes, sales taxes, public bonds, and private investments, too. What is striking is that there is a baseline consensus: Everybody gets it about the need for public investment. The question is not whether there should be public services, including publicly-funded healthcare—the question is about how to make it better.

So it’s beyond funny that American conservatives point to Canada these days. The Right has recently started a campaign to lower the US corporate tax rate to Canada’s 15 percent level, citing Canada as the model (Canada should be newsworthy because a Canadian general is now running the NATO campaign in Libya, or because Canadians are in the second week of their six-week national campaign to choose a new prime minister, but nobody here cares about that stuff). What American conservatives don’t ever mention is that the pro-business, pro-growth Canadians pay a top personal income tax rate of 48 percent compared to 35 percent in the USA, and that 48 percent rate kicks in at about $80,000 of income. Nobody in Toronto gets to deduct mortgage interest on their taxes, either. And there are both provincial and national taxes on consumption that ding you for 15 percent on most purchases.

Back home in New York State, we in 2011 will walk into our local and regional elections with a tepid, squeamish and no-longer-inspiring leader of the American public realm setting the tone for our public choice-making. Our consensus about taxes and public investment is decidedly different than in Toronto, to be sure, but it’s even different than it was barely two years ago.

While Democrats split ever farther from labor and from economic populism, the result is that Democrats and Republicans today have a new anti-public consensus. Both Democrats and Republicans ignore the colossal increases in income for people who take their income from capital gains rather than from wages or salaries. Democrats and Republicans alike sound like they agree with the idea that public spending of any kind is all downside and no upside. President Obama, Governor Cuomo, and indeed any elected officials other than Vermont Senator Bernie Sanders and Ohio Congressman Dennis Kucinich evidently believe that asking high-income individuals to foot part of the bill for public services, infrastructure, transit, culture, libraries, or healthcare will hurt the public interest.

So I am inclined not to wait for a brave, well funded, articulate woman or man to buck the Obama example and emerge as a candidate for Greater Buffalo’s future, because there is neither a statewide nor a national discourse about how community uplift, cultural advancement, scientific innovation, and social peace can be supported and directed by sensible, evidence-based, long-term planning and public investment. We are not Toronto. We are not Ontario. Erie County voters, what few of them bother to turn out, apparently cannot produce a candidate for public office who will stand for what so many customers of culturals, so many community gardeners, so many library constituents and parks users want—someone who will boldly advocate for public support.

Thus it’s a good thing that we have a multi-level government, and specifically, a federal system. Our federal system guarantees that when local thugs and dimwits undermine the broad public interest, a higher level of leader can step in. So here’s the pitch to Albany: You screwed up when you filched $12.5 million from Erie County in 2006 to give to the town governments that only subtract from regional sustainability and now have more money with which to do so. Fix that error, Albany, but if you can’t, then at least step in in 2011 and provide the Buffalo area with the cultural, intellectual, and environmental stewardship that the current Ccounty leadership won’t provide. It’s this region’s sales tax money, after all: Just make sure that it gets spent on sustaining this region’s quality of life.

If Albany sets an example of enlightened stewardship, it will actually be a demonstration of Albany’s self-interest, because a stronger Buffalo regional community will suck less revenue from state coffers. Should that happen, then who knows, perhaps a more courageous candidate for county executive will emerge. Changing the national discourse on the public dollar’s role in community sustainability, however, will take more than one election cycle. But while we await that change, our community shouldn’t have to suffer any further.

Tax talk in a season of special elections

2011-03-23T22:51:00.001-04:00

All This for Just $40 a Month

by Bruce Fisher

It's a county election year, so prepare for a season of tax rants

Next Tuesday, there will be a special election for mayor in normally orderly Rochester. The chief candidates are former three-term mayor Bill Johnson on the Working Families and Independence lines, and the Democratic organization’s man, Thomas Richards, with a Green Party candidate who may get enough votes to spoil it for either one. Lurking behind the headlines of this highly unusual off-season election is the bitter economic anxiety that afflicts most of Upstate New York. Richards, the party favorite, has become known mainly as the short-term CEO of the Rochester Gas and Electric Company who laid off 225 workers, moved the utility’s headquarters out of Rochester, and took a $10 million severance package for himself while trying to raise rates on customers. Johnson, the generally well regarded 12-year veteran, is ruffling establishment feathers by questioning the propriety of big subsidies and tax breaks for a massive downtown corporate relocation scheme, but faces criticism for his own support of the ill-starred “fast ferry” that was supposed to connect Rochester and Toronto. With the Rochester city budget facing a budget deficit of as much as $50 million, money issues loom large in the foreshortened campaign. Layoffs, a pay freeze, cutbacks in service, a cut in the city’s education fund, and sharp questions about development subsidies are up front. Class resentments, and both doubts of and hopes for silver-bullet projects, are on voters’ minds.

Those issues will be in the Buffalo media market coming up this May, with Western New York’s own special election. The race to fill the vacant congressional seat of the chest-baring Chris Lee may turn the backstory into the headline—or maybe not. The Republican, Conservative, and Independence parties have endorsed Assemblywoman Jane Corwin, from the multimillionaire family that publishes a telephone directory. The Democrats have endorsed Erie County Clerk Kathy Hochul, from the multimillionaire family that helped start an international computer-services firm. Self-made multimillionaire Jack Davis seeks to run as an independent or Tea Party candidate on a platform of deporting Hispanic farmworkers and bussing black youths out to pick crops, and maybe a few other issues, too. In his two previous runs for Congress, Davis gained populist traction with his campaigns against the North American Free Trade Agreement, which local manufacturing workers erroneously but passionately blame for the disappearance of their jobs. (NAFTA was enacted long, long after manufacturing employment in the Buffalo area fell from a high of about 225,000 in 1954 to around 50,000 today.)

The resentments are out there, to be sure, and they are firmly based in reality. But politics in the Obama era doesn’t let us talk about class polarization, the utter dominance of financial speculators, how very much richer the very, very rich have gotten even compared to the old-fashioned well-off. Instead, President Obama and the Congressional Democrats have avoided articulating economic progressivism of the kind that Roosevelt, Truman, Eisenhower, Kennedy, Johnson, and even Nixon would have embraced—because the investment bankers, real-estate tycoons, and socially progressive millionaires who fund Democratic campaigns are progressive up to but not past the point where Democrats start talking about income tax surcharges on million-dollar incomes, or about progressivity in taxes rather than limiting the reach of the term “progressive” to discussions of gender issues and identity politics. Meanwhile, the populist class resentments of Tea Party folks, who hate big banks and Wall Street and Obama, too, have been captured by self-interested fat cats like the Koch brothers.

But the facts remain: When you look into the numbers, even locally, the data show unequivocally that middle- and lower-income households have seen their share of the pie shrink, while the very upper end of the social and income pyramid has been thriving beyond any dimension known since the 1920s. There is a new social structure here, but no political vocabulary has yet evolved to address it.

The numbers here

Just last week, the New York State Department of Taxation and Finance released its most recent data on 2008 tax returns. Our preliminary analysis shows that the top two percent of households here in Erie County, those with incomes over $200,000 in 2008, took in over 20.5 percent of the total income reported by the roughly 410,000 tax returns filed. (There are about 30,000 more tax return-filers than households in Erie County; analysts tend to call them “households” anyway.)

Here’s the most salient fact about that charmed top two percent of households: They had more income than the bottom 63 percent of households here. Put another way, the best-off 8,100 households had more income than 260,000 of their neighbors.

These 8,100 households stand out in another way. The median household income here is about $49,000; statewide, that number is about $10,000 richer, because there are lots and lots of richer people in Downstate New York. But here in Erie County, more than 70 percent of families and individuals filing tax returns in 2008 had incomes below the median household income of $49,000. For the 8,100 or so families and individuals filing tax returns on incomes over $200,000, the economy functions much differently than for the bottom 260,000 individuals and families whose incomes are below the median. For the 1,682 Erie County residents who reported incomes over $500,000, the world is an even more different place.

Here’s an indication of how much things have changed over a relatively short time. Budget officials in New York State did not separate out the over-$500,000 bracket in 2000. Only a decade ago, though, income polarization in this state was an established reality. In 2000, households in the top bracket took in about 18 percent of all the income reported to New York State. Nationally, the figure reported by the Congressional Budget Office was about the same.

Today, those households get an even bigger share of total income than they did 10 years ago. And between those two poles lies the middle class. The absolute number of middle-income tax filers in Erie County has shrunk since 2000. Their share of total income has shrunk, too, just as did moderate-income and lower-income household income. Of the 140,000 or so households here that are between the lower 260,000 and the top 10,000 or so, about 90,000 of them have public employees in them. The bulk of the middle class here consists of public employees—teachers, college professors, police, fire, health, child protection, and social workers.

Yet today, there simply is no explicit debate about these numbers or what they mean or who these different sectors of the workforce, the tax base or the electorate are. Among candidates for public office, we hear a great deal about the “business community,” and about recipients of social services, but nothing much about moderate-income households, the middle class, the role of the public sector in the economy, and certainly nothing about how it has happened that the top two percent of the income spectrum has galloped ahead in both absolute and relative terms. Whether the candidates are Democratic, Republican, or Tea Party millionaires, all we hear is a contest about which one of them hates taxes more.

President Obama set this pattern last November when he refused to take on the new Republican majority-elect in the House of Representatives over the estate tax, which is not paid by anybody with assets of under $2 million. It is as if he was seeking approval from the Wall Street Journal editorial page, which always puts the term “rich” in quotation marks, as if there were no objective reality connected to that particular English lexical item. Wall Street’s voice praises New York elected officials who oppose the surtax on New York incomes over $200,000—of which there were 217,000 in 2000, but more than 321,000 in 2008, and not because there was 51 percent inflation in eight years. Obama’s 2008 campaign talk about tax progressivity is absent from the White House, from Congress, from state capitols, and from the utterances of candidates in our special elections.

But it’s not just a polite silence. Even Democrats seem to be relying on the tax analysis of highly ideological, partisan sources like the Tax Foundation, the Business Council, and the various versions of the Chamber of Commerce. New York State, whose population is still growing (due to Downstate growth that negates Upstate shrinkage), is routinely derided as the state with the worst “business climate” because it has a top individual income tax rate of 6.85 percent for incomes below $500,000 and, due to the surcharge that may not be renewed, 8.97 percent for incomes over that amount, as if a state tax rate were absolutely determinative of whether business, population, and communities will or won’t grow.

Lost in this fog of numbers is the fact that tax rates stopped having much relevance to the economic performance of metro areas or even states once two other factors changed—namely, when the returns on investment became overwhelmingly shaped by financial speculation rather than by domestic American industrial productivity, and when the bargaining power of the middle-income worker was destroyed by Washington’s full-bore assault on unions.

America, including Upstate New York, is now in a new conversation about taxes, government and the common good. What we will hear in this season of special elections will not reflect the reality that the national and state taxation systems today are heavily tilted toward benefiting the top two percent of households at the expense of the prospects of the bottom 70 percent. To see it, all we have to do is look at the local numbers.

For when you add up all the taxes paid by New Yorkers—federal and state income taxes, together with local sales taxes and property taxes—the facts say that in 2008, the rate at which all New Yorkers paid taxes worked out to be a good deal for millionaires, who paid a lower combined rate—measured as a share of income—than people whose incomes are at the median or below. If you made $43,800 in 2007, according to the Institute on Taxation and Economic Policy, you paid 11.6 percent of your income in taxes in New York State. If your income put you in the top one percent of people reporting earnings in our state, congratulations: You paid 7.2 percent of your income in state taxes and local taxes. The sales tax in particular was a great bargain, but so was the local property tax.

And that’s where the talk is really going to heat up this year.

The $40 a month county tax

This is election year for Erie County executive and legislature. The rhetoric you will hear will doubtless include the following: that Medicaid is a disastrous burden on your life, that your county property taxes are eating you alive, that the culturals and the libraries are too expensive, and that unless the county property tax is cut, we will all die.

It’s all nonsense. If you purchase a cup of coffee at McDonalds in the morning—not Starbucks, not at a fancy local coffee shop, but the buck-and-a-quarter kind at a fast-food joint—you will have paid more for that joe than for the government that handles libraries, culturals, public safety, Medicaid, child welfare, Food Stamps, Homeland Security, and emergency dispatch. Or used to.

The tax rate on real property in Erie County is just over $5 per $1,000 of assessed value. That means that the typical house in Erie County, which is worth about $100,000, carries a county tax bill of $500 and change, or a little over $40 a month. Follow the numbers. If Erie County homeowners paid property taxes at the rate they’re charged in Niagara County, the bill would be about $80 a month. If we paid the rates they pay in Monroe County, the bill would be $100 a month for full value.

What’s most outrageous about the property tax rants you will hear and read here is that there is not a single Democrat who has yet to stand up and explain, or claim, that there is any benefit whatever to the region, or to individual, that anybody gets from this level of government providing these services.

In fact, we don’t hear Democrats talking about the role of government in the economy at all—except when we hear politicians talk about tax breaks or about special handouts to individual special projects.

Will we develop a way of talking about the collective public enterprise called government again? Yes, we will—because within the current year, Erie County will have to take a Home Rule message to Albany in order to re-authorize the county portion of the sales tax. The only politician getting ready for this is the current county executive—the one who cut the culturals and the libraries, the one whose administration is fighting federal and state charges that his anti-government management of government violates federal and state law, the one whose management of public funds includes hoarding of “stimulus” funds in a massive surplus which is neither invested in maintaining services nor returned to taxpayers as a giveback.

We know that anti-government language well—notwithstanding its perverse relationship to reality. What’s needed is for a candidate, or a citizens movement, or organized labor, or public servants, to explain what the money goes for. Explaining what your $40 a month buys is a good start. Then getting into who actually pays it would be a good idea, too. Hint: It’s not just the 8,100 people who have taken more of the pie over the past decade.

Race, gas and ECC

2011-03-09T22:55:00.000-05:00

Cars and College Students

by Bruce Fisher

Why ECC needs to consolidate downtown

A generation ago, two creative and relentless Erie County legislators named Joan Bozer and Minnie Gillette led preservationists and educators on a successful mission to save the downtown post office building from the wrecking ball, and to turn it into the city campus of the county’s community college.

Adding to that campus has been a bipartisan effort for 30 years. Democrat Dennis Gorski and the World University Games added the Flickinger Athletic Center to the college’s downtown footprint. Republican Joel Giambra added the Public Safety Campus, which houses an emergency operations center, central emergency dispatch for all cell-phone 911 calls, the DNA lab where the Bike Path Rapist case was solved, and training facilities for emergency responders region-wide. State funds, meanwhile, gush into new development just up Main Street in the Main-High medical and research complex, which includes a cluster of institutions that hire the healthcare services workers trained by Erie Community College.

The logic behind all this concentration of capital and people-power is pretty straightforward. Downtown Buffalo is still the transportation crossroads of Western New York, and its legal, financial, and administrative center. Concentrating the region’s vocational-education resources downtown makes sense, too: The federal and state workforce development programs are centered downtown. The welfare-to-work offices are downtown.

And concentration of these public functions makes economic sense, too. As Harvard’s Edward Glaeser explains in his new book Agglomeration Economics, the “agglomeration effect” creates efficiencies, simply because when activities are clustered together rather than scattered across the landscape, the costs of everything from utilities to maintenance to transportation are lower. and the return on investment is higher.

And as the regional transportation authority dusts off its old plan to take a look at the possibility of extending the light-rail surface system out to the Southtowns, east to the airport, and north to the Tonawandas, one old reality comes into focus again: The historic crossroads of the region is still where it was 200 years ago. It is downtown.

But these days, the logic of concentration is once again being ignored. Erie Community College, which only a few years ago was on the path toward a one-campus consolidation downtown, is once again planning to disperse its resources to its suburban campuses.

ECC currently has a $40 million capital expansion on the drawing board. A committee of the board of trustees—a highly political body dominated by suburban Republicans—decided to issue a request for proposals last fall that specifically called for bids on a new healthcare training facility for the Amherst campus of ECC. In today’s jargon, the building would be known as the “Center for Academic Excellence.” The document ECC used to brief Western New York elected officials says, essentially, that there isn’t room downtown for all the new students that are flocking to ECC, and that there is “excess land” at the suburban campuses. And on this “excess land,” ECC officials want to use public funds to build other stuff, too—including housing and commercial space.

The capstone argument of this document is that the Buffalo Niagara Partnership, which endlessly upbraids Albany for more and more public subsidy for private enterprises and capital projects at the Main-High medical complex, endorses ECC’s plan to put its new building for healthcare-worker training program in Amherst at the intersection of Youngs Road and Wehrle Drive, which is many miles away from the Main-High medical complex.

In 2011, with crude oil just having topped $105 per barrel and gasoline pump prices approaching $4 per gallon, it is déjà vu all over again.

The relentless logic of sprawl

Only a few years ago, a consultant hired jointly by Erie County and by Erie Community College concluded, in a blisteringly obvious but well documented study, that keeping three separate physical plants and three separate program mixes in Amherst, Orchard Park, and Buffalo costs more in maintenance and administration than would one consolidated campus. In 2004, the consultant calculated the extra costs of keeping three separate campuses at $5.7 million per year, not including the cost of any new buildings on the three campuses.

Those were innocent days. Gasoline had not yet spiked, as it did in 2008, and as it is spiking today once again. Leaked official diplomatic cables did not in 2004 indicate that Middle East oil production would peak in 2012. Today, we know that gasoline may become permanently expensive. The threat of price-spiking for transportation is so real that economists are predicting that the anemic economic recovery we now see may be undermined.

Fuel prices are why so many former adversaries are getting religion about fixing up old central cities. At a recent discussion of land-use planning professionals held in Buffalo, there was much talk about the impact of a 50 percent to 100 percent increase in fuel prices on the purchasing power of moderate-income households. If one’s take-home pay is under the New York State median, then the average AAA estimate of automobile operation costs (about $8,000 a year) goes up by about $2,000 a year. Out of a disposable income that maxes out at about $30,000 a year for an individual, that’s serious money.

That’s just one reason why an educational institution designed to serve moderate-income workers should be located where it’s easy to get to by private or public transportation.

Back in 2004, when the last effort to consolidate ECC’s three campuses into one was underway, the driving issue was the upcoming accreditation review by the all-powerful Middle States academic credentialing commission. Then, as now, there was a clear choice: Meet the academic standards by keeping three campuses and erecting new buildings to replace 1960s-era Amherst and Orchard Park facilities that are falling apart, or invest anew in one central location, achieve economies of scale, and meet the academic issues with new inputs.

The capital cost figure in 2004 was $130 million to bring the suburban campuses up to Middle States standards. But remember, that capital cost is not all. Keeping three campuses would also commit the community to bearing the extra (and avoidable) costs of $5.7 million a year—an annual tab that would not exist on a consolidated campus.

By contrast, the total cost of building a new campus downtown—with new buildings, new technology, secure parking, and transit access to the entire region—was estimated in 2004 to be $160 million. That’s $160 million plus normal operating costs, versus $130 million for new buildings on three campuses, plus $5.7 million a year in avoidable costs, on top of normal operating costs.

In short, the consolidation option was cheaper. It would have seemed an easy choice. Less money, better product; unification and co-location versus more money, same product, continued fracturing and sprawl. City students would get access, suburban users would get a unified campus with secure parking for those who drive and established bus service for those who didn’t, and everybody would get a regional hub with a college at its core, with no more public money being squandered in triplicate.

That’s what Niagara County Community College offers. What students call “N Trip” (for NCCC) is all in one place. A survey of ECC students done after 911 found that those who drive all the way to Lockport to go to NCCC do so in part because they don’t have to horse around going to three different campuses to complete their two-year degrees. And it’s not just students from far northern Amherst and Clarence who go to NCCC: Even residents of the Southtowns drive all that way for one-stop shopping.

Suburban fears at work again

Consolidation had its logic. But in this fractured region, weirdly persistent antique racial politics intervened, and ECC’s leadership, then and now, coyly avoids any talk of consolidation. The president of ECC would put more public money in a three-campus system that isolates poor kids in Buffalo, sends suburban kids into traffic hell at Youngs and Wehrle, and could strand them in proposed dormitories near the airport or in Orchard Park—all because, according to their documents, there isn’t enough parking downtown, and because downtown land is allegedly too expensive to acquire. Left unaddressed is the fact that the Town of Amherst, among other prospective users of the Youngs Road ECC campus, expressed serious interest in purchasing the land.

Not much has changed in the last decade. The current president of ECC, Jack Quinn, wants the three-campus status quo. The faculty union is content with the status quo. Administrators (of whom there are more today than there would be in a unified campus) accept the status quo. Each academic department that has a presence on each campus has separate leadership, which wants status quo.

The current ECC president wants incremental capital spending on each of the three campuses. His predecessor wanted to build hockey rinks and dormitories on the south campus in Orchard Park. Promoters of amateur sports object: The Flickinger Center is a major destination for swim meets, and hockey aficionados say that if rinks go anywhere, they should go downtown, near HSBC arena. As for student housing, developer Jake Schneider recently completed an adaptive-reuse for the old Alling and Corey building, using no public funds beyond the usual tax incentives, to create apartments and retail space.

The current ECC president, like his predecessor, wants to build a new academic building at the Amherst campus even though the very activities it would house have nothing to do with and are literally miles away from any healthcare employment, internship, or continuing-education function.

The math is very straightforward.

The “social” math is very straightforward, too.

A community college is a place for people in transition. Its students are a mix of displaced workers seeking retraining, kids on their way to a four-year school, adults seeking various vocational training courses, and others, of various ages and at various stages of life, looking for skills-upgrades related to specific companies in the area. A community college should be accessible (e.g., a 17-minute drive from anywhere in Erie County), upgradable, networked, cheap, convenient, and flexible in schedule. A community college is not a university. A community college should not be an academic environment sequestered in splendid isolation.

The old Erie County Vocational and Technical College got turned into a three-campus oddity during an era when sprawl was relentless and money for suburban education, apparently, was limitless. Now, when resources are constrained, and when demand for the vocational education in which the community college specializes is in greater demand, there is good sense in upgrading a physical plant. But there is no sense at all in doing it three times.

I tell you my dear, it won't happen here

2011-02-24T08:19:00.000-05:00

America 2050

by Bruce Fisher

Joel Kotkin predicts growing population, growing suburbanization

Günter Grass, the German author of The Tin Drum who won the Nobel Prize in Literature a couple of years before ‘fessing up to having been in the Waffen SS, wrote a few not-so-famous books about a subject Rust Belt people know about: dying out. The German birth-rate is low. The Italians aren’t making many babies, either. Member-states of the European Union have reproduction rates that won’t sustain current population levels of actual Europeans, which partly explains why some nativist political movements are getting stronger: Immigrants brought in as “guest workers” are a growing share of the population, and ethnic Europeans are getting nervous. Many of the children born in Europe today are being raised as Muslims by parents who may live in Germany, France, or Norway but who were born in Turkey, Algeria, or Kurdistan. Grass’s novel Headbirths, Or, The Germans Are Dying Out was a political allegory about running out of Germans.

Every once in a while in a Grass novel, he mentions Buffalo. It’s the city where Oskar Matzerath’s grandfather went on, if indeed he didn’t drown in a lumber-raft disaster on a Polish river, to become a millionaire. Grass wrote an absurdist play about Buffalo, a place that two German locomotive workers never quite get to but are heading for. In Grass’s imagination, Buffalo is a fabled place of possibility, if slightly insane, as Buffalo is America.

But in Joel Kotkin’s new book about the coming population explosion in America, it’s best to keep the German’s worry about his volk fading away in mind, as the story of The Next Hundred Million: America in 2050 has an upbeat, positive take on the coming American Century, but not much to say about places like ours.

The American recipe for growth

Only one of the five published projections of population trends in the Buffalo-Niagara area sees this region growing by 2035. The US Census, Cornell University, the University of Pennsylvania, and the New York State Comptroller all project that Erie and Niagara counties will continue to shrink. Only the Greater Buffalo Niagara Transportation Council holds to a model that produces an output that says that the Buffalo-Niagara Falls region will start growing again starting about 20 years from now. The growth: from today’s regional population of 1.27 million to (drum roll, please) 1.29 million, an increase of about 20,000. But only after more shrinkage first.

Kotkin’s book is about the rest of America. By 2050, if cataclysmic climate change hasn’t made large parts of the Southeast, Southwest, and California uninhabitable, the Census predicts that the United States will have grown from 308 million today to 400 million people. Kotkin’s book is about how America gets there, and also why. It’s hard not to like this book. He is no ideologue, though his essays and op-eds are often published on the highly tendentious and ideological pages of the Wall Street Journal. Kotkin is a futurist an MBA can like, because his analyses are data-driven. But mainly, Kotkin is positive about the very trends that progressives, secularists, and New Urbanists find very hard to like.

Where will the next 100 million Americans live? Kotkin thinks he knows: While 20 million may indeed find their way into the urban cores, most will live in the multi-nodal, car-defined suburbs. Will rising energy costs and a desire for density “force” empty-nesters back downtown? Not likely, says Kotkin—and the sprawled-out megacities of Houston, LA, Atlanta, and Miami will become the dominant paradigm of metro life. The strip shopping plaza may make Jane Jacobs aficionados wince, but in the West, the Southwest, Texas, and all across the Southeast, that’s where the folks are going to continue to want to be. Meanwhile, the “superstar” cities—Manhattan, Boston, Chicago, San Francisco, Portland, Seattle—will become even more luxurious playgrounds for the owning class, folks who are so much richer than everybody else that these places will have next to no middle class residents at all, only tycoons and their servants.

Meanwhile, by 2050, massive immigration will have transformed the American racial drama from the tired white-versus-black, suburb-versus-city tape-loop drama of Buffalo into a non-drama of interracial marriages, multiracial children, and multi-local networks where everything positive about diversity will trump old resentments and old boundaries.

Kotkin says that the American birth-rate, American productivity, and American economic growth are so unrelentingly positive compared to Chinese, Japanese, Korean, Russian, African, and European trends that we will still dominate the planet even though there will always be many more Chinese and Indians than us. Reports of our demise, he says, are more about politics than about facts.

As immigrants (even fictional ones) from across the planet know, it’s still good to become an American, and we still get the restless strivers crossing our borders every which way they can. Census data shows that while refugees tend to congregate in cities, the less-stressed head for the ‘burbs.

But all is not rosy, even in Kotkin’s rose-tinged reckoning. He is immensely critical of the immense polarization of income and wealth in the Bill Clinton-George Bush-Barack Obama years. He worries about stuffing all the rewards of enterprise into the hands of financial speculators, the US risks the potential demise of the one magical ingredient of American success—namely, the idea, reinforced by many real experiences, that by independence, clean living, hard work, and educational uplift, a person or a family can get a piece of the pie.

And Kotkin is much more upbeat about energy and environmental issues than the specialists tend to be. James Kunstler and other exponents of the Peak Oil hypothesis recently had a sad confirmation, by no less than Saudi Arabian oil executives whose admissions were published in those Wikileaks disclosures, that Peak Oil may be here within the next year. Here’s what Peak Oil means, in a nutshell: Anybody stuck far from workplaces, schools, healthcare providers, food sources, and the other commonplaces of life will see more and more of his or her after-tax disposable income get devoured by the cost of running a car.

Most analysts expect much more public transportation, not less. Republicans in Wisconsin, Ohio, and Florida are busily spurning federal funds for high-speed rail, but Republicans and Democrats elsewhere are generally supportive of major rail, light-rail and subway improvements. (Republicans in Northern Virginia last year instructed their House and Senate colleagues to cool the rhetoric and just put the money up for extending the Washington, DC metro system all the way to Dulles Airport). In the mega-cities and certainly in the “superstar” cities, enhanced public transportation systems are a much better bet than Kotkin acknowledges.

But do the math: If you commute the times and distances that are typical in Rust Belt metros, which is to say, commutes that are shorter and quicker than the national averages of 45 minutes and 20+ miles, gasoline could rise to $10 a gallon, and still, most of the behavior of staying solo in the car would persist.

Infrastructure decisions shape lives for decades to come. Take the UB Amherst Campus, for example. The Greater Buffalo Regional Transportation Council plan for 2035 quotes a UB review of its constituents’ transportation behaviors: Today, nine out of 10 teachers drive solo to work at the suburban campus, while the overwhelming majority of students who don’t live on campus do the same.

A much better bet for energy-efficient, cost-effective people-moving and goods-moving is the city. Kotkin acknowledges this, even as he observes that the oil-sucking, car-focused suburban Sunbelt formula won’t be easily disrupted.

The short, sad sum of this story: While the rest of the country will get the next 100 million people, and in the course of doing so will embrace the New Urbanists and the movement toward sustainable communities that use less energy and that spare middle-class wallets, in a Rust Belt region like ours, nothing short of sustained, assertive campaigning for re-tooling transportation will get more people to use it. Without a leader and a campaign, or better, an ongoing movement with a chorus of voices chanting a wake-up call, we will remain stuck with the sprawled-out structure of a Houston, an LA, or a Phoenix. But unlike those immigrant-friendly, entrepreneur-friendly places, we today lack—and will continue to lack—the population to replace all our Günter Grass characters as they age out and trend toward the cemeteries that were our first suburbs. Funny, those: how densely they’re settled!

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

Big bubbles

2011-02-10T07:59:00.001-05:00

Dodging the Next Bubble

by Bruce Fisher

Reagan redux or Keynes ahead?

Sleek new trains engineered and built right here in the USA. Whirring windmills and other carbon-neutral energy innovations powering our endeavors. Ever-quicker information-sharing networks. More freshly minted post-doctoral fellows at work in our institutes and clinics busily making medicine and healthcare both smarter and cheaper. And of course, all those 20-somethings with laptops full o’ code, working it early and working it late, eschewing beer for coffee in the hunt for the “blear-eyed wisdom out of midnight oil” that William Butler Yeats smiled at a century ago.

These are the longed-for tools of contentment which, if our leaders would only invest our tax dollars prudently, could get us a new American Century.

So says a new crop of progressive economists who would like us to leave behind the bubble-producing FIRE economy and move ahead into the new TECI economy. Over-reliance on finance, insurance, and real estate got America and the world into huge trouble in 2008. A new focus on next-generation transportation, energy, and communications infrastructure (thus TECI) could transform us from financial speculators into industrial producers once again.

That, sadly, isn’t happening. Instead, we are witnessing Barack Obama’s version of the Ronald Reagan-George W. Bush policy array unfold. As progressives ruefully note, Bush’s tax-rate regime is intact because of Obama’s unilateral November armistice day. Retailers worry that the incremental recovery that has reduced unemployment to nine percent (remember that in the 1950s, 1960s, and 1970s, the top unemployment rate was around five percent) is probably going to get stymied, with unemployment going back up to last year’s 10+ percent, because state and local governments are already laying off more teachers, social workers, plow-truck drivers, environmental-compliance officers, and other public workers in the name of “austerity.” Progressives aplenty still hope for a re-regulation of Wall Street, and a reversal of Bill Clinton’s completion of the Reagan rebellion against financial regulation, but hope wanes with the new Republican majority in the House of Representatives. Environmentalists wince when Obama speaks to the US Chamber of Commerce because their progressive president mouths the very phrases, the very Chamber-engineered language, to wit: environmental regulations impede commerce. Morgan Stanley’s Bill Daley is running the White House staff now. Carol Browner, who held the climate-change portfolio, is no longer in the Obama administration. In the run-up to the 2008 election, much intellectual verve was loosed, most of it research-driven, fact-based, and policy-wonked, and its smartest advocates felt they had a champion in the person of the new president on pretty much every issue dear to the progressive conscience.

At the moment, those folks are feeling something worse than stymied. That’s because the 2010 elections gave us a Congress that has already tried to roll back Obama’s incremental healthcare reform, that will suffocate Obama’s climate-change legislation, and that will try to cut even more investment initiatives than Obama’s own new White House staff has already decided to shrink or eliminate. Even signature Obama initiatives, including the Great Lakes Restoration project (which will still exist), will lose 25 percent or more of their funding. High-speed rail is being strangled in Ohio and Wisconsin by new Republican governors, while China and Europe muscle ahead with hundreds and hundreds of new miles of high-tech, energy-efficient rail lines. Worst of all, though, is that the serious financial regulatory reform that many analysts called for never even made it to Congress.

So the chances for the policy mix prescribed by progressives is quite a bit slimmer than it was two years ago. Yet there’s no more urgent moment than now, argues Eric Janszen, whose brief, smart new book is The Postcatastrophe Economy: Rebuilding America and Avoiding the Next Bubble.

Two anniversaries

“By adopting an impractical, fundamentalist, laissez-faire ideology in the 1980s, the United States ceded economic and energy policy to investment banks,” writes Janszen. He wrote those words many months before Americans were treated to all the observances of Ronald Reagan’s 100th birthday last week. The politician most responsible for having created the FIRE economy has been celebrated as a savior, even as the collapse of that economy leaves our country swimming in debt, polarized between rich and poor as never before, and stuck with “one of the world’s most inefficient transportation systems” because Reagan set us on a 30-year-long “joyride on an ocean of cheap oil.” Janszen predicts that “[n]o crisis will be more dire, and exert economic pain less evenly, than the onset of permanently high and rising oil prices that act like a regressive tax that consumes an ever-greater portion of the incomes of the lowest-earning households.” The Reagan anniversary, celebrated loudest by those who want government to keep subsidizing the FIRE economy but not to build any high-speed trains, overshadowed the 75th anniversary of John Maynard Keynes’s influential theory about what role government absolutely has to have in stepping in when markets screw up. Keynes’s most astute student was an American president named Franklin D. Roosevelt, who took the occasion of the Depression to do some long-term economic stimulus that created wealth-producing infrastructure of the kind Janszen calls for. Roosevelt’s successors did the same thing: Harry Truman’s GI Bill spending created human capital as never before by sending vets to college. Dwight D. Eisenhower’s Keynesian stimulus was the interstate highway system. John F. Kennedy’s was NASA, Lyndon Johnson’s the Great Society. Even Richard Nixon, who glowered when he said, “We’re all Keynesians now,” spent heavily on infrastructure, science, health, and technology; It was Nixon who launched the “war on cancer” with unprecedented grants for research. But Reagan, though he spent like a Keynesian, changed the language, spawning Ron Paul, the new deficit-mania, and the bellicose, anti-public rhetoric of Palinism.

If Reagan is the icon of orthodox, let-the-market-fix-it politics, Keynes’s 75-year-old advice on how to fix broken economies is the playbook still cited by all those who notice that government always has a role in economic events. Always has, always will.

But the policy choice matters, and so do the local versions of national policies. If the federal government spends while states cut, the federal thrust is blunted. Then there are the hangovers that we’re stuck with even many mornings after. Here in New York State, we see that the Obama administration still leaves crazy, economically destructive legacies of the Bush administration cranking along. For example, critics of the Seneca-owned casino in downtown Buffalo have to face the fact that the Obama administration has done precisely nothing to reverse the Inauguration Day decision by George W. Bush’s Interior Department appointees to leave the Michigan Street, off-reservation casino operating despite a pretty unequivocal ruling by a federal judge that doing so breaks federal law. A new study forthcoming from a Niagara University researcher quantifies the economic harm caused by the Niagara Falls casino, which lures and holds gamblers by giving free meals and free hotel nights, thus killing any restaurant and hotel competition for miles around. Try selling steaks, chops, and nights when the people down the way are giving it away. If your restaurant is short of business or your hotel can only fill up if you slash overnight rates to zero, then thank President Obama and our Congressional delegation for a government intervention that clearly hurts the regional economy.

Could better policies be in the offing? Could subsidies for the FIRE economy be ending, and smart investment in transportation, technology and energy be on the way? So far, there hasn’t been any change in state economic development policy. Governor Andrew Cuomo has just appointed new leadership at the Empire State Development Corporation, which has a legacy project underway here in Buffalo. Before Cuomo took office, the authorities he now rules approved plans to invest $153 million into replica canals and retail and commercial space in Erie Canal Harbor as if the go-go, pre-2008-crash days of ever-expanding commercial real estate and retail are here again. (Hint: Janszen and others point out that all that consumption, and all that real-estate speculation, was done on borrowed money—which consumers are, um, rather short on now.) As it stands, carried-over state economic development policy could result in a newly built, 700,000-square-foot office complex, built with taxpayer dollars, that would empty out the HSBC tower, creating a sudden glut on an already glutted downtown market.

Federal policy gives us a job-killing casino. State policy could give us a death star for downtown real estate.

Clearly, if we’re going to move from the FIRE economy to the TECI economy, we’ll need more dissident voices to leave their websites and enter the precincts of the policy-makers.

The encouraging news is that more of those dissident voices seem to be cracking through the sound-barrier erected by the major media, which still give mainstream economists—including Barack Obama’s FIRE-focused advisors—daily access to all of us.

What’s disturbing about Janszen having been so right for so long is that his optimism seems rather forced. Getting from where we are to a TECI economy will take a political transition that looks faraway. Obama’s tactical retreat on taxes, like his courting of the leading voices of the business establishment, leaves the features of the FIRE economy untouched. Maybe the investment bankers who fund political campaigns will be like the progressive organizers who organized the grassroots for Obama: Maybe neither of these groups will have anyplace else to go in 2012 than with the president who once promised high-speed rail, clean-energy technology, re-regulation of Wall Street, and new investment in American industry simply because the alternative is untenable. One can only hope that Obama co-opts the folks who fund the anti-Keynesians, for after reading Janszen, it’s pretty obvious that a return to Reaganism and the full force of the FIRE economy will only make the world ill again.

Meanwhile, oil prices today wend their way ever-upward just as Janszen explained they would. Market forces (i.e., the increasing cost of fuel) may help re-introduce the inherent sensibleness of energy-efficient transportation alternatives to a country that lurches to and fro on trains. This is no time for progressives, policy wonks, and people who can count higher than 21 to stop working on what has to come next. But there’s political prep-work to be done too: Blue Dog Democrats are as useless to this future as are Reagan revivalists.

Cornucopia politics

2011-02-07T12:44:00.004-05:00

http://artvoice.com/issues/v10n5/cornucopia_politics

Why Sensible Policies Don't Get Implemented

by Bruce Fisher

Cornucopia Politics

The news should be heartening to green-minded people throughout Western New York: The federal Homeland Security authorities have confirmed that $300 million will not be available for constructing a massive blacktop desert in what is now the Peace Bridge neighborhood, because Homeland Security sees no need for a big truck plaza there. This should be the signal for the area’s construction firms, engineers, and tradesmen to turn their sights on the urgent project for which there is actual federal funding already in place, specifically from the dedicated Great Lakes Restoration fund. This project—over $110 million of whose local public matching funds are also in hand, currently held by the Erie Canal Harbor Development Corporation—could transform the Buffalo River watershed from a wasteland of brownfields and poisoned fish into a clean and green waterfront.

Not having money for a carbon-belching Peace Bridge plaza is a blessing, especially as—once again—Mideast turmoil raises the spectre of $150-a-barrel oil, which translates into $5-a-gallon gas, which ought to result in Washington getting serious about energy-efficient trains and alternative fuels…again. Some theorists, like Richard Janszen of iTulip.com, think that the inherent fragility of our international economy means that a crisis as in Egypt might create another global crisis. The more immediate concerns of Buffalo and other Great Lakes communities is that they will, over the next two years, lose Congressional representation. Here on the North Coast, the federal cornucopia may be ending its endless Christmas.

Oil issues connect the short-term concern about oil-price disruption and long-term infrastructure issues. We may be nearing the end of cheap, abundant petroleum, and there is no technological alternative to replace it. Those wily Canadians will certainly step up oil-sands production, and sell us all the greenhouse-gas-producing oil they can—at a steep price. More carbon, more despoliation in Alberta, and more trade deficits will result, but in a depopulating region like ours, the dumbest thing to do while oil from anywhere rises in price is to commit ourselves to relying upon more and more of it. It would seem pretty logical, then, that if there are a few thousand construction workers who want work here, they should work their representatives to take advantage of the only construction money that’s really readily available—namely, the Great Lakes Restoration fund. A cleaned-up waterfront for Buffalo could actually be a reality, and could make the water-rich Buffalo area a better place to live in an oil-challenged future.

Civilians tend to be able to connect these dots. Not so, apparently, our local elected officials. They’re either pledging to go back to the Republican-dominated House of Representatives to fetch the hundreds of millions for the Peace Bridge (US Representative Higgins and Senator Schumer), or they’re silent about the big opportunity of federally funded environmental remediation (US Representatives Slaughter and Lee). Western New York will lose another Congressional seat before the next Congressional election; should President Obama win re-election, one must ask how likely it will be that a Sunbelt-dominated House of Representatives is going to do an about-face and ladle $300 million into a Rust Belt district even if the House once again goes Democratic, given that Homeland Security has already said no. Should Obama lose, the likelihood of that money coming here will go from slim to none. And in any case, the long-term question remains: Why invest in oil-based transport that’s inefficient (trucks) rather than in trains and clean water?

One hopes that all the people who want to do green infrastructure—laborers, skilled tradesmen, engineers, environmentalists, and some currently epicene officials—will hurry up and figure out that the cash that’s actually available for a clean-water project should be grabbed before Congressional Republicans make good on their pledge to wipe out $100 billion of federal spending. (The claim that Tea Party Republicans are anti-earmark rings true, thus: Sunbelt Republicans are definitely against earmarks for Democratic districts, like Buffalo’s.)

The alternative? Buffalo could go ahead with the Erie Canal Harbor Development Corporation plan, which will sink a total of $53 million more into replica canals, parking garages, and consultant fees, leveraging nothing except wished-for but unlikely matching private dollars. Once that pot of public money is empty, and thus unavailable to leverage the federal clean-water dollars now sitting in a Washington account, Buffalo will surely have its replica canals and the rest—plus a potentially huge new unfunded mandate. Conditions in the Buffalo River watershed currently served by the Buffalo Sewer Authority puts it in violation of the Clean Water Act—which means that the Buffalo Sewer Authority could well be instructed, by a court or by a federal agency, to clean up our nasty water anyway. Where would Buffalo get the money to do that? Simple: The sewer authority would simply double or triple the rates that its customers pay to come up with the local matching share—money that we have today, except that today’s money is going to be used to buy replica canals, parking garages, and consulting services instead of shielding us from a big local tax increase.

Could the federal government force Buffalo to clean up its messy, smelly, fish-disfiguring, floatie-filled water? You betcha it could. And if it does, we should expect to see a local Tea Party—a Green Tea movement—composed of every progressive advocate of homeowners, renters, churches, small businesses, and everybody else under our Buffalo sun, because ratepayers in our moderate-income burg would then be saddled with a completely unnecessary and avoidable burden in each of our mailboxes, postmarked Buffalo Sewer Authority, to pay for a job that other money could have paid for.

Why would our elected leaders chase a fantasy of a truck-traffic bonanza when there’s a clean and green—and largely paid-for—alternative right in front of our noses? Why would elected officials and their brilliant, high-achieving staffers ignore the problem stinking up those waterfront-oriented noses when a solution is at hand?

I blame Francis Fukuyama.

Fantasies of endless abundance

Back in 1989 and 1990, when the Berlin Wall was breached and Communism disintegrated, everybody believed in the peace dividend. A generation has since grown up not knowing about mutually assured destruction, Stalin, Communism, or air-raid drills. The hundreds of billions of American taxpayer dollars that were annually “stolen” from us (to quote our late President Dwight D. Eisenhower, who thus characterized defense spending) were going to be available for peaceful purposes—like cleaning up our waterways and building the American version of the super-fast trains that Europe has had for 30 years. The American way had triumphed, and we were going to thrive on peace.

That was Francis Fukuyama’s point in his 1992 book The End of History and the Last Man. This former State Department planner’s book was profoundly influential, first among conservative intellectuals, then for a much wider audience. He announced that the triumph of the West over Communism was proof that history does indeed have a direction, and that that direction is toward the everlasting and ever-growing abundance made possible by what is working out to be humanity’s highest organizational triumph—liberal democracy and representative government, exemplified by none other than Uncle Sam. When Fukuyama celebrated, lots of people applauded. That applause echoes in our policies today.

Though intellectuals all over academia may resent Fukuyama his fame, and pick nits in his reading of Hegel and Nietzsche, there is simply no denying his influence. It’s not that he was a pioneer or an outlier: His role was to give gravitas and context to self-congratulating American and European elites in a world consisting of countries governed by tribal thugs, criminal gangs, or control-mad ideologues. The myth of being rich while also being good gained full voice. What this particular intellectual wrote in 1992 became part of the political discourse of candidates and editorial pages and public expectation, too. So all through the prosperous 1990s, it was believable when he posited that humanity will demand that everyplace become more and more like America. “Moreover,” he wrote, “the logic of modern natural science would seem to dictate a universal evolution in the direction of capitalism.”

Missing from his narrative is anything about how all our wealth, all our consumption, all our globalization, all our suburbanization, are all stones in an archway whose keystone is oil in cheap abundance. Also missing is the notion that it wasn’t capitalism per se, but the well ordered, well regulated capitalism of the New Deal and the Great Society, with its huge and photogenic and healthy middle class, and not capitalism as a hedge fund manager’s ideal of deregulation, that became the world’s icon of the personal fulfillment that American-style freedom could deliver. Missing as well is the notion that being so rich could ever make the world so dirty that not even advanced technology could clean it all up. Missing, in short, is any sense of limits, or of consequences.

Hating taxes, loving handouts

Also missing from Fukuyama’s narrative is what we see in Buffalo, New York, and throughout the Rust Belt, where participatory democracy and free-market capitalism have given us the elite’s deindustrialization and widespread abandonment of a mature, medium-sized but withal very civilized communities. Strangely, for all the blame one hears of government, these are places whose elected and non-elected leaders alike act as if certain kinds of compensating abundance, namely, imported public funds, are not only permanent but our special prerogative as well. Here in Buffalo, hundreds of millions of federal and state dollars for new college and court buildings, new roads, new bridges and private enterprises, are expected from the never-ending public cornucopia. Very little ever gets to cleanup projects, which would benefit many but not enrich the few. And the messaging of these tax-hating, public-fund-grabbing elites is ever hostile to the living wage, to unions or employment security, or to public goods as once defined.

One of Fukuyama’s chapters is entitled “Accumulation without end,” which he concludes by saying that history has yet to yield a better politico-economic system, as measured by how much abundance it creates for so many. But think of our hometowns: devoured resources, spent lands, residues of production, stewardship abandoned, uncomprehending elites who practice “accumulation without end.” Abundance, it seems, has a public price.

And a more fundamental cognitive dissonance in our leadership is a mainstay: While the consensus of climate scientists is that humanity had better get cracking on some workable concept of limits, neither locally nor nationally do we see empowered folks doing much to contrive strategies to adapt to any new constraints that nature might impose.

A baby born on the day that the Berlin Wall fell in November 1989 would be 21 today—old enough to drink beer in Buffalo, old enough to vote in an election, old enough to enter into a contract, and certainly old enough to connect to even a 21-year-old’s experience the philosophical musings of a professor whose book celebrated the true peace dividend at the time it was created. Living in a community whose county executive hoards $74.5 million in federal “stimulus” money while ending daycare subsidies for working mothers, slashing libraries, and telling his health and environment commissioners to stop applying for federal grants, who subsidizes suburban roads and suburban police patrols and slashes urban culturals and jettisoned urban parks, that 21-year-old could rationally conclude this: The suburbs won the Cold War, but the cities, the environment, and any sense of shared community lost that war.

Fukuyama predicted a future of complete triumph for liberal democracy and capitalism. An earlier writer who also imagined the end of history, Vladimir Illych Lenin, predicted that financier-driven globalism (he called it “imperialism”) would be the last stage of capitalism, after which the proletariat would rise up, led by a vanguard, and smash it into a new utopia.

Smart boys indulge in magical thinking, too. What neither of these two can be expected to have imagined was that not even technology could change our collective outcome: oil-depleted, heated-up, potentially unlivable due to desertification in many places, potentially unlivable due to the lack of affordable fertilizers and pesticides in others, and coastlines under seawater—whether because humanity burned too many barrels of oil, or because humanity ran out of new barrels of oil.

Even in Buffalo, global trends just might matter—perhaps we will become relevant again as a well-watered place, perhaps even a refuge of livability, if our water isn’t poisonous. As we watch the output from the ever-producing Washington and Albany cornucopias dwindle, even as we hope for those demonstrators in Egypt that they get the individual freedom that they want, it would seem that our best shot at having a future would be to concentrate our efforts on what will serve us best, oil crisis or no oil crisis. Clean water works. Regional interconnectedness works. Rail works. Libraries, parks, and riverside paths work.

A big black asphalt pond next to the Peace Bridge? That won’t work. And we’re not going to get it anyway, so let’s focus on the job at hand: cleanup from the age of accumulation without end.

UB 2020 and the Knowledge Economy

2011-01-27T07:53:00.001-05:00

by Bruce Fisher

Buildings or brains first?

In the post-Tucson America of carefully civil discourse, Buffalo-area politicians who have endorsed the massive taxpayer-funded construction plan called for in UB 2020 are going to have to watch themselves, because serious disputes over what public money should buy, and from whom, could bring a quick end to politeness. The State University at Buffalo’s current president announced that he would leave specifically because the State Legislature objected to several aspects of the UB 2020 legislation he promoted—including its plan for differential tuition rates, as well as its suspension of various parts of the Public Officers law, of state higher education law, of the General Municipal law, and of other statutes. Assembly critics have also questioned the UB 2020 legislation for its outsourcing of various real-estate-related operations to new, yet-to-be-defined entities that won’t be subject to public oversight in the same way that the rest of the State University system is. Everybody salutes the idea of UB being a success, but legislators question these technical issues.

But you know how it works in Buffalo: If anybody raises any questions to anything that some folks say they want, a version of Stalinist terror is unleashed. At least the verbal version.

So as soon as Governor Andrew Cuomo introduces his budget, watch for these buzzwords to start cropping up: “downstate special interests,” “obstructive Assembly Democrats,” “anti-upstate Speaker Silver.” Especially because of the rhetorical strategies of the Buffalo Niagara Partnership and its allied lobbying group Unshackle Upstate, any questions anybody in Albany or New York City or on any of the other campuses of the State University of New York ask—unless the post-Tucson rules actually get applied here—will doubtless result in more of the same ugly name-calling and bitterness we’ve grown accustomed to.

Call it the Partnership style, or call it Paladino-ism. Meanwhile, more sober and more measured folks are asking questions like these:

• As long as there’s a $10 billion state budget deficit, what can UB, the three other university centers, and the 60 other SUNY campuses expect in the way of state support?

• If Assembly Higher Education Committee chair Deborah Glick (D-Manhattan) opposes both the state’s terrible practice of sucking money out of SUNY campuses and the UB 2020 plan to raise tuition on middle-class students, is it realistic to think that yelling at her will convince her to change her mind?

• If SUNY is truly going to drive our economic future, not just as the operator of campuses but as the centerpiece of the innovation economy, which of our scarce public dollars will yield the best return on investment—the construction dollar, or the faculty dollar?

Common dreams

Everybody wants a new economic engine to replace the broken manufacturing, real-estate-development, and transfer-payment motors that drive Upstate New York. Everybody in Ohio and Pennsylvania—and in Rochester and in Syracuse and in Albany, too—wants the same thing. What’s dramatic about the UB 2020 discussion is how different the approach seems to be in other places. Here, the approach seems to be largely about real estate. Elsewhere, the first dollars in are for high-achieving faculty members, for post-doctoral fellowships, for high-achieving students—and for helping students get access to higher education in the first place.

Chairwoman Glick, writing recently in the Albany Times-Union, points out that Cuomo and his two predecessors have all “touted the economic development potential” of SUNY institutions. But she is unimpressed with the new version of the UB 2020 legislation, which goes by the name Public Higher Education Empowerment and Innovation Act, precisely because it threatens to raise the price-tag for the prime customer: the young people of New York State.

What nobody on any side of the discussion misunderstands is that the very operation of the 46 SUNY campuses has major positive economic consequences for the local and regional economies where they’re sited. The handsome villages of Geneseo, Oswego, Cortland, Brockport, and others where SUNY operates campuses are a sharp contrast to Upstate towns quite nearby. Pulling SUNY out of these places would leave students to turn to predatory for-profit “colleges,” or, for most, to miss higher education altogether.

But it’s not just the college-as-local-employer economic impact that the four big research institutions are supposed to deliver: It’s the innovation economy, too. Patents, commercialized intellectual property like drugs and industrial processes—that’s what the new research university is asked to deliver. Every chancellor wants his or her system to be Stanford or Harvard, with genius professors, genius students, and a Silicon Valley or a Route 128 popping up next door.

When you look at the UB 2020 legislation, what’s so striking is that there’s not much in it about intellectual innovation, but a whole lot in it about real estate.

So in a civil discussion about how a public university like the University of Pittsburgh became one of the institutions that wins many hundreds of millions of dollars in grants every year, from both public and private sources, one would think that the first question is how did they do it? Some of the answers may be contained in the individual life-histories of public institutions—biographies of leaders, of researchers or of donors. Another way is to look at how universities grade each other.

The answer seems to be to follow the grant money. The new report of the Center for Measuring University Performance, alluringly entitled “The Top American Research Universities,” says that UB ranked 53rd in the total quantity of research grants won, and 64th in the total quantity of federal research grants won. Out of 200 or so schools reviewed, that’s starting to sound like good news. Schools get ranked on research grants won, faculty publications, PhDs awarded, student scores on achievement tests, endowment size, and other issues, but when it comes to research universities, the prevailing thinking seems to be this: If your faculty are winning national competitions for research grants, your university gets a good score. If faculty don’t bring home the bacon, the score suffers.

This report ranks UB ahead of Stony Brook, Albany, and Binghamton, which are the other three SUNY research institutions; all the other SUNY campuses are either four-year colleges or two-year community colleges. UB’s own website touts its take in grants. UB faculty won $149 million in federal grants in 2007. Stony Brook won $111.2 million. So it would seem that UB is a winner.

But context matters. Other public research universities win many more of these grants. In New York State, the private universities, particularly Columbia, Cornell, and Rochester, dwarf SUNY individually and even collectively. UB won $44 million in Department of Defense grants since 2000, but in that category Cornell got $168 million, Columbia $125 million, Rochester $98 million, Renssalaer Polytechnic Institute $73 million, and RIT $45 million. The private colleges and universities in New York State have been known to ask why there needs to be a SUNY anyway, given the comparatively stellar performance of the private institutions in getting these grants.

SUNY’s distinct mission since 1948 has been to serve students who are modest of means. So the discussion of economic impact of policy changes—like tuition policy—is necessary. And then there’s the lack of clarity about how to judge other statistics used for ranking research universities. For example, is Stony Brook, whose mathematics program is internationally recognized, a lesser institution because its grant haul from the DoD is smaller than UB’s? Or does Stony Brook’s smaller take in grants reflect that it does not do as much medical research as UB does (which is not surprising, as Stony Brook has no medical school, while UB does)? Would Stony Brook get more grants if it had its own version of UB 2020, or if it dropped its math and chased DoD projects instead?

People power

This is a huge set of variables, but inevitably, when it comes to ranking and reputation, one has to focus in on the question of faculty. Stony Brook has more faculty than does UB who are members of the national academy of each of their respective disciplines. There’s a radical sorting that has already taken place in America: The schools with the big reputations have so profoundly many more of these scholars than the low-ranking schools, or even the medium-ranking schools, that most other institutions are in comparative darkness. Of course Harvard, Stanford, MIT, Yale, and Columbia are in the top 10 in this measure. But the rest of the top schools that win the reputation wars are public: University of Texas at Austin, University of Wisconsin, University of Washington, and three California public schools: Berkeley, San Diego, San Francisco.

So the lesson seems to be this: Public money spent on people brings the public schools into the ranks of the best-known private schools. And when the rankings go up, whether public or private, the big, rich universities win grants. Then they win philanthropic support—endowed chairs and such-like. And then, after they win recognition for excellence, is when they make money.

Academic personnel matter. Students matter. Buildings? Of course. But hardware without software and operators doesn’t operate itself. Yet at this time of fiscal mayhem in the states, the first casualties everywhere are the students—and faculty, too, as faculty are neither being hired nor encouraged to stay. California students have been very loudly protesting cutbacks in aid and even more loudly protesting increases in their tuition. Elected officials in New York State are reminded daily how real the recession is by constituents who think that public services are the cause of their economic woes, rather than Wall Street, globalization, or $100-a-barrel crude. And in a predictable turn of events, some SUNY campuses may see enrollments go up even as cutbacks kick in, simply because the price of a SUNY education is still within reach the reach of working and middle-class families, while private tuition moves further and further out of reach.

Dollars are scarce, so difficult discussions will necessarily be had. Assemblywoman Glick pointedly mentioned how cutbacks at SUNY have gone on even while state government has not stinted on “resources we have readily provided to private enterprises.” In its current form, then, it would seem that the UB 2020 legislation may never pass. That still leaves the question of not whether, but how UB attracts and retains the people who compete with Harvard, MIT, Stanford—and the University of Pittsburgh, UC San Francisco, and the University of Rochester—to bring the reputation money, the ranking money, even the DoD grants home. A reprise of last year’s divisive rhetoric won’t be much help in that job.

Austerity, policy and Upstate

2011-01-05T23:13:00.001-05:00

Hope and History

by Bruce Fisher

Andrew Cuomo (photo: Pat Arno/Wikimedia Commons)

Austerity, priorities, and a new economy

As the new year dawned, Andrew Cuomo took the oath of office as governor of a state with a $10 billion budget gap, a divided state legislature, dysfunctional economic development agencies and authorities that never coordinate their actions, and now, it seems, he must also deal with New York State’s own Erin Brockovich problem. The federal Environmental Protection Agency’s Christmas gift to Buffalo, Syracuse, New York City, and 28 other cities was its acknowledgment of a scientific watchdog’s December report that all these cities have cancer-causing chromium-6 in their water.

Chromium-6 is a proven carcinogen. The actress Julia Roberts portrayed Erin Brockovich in the eponymous film about how Chromium-6 pollution was causing widespread sickness in a small community. Until the real Brockovich won a $300 million court settlement, the big corporation that caused the problem did nothing to clean up the pollution, but spent millions on cover-up, denials, PR, and demonizing its critics.

How exactly does one do economic development if a community’s water is polluted with cancer-causing contaminants? A news blackout helps: Since the holiday news flash about chromium-6, there has been no further news coverage of the problem in Buffalo.

Turning a blind eye is established practice here. In December, state economic development agencies ignored the original purpose of the New York State Power Authority funds, funds which were obtained specifically for environmental remediation, in favor of endorsing Erie Canal Harbor Development Corporation’s plan to build short, shallow replicas of old canals in the Canal District, leaving the adjacent Buffalo River full of sewage and contaminants. According to the New York State Department of Environmental Conservation, the Buffalo River’s water is so contaminated that 34 percent of the black bass and 87 percent of the brown bullheads that live in it have tumors, facts that have been reported only in Artvoice.

One hopes that Governor Cuomo will appoint an environmental leader like former Commissioner Pete Grannis, whom former Governor David Paterson dismissed allegedly for complaining about the loss of professional staff whose job it is to enforce pollution regulations and direct cleanup funds to our own Erin Brockovich problems. But whoever heads the Department of Environmental Conservation will need the staff, and staff cost money. Money for state operations comes from taxes, which means that we, and our new governor, must urgently focus on how to get the state’s economy strong enough to meet our challenges.

Cutbacks versus investment

A December 2010 report from the Kauffman Foundation for Entrepreneurship has a lot to say about how state governments should deal with the new reality of revenue shortages. State governments have far less power than national governments in shaping economies, but governors are on the firing line to produce economic turnarounds, and they have lots of policy tools at hand. No governor, except perhaps Governor-redux Jerry Brown of California, has a bigger job ahead than Andrew Cuomo.

States do matter. The leaders of California have long cited how much larger their state’s economy is than those of various sovereign countries; with a current Bureau of Economic Analysis figure of $1.09 trillion, New York’s 19 million people have a larger gross domestic product than every other state except California ($1.89 trillion) and Texas ($1.14 trillion), which even individually are bigger than most other national economies on the planet. Economic contraction over the past few years has been a reality.

One wishes that the Kauffman report had been organized by metros rather than by states. Andrew Cuomo’s problem is not the dynamic, growing economy of the greater New York City metro area, which contains about 14 million of our state’s 19-plus million people, and which produces so much excess tax revenue that not only does Upstate feed off it, but so does the rest of America. No, the Downstate portion of Cuomo’s New York is burgeoning. It’s the economy for the five million folks of Upstate New York that is the challenge.

The Kauffman report addresses this problem with an intriguing international example from recent history. The nation of Finland, population about 5.3 million, went into an economic tailspin after the Soviet Union fell apart in 1990. But rather than take the “everything should be on the table” approach to cutting its budget during its time of fiscal crisis, Finland “took the long view,” says Kauffman: “They cut government spending, but they increased investments to help transform the Finnish economy from one dependent on natural resources to one dependent on knowledge and innovation.”

The biggest target of Finnish investment was primary and secondary education. Finland is a small country. Its GDP is only $190 billion, according to the OECD, and their per-capita product $35,918, compared to $50,205 in New York State as a whole. (I don’t know how to calculate the GDP of Upstate New York, other than by aggregating the metros, but I will report back soon.) The history lesson is this: Finland’s GDP and its citizens’ per-capita income were half that before the Finns fixed their schools.

Kauffman now calls Finland a model of what an innovation-driven economy should look like. Everybody who looks at it concludes the same thing: It was fixing the schools that did it. In the latest international comparisons, the Finns tied South Korea for first place among all 70 OECD countries in results from a two-hour test administered to hundreds of thousands of kids worldwide. The test measured literacy, math, and science knowledge among 15-year-olds. Chinese kids in Shanghai scored best on math, US kids beat most on science, but we scored lower because we in America have a huge problem holding us back: The OECD found, as has Syracuse University’s Jerry Grant, that when kids are segregated by income, the poor kids fail and bring everybody’s numbers down.

Note to US governors: The evidence says you should make like Finland, invest in the right stuff, desegregate your schools by income, and stick it out for the long term.

Bold strokes or baloney?

Andrew Cuomo and his staff know, with great specificity, just how much it costs to keep the dysfunctional, locally administered school apparatus of New York State going. His budget challenge is not only a current-accounts problem but a structural one: Albany is not the only state capitol that shovels money into local governments and school districts in an old political arrangement that keeps the local government natives quiet. But before he and other governors go after local school districts—of which there are 62 city districts and more than 600 suburban and rural districts, by the latest count of the New York State Education Department—the governors need a political target. They have all chosen to go after the pay and benefits of public employees, including teachers.

But when that skirmish is finished, the governors then have to get serious. They’re going to have to take on the dysfunctional, duplicative, monstrously inefficient target called separate school districts. The international evidence has poured in, and even in Buffalo, the general media find themselves able to report that the economy is better when reading, science, and math scores grow. But there the story stops: Social scientists know that scores stay low when poor kids are isolated. We have known this since the 1960s. The OECD knows it. Our nearby peer city of Hamilton, Ontario, having been apprised only a year ago of the new evidence in Professor Grant’s book—which shows how educational outcomes are better in income-mixed, county-administered Raleigh schools than in income-segregated, city-only Syracuse schools—is moving aggressively to end their old segregation-by-income, city-only system. Will Cuomo’s education bureaucracy move on this, and give New York State regional schools? The evidence is in that economies grow when that happens—but will anybody in Albany be bold enough to do what Finland and Raleigh did, and what Hamilton is doing now?

There is obviously more to innovation economies than schools, of course. New products, processes, and commercialize-able intellectual property come from people with higher education, and in this realm, Andrew Cuomo would seem to have a distinct advantage. The number of degrees our New York institutions hand out is impressive. According to the December 2010 report from the National Science Foundation on how many PhDs were earned in 2009, New York State institutions conferred 3,852—second only to California’s 5,966. Albany Medical College conferred nine, Alfred one, Clarkson 22, Cornell 515, Renssalaer 131, RIT 10, Upstate SUNY campuses 287 plus UB’s 312, Syracuse 136, Rochester 220—the brain-numbing numbers mean that there are almost 4,000 people, just in this past year, including more than 500 from west of the Genesee River, who have certificates that say they’ve achieved the highest academic credentials available.

But is that enough? Is it relevant? More relevant, says some recent thinking, are the number of generally educated folks, i.e., those with bachelor’s degrees. More relevant still, according to the paradoxical utterances of a conservative economic theorist, are the messages we send.

Not poor enough?

In New York, there are agencies—the Thruway Authority, the New York Power Authority, the Empire State Development Corporation, and many others—that spend tens of millions of dollars of public funds on projects that do great things for insiders and not much measurable good for anybody else. The aroma of corruption is a problem, but so is sheer the irrelevance of the spending. Questions that poor countries would ask are not asked here, such as these: How will the decision to spend $153 million of public funds on real-estate-development-related projects in Erie Canal Harbor increase the sustainability of Upstate’s largest metro region? How will the Thruway Authority’s decision to move the tolls eastward from Transit Road, at a cost of tens of millions of dollars, effect the behavior of drivers in the Buffalo metro area, which is already losing population even as real-estate development sprawls farther and farther outward? Why, in a state with both a state and a federal mandate to use renewable energy, even as crude oil prices once again reach far past $100 a barrel and gasoline prices jump over $3 a gallon, is there no metro-by-metro Upstate plan to rein in fossil-fuel use in favor of renewable energy for transportation?

The answer seems to be this: Upstate is on the Downstate dole, but the empowered voices in Upstate keep asking for the same short-term, insider-directed projects that they’ve always asked for, and to shut us up, Albany throws some New York City money our way to squander as Upstate always has.

Our river’s water is dirty, but because nobody empowered is asking for clean water, the public money gets misspent on commercial space. Our resident population obtains BAs, MAs and even PhDs from area universities—more than 300 from UB alone in 2009—but our retention of these assets is inadequate to move Upstate into the ranks of places like Finland, where the innovation economy is sufficiently strong enough to keep the talented from leaking out to enrich the rest of the world.

As long as our empowered Upstate voices keep asking for the wrong stuff while the core challenges remain unaddressed, we can expect the same result. We will have successful higher-educational institutions that graduate accomplished young people, next to expensive public schools that treat the middle- and upper-middle classes beautifully but that leave poor kids festering in bad culture and worse rhetoric, with racial ranting on all sides. We will have dirty water that makes national news. We will have the opposite of what the economists call the “agglomeration effect,” which is the upward tornado of economic activity that happens when folks do what they do close to one another, rather than sprawled out all over distant suburbia. Andrew Cuomo can’t be expected to task his staff to work on all these issues today. He should at least, however, expect that his agencies start acting as if they are too poor to spend money that our tax base is too small to keep giving them. But as long as Downstate continues to subsidize Upstate, evidently we’ll never be poor enough to get serious about fixing our fundamentals.

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

Economic "development"?

2010-12-23T09:13:00.000-05:00

Killing Us Softly

by Bruce Fisher

Andrew Cuomo has an opportunity to change the state's development strategies.

Can we survive New York's economic "development" plans?

Here in Buffalo, we need to care about an obscure economic fact called the Canadian consumer debt-to-income ratio. Canadians are just like Americans except more so: Canadians consume more than they earn, and pull off that trick by borrowing money. Statistics Canada reported last week that the ratio of household debt to disposable income reached a new record this year when it hit 148.1 percent. The US number is 147.2 percent. A senior Conservative consultant told me a few months ago that Americans shouldn’t plan on Canadians coming down to Buffalo to buy much stuff for too much longer, because the banks in Toronto would probably start tightening things up in the new year. It’s December, and not only are they doing so already, but the Canadian government is warning about interest-rate increases in the coming year, and fretting out loud about Canadians’ ability to pay their old bills, much less come to Buffalo to shop.

Canadian shoppers kick in a few millions of dollars of sales tax to Erie and Niagara Counties, although that amount wobbles up and down depending on the exchange. It’s been as much as five percent of the take in Erie County in good years. But it’s not written in stone that Canadians will put up with US Customs inspectors at the bridges. And now, we’re being warned not to rely on Loonies and Twonies.

If Canadian disposable income is iffy, American is more so, according to the most recent numbers from the US Bureau of Economic Analysis. Personal income is just not rebounding in our part of the country, notwithstanding the assertions of other agencies that the Great Recession has ended. Retail trade seems to have made a modest recovery for Christmas 2010, but many economists suspect that there is much to be resolved. Even the Wall Street Journal has reported that a slight uptick in private economic activity is being hampered by government cutbacks, layoffs, and public-school downsizing as governments experience the so-called lag effect. Here in the Buffalo area, we see that $74.5 million in federal stimulus money received by Erie County is sitting in Erie County coffers, and that 200 county workers are being laid off, funding for libraries and culturals is being cut, and federal grants-in-aid to county health, social service, and environmental programs are being turned away, because Erie County Executive Chris Collins and the Erie County Legislature have chosen anti-government ideology over basic economic arithmetic.

Yet despite continued low income-growth, continued regional population decline, warnings from the Canadian government about the new realities facing even prosperous and more numerous Canadian households who come here to shop a little, New York State’s key economic development agencies stick to plans that area based on the idea that we and our neighbors have lots of money and nowhere to spend it all.

The events of December 16

Last Thursday, the leading New York State economic development agency endorsed spending more than $50 million of a unique and irreplaceable pot of public money on building replicas of canals in what was once America’s largest inland port so that Erie Canal Harbor can become a retail and entertainment hub. The $50 million is part of a plan to spend $153 million over the next couple of years on “[c]reating tenant spaces suitable for a mix of uses, including office space, hotel space, ground level retail and community facility spaces, to ensure that Buffalo can capture its share of future economic growth and new jobs,” according to the Modified General Project Plan. Nowhere in the official document is there any mention of the current economic context, including the glut of downtown office space in every category from A to C, or the glut in retail space in the area. (Buffalo metro has somewhere between 32 and 34 square feet of retail space per capita, compared to a normal ratio of about half that, while Portland, Oregon has less than 10 square feet per capita.) Also missing from the plan for Erie Canal Harbor are items that were part of the press releases of November, in which the agency that has authority over the historic terminus of the Erie Canal pledged to build a pavilion, create a “tent city” that would be something like an ongoing summer art festival, spend public dollars on the arts, and engage consultants with experience in “place-making.” The documents instead reflect what these economic development agencies have been planning for more than a year—namely, using a finite and unique public revenue to build replicas of canals, plus five parking garages, and hundreds of thousands of square feet of commercial, retail, restaurant, and hotel space.

So there are grounds on which to question the appropriateness of this use of public funds. Some also question the propriety of the deal. Without ever having gone through the usual public procurement process, in which potential developers for a publicly funded project are required to offer bids, the designated developer—which will use public funds to create the hundreds of thousands of square feet of new commercial space—remains Benderson Development Corporation, which has a sweet deal: It will pay $10 to take title to the development after it is built out.

At the very same time that Empire State Development Corporation was voting approval of the Erie Canal Harbor Development Corporation’s plans last Thursday morning, State Supreme Court Judge Frederick Marshall was delivering his decision in the Goldman v Bass Pro Shops case. Judge Marshall decided that the taxpayers who brought the lawsuit did not have standing to sue to stop this use of public dollars, dollars which came from the 50-year stream of payments that the Buffalo area was scheduled to receive from the New York Power Authority to compensate it for the Niagara Power Project’s environmental consequences. That 50-year stream of public money will become a one-time shift of cash to an economic development agency that has decided, notwithstanding all the meetings, protests, and questions about the existing glut of retail, parking, and commercial space in the Buffalo area, and amidst the crisis in public support for the arts, to build more retail, parking, and commercial space. And replica canals.

A coda came two days later with news reports that the president of the Seneca Nation of Indians is reaching out to ECHDC to see how to coordinate the Seneca Gaming Corporation’s plans for expanding its Michigan Street casino. Jordan Levy, who chairs the board of ECHDC, serves on the board of the Seneca Gaming Corporation. According to its own records, the Seneca-affiliated casino corporation’s Buffalo operation draws its clientele from within 15 miles of the intersection of Michigan Street and South Park.

A few years ago, Erie County and local citizens sued the Bush administration to stop the Seneca Gaming Corporation from building a casino off Seneca reservation territory, arguing that while the Senecas have every right to build whatever they want on their own territory, it’s not only illegal but economically destructive to locate a sovereign nation’s tax-exempt entertainment enterprise—whose goal is to keep visitors inside its walls, spending money on Seneca-owned products and services—in a marketplace where locally owned, tax-paying businesses have to follow normal business rules. The current Erie County executive removed Erie County from that lawsuit. The Obama administration has been silent. The Seneca Gaming Corporation continues to compete with locally owned businesses and entertainment venues for local disposable dollars.

Welcome to the world of “economic development” in Upstate New York, where the state’s agencies will spend over $8 billion of taxpayer money in various direct subsidies, tax abatements, and project-specific infrastructure investments so that politically connected bankers, construction management firms, real estate developers, engineers, architects, and others will keep this system going.

Do note that the system has produced the following results: a drop in population to 1.1 million, which is below the region’s 1974 peak of 1.4 million, with a continued decline expected to continue at least until 2030. Meanwhile, because of direct and indirect subsidies for what is termed “development,” 76 percent more land in the Buffalo Niagara metro area is being used than in the 1970s, even as the population of the urban core has dropped from more than 400,000 to less than 280,000. As Rolf Pendall of Cornell University and the Brookings Institution noted, Buffalo and all other Upstate New York metros has experienced “sprawl without growth.”

Will Cuomo change any of this?

The “economic development” entities that taxpayers fund, directly and indirectly, are allegedly busy at work in the public interest, tasked to help bring new economic activity to aggrieved and challenged parts of New York State. Many observers question their efficacy. This past August, another report on the dysfunction of local industrial development agencies (IDAs) showed how public funds result in lower local tax revenues and fewer rather than more jobs. The Coalition for Economic Justice and its partners are now engaged in a broad campaign to help elected officials in Albany, and taxpayers, understand that the current system rewards insiders but doesn’t increase net employment or return any net positive on the public’s investment. But when Buffalo Assemblyman Sam Hoyt and his colleagues broached the prospect of public accountability, the blowback was intense: Construction unions joined with the financiers and developers who love the status quo to protest any enforcement of standards.

Few elected to public office in New York State seem to want to change this system. Elected officials are generally intimidated by the rhetoric of what in Washington used to be known as the “loophole lobbyists.” The Fiscal Policy Institute, a labor-affiliated think tank in Albany, continues to provide the intellectual horsepower for the accountability movement through its reports and analyses—including its most recent piece on “job-creating” tax breaks and handouts that add $5.4 billion to the state’s deficit without creating public benefit. This institute produced a sensible and moderate agenda for economic policy in 2006, giving special attention to the problems of Upstate metros.

But the worm may have just turned.

The recent hubbub over the Erie Canal Harbor, plus public outrage over Erie County government’s refusal to adequately fund quality-of-life amenities including libraries and culturals, has sent a signal to local elected officials that irritation with the status quo has a certain anti-elitist energy that endures. The political energy of 2010 is not spent.

And there is some evidence that even the business elite in Buffalo may have just figured out that Empire State Development Corporation’s plans and the Erie County executive’s policies cause more burdens than they’re worth. While ECHDC’s leaders press ahead with their plans for replica canals and 725,000 square feet of new commercial space, the board of directors of Buffalo Place—which is the business-improvement district that serves the companies that own existing real estate downtown—succeeded in getting Mayor Byron Brown on board with a letter to HSBC, imploring the bank to stay inside HSBC Tower rather than let Empire State Development Corporation and ECHDC build the bank a new, taxpayer-subsidized office.

And the business community seems to have awakened to the price-tag of County Executive Chris Collins’s anti-stewardship policy. While Collins hoards the $74.5 Obama stimulus funds in a surplus that is over $88 million, he has shifted responsibility to local businesses and philanthropies to not only continue their customary support of the 19 theaters, several small art galleries, dance groups, and other arts groups, but to make up for the county support that he cut.

Meanwhile, ECHDC has already spent $5.1 million on a single consultant, a New York City architectural and engineering firm that designed the replica canals. Empire State Development Corporation has endorsed spending $51 million on building those replicas, on a path toward building out the plan that has not changed much, except in its phasing, since last summer.

At the moment, the “economic development” strategy of New York State consists of ignoring the crisis of the existing culturals, the existing libraries, and the existing landlords of downtown Buffalo; ignoring or not addressing the coming challenges to cross-border commerce; endorsing a policy of downsizing public employment at a time of anemic consumer demand; and adding to destinations for disposable income without adding to the region’s ability to produce income.

As soon as Governor-elect Cuomo takes office, the question becomes this: Will these be his policies too?

DC deals and Rust Belt ripples

2010-12-09T01:27:00.000-05:00

Once Were Creators

by Bruce Fisher

As Obama surrenders, the Rust Belt wonders

The viral video of the moment stars Senator Bernie Sanders of Vermont. He is the white-hair standing at his desk in the US Senate giving a passionate speech, a speech that recites disturbing facts about how different the rich in our country are from everybody else.

At least since the 1980s, progressives have been warning about how much richer America’s rich are getting, and why their self-isolation is a problem for democracy and a sense of a shared national destiny. But the language progressives use to describe this problem is numbing. We are accustomed to hearing about “income polarization,” and “tax regressivity.” But on YouTube, Bernie Sanders makes it simple. He explains how eight out of every 10 new dollars of new income reported in the past 30 years have gone to the richest one percent of Americans. He says that the rich are conducting a “war” on the American middle class, and that America is turning into a banana republic. He is mad as hell that any Democrat would consider extending the Bush administration’s tax cuts for people whose incomes are over $250,000 a year because doing so will add $750 billion to the federal deficit over the next 10 years. Sanders raises his voice against the hypocrisy of Republicans who would cut aid programs for the elderly, the sick, students, and other members of the broke-oisie in the name of ending deficits, but he almost shouts about how repealing the estate tax, as Republicans advocate, will cost the Treasury more than $1 trillion over the next decade, all to benefit the top one-third of one percent of American households. He is contemptuous of Exxon-Mobil’s $19 billion in 2009 profits, on which it paid zero federal income tax.

Sanders gave his speech last week. This week, President Obama, who campaigned vigorously against the Bush program of tax cuts for high-income households, agreed with Republicans to extend precisely the tax policy against which he campaigned.

This move came only a few days after the president’s blue-ribbon commission on the federal deficit produced its report, entitled, melodramatically, “The Moment of Truth.” Not since the 1980s has there been so much elevated and urgent discourse about the federal deficit and the national debt. In the 1980s, America learned that the central claim of Ronald Reagan’s “supply side” policy was a fantasy: Cutting tax rates on high-income individuals and corporations does not result in such great economic expansion that tax revenues lost today are more than made up tomorrow. Arithmetic has proved more reliable than fantasy: When Bill Clinton and the Democratic Congress raised tax rates in 2004, Ronald Reagan’s deficits went away. When Clinton left office in 2000, he left a surplus. When George W. Bush and the Republican Congress did Reagan Redux and cut tax rates but kept on spending, the surplus went away, deficits were created and the national debt mounted.

Now comes the deficit-reduction commission and its surprising report. The headlines have been all about cutting Social Security, squeezing Medicare and eliminating the home-mortgage interest deduction. In reality, it is a genuinely progressive plan.

The 59-page commission report, like Bernie Sanders’s speech, is all about cutting defense spending and taking care of poor people. The commission’s recipe-book includes the most far-reaching tax-reform package anybody has seen since 1986. This “Truth” plan would close almost all tax loopholes on both individuals and companies, and in return, would cut income tax rates. Clinton’s top rate was 36.9 percent. Bush cut it to 35 percent, which Obama, contrary to his campaign promises, accepts. The “Truth” plan would cut the top rate to 24 percent. Interest on municipal bonds wouldn’t be tax-free any more; you’d only be able to deduct your mortgage interest on mortgages under $500,000, which is still very generous given the collapse of real estate in most US metro areas. The only tax breaks that would remain are those for childcare, for some health plans, and for low-income workers. There wouldn’t be any other deductions, exclusions, preferences, or deals available. Capital gains would be taxed just the same as ordinary income, which is the same deal enacted in 1986, only to be gradually done away with. Corporations would lose all their loopholes.

American industry might actually have a chance were this plan adopted. The document has tables that show exactly how much more or less federal income tax would be paid by individuals and corporations. It is a strongly progressive plan, meaning that the effective tax rate of the people Sanders complains about would go up, even though the nominal tax rate would still be a dozen points lower than even George Bush set it. Almost immediately, the incentive for financial speculation, rather than for industrial production, would be curtailed.

The political problem this “Truth” plan has is that most people believe that it would screw old people out of their Social Security. The plan does indeed propose raising the retirement age to 69—but that wouldn’t happen for 40 years. The plan would reduce the benefits of high-income retirees, but it would boost the low-income retiree. It is indeed a progressive plan.

But in the current penumbra of Obama’s capitulation to the anti-progressives in the Republican Party, the commission’s call for progressivity may be just whistling in the darkness.

Hitting home

Sanders complained about shopping for Christmas presents and finding only “China, China, China” stamped on every manufactured item for sale in American stores. We are living the consequences of Richard Nixon’s presidency, for it was he and Henry Kissinger who opened the US to trade with China. High-wage manufacturing jobs in the United States were doomed once Nixon met Mao and began the flood of investment capital to a place where wages are a buck an hour or less.

Today, 40 percent of households in the Buffalo-Niagara metro, according the Internal Revenue Service, make $20,000 or less per year, which is minimum-wage work. In Buffalo-Niagara’s great industrial age, when almost 40 percent of the workforce was engaged in manufacturing, the effective wage rate was more than double that level; median household income was at or slightly below the national average. Not today.

The bipartisan, pro-investor, anti-union, anti-high-wage “free-trade” policy became Bill Clinton’s policy, too. Now it’s Obama’s. And the local consequences of globalization include this: Most of the local dollars we spend on consumption flow out of our region, which is why globalization is a chief reasons that the American Rust Belt has become more and more superfluous.

A new report from the Brookings Institution that reviews 150 metro areas worldwide reaffirms that Buffalo-Niagara is in decline; we rank 40th out of 50 American metros in terms of recovery from the recession. Quibbling about the yardsticks used in reports like these misses the point, which is, sadly, this: The export of American manufacturing has been a disaster for everybody except the financial elite.

The reason our waterfront it available for new use is because it’s no longer economically relevant. Back in the American Century declared by William Henry Luce, the Great Lakes industrial economy—plus a steeply progressive federal income tax whose proceeds bought highways, college degrees for vets, and global economic hegemony—meant our waterfront was where our wealth was created.

We’re still looking for the wealth-creating industries that other former industrial towns now have, especially the ones with pretty waterfronts. San Jose, California was nothing to shout about until the combustion of intellectual property and venture capital created Silicon Valley. Ditto Seattle and Portland. Boston was going nowhere in the 1970s until science and money combined to create innovation, patents, and then all the high-tech jobs of Route 128. The stories of other places are similar: Public money, often through universities or through the military and intelligence services, created great opportunity, and then subsequent to the opportunity, folks needed a place to spend their money, and voila, suddenly old waterfronts and warehouse districts and brownfields became zones of play, redevelopment and vitality. But before the frosting came the cake. In Buffalo and most other places in the Rust Belt, we await the cake.

Vanguard Buffalo

The hard-working and hopeful folks of the Great Lakes Urban Exchange and of the Rust Belt-focused Cities in Transition network are working hard on imagining the next Great Lakes economy. At the conference in Buffalo in 2009, the meetings in Cleveland and Dayton and Youngstown in 2010, and at the upcoming “virtual conference” next week, the focus is the same: We’re wondering what the next industry will be for places that have been exporting their intellectual property the way they used to export cars, planes, metal parts, glass and other manufactured goods that contained our ingenuity inside those finished products. These Rust Belt towns used to be vertically integrated producers: We’d design stuff here, then we’d make it, then we’d market it, and use our ports to ship it. Now, with globalizing speculators running the show and getting every Washington tax incentive imaginable to keep doing so, we do some designing and inventing here in the Rust Belt, but not much making any more, because making things is cheaper overseas.

So the question today is this: How do we get the capital to turn patents and processes and designs created in Buffalo and Detroit and Cleveland and Akron into income-creating, job-producing enterprises in these historic centers of innovation that used to be centers of production, too?

One way to frame the question locally: Should public money for Rust Belt economic development be put into investments that will create wealth- and income-creating industry, or should public money buy the Rust Belt more places to made things made in China? The pending Goldman et al. v. Bass Pro lawsuit against the New York State Power Authority and Empire State Development Corporation is precisely on this issue, because the rules say that public money has to help industry, not retail and commercial development.

While we debate that issue here, Obama just cut a deal that hurts our prospects. Obama ran against the incentives for exporting jobs and for financial speculation, but he has just this week flip-flopped. At the moment, the loudest voice in opposition to that deal belongs to a white-haired senator from Vermont.

“China, China, China,” complains Senator Sanders. “I give up,” says President Obama. Where does that leave the non-investor? Right here is where, in one of those metros that Brookings surveyed, wondering whether the Rust Belt’s dreams of economic renaissance can ever be realized in a place whose waterfront once created wealth. If you ever imagined that Buffalo was a leading-edge metro, wonder no more: Buffalo’s fate may be a preview of America’s.

Waterfront progress in Buffalo?

2010-12-02T00:51:00.000-05:00

Inching Toward Sanity

by Bruce Fisher

Too much supply, not enough demand on Buffalo's waterfront

UB Professor Bruce Jackson’s photography exhibit of Buffalo’s grain elevators will open in January at the Anderson Gallery up in the University District. His collection of images of these concrete megaliths is entitled Buffalo’s Chartres, in reference to the massive 12th-century cathedral in France that is the defining example of the Gothic style. Buffalo’s grain elevators brood above the troubled Buffalo River, having largely lost their economic relevance as grain-storage devices and, despite the two decades of effort by Lorraine Piero and the Industrial Heritage Society, as a destination for mass tourism.

That may change now that the Erie Canal Harbor Development Corporation has nodded toward Mark Goldman, his brother developer Tony Goldman, and their friend Fred Kent, who may be hired by ECHDC to advise this New York State board on how to integrate its thinking about Erie Canal Harbor with the possibilities of the Buffalo River shoreline.

Earlier this week, ECHDC’s board voted on some proposals that activists, demonstrators, preservationists, and others have been shouting, whispering, and nudging about for years. ECHDC’s mission is (from its website) “to revitalize Buffalo’s inner and outer harbor areas and restore economic growth to Western New York, based on the region’s legacy of pride, urban significance and natural beauty.”

But until recently, ECHDC had been focused on the 20-acre Inner Harbor area. The plans for which it obtained approval from its parent body, another board called Empire State Development Corporation, included developing 725,000 square feet of mixed-use real estate, building five parking ramps, constructing replica canals in their approximate historic location, and exploring future development options for the 150 or so acres of vacant land on Buffalo’s Outer Harbor area. That land is currently held by the US Coast Guard, the Niagara Frontier Transit Authority, and the New York State Power Authority. ECHDC’s budget is $153 million of public money, mainly from the 2005 settlement with the power authority, plus some state and federal funds.

Broad community opposition to using those funds for subsidizing private development joined with broad community opposition to using those funds to build replica canals. ECHDC decided to take a couple of weeks for public comment. Many public and private meetings were held. Some of the private meetings were uncomfortable.

Then came this week’s vote. ECHDC remains committed to developing 725,000 square feet of mixed-use real estate. ECHDC remains committed to using $39 million for subsidies for an “A-1” tenant, and four of the five parking structures in its original plan are still on-line, as are the replica canals that will remain unconnected to the Buffalo River or Erie Canal Harbor.

Buffalo’s front yard

Buffalo’s grain elevators, part of the distinctive architectural fabric of Buffalo that New York Times architecture critic Paul Goldberger and others have praised, have long been celebrated by enthusiasts and specialists. Out-of-town visitors cite our “genuineness,” and praise us for being distinctive. Local folks who share these sentiments have new hope because ECHDC chairman Jordan Levy has been astute enough to invite their participation in shaping part of ECHDC’s program. When Buffalo historian and restaurateur Mark Goldman obtained private philanthropic support to bring award-winning developer Tony Goldman and waterfront change-agent Fred Kent to a large community meeting on November 6 at City Honors School, Jordan Levy attended. Discernible community enthusiasm developed quickly for the “lighter, faster, cheaper” approach that Kent has advocated successfully in many waterfront cities. And this past week, Levy’s board endorsed much of what has been suggested—including the preservationists’ dream of an open-air pavilion for Erie Canal Harbor, where vendors of art, snacks, and crafts might quickly set up shop, thus cheaply and quickly creating a destination and some hope for more continuous activity. By embracing the 1,000 or so folks who moved themselves to attend the City Honors forum and two others held at the Burchfield Penney Art Center, the leader of the ECHDC responded nimbly.

Levy understood the need to get some buy-in from the arts community; he is on the board of the Albright-Knox. He knows that there is no better or higher use for the 120 acres of the Outer Harbor than for it to become a public space, and for its very spaciousness and greenness to become part of the new brand for a city still burdened with brownfields. He asked for an environmentalist to join his board, and now, after his predecessors stiff-armed preservationists, he has asked for Tim Tielman, the community’s cocklebur nudger-in-chief, to come in to advise. Levy is slow to see the economic utility of bringing the advocates of a “living wage” around despite low-wage work being such a drag on the region’s economy. He is dismissive of the idea of retail workers earning $12 an hour rather than minimum wage, and is unlikely ever to agree to a community benefit agreement that includes a wage standard. He speaks often among friends about bringing a franchise operation like 5 Guys Hamburgers to Buffalo. He speaks of constructing a site for Dinosaur Barbecue, so that it can open up a joint like its restaurant in Rochester, as a good use of public money, even if all the customers for these out-of-town businesses will be local. Levy gives the impression that he has concluded something about Buffalo, which is that its suburbs’ culture—especially suburban tastes in entertainment, branded restaurants, play spaces, and shopping—is permanently in the ascendant, that it’s naïve to resist that culture, which people here like and want, and that we can’t have a bunch of cultural elitists sitting here lecturing people about the story of how Daniel Davis was rescued from slavery at the Commercial Slip in 1851, or how Dart invented (yawn) the grain elevator, or how our towering concrete guardians of the Buffalo River are like a French cathedral, because they may be smart but there aren’t very many of them. Levy respects the acumen of successful developers like the Benderson family, which have successfully catered to suburban tastes in retail, entertainment, and play-space.

If Empire State Development Corporation rubber-stamps the ECHDC plan when it meets on December 16, then all the features that the “faster, lighter, cheaper” advocates want will—if ECHDC does what it says—start happening in the spring of 2011. But then so will the 725,000 square feet of retail, restaurant, office, hotel, and residential space, and so will four of the five proposed parking garages that are also laid out in great detail in the Modified General Plan that ECHDC just voted to accept.

If ESDC approves the ECHDC plan, then in 2011, the Outer Harbor park will start to be created out of what is currently NFTA-owned scrubland. The replicas of canals will start being constructed. Over the next five years, the $153 million of public funds will get spent, and the expensive synthesis of programming, of green space, of “water features,” and of suburban sandwiches, or at least the space for them, is going to happen. What is new about the Levy synthesis is that the arts people, the troublesome Tielmans, the aspiring Goldmans, the buskers, the hawkers and performers, the puppeteers and imageers, are going to get their shot. That’s new. That’s news. The rest of it is a big, expensive gamble that will have dirty Buffalo River water flowing next to it but not through it, as the replica canals won’t be connected to the Buffalo River. And the 725,000 square feet of subsidized commercial space will get built.

But if ESDC has a rationale for rejecting the ECHDC plan, it’ll probably be this: economic fundamentals. Downtown Buffalo’s existing commercial landlords are seething that the state is going to shove hundreds of thousands of square feet of new inventory into an already oversaturated market. The value of existing buildings will be pummeled if brand-new subsidized office and shop space is created at great public expense. The taxable value of existing real estate—and thus the tax payments that go to the city and to the county—will drop. The HSBC tower currently leases more than 700,000 square feet to HSBC, which is one of the largest financial institutions on this planet. If HSBC Tower loses HSBC to a subsidized development, the domino effect will occur: The empty space will become available; the value of the building will drop; the owners will probably declare bankruptcy and then figure out a way to buy it back at a much lower price; the assessment will drop, which will cause city and county tax receipts to drop; then rents everywhere in town will drop. And thus state intervention in the marketplace will once again demonstrate that the road to hell is paved with great intentions—but because there simply is not the demand for office space here that would warrant spending a nickel of public money to create more, when the state creates more, the consequences will be negative.

Meanwhile, the dirty old Buffalo River-Buffalo Harbor-Black Rock Canal system won’t get a taste of the $300 million federal fund President Obama set up in order to help cities clean up the Great Lakes—because access to that pot of money, which is specifically for helping Rust Belt cities fix their leaky sewer systems with new green infrastructure, requires some up-front local matching money. If ESDC salutes the ECHDC plan, then there won’t be any source of local matching money to help us get the federal money, because the local money will all have been spent on replica canals, festivals, and 725,000 square feet of new commercial space.

Buffalo in 2015

Five years from now, the grain elevators Bruce Jackson and so many others photograph will still loom above the Buffalo River. The Ohio Street corridor will happen, if there’s any demand in the marketplace. The Outer Harbor park could be well established by then.

If ECHDC follows through on investing the $2 million, then the Buffalo Olmsted Conservancy could turn the Outer Harbor scrublands into a park, giving the region a front yard that is something like Chicago’s, except that Chicago’s has the Field Museum of Natural History, the Shedd Aquarium, the Adler Planetarium, and the wonderful new art-filled community play zone called Millennium Park. A century of philanthropy by tycoons named Field, Shedd, and Adler gave Chicago its distinctive waterfront, which stretches for 21 miles without a single restaurant, shop, or office building, unless you want to count Soldier Field where the Bears play as an office building. We have tycoons a-plenty, but we seem fresh out of Fields, Shedds, and Adlers.

Five years from now, we could be winding up the fourth season of Tim Tielman’s tent city in the Inner Harbor. Five years from now, we will still have the majestic arch of the Skyway rising above it all, giving Buffalo-area residents their only glimpse of the vista of our harbor and of our peaceful international waterway, of our rolling Allegany foothills to the south, and of our winding parade of grain elevators along our river.

Will Jordan Levy’s replica canals have attracted any private investment by then? In 2015, according to demographic estimates done by Cornell, the University of Pennsylvania, and the US Census, one in four residents of the Buffalo-Niagara metro will be over 60 years old. In 2015, the proportion of the workforce that works in low-wage work will be about the same as it is today unless high-wage opportunities come; the latest available figures from the IRS indicate that about 40 percent of the Buffalo-Niagara metro workforce earns less than $20,000 a year, and that the number of households with incomes over $100,000 a year is fewer than 9,000 (out of about 300,000). The numbers today and the trend-lines we see today indicate that we are bound for an Erie County population of about 800,000 by 2020, down from a little more than 900,000 today.

I would prefer that our state government not purchase more supply of things we have in over-supply, like office space. I would prefer that our state government direct its various boards and commissions charged with this elusive goal called “economic development” think more about sustainability and stewardship than about giving out-of-town consultants free rein to raise expectations. I would prefer evidence-based practices, because I intend to be here in 2015, and I would prefer to be wrong about replica canals, commercial space, water quality, and other such issues, but I fear that I won’t be.

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

Buffalo's soul

2010-11-24T13:30:00.001-05:00

A Time To Rally

by Bruce Fisher

The Party for a Lighter, Quicker, Cheaper Waterfront

When: Saturday, November 27, 2-5pm

Where: Commercial Slip, Erie Canal Harbor, foot of Pearl Street at Marine Drive, next to the Naval and Serviceman’s Park.

Why: Celebrate with great music and arts and food, and let the Erie Canal Development Harbor Corporation know: We can do better. Working together, we can start right now on projects that are “lighter, faster, cheaper.” We can win a community benefit agreement that ensures real community planning, green design and operations, quality jobs, and local businesses on our historic waterfront.

Preventing the fake canals

Erie Canal Harbor wouldn’t exist if it hadn’t been for a couple of hundred volunteers showing up one spring morning with snow shovels, rakes, garden spades, and fearsome-looking red and yellow plastic sandbox tools to demand that an appointed state board restore the original Commercial Slip, which is the actual terminus of the Erie Canal, instead of a fake, “replica” canal-like structure with a bit of water and no reality. The message then was simple and potent: The protestors said, “Dig the real canal or we’ll do it for you.” The state board then, as now, had advanced a plan to make a replica of the Erie Canal terminus. The state board then, as now, had spent a great deal of public money on a New York City architectural and engineering firm. Buffalo folks rallied, petitioned, wrote letters to the editor, and went to court, too, to stop all that.

And when the volunteers won, every politician in town was there to celebrate. Then-governor George Pataki came to town on the 175th anniversary of his predecessor DeWitt Clinton’s inauguration of the Erie Canal one fine October day. Pataki was presented with a jug of Lake Erie water, just as Governor Clinton had been in 1825. Clinton took that water down to New York harbor and performed the “wedding of the waters.” Pataki did, too. Schoolkids cheered. Everybody had a great day, and all the acrimony of the fight was set aside. It took another few years to get all the details ironed out, but by 2004, the court fight had been settled, and the government agencies and their recalcitrant personnel had been tasked to do the new plan, which was the volunteers’ plan—the plan to restore the Commercial Slip, the bowstring bridge, a long stretch of the Central Wharf, and as much of the historic street pattern as could be exhumed from the area that lay between Marine Drive and the Buffalo River.

The volunteers didn’t get everything they wanted. They’d proposed that a couple of buildings be reconstructed to the exacting specifications of the National Parks Service, an agency that activists have been hoping for decades would come to Buffalo and set up an interpretive center, similar to the one they have in Little Falls, New York, toward the eastern end of the Erie Canal. There wasn’t the money in 2004.

The deal was, however, close to being done. By 2007, the Commercial Slip had been excavated and re-watered. The Bowstring Bridge was up and walkable, as was the Central Wharf. The historic street pattern had been laid out again, and the foundations of many of the old canalside buildings had been revealed. Much archaeological work had been done—including an emergency bit of salvage archaeology one sunny weekend, when Tim Tielman and about 400 other volunteers successfully followed a trail of dump trucks out to a dump in Tonawanda where they scratched through all the cinders, slag, busted-up asphalt, and fill that Empire State Development Corporation had carted out of the Canal District.

The public got a lot of its wish: Our own historic site was finally accessible. We’d all hoped for some bathrooms, after all those millions of public dollars, but whatever—it was finally accessible. Local historians were finally able to lead tours there, to show the place where, in August of 1851, one of the great dramas of the movement to abolish slavery was played out—right there, right at that very spot where the Commercial Slip meets the Buffalo River. You can stand where Daniel Davis stood, and see what Daniel Davis saw: Buffalo Harbor, and across it, the Canadian shore, where he went to escape the Fugitive Slave Act that Buffalo’s own President Millard Fillmore had signed into law just a year before.

Local schoolkids and tourists alike could finally get the story about Dart and his grain elevators. A new generation of Italian-Americans could come to the place that their grandparents had known, because the Canal District was a dense Italian neighborhood until it stopped being a neighborhood. The Irish connection to the place is genetic, too, because the descendants of both 19th-century canal-builders and 20th-century grain-scoopers still dominate the neighborhoods just upstream. So many immigrants came through that very place between 1825 and World War I, first on canal boats, then on the railroads that ran into the Canal District, that some allege that Buffalo saw more newcomers into North America than even Ellis Island.

We were on track to have not only a good-looking, authentic historic site— unlike the mall-like Baltimore inner harbor, with its fake fiberglass replica cannons—and with it, a whole bunch of development parcels for entrepreneurs willing to risk their own dough, just as their historic predecessors did, long before Empire State Development Corporation and its various subsidiaries came along. It was a sensible plan, the 2004 plan: restore the old stuff, lay out the design criteria so that the Canal District actually looked like the Canal District, and let some brave soul step in, buy cheap, build, work it, and see if it caught on. As Niagara University’s Eddie Friel tells it, that’s what happened in the Docklands development in Dublin in Ireland. The development authority there did the infrastructure, then sold a few parcels quite cheap. Entrepreneurs moved in, then more, then suddenly, the tornado effect, where it caught on as a destination, and the land that had previously been worthless was the hottest property in the whole damned town.

That’s not what happened in Buffalo. The promise, or the threat, of Bass Pro is what happened here, and suddenly, all talk of small-scale local entrepreneurship, of authenticity of specialness, all went by the wayside. The local architects who had followed the memorandum of understanding that had settled the court case were dismissed, and the previous firm, the New York City firm, was brought back in. Suddenly, the community’s work on restoring the Central Wharf and the historic street pattern—with the 95-plus developable parcels—was set aside for a Bass Pro store that was going to go on the public space, and glass-in the historic street pattern for this particular iteration of this chain store.

Since 2007, the state board has spent more than $5 million on the New York City architectural firm whose previous work led to the rallies, the letters, and the court case—the firm that today offers architectural plans, drawings, animations, and presentations, all at great public expense, that feature fake or replica canals in a design that would put a big-box chain retail development where the 2004 plan envisioned local entrepreneurs.

It’s time to rally.

At press time, the Erie Canal Harbor Development Corporation was still scheduled to hold a meeting on Monday, November 29, at which they will vote on their modified general plan. Here’s what’s in the plan:

• 398,650 square feet of retail space;

• 182,150 square feet of restaurant space;

• 263,600 square feet of office space;

• 120,000 square feet of hotel space;

• 194,400 square feet of residential space;

• 20,000 square feet of cultural space;

• 2,471 off-street parking spaces, including “five parking garages spread across the project area.”

The plan calls for $36 million of public funds for parking, $39 million for the “A-1 parcel development” and “anchor tenant allowance,” and $12.25 million for architectural fees and “soft costs.” Total public expenditure: more than $150 million.

In the past few weeks, while another group of volunteers awaits action by State Supreme Court on another lawsuit against a New York State board, the “lighter, quicker, cheaper” movement has taken shape.

Among its leaders are Tim Tielman and Mark Goldman. Tielman is aiming to convince ECHDC that its money would be better spent, with $100 million left over, on finishing the 2004 plan, including a new version—or even a re-construction—of the pavilion that Frederick Law Olmsted and Calvert Vaux built and which used to stand in what is now Martin Luther King, Jr., Park. The pavilion would allow all those quickly setup, quickly changing events, vendors, artisans, marketers, and entrepreneurs to do what they do, which is to take a public space and make of it a destination. Goldman sees the Erie Canal Harbor as part of a string of venues along the Ohio Street Connector, a string that will include Erie Canal Harbor, Peg’s Park along the Buffalo River, the grain elevators, and the riverfront spaces that are naturals for arts and festivals and programming that could feature the works of our own creative class.

The rally on Saturday, like the 1999 rally of the sand-shovels and the snow-shovels and the garden-spades, is an effort, once again, to let the elected officials and the appointed ones, too, know that local creativity, local culture, a sense of authenticity, and a dogged persistence are all still here, thriving, energized, and also utterly opposed to subsidies for somebody else’s leftover shopping mall.

Perhaps it was easier a decade ago, when the rallies happened in the spring, and when there was a sense of hope in the air. This time, the weather will be a challenge, but the task is arguably more urgent, for if the new state board decides to blow the public’s money on fake replica canals and parking garages and retail and office and restaurant space in a place that has too much of all of it already, we won’t have a popular new governor coming to town anytime soon to embrace the hopes of volunteers, smile at the cheers of schoolchildren, celebrate Buffalo’s liberation heritage, or promote the legacy of his visionary predecessor DeWitt Clinton. If the community shrugs at its challenge today, or stays home around the post-Thanksgiving hearth, chances are quite good that the governor on whose watch our money is spent won’t have anything but another derelict Buffalo commercial development to explain when he runs for re-election in 2014.

So get out there Saturday, and help the poor guy, before he gets stuck with a true turkey.

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

Rethinking Buffalo's waterfront

2010-11-18T07:11:00.001-05:00

Two Weeks in Timeout

by Bruce Fisher

Can the tide be turned on development of the city's waterfront?

The Buffalo State College Center for Economic and Policy Studies will host the third in a series of Citizens Waterfront Project meetings Thursday, November 18, at the Burchfield Penney Art Center auditorium. After previous sessions at the Burchfield Penney and at City Honors, this time the focus is economics—costs and benefits—and more specifically on weighing the claims of economic benefit contained in the official documents prepared with millions of taxpayer dollars by consultants to the Erie Canal Harbor Development Corporation.

It’s a tough topic, but a necessary discussion at a time when fantasies abound. The list of proposed uses for the $153 million in public funds under the Harbor Corporation’s control is comically long, and include many ardent proposals for museums about sports, weather, Erie Canal history, bicycles and even meat-packing. Creative citizens have been attending ECHDC sessions, and the corporation has just announced a series of “open house” meetings at which the corporation’s lead consultant, which has received over $5 million in public funds, will be present to answer questions about the new, modified plan—which is just a version of the retail-centered plan that would have given us Bass Pro at one of America’s most important Underground Railroad, immigration, and commercial history sites.

Ideas can be expected to keep flowing in: Skyway observation decks, new $100 million bridges, even an idea for a “22nd-century library” have been floated. With $153 million in public funds available—funds that, sadly, are being depleted by the numerous expensive consultants, attorneys, staff, and expenses of ECHDC—everybody from a bicycle collector to a green-energy consultant is stepping forward with a compelling presentation.

ECHDC listens to them all, but stays strictly on plan—that is, the new plan. Since 2007, the corporation has been more or less ignoring the hard-won community consensus that led to the re-watering of the Commercial Slip, the construction of the Central Wharf and the bowstring bridge, and the uncovering of old foundations and streets—the elements for which preservationists marched and went to court, and which they succeeded in convincing state and local officials to keep authentic. The new, post-2007 plan has been all about retail stores—and about the parking garages that big-box retail stores have when they’re located in suburban shopping malls.

But nowadays, the “creative class”’s view of Erie Canal Harbor is resurgent. Elements of the coalition that defeated the previous state agency in control of waterfront development—then as now an offshoot of Empire State Development Corporation, then as now advised by a New York architect named Stanley Eckstut—have stepped forward again.

At Thursday evening’s presentation, Tim Tielman from the Campaign for Buffalo History, Architecture and Culture will join the Canalside Community Alliance, historian Mark Goldman, and others in a community briefing session that will include some of the history, the context, the analysis, and also some recommendations that are distinguished from the many hundreds of new museum, library, and subsidized-store ideas that have been so prevalent—mainly because Thursday’s presentations will be squarely consistent with the original plan that the community thought it had achieved in the first decade of the new millennium.

Our special money

Meanwhile, in the world beyond Buffalo, New York State’s fiscal crisis is deepening, and this crisis has a special significance to the Erie Canal Harbor, the Buffalo River, the Outer Harbor, and to all the plans being promoted for the front yard of our moderate-income, over-retailed, housing-glutted, depopulating region. In the extra two weeks of comment that ECHDC is allowing on its modified plan, Buffalo will be doing something that the rest of New York State can’t do—namely, relying on a special source of funds for our waterfront planning.

Just this week, experts in municipal finance began warning of a potential crisis in the multi-trillion-dollar debt load of distressed states, including our own. The word is hitting Wall Street and Main Street alike: A new age of austerity is upon us, because there is no more “stimulus” money coming from Washington, and there is no will in any capitol, including Washington and Albany, to raise taxes to pay for anything new, or even for existing commitments. One consequence is that the standard practice of Empire State Development Corporation, which is used to being able to offer credit and financing to the normal run of politically favored projects, is abruptly over. Personnel in New York State’s primary economic development agency are being told that accounts that still contain project money are going to have to be emptied so that the overextended and underfunded health, welfare, and education budgets of state government can be kept whole. With the election of a Republican majority to the House of Representatives in Washington, the days of extra federal matching funds for New York’s huge Medicaid budget are also over. Earmarks—also known as Congressional pork—are a target of the new Tea Party-flavored majority, so we cannot expect money for infrastructure except from special funds like the Great Lakes Restoration Act fund, which is for sewers, not bridges, convention centers or stadiums. Already, projects across New York State are being put on hold.

But the situation is different for Buffalo’s waterfront. While there are state and federal funds involved, most of the money is from a unique source—namely, the 2005 settlement with the New York State Power Authority, which grants Erie Canal Harbor Development Corporation, as well as the Niagara Greenway Commission, a special revenue stream for the next 50 years. It’s special money from a special source—money that will almost certainly be left in place. But once this money has been spent, it won’t be backfilled in the usual way from the various legislative slush funds and executive reserves. Those are about to be gone.

So the question facing Western New York just became more urgent: If $105 million of the $153 million in ECHDC’s coffers is a one-time, single-source pot of gold, how can it last through coming age of austerity? If that’s all we get, then what’s the most sensible use?

The two-week timeout

On Tuesday, ECHDC announced a two-week delay in submitting its revised plan for approval by its parent body, Empire State Development Corporation. Previously, Empire State had rubber-stamped whatever ECHDC sent it—which is one of the complaints of the plaintiffs in the Goldman v. Bass Pro lawsuit pending in New York State Supreme Court. (I am a plaintiff in that case.) The new, “modified” plan is largely identical to its previous plan, which was notoriously centered on Bass Pro Shops. The new plan is also still focused on bringing retail stores and restaurants to the historic Erie Canal Harbor area. More than $50 million of the proposed $152 million public investment is still programmed for parking. More than $10 million is proposed for various architectural, planning, and other “soft costs.”

But as the old coalition reasserts itself, and joins with the Canalside Community Alliance and the Buffalo Common Council—which has endorsed the Canalside Community Alliance’s call for a community benefit agreement—five strong themes are emerging.

First, there’s strong interest, once again, in authenticity. ECHDC insists on committing $40 million of public funds for water features that it characterizes as “canals,” but neither Buffalo preservationists nor visiting experts like Fred Kent nor Tony Goldman salute this flag.

An idea Buffalo could emulate: projections on Qubec City's riverfront grain elevators.

Second, there’s a recognition that it’s a diverse group of activities—art shows, light shows, concerts, “tent cities” such as the one that forms each June for the Allentown Art Festival—that gains the support and interest of the regional audience. The region’s historic waterfront is seen now, as it was a decade ago when it was first saved from the Horizons Waterfront Commission and its New York City consultant, as the logical home for these light-footed, quickly assembled and quickly disassembled activities. A pavilion that could house such activities—and some permanent potties—might be the only structure needed. Some of the remaining funds might go to a program fund, leaving the bulk of what’s left for cleaning up the filthy water of our waterfront.

Third, a quiescent but very strong element of Buffalo’s 20th-century identity is reasserting itself: the indigenous avant-garde sensibility. In the next two years, a recently arrived curator at the Albright-Knox Art Gallery will mount an exhibition on the extraordinary flowering of culture created 40 years ago here when the late Governor Nelson Rockefeller put public money and his brand-new SUNY flagship known as UB at the service of musicians, painters, filmmakers, and literary artists. Suddenly, discussion of Erie Canal Harbor is being contextualized as a historic zone where new expressions can find a home as they did back then. A few years back, Quebec City’s riverfront grain elevators became the projection screens for towering images, and tens of thousands of tourists joined hundreds of thousands of natives when the shows went on. Buffalo is much closer to the rest of North America than is Quebec City, the thinking goes, and we do things in English. With appropriate observations about the distinctiveness of each place, there is an emerging sense that dramatic art displays based in our own Buffalo psyche might inspire us, attract the world and create some jobs along the way—all for a lot less than the subsidy cost of a retail “anchor tenant” and some ersatz “canals.”

Fourth, there’s a growing recognition that the money is going fast, and if it is to leverage any other money, it had better happen soon. That’s why proposals for new museums and libraries are inherently flawed, while cleanup-greenup investments that leverage federal matching funds have a more compelling logic. Even the advocates of a new Erie Canal Harbor heritage center have a hard case to make, made more difficult because of the behavior of local politicians like Erie County Executive Chris Collins. Collins has slashed cultural funding by more than 25 percent from the level of his two predecessors. Collins has also cut the Erie County library system by more than 20 percent. Construction, staffing, maintenance, and programming for the comedy museum, the weather museum, the bicycle, sports, green-tech, lake ecology, immigration, canal heritage, or children’s museum would all be partly public for the duration of the new museum’s lifespan. The stewardship of existing cultural assets is questionable. So is future philanthropy. Spending today without leveraging new money looks worse and worse.

Fifth, there’s a hunger for green space and clean water, not new, prefabricated destinations.

Clear-eyed thinking

As the public discussion goes forward, decisions on spending public funds will ultimately be made by ECHDC and by Empire State Development Corporation. The two-week comment period will inevitably result in more proposals being floated, and more money being spent on out-of-town consultants. Meanwhile, the message from the Buffalo Common Council remains as clear as the day when that body first endorsed the community benefit agreement concept earlier this year: The Council will not turn over the Erie Canal Harbor land to ECHDC unless it negotiates a CBA. The Goldman v. Bass Pro Shops lawsuit remains pending in State Supreme Court; until it is resolved, ECHDC does not have all the funds that its revised plan requires in order to pay for parking garages, replica canals, and consultants galore.

If there is a moment for clarity, this is it. Buffalo had that clarity with the 2004 plan for Erie Canal Harbor, but that was before the New York Power Authority money, Bass Pro, and the old crop of consultants arrived. Sadly, unless the new governor and his staff understand the need for the state-created development agencies to seize their true opportunities in the harsh new economic climate, the current generation of Western New Yorkers may be stuck with its own planning disaster to rival a previous generation’s nightmare. The economic consequences of squandering $153 million of public funds that could have re-branded Buffalo while cleaning its filthy water might turn out to be worse than the decision made almost 50 years ago, the one that sent so much of Buffalo’s intellectual capital and prospects for self-generating renewal out to the swamps of Amherst.

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

October 21, 2010

2010-11-09T09:57:00.000-05:00

Global and Local Carbon

by Bruce Fisher

Why we should be investing in clean water and public transportation instead of bridges for cars

At the annual meeting of the New York Economic Association last month in Rochester, Kent Klitgaard of Wells College gave a disturbing paper about how everything we know about economics is going to be upset by the crisis of global climate change. Klitgaard and other economists have been trying to assess how the various carbon mitigation schemes will work, reviewing such proposals as cap-and-trade and the fuel-efficiency and renewable-energy sourcing standards now in place in many states.

Their sober summary is this: Nothing anybody in America is doing so far measures up to the challenge.

Meanwhile, just north of us in the growing mega-metro that stretches from Toronto to Hamilton, a bipartisan political consensus on public transportation investment was reached two years ago—a consensus that will redirect billions of dollars away from roads and put the money instead into electric streetcars and commuter rail. The Canadians call their project The Big Move. They will go from about 250 miles of streetcar lines to 750 miles, reducing their carbon footprint even while preparing for population growth.

Tragically, 2010 seems to be the year that some see as the irreversible turning-point for man-made climate change. Scientists dispute not whether irreversible change is happening, only when the tipping point will come. Some think that 2010 is the year. The timing is tragic because 2010 is also a political year in which climate-change deniers are running strong in the mid-term and gubernatorial elections. Candidates aplenty may be elected on a platform that man-made global warming is a left-wing theory, that oil will remain in plentiful supply because it is made by geological rather than biological processes, and that terrorism, covert action, and other forms of political violence that stem from the global fight to control oil are all issues that can be controlled so long as we let our soldiers use methods that American law generally refers to as torture.

The pessimistic expect that the national consensus American politicians developed 20 years ago on the question of chlorofluorocarbons, which threatened the ozone layer, won’t be repeated in the case of greenhouse gases. The scientific evidence and the near-universal consensus about the reality of man-made climate change—which results mainly from burning oil and coal—is being met with phenomena like the Democratic Senate candidate from West Virginia, who is running on a platform of opposition to climate-change legislation, a position quite comfortable for every Republican. But as British think-tanker Nafeez Mossadeq Ahmed’s new book shows, not only is there a consensus among scientists about catastrophic climate change, there’s a growing recognition that climate change, looming global food shortages, recent and future financial crises and the ongoing plague of political violence and terrorism are all linked by the fossil fuel business.

Ahmed’s A User’s Guide to the Crisis of Civilization is a tough read. It is dense, brilliant, and frightening. Ahmed has done the job that has needed doing: He has connected the dots for the non-specialist. His first depressing achievement is to have collated the dense scientific literature on global warming into a chapter that sums it all up simply: The governments of the major industrialized countries have all come to understand that climate change is for real, and that the catastrophe of a four degree Celsius rise in global temperatures will happen by 2050, but because we are stuck in a global system dominated by petroleum, the governments that should be taking urgent, radical steps to move us to a post-carbon economy are not doing so. Nor, Ahmed says, can they be expected to do so.

Ahmed follows his summation of what the scientists are saying with a still-salient report on the recent global financial crisis, a review of the ongoing Third World food-production crisis, and a long, unsparing look at America’s global lust for oil, a lust that has sometimes put us on both sides of the “war on terror.” The result is a difficult volume that is hard to put down. It is a truly impressive book that is terrifying, but that, sadly, because Ahmed is a Marxist, is destined to be ignored. But you can’t ignore his sources, which include US military documents that concur on the inevitability of major climate change, but that strangely do not map out energy alternatives for America.

Where is President Obama on this? One would think that Obama and his Nobel Prize-winning secretary of energy would have galvanized the nation and created a crash national program on wind and solar power, instead of hurrying up the construction of nuclear power plants—of which there could never be an adequate supply, according to Ahmed’s sources. The creator of the Gaia hypothesis, James Lovelock, pooh-poohed wind and pushed nuclear, but wind power is gaining: Google executives just last week announced that they will spend $5 billion of their pocket change to create a near-shore East Coast wind-powered grid to power more than million homes. Ahmed’s book reports on the astounding strides that the government of Germany has already made in fostering alternative, renewable, carbon-neutral energy. He also gives kudos to some local British successes. But it’s hard to be hopeful in the US today, as the fossil-fuel lobby may be about to retake the House of Representatives.

As we read the consistent warnings of economists and scientists, there is another disconnect—a local one. Predictions of the consequences of global warming are downright scary, especially the part that says that the time for action on reducing carbon-fuel emissions (including from biomass fuels like corn-based ethanol) is now. Why, if this crisis is galloping toward us, are local and regional policy-makers committing public resources to roads, bridges, and other long-lasting infrastructure that are all about oil?

Where is the commitment to public transportation?

And why are our public officials dithering about the one resource the Rust Belt may control—namely, our fresh water lakes—that may be our salvation, if it doesn’t poison us first?

Leaders and choices

Imagine that you are in public office. You have just read Nafeez Mossadeq Ahmed’s book. You may have dispatched your capable staff to hunt down some of Ahmed’s primary sources, like that National Security Agency document that somebody leaked during the Bush administration, the one that lays out all the contingencies for war over resources like fresh water. If you’re an elected official who takes the job seriously, you’ve looked at the table that shows oil prices rushing sky-high by 2015 as supplies fall. (Go to http://www.iTulip.com and read economist Richard Janszen’s time-line for a similar view of the “peak oil” hypothesis and its projected impact on global energy, commodity and financial systems. Janszen thinks that the sky-high prices will happen before 2015.)

After reading these documents, somebody shares with you a map of where the fresh water will be in 2050—not globally, just in the US. The map is from a new study by Tetratech, commissioned by the Natural Resources Defense Council (http://www.nrdc.org/globalWarming/watersustainability/files/WaterRisk.pdf).

These researchers found that one-third of American counties “will face higher risks of water shortages by mid-century as the result of global warming.” California, Arizona, Texas, Florida, the Atlanta area, Washington, DC, and many other areas will be suffering.

Guess which counties won’t be suffering?

Answer: The old Great Lakes urban areas are where the water is and where the water will still be, thanks to the Great Lakes Compact signed two years ago. But the current state of our wisdom includes discordant information: The water will be here, but the people won’t. By 2050, California’s population will surge another 20 million over its current population, which is already north of 35 million today. Back home in the Rust Belt, where the population is not projected to increase (in fact, our population is expected to decrease radically by 2030), one could say that we will have the most precious of resources in oversupply, and users in under-supply.

So as an elected official, here are the facts: Your population is shrinking, but you have a precious resource that could, when today’s college students are old enough to be the parents of college students, be the great differentiator in economic survivability as climate change raises sea levels for our coastal cities, shrinks California mountain snowfall, dries out the Sunbelt, and generally causes distress everywhere but here. What would you, as a far-seeing elected official, want to invest today’s scarce public dollars in?

Here are the choices: a) invest like the Province of Ontario is investing, $2 billion a year for 25 years, in public transportation, so that 80 percent of the residents of the Greater Toronto and Hamilton Area will be no more than 1.2 miles from an electric train or trolley car; b) invest in the technology that will replace oil and create a more localized system of carbon-free or at least carbon-neutral power; c) clean up the water you do have so that the toxic waste, the sludge, the brownfields, etc., that characterize your waterfront today are gone by the time the demand for development arrives.

Those would seem to be smart choices. Instead, our local government leaders have no plan for extending trolley cars or replacing the filthy and dangerous coal-fired power plant on River Road or the one in Somerset. And instead of using public money to clean up the unique natural resource—water—they are in a rush to get Obama’s money to build more bridges for oil-fueled cars and trucks, including a redundant bridge over the Buffalo River that will connect downtown to a waterfront brownfield.

The Canadians are creating jobs by building their infrastructure. The Canadian manufacturer, Bombardier, is producing the new trolley cars that will start life in downtown Toronto and downtown Hamilton in the next year or so. Using the uncrowded Peace Bridge, where the only delays you’ll ever encounter come when Canadians are on the way to Bills games, you can drive north and see the future that local leaders evidently cannot imagine for us.

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

October 28, 2010

2010-11-09T09:55:00.000-05:00

The Winners: How Wall Street Runs Our Politics

by Bruce Fisher

How Wall Street runs our politics

Austerity is the word the British use. Smaller government is the phrase we Americans use. The Democratic president who got Congress to go along with his plan for more than $700 billion in emergency economic stimulus spending has now become a deficit hawk. Both the Republican and the Democratic candidates for governor of New York are pledging to reduce government spending and to balance the budget without raising taxes. From London to Manhattan, from Washington to Wisconsin, there is not a candidate in the land who is ready to defend or even explain the role of government in the economy. The rhetoric is all Reagan, all the time.

This drives some economists nuts. Joseph Stiglitz, who won the Nobel Prize in 2001, told a New York audience last week that the American economy desperately needs another round of stimulus spending by the federal government—and a much more robust public works program. “Without a second stimulus, we will have a long recovery period,” he said. State governments need more federal help, not less, because states “were the innocent victims of economic mismanagement at the national level.” Stiglitz made headlines, but not many politician friends, when he called for a “millionaire’s tax” in 2008. Readers of the New York Times are familiar with this approach because Paul Krugman, another Nobel Prize-winning economist, writes a twice-weekly column in which he makes these same points.

The counterpoint is that government spending of any kind is bad. This view is on display every single day of the week in the Wall Street Journal, on Fox News, and in the position papers of every candidate who bothers to write them.

It would sound like a replay of the traditional liberal versus conservative rhetoric, except for one new reality—which is that it’s bipartisan. Meanwhile, there’s a third group of economists, the students of the bubble, who are critical of both the borrow-and-invest liberals and of the cut-and-divest conservatives. These are the folks who are warning that the speculative bubble that former Federal Reserve Board chairman Alan Greenspan created during the George W. Bush presidency, the bubble that started bursting in 2007 with the subprime mortgage crisis and that threw the world into crisis and recession in 2008, was nothing compared to the speculative bubble that is growing in China today. The Chinese bubble will burst as soon as next year, wreaking havoc of the kind the world hasn’t seen since the Great Depression.

And all of our candidates, Democratic and Republican, at every level, are working overtime to outdo one another in driving down the one area of the American economy that might just help avert the next global financial catastrophe—namely, government spending that might get our economy growing again.

No jobs, old sewers, no will

Liberals are complaining much more loudly that Obama blew it. Obama stuck too close to the bankers, they say. Larry Summers, Obama’s chief economic advisor, led the way for deregulation of financial markets, became a rich consultant to bankers, and drank their Kool-Aid. Liberal economists have been complaining at least since Ronald Reagan’s election in 1980 that the rich are getting too rich, the number of poor people is growing to be too large a share of the national population, and the American middle class is too stressed. Conservatives scoff at all that, and remind everybody that even liberals love capitalism. These days, as unemployment lingers at 12 percent in many states, as Food Stamp applications rise in the suburbs, as Rust Belt cities temporarily stop shrinking because their young people can find no Sun Belt jobs to move to, and as the next phase of the foreclosure crisis lurches into public consciousness, every level of government is a piñata, and incumbents are the whipping-boys. We’ll all be rich again, the rhetoric says, if we just get government out of the way of the private sector.

Here’s the problem: The private sector as we know it has changed. One struggles to tell just how greatly things have changed, and that the old rules won’t work, when even a learned professor from Harvard still argues that unemployment benefits should not be extended beyond 26 weeks because back in the 1980s, during our last hard recession, that relatively short time-horizon led job-seekers to find work quickly. What work is there to find today? Thousands of factories have closed since then. They’re all in China now.

Economists who study the bubble talk about how liberals and the conservatives are both wrong. There has been a structural change in the American economy because the financiers have come to rule politics after having succeeded in convincing American politicians to deindustrialize, which eliminated high-wage jobs. At the same time as thousands of factories (except defense factories) closed, there was a vast deregulation, as when Bill Clinton’s team tore down the New Deal wall between regular banks and investment banks, a move that encouraged risky speculation of money that was supposed to be risk-free, and that made the financially rich far, far richer than at any time in history. Meanwhile, to distract the middle class, whose incomes (the liberals relentlessly pointed out) were not keeping pace with inflation, Washington policy-makers of both parties, and especially Greenspan of the Fed, propped up middle-class finances by fabricating the real-estate bubble.

We were rich with fake money. A Florida or California or Boston or Washington house bought for three times your annual salary in 1990 was suddenly worth 10 times your annual salary in 2000. Folks from Buffalo or Cleveland or Indianapolis who got transferred to any of these hot real-estate markets in the 1990s or early 2000s experienced sticker-shock, because back home, the value of a house had by comparison changed but little over the previous decade. Suddenly, folks were taking out home-equity loans because their houses had jumped in value—using their houses like ATMs, in effect, to buy things like college tuition, SUVs, new kitchens, and even vacations. When the bubble started bursting in 2007, homeowners began finding themselves unable to pay on their loans; millions were foreclosed. Somewhere between one-fifth and one-third of all mortgages today are on houses where the amount owed is higher than the market value of the property.

Chinese bubbles

A Chinese professor of economics just in from Beijing attended a seminar on public finance the other day, and, wide-eyed at this description of recent events in America, quietly spoke about how today in China, the house he bought three years ago is now worth 300 percent of what he paid for it. As he described how buyers are rushing to get their cash into real estate, even though the Chinese buyer cannot borrow as much as the American buyer, the unmistakable characteristics of a growing bubble were revealed.

Back home in electoral America, there is not much talk today about raising federal income tax rates on hedge-fund managers or Wall Street bankers, notwithstanding new record-high bonus payments having just been reported. The Ronald Reagan rhetoric of 1980 has become everybody’s article of faith: On tax policy, one cannot distinguish Glenn Beck or Sarah Palin from any Democratic running for any office. A new study of growing poverty in America has not led to a plan, at either the state or federal level, to use public funds to create employment. Report after report is issued about the aging of our 1950s-era infrastructure, especially long-neglected sewer systems in old cities, but 2010 is not 2009, which is the last time anybody in public office spoke about creating a National Infrastructure Bank.

What’s happening now, say the non-liberal, non-conservative economists who study bubble economics, is that the Wall Street speculators have decided that austerity, smaller government, and reduced consumer demand are all just fine with them. And since they fund campaigns, everybody who wants their money sings their tune, Democrat and Republican alike.

James Galbraith calls this new situation the “predatory state.” Michael Hudson calls what’s going on today the consequence of “hitting the wall of indebtedness.” Edward Janszen of itulip.com criticizes the traditional liberals who want the US to go further into debt in order to stimulate new jobs, because he thinks that our new Federal Reserve chairman, Ben Bernanke, is already proposing that America “borrow its way out of debt.” Sound crazy? You betcha.

More unemployment. More poverty. The middle class unable to borrow more, and thus unable to consume as before. Corporations holding onto their earnings. Banks speculating overseas rather than lending here, notwithstanding all the encouragement banks get to make loans here. Housing prices low and declining in many parts of America. State governments having to reduce spending even as the demand for state services goes up. These are all deflationary pressures. Deflation is the opposite of inflation.

On the websites of the bubble economists, ugly scenarios get sketched. Here’s one for a couple of years from now: America’s demand for Chinese-made goods is lower, American economic activity is still anemic, Tea Party rhetoric is hotter, the anti-spending, anti-government craze leads to a full takeover of Congress and the White House by folks who decide that warfare is the only way to spend public money that the angry, unemployed, poorer public will accept, but in order to get some meat on the table, a bubble will have to be created.

Wait, doesn’t that sound familiar? Didn’t we just live through eight years of that? Stay tuned, ladies and gents: The warfare bubble is straight ahead!

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

Max
03 Nov 2010, 16:03

Thanks for another insightful piece, Bruce. I suppose the only question now is where our next military escapade will take place - the Middle East or Asia?

Buffalo and its discontents

2010-10-07T10:00:00.000-04:00

by Bruce Fisher

A portrait of Paladino country

Steady investment in what the federal statisticians call “performing arts, museums and related activities” led to measured economic growth in the Buffalo metro area over the past decade. The cultural sector grew from about $255 million in 2001 to $355 million in 2007, an increase of 55 percent in real, inflation-adjusted dollars into the Buffalo metropolitan economy, according to new statistics from the US Bureau of Economic Analysis. For the past 20 years or so, about $6 million of the $7 million of government support for the performing arts and museums in the Buffalo area has come from Erie County government.

These numbers should lead any prudent cost/benefit analyst to say that this particular investment is a pretty compelling winner, as $6 million in county tax dollars invested leveraged $355 million in economic output. Yet notwithstanding that nearly 60-to-1 return on public investment, Erie County Executive Chris Collins has proposed slashing that investment. He had already cut it from $6 million to $5 million last year. Now he proposes to cut support to around $4 million going forward. His justification for eliminating funding for all the area’s theaters is the same as his justification for warehousing over $74 million in Obama administration “stimulus” funds in Erie County’s bank account rather than using the funds to stimulate the economy: This elected official has decided that keeping the property tax low is his priority. He wants the average Erie County homeowner, who pays $505 a year in county taxes on a house assessed at $100,000, not to have to pay $507. That $2, which he will trumpet as a taxpayer boon next year when he runs for re-election, could keep the libraries and the theaters open. That $2 could keep a few hundred people employed. But he has decided that austerity is good politics, and he will run on keeping your wallet $2 fatter, even if that means that Shakespeare in Delaware Park and many other theaters, dance troupes, small art galleries, and other components of the regional arts marketplace are shuttered.

Many property taxpayers here, mainly elderly white suburbanites and their Baby Boomer neighbors, apparently think that this is sound policy, as evidenced by the utter silence of any of their elected representatives. Neither is a peep being heard as Collins proposes to further reduce the county-wide library system’s funding by about 20 percent beyond what he cut last year.

Welcome to the land where Carl Paladino won 93 percent of the Republican primary vote. It’s a place where the loudest private-sector voices clamor against taxes, yet where the real-estate, financial and construction industries all speak eloquently, if quietly, via campaign contributions, for a never-ending stream of huge make-work construction and development projects and subsidies, all paid for with money siphoned from faraway, resented, demonized Downstate New York.

The Center for Economic and Policy Studies at Buffalo State College has done the numbers, and they bear repeating: Downstate has about 65 percent of New York’s people, but produces 75 percent of the state’s tax revenue. Upstate is the net recipient of what Downstate overpays to Albany. In this flow of funds, the flow is one-way: toward the place where Carl Paladino rails against the Albany politicians who keep sending checks this way, and his way, too.

This dependency has produced a poisonous politics where the status quo keeps getting uglier. Democrats who should be in the vanguard against suburban sprawl, who should be leading the charge for regional governance as a way of combatting the toxic isolation of the poor inside an obsolete urban boundary, instead vie with Republicans as each tries to bash government harder than the other. Paladino Country is a place where elected Democrats introduce ballot measures to downsize their county legislature but fight to maintain town board seats. The capitol city of this special place is Buffalo, where a Democratic mayor salutes developers’ plans to spend more than $100 million of public money on subsidies to retailers rather than on cleaning up drinking water sources that are so tainted that more than a third of the fish have tumors. Paladino Country is a historic place where a historic neighborhood overlooking the Niagara River may be demolished so that a privately held duty-free chain can squat on a new sea of publicly financed asphalt.

In the current political geography of New York State, Upstate, and especially the Buffalo-Niagara metro, is the place where antipathy to state government consistently polls most intensely. State government is blamed for the pervasive sense of economic decline, even though the numbers indicate that there was a modest but real economic expansion over the last decade. Manufacturing employment used to be the core of the region’s prosperity, but here, as everywhere in the Rust Belt, globalization began eroding that core as far back as the 1970s. Yet economic diversity has produced a resilient, if shrinking, workforce. It is not the best of times here, but neither is it the worst of times. Not at all.

What is true is that Upstate is a shrinking region. Population trends here are negative: by 2035, according to demographers at Cornell University in Ithaca, the 908,000 people who reside in Erie County today will number only 755,000. Population in Rochester, Syracuse, Binghamton, Utica-Rome, and in the smaller Upstate communities as well is expected to drop by anywhere from 10 percent to 35 percent, with some rural counties projected to lose over half their population just in the next decade. In Rochester and Syracuse, there is some official recognition that a trend toward shrinkage is underway; the mayor of Rochester’s 2009 “Green Plan” refers explicitly to population loss as a challenge that must be embraced rather than shunned. In Rochester, they’re talking about a 20-year plan to manage this change.

Such sobriety is sorely needed in Buffalo. But there is no such recognition of demographic reality in Carl Paladino’s hometown. That’s because a small cadre of real-estate developers, construction managers, and financiers dominate local politics and shape local perceptions. What they want the population to believe is that all is lost unless wages for public employees are cut but that simultaneously, massive construction projects must be undertaken at public expense. In Paladino Country, organized labor is a mere shadow of its former self, yet still serves as the whipping-boy. The Medicaid program for the poor is savaged as an unbearable burden though it accounts for less than five percent of local government spending. And every politician will agree with every radio talk-show host that local and state taxes are the reason for the poor state of things.

Paladino Country is where facts don’t matter as much as the angry demeanor of subsidy-grabbing developers who don’t want the locals to know that, were it not for them, the region would be better governed. The region would be less burdened by overbuilt infrastructure that is expensive to maintain. The region would probably be a lot greener, too. And the region’s real estate would be worth more if only developers stopped muscling politicians to let them, and too often pay them, to keep creating more supply in a place where demand is shrinking.

Projects and plans

There is very little demand for new housing in a metro where the population is shrinking. Yet a lethal combination of fractured, competing local governments plus a very active home-construction industry produces between four and six new housing units for every new household being formed in Upstate. That over-supply factory requires that Upstate’s old city and first-ring suburban neighborhoods be abandoned, so that newer construction can happen farther and farther out. This is known as “economic development” in Paladino Country.

The cycle of new-builds instead of re-use is also true of infrastructure, not just housing. One leading Buffalo politician thinks that a doubling of the international car and truck bridge, a $700 million project that will be funded by federal and state funds, is a necessary project, notwithstanding the lack of any bankable increase in demand for the bridge. (Were the operators of the crossing able to demonstrate a growth in demand, and thus in bridge tolls, the bridge itself would fund any market-driven increase in its capacity.) It’s bad enough that the proposed Peace Bridge expansion is a make-work project. It’s awful that bonds will be sold to fund a bridge to service petrochemical-powered cars and trucks when scientists all agree that their emissions cause climate change. Worse is that, just a mile downriver, a 100-year-old railroad bridge between a Canadian industrial area and an American industrial area, which is a logical corridor for a greener, more efficient mode of transport that will probably grow, is overlooked entirely. Why? Probably because no local politically connected developer can make any money from expanding cross-border rail capacity.

Meanwhile, another leading politician believes that the downtown Skyway bridge that crosses the Buffalo River and connects the city’s central business district with the lakeshore freeway should be demolished and replaced with a grade-level lift-bridge, at a total cost of more than $100 million. The Skyway has a certain utility: It is high enough to allow the numerous grain elevators that line the Buffalo River to be visited by the huge lake freighters that bring corn and wheat in from the Midwest, utilizing the most fuel-efficient transport system in the world.

The misperceptions in Paladino Country multiply because politicians here never rebut the terrible truth—that these hundreds of millions of dollars for ill-advised, anti-green, make-work infrastructure projects won’t always come down the pike. In a state with a $9 billion deficit today and a gap of as much as $37 billion by 2014, there is no guarantee of further funding for big projects, either good or bad. At the same time, a necessary project goes begging: The federal government long ago agreed with Canada that the two countries needed to clean up what they called polluted “areas of concern,” one of which is the Buffalo River. Today, whenever it rains in Buffalo, raw sewage gushes into the Buffalo River from 38 outfalls, otherwise known as storm-sewer pipes, that mix rainwater with the stuff we flush. While local politicians join the rant about high taxes, and salute make-work bridge and road projects, the Buffalo River festers with an unaddressed problem.

But it’s worse than that. Candidate Paladino, foe of government, blisters critics of the plan to lure big-box retail to Buffalo’s old inner harbor area with $150 million of subsidies. The money comes from a settlement with the Niagara Power Project, which produces hydropower in huge turbines whose blades are turned by the water that flows at 16 knots past Buffalo, down the Niagara River and through a series of tunnels dug through Niagara Escarpment limestone 60 years ago. When the Power Project was relicensed, the authority that runs the turbines agreed to pay the communities upriver about $9 million a year for 50 years so they could green up and clean up their waterfront areas. Part of this revenue stream—all public money, if not from a typical source—was meant to finish building out the old Canal district in Buffalo, which is where the original Erie Canal terminus is. The rest of the money was for environmental remediation. But the developer-dominated public board that controls the money hijacked it away from green projects and instead planned a suburban-style mall for Buffalo’s inner harbor—a mall meant to look like the South Street Seaport or Baltimore’s Inner Harbor, with big-box retail anchors and restaurants and $6 ice cream cones.

But the developer mentality ran into reality. The big anchor retailer Bass Pro Shops, known from David Cay Johnston’s expose in his book Free Lunch as one of the most notorious subsidy-gobblers, turned Buffalo down. So did the Swedish furniture retailer chain Ikea. Why? Because Buffalo is shrinking, not growing.

Yet even well-meaning and experienced business people and civic activists are so accustomed to the developer mentality in Paladino Country that they still buy into this notion of creating supply in the absence of demand. They persist in trying to steer a 50-year revenue stream into a suburban-style, big-box retail complex, augmented by historically themed cultural accoutrements, in a downtown that lost its relevance as a retail center when its last home-grown department store closed two decades ago. This is a downtown which has not been able to sustain an enclosed shopping mall. It is a downtown whose brief flowering as an entertainment district seems to be fading as fast as Cleveland’s ill-fated Flats District did. Today, despite the presence of more than 40,000 workers in the Central Business District, there is no place downtown where any of them, including the 3,000 lawyers practicing in Buffalo, can buy the shirts, suits, or shoes that they wear in the federal, state, and local courts that are all clustered within a few hundred yards of one another. Retail in Buffalo, as it is in Rochester, Syracuse, and even in Upstate New York’s smaller towns, has for decades been a solidly suburban affair, except for a very few village shopping districts that have withstood the onslaught of the big boxes in strip malls. The Buffalo-Niagara metro has, according to one study, between 32 and 34 square feet of retail space per capita. The Portland metro in Oregon, by contrast, has less than 10 square feet per capita. Sprawl wrecked Buffalo’s downtown as a retail destination, and now, even with $150 million of subsidy money on the table, money that should be spent to clean the waterfront, not even big-box retailers can be enticed to get in.

All over Upstate, in the statistics and in daily experience as well, there is vast, consistent, incontrovertible evidence of demographic change, but also of the corrosive effects of the wrong kind of development. Much of the demographic change is urban, as the cities continue to shrink, but the shrinkage is also rural throughout the region. There is an understandable feeling of dislocation and uncertainty, exacerbated by government policies that seem always to make more outside money available for projects that never deliver the hoped-for transformations. Could tearing down one bridge and building another across a couple of hundred feet of river really change the fate of a downtown which hasn’t had a retail district in decades? Could the urban or regional economy really benefit from the construction of an additional international bridge-span, vastly expanding a Customs and duty-free parking lot, expanding a plaza for idling diesel trucks, but bulldozing a historic neighborhood in the process?

In Paladino Country, there is ample money in public coffers that could sustain libraries and economically positive cultural amenities, but today, among current elected officials, there is no will to sustain them because of the relentlessly repeated insistence that local taxes are what ails the economy. There is money available to clean up the filthy and dangerous waters of Buffalo’s waterfront, but those who control the money insist on pushing for a retail complex in retail-resistant corner of a poor, shrinking, over-retailed region. A sturdy middle-class riverfront neighborhood might be able to weather the stresses of aging homeowners, economic hard times and ethno-cultural chafing, but it’s hard to see how its residents will maintain a sense of cohesion in the face of both gubernatorial candidates, a congressman and state legislators all saluting a bridge-expansion project for which there is no demand and that commits the region to an expensive, carbon-devouring technology that will lose the price competition to rail transport even before the project itself is finished.

But here is where reality intrudes. The 2010 Census numbers will have an impact. After the next reapportionment in 2011, there will be fewer federal and state representatives for this area. That will mean fewer outside dollars coming in to sustain either government operations or to build more of the unsustainable infrastructure that the developers and the construction managers and the financiers clamor for.

Change is upon Upstate. Shrinkage will continue. The region’s comparative advantages—namely, fresh water, cheap land, extensive pre-built infrastructure—need stewardship over the next couple of decades. What’s needed now is a leadership that understands the notion of stewardship, and that understands that economic development in the form of make-work projects is not economic development at all. Sustainability for the long term, especially as the region’s population shrinks, means accepting the new parameters.

Instead, in Paladino Country, we have developers who rail, and a political class that quails, and now, a railing developer-turned-candidate. Will the rest of New York State buy his bile, or count up the money it’s been costing them?

30 September 2010

2010-09-30T08:40:00.001-04:00

Love That Dirty Water

by Bruce Fisher

Will there be money for cleanup or for investor subsidies?

Tumors that are the result of pollution afflict more than one-third of the largemouth bass in the Buffalo River, which is the body of water on which the proposed Bass Pro shop was to have been built. Other species of fish in the Buffalo River are even worse off: 51 percent of a little fish called the gizzard shad have tumors. More than 85 percent of the Buffalo River’s brown bullheads have tumors. Overall, according to a 2008 status report on the federally mandated Buffalo River Remedial Action Plan, about 37 percent of the fish in the Buffalo River suffer from DELT—“deformities, eroded fins, lesions and tumors.”

There is a sense of urgency, and a new sense of possibility, about Great Lakes waterways like the Buffalo River. Since the advent of the Obama administration, the problems of brownfields, toxic sediments, poisoned wildlife, inedible gamefish, and stinking sewer overruns seem to be getting attention.

The specialists have been getting together frequently to talk about these problems. On October 6 and 7 in Buffalo, Canadian and US officials will meet to talk about brownfields at the fourth annual National Brownfield Association Canadian-US Brownfield Summit (CUBS). Currently underway and ending Saturday is the 39th annual conference of the North American Association for Environmental Education, also being held in Buffalo. Last week, the sixth annual Great Lakes Restoration Conference (“Putting people to work to restore the Great Lakes”) was held in Buffalo concurrently with the official US-Canada Great Lakes Commission’s Areas of Concern annual meeting. The Buffalo River was designated an official international “area of concern,” or AOC.

The Buffalo River is one of 43 AOCs. There are 26 in the US, 12 in Canada, and five that the two countries share. The list is long and depressing: Detroit, Cleveland, Toledo, and many lesser urban areas have them. In Buffalo, it’s the Buffalo River’s sediments, contaminated from a century of heavy industry, that made the last 6.2 miles of its run an AOC. But it’s not just old pollution: Ongoing pollution washes downriver from what are called “non-point” sources, mainly runoff from suburbs and farms far upstream. Inside the city limits, there are also 33 combined sewer overflow outfalls, which are basically big pipes that let raw sewage into the river, plus three connections to the Buffalo sewer system from outside sewer districts that also overflow into the river during storm events.

It is a big, big problem. Despite a couple of million dollars in undesignated fund balance showing on its latest financial disclosure documents, the Buffalo Sewer Authority doesn’t itself have the cash on hand to address all of its combined-sewer overflow violations. (There is a potential source of funds, but we’ll get to that later.)

But check out the time-line on this. The designation “area of concern” happened in the 1980s. The first draft of the remedial action plan (or RAP—these folks love acronyms) was delivered in 1989. Folks have been meeting, talking, testing the water, publishing scholarly papers, holding more meetings, talking, and occasionally doing some remediating, for the past 21 years.

And yet and still, today, 34 percent of a prized gamefish species, the largemouth bass, the bass that we like to catch and eat, have tumors. The Department of Conservation website advises against eating any fish that have tumors or lesions. The Department of Health website is a bit confusing: For the Western Region of New York State, it advises women over 50 and children under 15 years to eat no more than one meal per month of any Lake Erie fish except Chinook salmon less than 19 inches long, burbot, freshwater drum, lake whitefish, rock bass, or yellow perch. That’s the detail, but here’s the true fact: Most people never catch a burbot. The fish that most people set out to catch—specifically, walleyes, smallmouth and largemouth bass, the various types of trout—are in the category of not to be eaten more than once a month by women and children. Buffalo River carp shouldn’t be eaten at all.

And yet our entire political leadership put on red Bass Pro hats several years ago when the big sportfishing empire came to town. Everybody swears that recreational fishing is on the rise around here. Until about five minutes ago, a state agency called Empire State Development Corporation and its subsidiary Erie Canal Harbor Development Corporation planned plan to spend a 50-year revenue stream of at least $3.3 million a year, plus some extra Power Authority money amounting to more than $2 million a year, on some waterfront, fishing-oriented retail store right next to the river, the harbor, and the lake that are so filled with sewage, PCBs, PACs, and injured wildlife that two other offices of the same state government tell you to stay away. Even today, while most of the rest of that revenue stream goes to an amorphous body called the Greenway Commisison, ESDC and ECHDC still have no commitment to let any of that money go to environmental remediation, which is the fancy word for cleaning up the mess in and around our water.

What’s going on here? Why are millions of dollars available for subsidizing development while these long-standing water-quality problems remain?

Cleaning up on cleanup money

Poking through the vast piles of documents from all the various meetings that have been convened for the past decade or so reveals an unavoidable truth: The Bush administration short-changed Great Lakes cleanup, even as scientists, engineers, local governments, activists, and even chambers of commerce began to understand that there is economic benefit to be had by addressing the problem of dirty water.

Last year in Milwaukee, the last time the Great Lakes Commission met to review the status of highly polluted AOCs, a document entitled “An agenda for jobs and economic transformation in the Great Lakes region” was released. Chambers of commerce from the 12 Great Lakes states all got together and endorsed a $26 billion program of environmental cleanup, asking the federal government to put up $13.75 billion of the amount. The rest of the dough is supposed to come from state and local sources. The reason the chambers of commerce like this kind of government spending is because of the economic benefit they see as the result of cleaning up the Great Lakes.

It’s a surprising document. Anti-tax, anti-government business organizations asked specifically for spending money on fixing combined sewer overflows in existing communities. In normal English, that means that white business guys saluted fixing the sewers in old cities.

The good news this season is that the federal government is doing its part. Long scheduled, now funded, some of the toxic-sediment dredging is about to begin this fall in the Buffalo River. (Some of the shoreline that is going to be dredged is owned by none other than Carl Paladino.) It will cost a couple of million bucks, and it will take until the end of 2011, just to dredge a couple of areas.

That leaves the rest of the Buffalo River, and there’s a lot more to do than dredging. To quote the official Environmental Protection Agency website on Canadian-US areas of concern, “There are 45 inactive hazardous waste sites within the AOC and contaminants of concern include PCBs, PAHs, metals, and industrial organics.” The EPA also mentions the 33 combined sewer overflow outlets, too.

But wait a minute. If money is the issue, and Bass Pro isn’t coming, and people not only want tumor-free fish to fish for but also clean water for themselves, on the theory that they actually require it for existence, then shouldn’t government use the money at hand to clean the water?

A growing coalition of citizens seems to think so. Earlier this week, on that rare night when there wasn’t a convention of international specialists in town talking about the urgent need to clean up the Great Lakes, about 50 people got together at the Parkside Lodge in Delaware Park to listen to Mark Goldman, the lead plaintiff in the lawsuit that is currently challenging those state agencies on their plans to spend more than $100 million of public money on a retail shopping mall next to the Buffalo River. There will soon be more community meetings about how to get green and clean into the thinking of government agencies that now have a $9-million-a-year payment every year for 50 years coming to them from the Niagara Power Project relicensing agreement.

The movement has a name, and a new FaceBook site: the Citizens Waterfront Project. Unlike the Canal Side project, this one is open to discussion about whether human health, wildlife health and public access should be part of any plan to spend all that money.

May 26, 2010

2010-09-23T16:41:00.000-04:00

Too Many Stores

by Bruce Fisher

American civilization has its perfect expression in Union Road, in the entirety of its run from Orchard Park to Williamsville. Union Road is a succession of strip malls that link the marquee suburbs of Western New York. It is what the anti-suburbanites call “Generica,” and it is a refutation of every fond hope for “smart growth,” “new urbanism,” “transit-oriented development,” and “green infrastructure,” because Union Road is all about automobiles. If gasoline spikes in price again as it did in 2008, whether because Goldman Sachs speculators bid oil futures up, or because the BP disaster in the Gulf gets worse, or because Sarah Palin and Ron Paul’s racist spawn win the mid-term elections, Union Road will be just one more suburban commercial thoroughfare clogged with angry consumers with not enough money to shop because their cars ate all their discretionary disposable income.

Union Road exists in the form that it does because since the mid-1950s, it has been the connector between consumers and retailing. At its north end, the traditional retail establishments in the Village of Williamsville predominate. Driving south toward Genesee Street brings one to the wide-setback strip plazas of the 1960s, where nowadays the somewhat downscale stores are. Further south, there is layering: regionally owned grocery chain stores are mixed with various national big-box stores in a plaza that was well established more than 40 years ago, while opposite, some locally owned stores and service centers predominate up until the entrance roads to the region’s largest shopping mall. Past the next big intersection at Walden, which is itself a mile of big-box stores intermixed with discount houses and a few relatively downscale stores that are not to be found in the premium-rental malls, there is a gap of only two miles before the 1960s strip mall pattern repeats.

The village centers have a vestigial existence as retailing zones; of the 16 villages in Erie County, only Kenmore, East Aurora, Hamburg, Williamsville, and Orchard Park look like villages, but even they have shopping plazas that have more retail space than each of their main streets does. Springville’s village center is obsolete as the area’s center for commerce, having long since been supplanted by the cluster of big boxes and Wal-Mart on Route 219. Angola village’s drugstore succumbed long ago to the big boxes on Route 5. Lancaster is a curious amalgam. Akron still looks like the New England Yankee place its Civil War veterans knew when they erected the tall pole to show support for Ulysses S. Grant’s campaign, because Akron still has a village commons of the type English settlers established before they came to the Niagara Frontier when it really was a frontier—but Akron shoppers shop like Angola, Lancaster, Sloan, Clarence, and also Buffalo shoppers shop: on big roads, at big-box stores, at gigantic grocery stores, and at the Galleria, Boulevard, Eastern Hills, and McKinley malls. That’s where the retail trade is. Change the names of the roads and the municipalities, and you could be anywhere in the contemporary United States.

But there’s increasing evidence that behavioral changes driven by the internet and by age-specific consumer preferences will change all this. At the Urban Land Institute and at many other institutes and think tanks, and in the real-estate industry’s own publications, there’s a growing consensus that there is way, way too much square footage devoted to retailing.

Too many stores?

Until recently, the conventional wisdom in the national real estate industry was that when America emerges from the recession, retail will come roaring back. Retail trade took a major hit in 2008 and 2009 when 10 million Americans lost their jobs, and more than a million lost their homes, and the theory of the rebound has been that retailers are going to benefit from the newly invigorated American consumerist feeding frenzy, just like in the olden days of, say, the middle of 2006.

But that consensus is creaky. Two market research specialists named Gruen, writing in the most recent volume of the Urban Land Institute’s cleverly titled journal Urban Land, wave the caution flag about retail stores. Mayors and other officials who are trying to revive downtowns in small cities, they warn, had better pay attention to some demographic shifts and behavioral changes in the post-recession world.

Gruen and Gruen are particularly focused on two population groups: the “generation Y” folks who are between 16 and 30, and the Boomers aged 46 to 64. Generation Y-ers “don’t spend much time or money shopping,” they say. Boomers have been hurt much more than Generation Y, but they already own many of the goods they want and most of what they need. “They frequently spend their surplus dollars on their children for college expenses…as well as on caring for aging parents,” say Gruen and Gruen.

And then there are online sales. Internet retailing accounted for sic percent of all sales in 2009, up from five percent in 2008. By 2013, Forrester Research, in another study, predicts the internet will jump to an eight percent share.

But it’s when you review the numbers on existing stores, not the new ones, that the story gets a little crazy.

Scholars Mark J. Eppli and Stephen P. Laposa, writing in the Journal of Real Estate Research, came up with a measure: the Gross Leaseable Area, or GLA. The GLA per capita is reported for fareestanding retail space, shopping center space, and total retail space. For established East Coast cities and their suburbs, the GLA per capita was less than 10 square feet. Cities that maintained a high GLA per capita, i.e., over 18 square feet, were all younger, high-growth cities and include Dallas, Denver, Las Vegas, Phoenix, and Salt Lake City.

The Buffalo area, strangely, has a GLA profile that puts it into the “younger, high-growth” category. This is not a high-growth area: The Buffalo metro area lost more than 50,000 people between 2000 and 2010. The population is expected to shrink another six to 10 percent by 2020.

Others measure differently. The fast-growing Washington, DC area has more than 100 shopping centers, more than 119 million square feet of retail space, and 25.9 square feet of retail per capita. It’s one of America’s strongest economic regions and is expected to grow rapidly over the next decade. The Buffalo area has more retail space per capita than DC. The Cleveland area, which like Buffalo has lost population and is expected to lose more, has a similar profile, according to the county planning commission there. The numbers there are even higher than Buffalo’s.

Why build more?

There is a theory that old central cities will be repopulated by a combination of aging empty-nest Boomers, plus Generation Y college grads, plus urban-experience-seeking ’tweeners. The Urban Land Institute analysts, like many real estate professionals who cluster at smart growth conferences, expect the general trend of urban redevelopment to persist.

But when they talk about repopulating the urban core, the first thing they all mention is housing. At his speech at the Burchfield Penney Art Gallery last Friday, the former mayor of Pittsburgh, Tom Murphy, proudly hailed his city’s new sports arenas, but noted again and again that his city’s true successes were in creating a continuous waterfront park—like the 150-block-long park in Chicago, or Fairmount Park in Philadelphia, or the waterfront in Hamilton, Ontario, etc.—and in creating new housing inside the boundaries of the formerly polluted city.

Housing. Parks. Green space. Waterfront access. That’s strangely reminiscent of the agenda of the former mayor of Milwaukee, John Norquist, in his book The Wealth of Cities. It’s the fabric of old and new, of walkable neighborhoods with locally owned stores immediately adjacent to where people live, that the late Jane Jacobs extolled. Housing and public space. Stores come later. And now that stores and shopping take place inside our computers, one wonders: Since we can buy anything at all except food and toilet paper and restaurant meals over the internet, or out on Union Road, why we would need any more stores anyway?

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

Max
27 May 2010, 14:38

Well stated Bruce and given the trends you cited along with the impacts of Peak Oil, Union Road and thoroughfares like it will be transformed into "shovel ready" lots as those behemoth big box structures become too cost prohibitive to maintain and lack potential for reuse by non-retail tenants, except perhaps as storage/warehouse facilities. It's interesting to me that most of what was built in the 90's and the 00's is already very obsolete.

PatrickP
11 Jun 2010, 19:02

I was looking forward to this article when I clicked on it, but you lost me before the end of the first paragraph. Racist spawn? When I read stuff flike that I assume the person writing it is small-minded and entirely dependent on MSNBC or the Daily Show for his daily news and therefore lacking in any credibility. It's a shame.

Gunter Pfaff
12 Jun 2010, 13:59

There is a great need for reasonably priced small spaces in which food artisans good make healthy food. A lot of these defunct malls could be turned into vibrant gathering/eating places. When I was in Malaysia I loved those food malls, lots of little affordable food makers on the periphery and lots of benches and tables in the "parking lot". You had lots of choices of reasonably priced food and the atmosphere was very life affirming.
I guess here the ownership class seems to be more interested in the bottom line and might prefer a bulldozer, rather than trying to make something like this work.

william reehill
12 Jun 2010, 18:26

america has always been and will be until too late an infantile selfcentered throwaway anticulture with a 'lifestyle' that has neither life nor style. its a little late for new urbanism we suburbanized long ago and now we are third worlding our habitat making it increasingly unlivable for humanoids worthy of the name

Daniel Jost
14 Jun 2010, 16:44

Interesting issue. One point that may be worth further study: the area's you mention with higher retail per capita- Buffalo, Cleveland, and the once booming cities of the Southwest are all auto dependent and in my experience people tend to live in large houses rather than small apartments. You can buy a lot more stuff (volume wise) if you live in a larger house and you need more retail space to display it. That's not to say people in NYC aren't buying stuff but they probably aren't buying big cheap stuff like the kiddie pool that's displayed in Walmart.

I also wonder how much it has to do with the cost of real estate. With Buffalo's cheaper real estate, retail doesn't have to be as efficient in squeezing out money per square foot.

Jacob Halpert
15 Jun 2010, 09:49

You might be interested in Stacy Mitchell's writing on this. It's not simply that the demographics are changing, but that retail development has been out of control. The amount of retail space per capita doubled between 1990 and 2005, mushrooming from 19 to 38 square feet per person. Incomes and spending grew only modestly.

There's a long chapter in Big-Box Swindle on this, and a shorter op-ed here:
http://www.newrules.org/retail/article/big-empty-box

Bruce Fisher
15 Jun 2010, 21:45

I reviewed the New Rules site's postings, but didn't refer to them in this piece. The point is important: a great expansion in retailing happened, and as four of the five writers above note, the data (none of it gathered from either the Daily Show nor from MSNBC) are pretty shocking. Now that a growing segment of retail happens via internet, the problem of overbuilt retail space is going to be more acute, and more visible, in areas of the country where the population is not growing. Cleveland, Buffalo and the rest of the Rust Belt have a problem that's going to get even worse as Great Lakes region is expected not just not to grow but actually to shrink between now and 2030.

Chris Hawley
01 Aug 2010, 22:43

I downloaded the 1997 article from the Journal of Real Estate Research and there wasn't a mention of the Buffalo MSA's GLA per capita. What's the word on this stat for this region? Not mentioned in the Artvoice post.

June 24, 2010

2010-09-23T16:38:00.000-04:00

The War For Jane Jacobs

by Bruce Fisher

Once spurned by urban planners, her legacy is now claimed by the Right and the Left and everyone in between.

Yet Buffalo still goes the way of Robert Moses.

Terry Cooke is a marathon runner, the head of the Canadian Urban Institute, and the former elected head of government in Hamilton, Ontario, that nearby industrial city where they still somehow manage to operate a big port and make steel. Hamilton was on the way to becoming Buffalo—a sprawled-out, deindustrialized former rail-head—until local leaders like Cooke and an engaged electorate transformed the place into a stabilized and now growing regional city with a merged city-county government. Last week, Cooke gave out a lifetime achievement award named for a legendary urban theorist, writer, and activist who came to fame in 1960s Manhattan when she rallied a neighborhood to prevent Washington Square Park from being turned into an expressway. The Jane Jacobs award went to Bill Davis, the former Ontario provincial leader who joined Jacobs, who had moved to Toronto in 1968, in stopping an expressway project that would have ripped Toronto in half.

Sadly for Buffalo, Jacobs bypassed Buffalo on her way from New York to Toronto: The Kensington Expressway devoured Humboldt Parkway in 1967, the year before Jacobs took up residence in a place beyond the reach of Robert Moses and his expressway-building epigones.

Jacobs, who died a couple of years ago, has recently become a rallying icon for urban designers and planners, professions that used to ignore her. She is the guru for a new generation of pro-city theorists and writers, and for real-estate developers, too. She’s the neighborhood activist who beat the great Robert Moses.

Moses was the planner whose name became synonymous with huge public-works projects in the 1950s and 1960s. In New York City, he is known for massive projects including the Cross Bronx Expressway and the Verrazano-Narrows Bridge, but also for his defeat at the hands of Jane Jacobs. In Western New York, we know Moses not from the sorry devastation his protégés gave us in the form of the city-destroying Kensington Expressway, but from the life-giving Niagara Power Project in Lewiston, and for the parkway named after him. The power project is such a great feat of engineering and clean energy that it stands in sharp contrast to Moses’s automobile-centered work: Not only does it produce clean electricity, it also produces money, including an annual payment of about $9 million that goes into a fund in Buffalo, a fund which could change Buffalo’s future for the better, or, in the alternative, which could be squandered on an automobile-centered project.

Moses, in sum, engineered many massive concrete public works that had everything to do with cars, because Moses’s calculations always favored cars over people dwelling in their messy, idiosyncratic, slow neighborhoods. But Jacobs beat him.

So when the Canadian Urban Institute sent the Canadian leadership class a message this past week, that message took the form of an attaboy for a beloved former Ontario premiere, and the award citation was all about retelling the story of how Bill Davis and Jane Jacobs beat a Robert Moses-style expressway. “If we are building a transportation system to serve the automobile, the Spadina Expressway would be a good place to start. But if we are building a transportation system to serve people, the Spadina Expressway is a good place to stop,” is what Davis said almost 40 years ago. Go to Spadina Avenue today and you’ll see what he and Jacobs saw then: In a city almost half of whose residents were born outside Canada, Spadina is a cluttered, buzzing, crowded neighborhood whose shops’ signs are in Chinese, Vietnamese, French, Portuguese, Ukrainian, and even English. There are cars on the street, but there are also streetcars on rails, and bicycles, and pedestrians. Masses of them.

The Canadians adopted Jacobs, and now they celebrate everything urban, but not only in Toronto, where adaptive re-use of old buildings has been a given for decades. Calgary’s mayor won an Urban Institute award for a new waterfront park and residential development squarely inside his city. Hailing from medium-sized cities all across the country, a fittingly diverse assemblage of citizen groups, local government officials, not-for-profits, and students got recognized for various happy projects. For the Canadians, Jacobs is all about neighborhoods where positive, clever people live together such that they get happier in each other’s presence. But down here among us Yanks, Jacobs is becoming something of an ideological mascot-in-dispute.

Principal and influential among the new Jacobs fans are the New Urbanists, who loudly claim her. Former Milwaukee Mayor John Norquist, who heads the Congress for a New Urbanism, leads an annual “Jane Jacobs pub crawl” in Manhattan, and wherever New Urbanists meet, real-estate developers get it crammed into their heads over and over again that the next real money to be made is going to be made in cities—or in suburban places that are set up as dense, walkable replicas of city neighborhoods.

Next are the progressives who are not in the real estate business but who write admiringly of Jacobs continuously; Google her name and it’s hard not to find right-thinking liberals extolling her as a model economist of the efficiency of urban density. Greens, too, love cities; Green writers lionize Jacobs.

And now the Right wants her, too.

The relentlessly anti-government Howard Husock, of Harvard’s John F. Kennedy School of Government, might have had very wide eyes indeed last week in Toronto at seeing how non-ideological the notion of urban density has become in a country committed to the very kind of regional land-use planning that makes American conservatives choke. Husock, writing recently in the Manhattan Institute’s City Journal, claimed Jane Jacobs for the Right, and chided American liberals and leftists for misreading her signature 1961 book, The Death and Life of Great American Cities, as anything other than a paean not only to free-market capitalism but also to the established American version of urbanization: Immigrant arrives in city ghetto, immigrant makes dough, immigrant books for the ’burbs making way for new immigrants.

It’s true that Jacobs described that “creative destruction” process, and the sequencing of uses of buildings in city neighborhoods. And it’s true that big bad Robert Moses was a planner, and that she hated his version of planning—which was all about cars and getting suburbanites to and from their suburbs. But in the Toronto Jacobs moved to, fought for, and stuck with, there is now a bagpiper’s tattoo for all things Jacobs that are about her adopted countrymen’s version of her, and in the actualized, implemented urbanism of Canada today, there is not a peep of dissension or protest against planning that has as its goal the urban density and agglomeration economics that Jacobs praised. Canadians claim that Jane Jacobs. But still, so do Harvard’s anti-planning Americans, including not only Husock but also the prolific young economist Edward Glaeser, who protests against things like regulations for historic preservation, claiming that they disrupt the natural, sometimes chaotic, sometimes un-pretty cycles of entrepreneurship and collapse in old neighborhoods.

Cities are complex, and she addressed that complexity, and as with any heroine who has competing fan bases, the debate will go on because she wrote so much that there’s evidence in her oeuvre for any argument you want to make. But the anti-government ideologues have a political agenda for which they mine Jane Jacobs’s work: She didn’t much like welfare spending as it was practiced in New York City in the early 1960s, and said so, and thus the “free market” boys love her for that and relentlessly bold-print those excerpts. But if you believe that welfare spending is the enemy of successful urban density, check out the European and Canadian cities that Jacobs admired: Their successful evolution to new levels of density, diversity and economic complexity has come about concurrently with much bigger social-service and income-support regimes than in America.

But let’s move on: The big issue, and the big change that hinges on which of our versions of city-loving Jane Jacobs gets emphasized, is our Robert Moses issue. That is, we have some decisions to make about oil-based personal transportation and the suburban landscapes that cheap oil and the Robert Moses mentality made possible. If, as some believe, the global crisis in petroleum will inevitably cause a massive re-migration to cities and an abandonment of suburbanization, then the progressive, green, Canadian version of Jane Jacobs will prevail. If cities are going to remain occasional entertainment venues for suburbanites who need massive subsidized parking garages so that they can drop by, dispose of some discretionary income, then burn some BP oil on their way back home via the Moses expressway, then the Manhattan Institute version of Jacobs will drive our spending. And the $9 million a year that is coming to Buffalo from the Niagara Power Project relicensing will be used to build us a Robert Moses version of urban life, rather than a Jane Jacobs version. For that’s what the proposed Bass Pro project is fundamentally about: constructing massive parking garages for car-driving visitors.

Most who claim Jacobs seem to be thinking of the spunky mom-in-tennis-shoes activist from Washington Square Park in 1963 or Spadina Avenue in 1971, when she fought big bureaucrats to defeat plans for expressways that murder neighborhoods and kill public space, especially green space.

But how are the lessons of Toronto and New York City relevant to the little cities that Jacobs leapfrogged over? And there’s another question that the great urban theorist left us: Before her death in Toronto a few years ago, Jane Jacobs began to have some misgivings about some parts of civilization—not the “civitas” part, to be sure—and she became a more nuanced thinker than the one who, earlier in her career, seemed to have a rule for everything urban based on her own Manhattan experience.

Maybe that’s because, in the 50 years since her fights with Moses, and 40 years since beating the Canadian expressway-lovers, Jacobs, and a few others, came to recognize that the suburbs are a part of city life, too.

The American city and 1968

The test case for Jane Jacobs is the city that was lost to racism, but that, paradoxically because of the biggest of big governments, became America’s most compelling example of how a new way of urban living might work—even here in the Rust Belt.

When Terry Cooke introduced the Jane Jacobs Lifetime Award, he made blunt, plain-spoken reference to what the Canadians of Bill Davis’s generation wanted to avoid. Back when they were fighting the Spadina Expressway, Cooke said, they were already well aware of how they didn’t want their city to “go the way of Buffalo, Cleveland, or Detroit, where the central city was abandoned.”

Cooke could have mentioned Washington, DC, which was similarly abandoned. But nowadays, people who love cities love much that has happened in Washington, DC. They particularly love the way some of its close-in suburbs have developed over the decades since Ronald Reagan’s “conservative” government poured billions of borrowed federal dollars into the Potomac River basin’s regional economy.

It’s either paradoxical or funny that Reagan’s anti-Washington spirit resulted in a flowering of government-stimulated wealth that is now much larger than the government spending that launched it.

The hallmark program of the Reagan years was the massive defense build-up, but his borrowed billions bought us much more. Reagan unleashed a feeding-frenzy for lobbyists which has never since abated. It brought Bentleys, minks, polished English-made shoes, and many glittering evenings to Washington, but it also brought dowdy downtown D.C. back from abandonment. Reagan’s unprecedented peacetime budget deficits, and his tax reform, plus the monument-consciousness and preservation-mindedness of the late Senator Daniel Patrick Moynihan, engendered a showy and elegant rehabilitation of Washington—much of which had been torched and abandoned in the riots that followed Martin Luther King, Jr.’s assassination in April 1968. Harvard’s Edward Glaeser may gripe about how preservationists and their pesky rules are making Manhattan a destination for the rich alone, but Washington’s rules about keeping buildings no taller than the Capitol spire, and about preserving the “fabric” of the city by keeping the facades of old buildings intact, attracted so many prosperous people and so much redevelopment that their very presence overwhelmed the forces of decline. The strongest, largest, and most enduringly prosperous black middle class is a major achievement of the Washington metro renaissance.

Washington is hardly recognizable since the great tax-cutter came to town. The slums of O Street, the crack-infested rooming houses of Massachusetts Avenue, and the mess that was all of the central city in the mid-1980s have been succeeded by refreshed or replaced brick and stone structures that were always there but that looked like, and were, slums. A skid-row hotel that in Reagan’s re-election year hosted high-school students on field trips and delegations from impoverished western Indian tribes in $21-a-night rooms has long since been charging 10 to 15 times that rate. The retail landscape, supported by a larger and steadily growing local population, is more abundant than ever in the city’s history. Chinatown hums and is no longer marooned between an uncertain downtown and a self-contained Capitol Hill. The short walk from the Gallery Place Metro station to the new National Portrait Gallery encompasses local and chain coffee shops, restaurants, a multi-screen movie house, home-furnishings stores, clothing and jewelry and specialty shops, the offices of architects, lawyers, dentists, accountants, and consultants of every description, and there is more of the same in every direction where, in the 1980s, there was only riot wreckage and Georgetown somewhere off to the west.

Yet 40 years since King’s death and the great conflagrations, there remain great stretches of un-reclaimed territory, which is another way of saying that the urban racial and class divide lives on in even in one of the richest of America’s metros. Capitol Hill has been expensive for some time, but H Street Northeast, immediately behind the handsomely polished and happily functional Union Station, is a commercial strip that limps in the seemingly perpetual gloom of that dismal history, as does much of the rest of Northeast Washington. Only inches from the prosperity and renovation of the classic rowhouses with their tiny neat yards and Easter Egg pastel colors, the body language of this street shrugs “boundary.” It’s still a broken territory. Urban pioneers do their pioneering in places like H Street Northeast; in Washington, as in Brooklyn or even in Buffalo, that means young professionals, but first it means immigrants. There are refugees from Ethiopia’s harsh politics and wars and droughts who have escaped all that, and who are happy, and proud, to operate a coffee shop named for the owner’s home province. Men from the Ethiopian taxicab associations visit it on Sundays. Across H Street Northeast, a conspicuously Caucasian yoga studio proudly proclaims its first anniversary with a fabric sign anchored on the empty storefronts to the right and to the left.

But the plywood enclosures sealing the windows of those vacancies have been there through more than one season—they have, according to locals, been there for a generation. The upstairs offices, shopfronts and apartment buildings are largely unredeemed by tenants, and the farther from Union Station, the emptier. The growth outward from Capitol Hill is indeed occurring: There are more owner-occupied rowhouses than a decade ago, and fewer storefront churches. The sense of the street is that the four decades of abandonment, poverty, isolation, and street-crime will linger on, if not for a fifth decade, then at least a while longer.

This is, however, paradise regained compared to the great swaths of Buffalo, Detroit, Chicago, and other cities that burned in the 1968 riots—because at least in Washington, new activity is right next door. Speculation on H Street Northeast still makes sense even after the real-estate crash. It’s coming this way—you can feel it. H Street Northeast will be next to “come back.” And another 600,000 souls are projected to enter the Washington metro over the next decade.

Not so in the other burned cities of 1968. Many, many square miles of those cities are still barely, if at all, touched by the investment of capital and of hope that restores the density of dwellings and commerce, the density of plural human life that we used to call “civilization.”

Toronto: the un-hollowed city

Jane Jacobs moved from New York City to Toronto in 1968 when Toronto was a haven for young American men who liked this continent better than Vietnam’s. Toronto was then the polyglot and dense urban affair that it is today, only much smaller and much grayer. Toronto had a big university and big banks right downtown, to be sure, and it was in 1968 a growing port city that was actually benefitting from the Saint Lawrence Seaway. That’s the project that had been imagined as the great public work that would, at its completion in 1957, catapult Buffalo and other Great Lakes cities back into the first ranks of American cities. The August 15, 1955 issue of Newsweek featured a cover story on Buffalo’s rosy economic future, a future that, the magazine shouted, hinged upon the Saint Lawrence Seaway. Business moguls, planners, and politicians were all quoted to the effect that Great Lakes cities, but especially Buffalo, would thrive as never before because the new system of locks and canals would open the world to American exports, and Buffalo to a new era of prosperity.

By the mid-1970s, when Buffalo and the other Great Lakes cities saw their middle classes flee in the wake of Rehnquist’s Supreme Court decisions on school desegregation, Buffalo and the other Great Lakes cities also saw the collapse of their industrial economies—and the Saint Lawrence Seaway helped them not at all. Instead, it was Toronto that had experienced the growth, and it was Toronto that received the trade, and a lot of Vietnam War protesters, and with them, Jacobs. Toronto became Jacobs’s favorite city—full of the life, the street romance, the inexact and idiosyncratic texture that she had observed as life-creating energy in small sections of Boston, of Washington, DC, of New York City, and of the other places she had celebrated in The Death and Life of Great American Cities.

That book had made Jacobs famous. It became her platform for the decades of the 1960s through the 1990s. It is hard to imagine today, when there is a stampede to out-Jane each other, that her hypothesis was largely spurned by professional planners. For those four decades, American students and urban-oriented thinkers thought of urban life and dreamed of urban renewal, and even invented “new urbanism” to characterize some of their ersatz-urban development projects hatched far from old cities—but the planners and developers lived with the rest of Americans, in a nation whose Caucasians had abandoned cities, out in the automobile suburbs.

As Jacobs left the USA, white folks abandoned cities. The watershed year was 1968. The watershed events were those post-assassination riots. Whites abandoned cities out of fear of black violence. But whites also abandoned cities at the insistence of and with the active urging of every level of government. With subsidies and with new Kensington Expressways, federal and state and county and town governments enabled rapid suburbanization and the low-density sprawl that threw North American humanity into the thrall of automobiles, subdivision developers, and suburban politicians.

Buffalo is a prime example of the new geography of Caucasian dispersal from city to suburb. Until 1960, just over half of the one million people in the 1,000 square miles of Erie County lived within the 42 square miles of the City of Buffalo. By 2000, 70 percent of the county’s population was outside the city limits. Of the 130,000 African-Americans in Erie County in 2000, all but 10,000 lived inside city limits. Of the 800,000 whites in Erie County, more than 600,000 lived outside the city limits. Back in 1950, when the City of Buffalo was almost 600,000 strong, more than 90 percent of the people living inside the 40.5 square miles were white. In short, the white population fled while the black population stayed. The tax base moved a few miles north, a few miles south, a few miles east of the municipal and school-district boundary, and the suburban jurisdictions added population, but the population of the region stagnated. This happened in Buffalo, in Rochester, in Syracuse, in Pittsburgh, in Cleveland, in Cincinnati, and in dozens of other metros in the Great Lakes states. It’s the same story.

It is not the story, however, of Toronto.

Toronto had a different experience of 1968. Toronto in 1968 was amused by all the new American boys showing up. It was brightened by the first few coffeehouses and youth-oriented saloons and shops in the rowhouse streets just north across Bloor Street from the University. But Toronto never had crowds of angry African-Canadians torching their substandard housing and looting their neighborhoods’ commercial areas in protest over yet another murder of a beloved leader. Toronto was peaceful, staid, “diverse” in the sense we mean that term now, with calm saloons for men closed on Sundays as all the shops did, and with restaurants that were required to maintain separate entrances, away from the bar, for women.

Then Toronto suddenly changed. In 1970, political crisis in Montreal, which had been the financial and cultural capitol of Canada, hit hard. Prime Minister Trudeau declared martial law after Quebec separatists kidnapped and killed a government minister. Capital fled. That is to say, big English-speaking commercial banks and insurance companies and industrial concerns abruptly began expanding their operations in English-speaking Toronto. Within a few years, some of the power and the money of Montreal, if not the city’s cultural sophistication, shifted to Toronto. The political and cultural self-awareness and assertiveness of French-speaking Quebec was a bonanza for the gray city of Upper Canada. By every measure of population (size of workforce, per-capita income, educational attainment, number of enterprises created), of infrastructure (housing units constructed, lane-miles of road, miles of public transit, water, sewer and utility systems constructed) and of activity (tons of freight handled, number of enterprises incorporated, taxes collected), Toronto’s growth after 1970 was positive and sustained. And because of the focus by Toronto and Ontario government planners—a focus on keeping the infrastructure compact and city-focused rather than allowing the sprawl that characterizes American urban regions—the city grew in density and still grows in density. Adaptive re-use characterizes every old brewery, storehouse, distillery, and factory not still (or again) utilized for its original purpose.

It all made Jane Jacobs happy.

Yet in her last book, Dark Age Ahead, Jane Jacobs complained. She restated her ancient gripe about traffic engineers, whose antipathy to the scientific method she’d decried back in the fights over traffic-calming in Manhattan in the early 1960s. Traffic engineers had made messes in Toronto, too. In all her years in Toronto, even after the great victory over the Spadina Expressway, she nurtured a specific hatred of the lakeshore’s Gardiner Expressway.

But in her last book, she also shared her happiness about the new phenomenon of “import replacing”—the not-so-novel fact that local urban density in Toronto has created a market robust enough to support local manufacturing of furniture and other items that used to be imported. Jacobs hailed the fact that local money circulates better locally, because products that for so very long had been imported from overseas cheap-labor producers are now, in dense Toronto, being produced and sold locally.

The happy urbanist Jacobs warns, in her last book, of a “dark age” precisely like the cliché of post-Roman Europe of barbarians and illiteracy and chaos that we learned about in high school. The bad times coming are not coming due to some shortfall in Toronto’s urban success. The darkness descending on us, she says, is descending due to true science being abandoned, and self-policing by the learned professions ending, and families being so stressed that they erode, and cultural memory being obliterated, and taxes disconnecting from local needs.

This is not the book for which we should remember Jane Jacobs. Her gripe about the decline of science and of standards among professions, and her contradictory gripe about municipal-government change in the Province of Ontario, are gripes writ larger than gripes should ever get writ. (She liked local government, and wanted Toronto to be governed as a city-state, then got mad at the government she’d advocated for.) She got angry with some engineers, planners, bank economists, and other educated elites and then wrote this book, in part, to warn that it was their blindness that was dooming civilization. Some of those very local, very fleeting controversies should have been edited out of her tome.

It is when she speaks of cultural loss, though, that a chill of universal recognition descends. We have read elsewhere, especially in Jared Diamond’s Collapse: How Societies Choose to Fail or Succeed, about societies that forget. Jacobs warns that we are forgetting about what it means to live in cities.

That’s the warning we need to heed. Driving through the sprawl of Generica—the suburban landscape that is precisely the same in suburban Buffalo as it is outside Chicago, outside Washington, outside every city—one sees what Jacobs loathed and what some (but not enough) young people now flee: the automobile-based roadside culture that depends upon endless supplies of imported energy, and that some well-meaning people now want to import into urban centers.

What the Canadians have figured out is that their taxes stay low when their cities sustain density. Spadina Avenue is all about locally owned enterprises. The density that works there and in the great cities comes about when new immigrants come in and create sustainable economies by lots of small-scale enterprises, and that happens most effectively when public infrastructure moving people around in vehicles other than cars.

If the small- and medium-sized cities are part of the same civilization that the great cities lead, then Jacobs is indeed the right guide for us all. What Jacobs contributed to our cultural discourse, a contribution that will long outlast her, is a warning that civilization is about cities—places where people live in close proximity, where they have a sense of shared identity, where they interact (shop, play, study, work, date) near where they live, and it ain’t about municipal boundaries. This is the point that her last book idiosyncratically makes. As she passed, she took a parting shot at all the Robert Moseses she could think of, re-fighting old fights. I doubt that a new urbanist, or an old urbanist, or even an ideologue could mine any one of Jacobs’s texts to find support for the idea of building parking garages for suburban day-trippers. Yet if that’s what keeps happening to public money in America, civilization will stay north of us. We will not only forget who we are: We will forget that we ever knew.

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

Rick Harrington
27 Jun 2010, 12:17

Another beautifully written and informative piece, Bruce. Having recently touched down in walkable NYC; the new-investment-infused formerly blighted suburbs along the recently opened Seattle light rail line; and vibrant San Francisco which is almost all about exurbanites spiriting in for the night - and enjoying long walks and bike rides around Buffalo - I make the following observation (you will observe that I need to learn to punctuate): it's all about miscegenation and overcoming fear and prejudice. Bass pro is sometimes scary for its worship of the rural life I recently moved away from. Where the statistics per capita for violent and often motorized death far out-pace any city's. The suburbs are about safety, wombs with televised views, and the illusion of storybook permanence for family for manor for narrative lines. In reality everybody is always trading up. Suburbs are built on the fiction of perpetual oil, of course, and their safety is only as bedroom communities whose violence is as outsourced as is their effluence. It is fear of difference which breeds generic sprawl; sameness is comfort. The automobile embodies the illusion that it is safe to drive through places you would never walk or bike through. Fast. It's not so much about the propulsion as about the armor and shock absorbers and simulation of living room inside. Bass Pro plunk in the city which terrifies those well-armed outdoorspeople might just, well, do some good toward mixing things up a bit more. Anyhow, the perpetual loop of a real underwater oil gusher ought to get a few more people to try walking and biking outside someplace where the view is not redundant; the city or the country, since who wants to bike in the suburbs? Might as well do a spin class. Oh!

avwrobel
29 Jun 2010, 21:18

Nice piece Bruce. 2 things to mention: First, the Welland Canal/Saint Lawrence Seaway; Pearson Airport; and the development of the 401 & QEW highways enabled Toronto to position itself as an import/export center, and therefore to support local manfacturing and agriculture. Second, Canadians tend to trust their government, and their leadership tends to make decisions and set policy with the common good in mind. We in the U.S. are plagued by charlatans at all government levels (while not the majority, make up enough of a minority to harm the country as a whole) who game the system for their (and their supporters) benefit. The rationalization system at work is that 'all interests compete and everyone wins in the long run'. This free-market mantra is their cover for corruption. So getting Buffalo (despite Albany) to plan for urban renewal through reuse? I hope it happens.

Steve Banko
30 Jun 2010, 15:18

Well done, Bruce. It remains to be discussed why what is so plain and visible to some is so mysterious and obtuse to others but that is a conversation we rarely seem to have. If enough people keep on illuminating, perhaps the light will one day pierce the darkness.

Peter Ormond
08 Aug 2010, 13:10

A well-written article, Bruce. It touches on many aspects. However, you may want to do a little more background research on your implied hero - Terry Cooke - before giving him kudos.

For example, ask him about his role in getting Hamilton's pristine Red Hill Valley paved. He was one of the biggest advocates - silver tongue and all. After all, forward-thinking Hamiltonians resisted the project for 50 years. Besides the disastrous ecological impacts, paving the valley has scarred the UN Biosphere Reserve - the Niagara Escarpment- resulting in flooding of the Red Hill Expressway and countless homes with every significant rainfall. In short, it has left our community in financial ruins, and our air even dirtier. It has also opened up the lands around the airport and mountain farmlands to development and stadium speculation.

Jane Jacobs apparently had one word to describe the cause of Hamilton's woes: "Corruption". Be wary of the tiger that changes it's stripes, regardless of the distance he can run. An agent of change? Like I said, do a little research. Jacobs, like countless others - including many within the City of Hamilton - would surely not be applauding.

We need 'leaders' to see the irony of their actions, and step aside or else the cycle continues.

The Fisher Variations

Buffalo Billion

January 4, 2012

Cuomo’s billion: Pay careful attention to the language

IDA blues

Time to Change the Rules

by Bruce Fisher

Can Mark Poloncarz stand up to real-estate developers and the politicians they fund?

Institutionalized corruption?

Political contributions by real-estate developers

Allies for sustainability

Or wish-lists?

Plans and Lists

by Bruce Fisher

US lobbyists, Chinese five-year plans

Plans, lists, and anti-planners

The plan is to have a plan

Cuomo's Dilemma

A new era?

Messages From Home

by Bruce Fisher

Can Obama heed the Hochul and Polancarz wins?

Will Democrats be Democrats now?

Solving the Cynthia Wiggins problem

Street Cars, Kids, and Jobs

by Bruce Fisher

Northern cities plan light rail. Will Buffalo?

A cheap way to go

Poor, urban, and invisible

The terrible number 77

What's in your capitol?

Absent Governors

by Bruce Fisher

Withering Rust Belt cities wait for action

A long process

Crossing the great divide

Climate change, engineering and us

Ready For Our Own Irene?

by Bruce Fisher

Toronto, Chicago, Portland prepare for climate change while we pursue real estate development schemes

Stirring the blood?

Casino nation II

A Pro-Casino Presidency?

by Bruce Fisher

Casino nation

The Judges Obama Ignores

by Bruce Fisher

Will casino money trump law in Buffalo?

The smoking gun

A $600 million local business

What now?

Yes he did.

Unity After Victory

by Bruce Fisher

The moment Bush squandered could be Obama's opportunity

What he should ask for

A consensus to strive for

Home Economics

Sales Tax and community assets

The Disconnect

by Bruce Fisher

How WNY's tax politics miss the future

A shared future?

Meanwhile, up north

Tax talk in a season of special elections

All This for Just $40 a Month

by Bruce Fisher

It's a county election year, so prepare for a season of tax rants

The numbers here

The $40 a month county tax

Race, gas and ECC

Cars and College Students

by Bruce Fisher

Why ECC needs to consolidate downtown

The relentless logic of sprawl

Suburban fears at work again

I tell you my dear, it won't happen here

America 2050

by Bruce Fisher

Joel Kotkin predicts growing population, growing suburbanization