Archive for April, 2012

WHAT’S WRONG WITH THE AMERICAN ECONOMY?

April 28, 2012

Just ask Jeffrey D. Sachs, as a left leaning economist he espouses more government economic planning to remedy the recessionary economic ills.

Sachs is a “firm believer in the market economy, yet American prosperity in the 21st Century also requires government planning, government investment and long-term policy objectives that are based on the society shared values”.

His book, The Price of Civilization – Reawakening American Virtue and Prosperity details how “our challenges lie not as much in our productivity, technology or natural resources but in our ability to cooperate on an honest basis”.

He asks, “Can we make our [current] political and economic system work to solve a growing list of problems?

He answers no, “not with out major changes”

He claims the laws of supply and demand have stopped functioning as the best means for both the individual and society and that government must step-in to assure that the existing mixed role of the private and government market is converted to:

  1. Redistribute income to protect the poor and unlucky,
  2. Provide public goods such as infrastructure and scientific research, and
  3. Stabilize the macro economy.

He is critical of government leadership where “Washington gradually stopped steering the economy in the Mid-70’s and increasingly handed over direction to the ‘corporatocracy’ composed of elite business leaders”.

Large corporate business is now the problem, rather than a solution participant according to Sachs.

Where in the past, labor unions and government provided principles of interclass equity balance, today corporate and business political influence have tipped the balance – social and economic fairness and equity is no longer possible without greater governmental involvement.

He chides American for letting this happen, “our government can go its merry way because much of the public allows this to happen by not working hard enough to stay informed” and lethargies to take action.        

He characterizes the economy as rigged, due to:

  1. Weakened national parties and strong local political representation promoted local needs ahead of national needs.
  2. Large military – industrial complex with dominance of a significant proportion of the national budget.
  3. Big corporate money financing elections, funding which significantly determines election outcomes.
  4. Globalization and the race to the bottom mentality that tilted the balance of power toward corporations away form workers.

Sachs believes that Americans would prefer to “give up some income through taxation in order to achieve shared social objectives” and it’s the role of government to raze sufficient tax revenue, by whatever means to meet these social objectives.

In order to achieve this goal, Sachs notes that “middle class Americans will need to make changes.  Today middle class American are “so sure that higher take home pay is the key to happiness, that they have lost touch of the need to pay taxes to fund society-wide undertakings and avoid an explosion of public debt.”

He advocates that richer folks should pay more and that social objectives should evolve from a higher degree of government planning that includes;

  1. clear goals and benchmarks,
  2. the mobilization and use of human expertise,
  3. creation of believable and acceptable plans,
  4. focus on the far distant future,
  5. termination of the corporatocracy,
  6. restore acceptable public management of government, and
  7. decentralization of government decision making, somewhat.

This change would create a new civilization for the 21st Century

Sachs, to me, is a recreation of FDR’s Rexford Tugwell who promoted more government planning as a means to change human behaviors creating a government controlled economy that not only cured depression ills but implemented social objectives.

Tugwell’s vision of a planned economy never materialized nor was many of the purported economic benefits for the depression “forgotten” ever achieved.

Only time will justify whether recommendations advocated by Sachs will take root and benefit Americans.

Readers will walk away with a better understanding of “Progressive Political Theory” being the foundation for much of the current Democratic Party election rhetoric.

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GOVERNMENT POLICY AGAIN DIFFERENTIATES GROWTH VS. DECLINE

April 25, 2012

For the fifth year in a row, government policies differentiate growth in state economic performance.

Arthur Laffer and Stephen Moore, again in their American Legislative Exchange Council Rich States – Poor States Economic Competitive Index, document key government actions that encourage and restrict economic vitality.

 Policies for growth include –

  •     Lower personal income taxes
  •     Lower corporate income taxes
  •     Lower sales taxes
  •     Right–to-Work business cost advantages

According to Laffer and Moore, the opposite of these growth policies are the “growth killers” with death taxes being added to the “killer” list by them.

Laffer and Moore provide a strong argument that “low taxes, limited government and fiscal discipline are a recipe for job creation”, the benefits of supply-side economics.

They present a convincing argument for the conservative republican based economic platform being played-out in the election rhetoric and in the news media.

They conclude “no income tax states outperform their higher tax counterparts across a board in gross state product growth, population growth, job growth, and perhaps shockingly even in tax receipt growth”.

Using fifteen policy variables they have ranked each state economic outlook and encourage the reader “to read the evidence and learn about the proven principles, which lead to economic growth, job creation and higher standards of living”.

Of importance to us Midwesterner’s is how does Illinois, Indiana, Michigan and Ohio “stack-up” with other states; the 50-state ranking data for each –

 

                           2012     2011   2010    2009    2008

  • Illinois            48        44        47        44        43
  • Indiana           24        16       20         17        12
  • Michigan        17        25       26         34        47
  • Ohio              37        38       42         45        47

According to the 2012 rankings, Illinois would be noted as the worst with Michigan being the best; a result of Illinois increasing and Michigan lowering business taxes. 

Ohio while improving, remains behind Michigan and Indiana.

They note that Indiana’s ranking will likely improve in subsequent rankings due to the passage of Right-to-Work legislation not recognized in the current ranking.

It’s interesting to note that the best states are principally located in the south and western United States – Utah, South Dakota, Virginia, Wyoming, North Dakota, Idaho, Missouri, Colorado, Arizona, and Georgia, being the top ten states.

These states have –

  •   Population in-migration
  •   Lower tax burden
  •   Are Right-to-Work states
  •   Increasing their proportion of US GDP

I subscribe to this pro-growth low tax – less expense line of thinking.

After 30+-years as a community planner, economic developer and entrepreneur, it is evident to me that business and people “vote with there feet” and seek to live and work in communities that provide employment opportunities and lifestyles that meet or exceed their economic goals.

In this line of thinking, when all is equal, people will migrate to communities where personal economic benefits are greater.

Therefore, the notion that governmental policy that directly impact the personal or business “pocketbook” will influence where one chooses to locate influencing the economic vitality of the community.

PLACE MAKING – A REDESIGN OF THE NEW DEAL NEW COMMUNITY PROGRAM FOR THE 21ST CENTURY

April 19, 2012

As a planner educated in a HUD funded New Town where the University was to anchor the city center, government involvement in new community development and “Place Making” holds special interest.

We can trace the origin of federal government new community development to the Hoover/FDR era, where government policy focused on the relocation of over populated urban tenants to rural farm locations via the “back to the land” homestead subsistence program.

FDR’s subsistence and new community social engineering effort was designed to reduce unemployment and population density within urban centers by providing a garden plot for agricultural self-sufficiency ultimately reducing reliance upon governmental financial support.

Some 34 subsistence homestead experiments were begun in 1933 as a precursor of the WPA federal supported new community experiments.

However, after eight years of experimentation the efforts were terminated by congressional action.

This period of history provides an excellent example of governmental social engineering by the use of regulatory and incentive action.

Study of the 99 subsistence homestead and new community program experiments undertaken between 1933 and 1939 offer an understanding of the basics of today’s “Place Making” strategy being popularized by current planning and community economic developers.

“Place Making” today is the federal government’s modern-day social engineering experiment to create vibrant urban oases that will attract young creative class residents for which new businesses will be attracted seeking employees.

Government planners seek to replicate the strategy of regulating and incenting human behavior to create concentrations of selected population to behave in a certain manner – young well educated – especially skilled population in central city locations that would otherwise remain economically stagnant and wither.

The pundits claim higher density urban living will solve environment and social ills.  Compact higher density urban living will reduce auto emissions, reduce oil consumption, create a lower carbon footprint, create less crime ridden safer neighborhoods, offer higher-wage job opportunities, reduce poverty and more.  “Place Based” community development will offer opportunities for improvement in “open space green infrastructure”, creation of walkable communities less dependent on auto transport and create small business economic viability due to higher concentrations of household shoppers to patronize locally owned businesses.

But will social engineering of where and how people live actually work?

For community planners this is a question that needs to be asked and answered?

Using the FDR experiment as an example, one can question whether this form of social engineering will achieve its desired and expected outcome.

Reading the Paul Keith Conkin book Tomorrow A New World: The New Deal Community Program will provide some background and stimulate thinking about the need for, and role of, government in shaping where and how people choose to live.

He chronicles the beginnings of the “back to the land movement” and its rise to suburban and rural new community planning.  He focuses on the rise of the professional city planner in advocating the” need for government [sponsored] whole new towns or communities in spacious rural environments” to house a growing population and to remedy social and economic ills.  The need for government involvement was based on the fear of private sector “inefficiencies and waste that would occur by non-government involvement in effort to provide housing and jobs to the mass of unemployed suffering the effect of economic depression”.

Conkin begins by summarizing early efforts of the federal government to provide housing for veterans returning from the Civil and World War I where federal government policy was formed establishing the role of government to provide housing opportunities, a policy that grew in stature through the great depression and end of WWII.

Documented is government’s experiment applying Garden Cities and City Beautiful city planning principles to what we today might call “Place Making”.

As the new communities movement grew over the years, the Department of Agriculture’s Rexford Tugwell (an original FDR Brains Truster) responsible for the program sought to intuitionalize within government a “long-term solution [for the provision of housing and geographic population distribution] through economic planning for agriculture with social control over the individual and his use of the land”.

His main goals were to “point to a new way of life …to promote industrial decentralization and to show what social and economic planning might accomplish if given a chance” using example governmental planned communities scattered throughout the US.

Sixty suburban new communities were planned as this social experiment.

The success of the FDR new communities program is a matter of serious debate.  Tugwell’s  legacy of federal government involvement in the provision of housing,  although scattered, remains encased principally in the Department of Agriculture, Department of Housing and Urban Development but remnants are found in other departments.

Today’s Place Based planning strategy is just more of the same, the current edition of principles discovered during the FDR era  repackaged to meet modern concerns similar to those of the great depression era, lack of individual employment opportunities, insufficient affordable housing opportunities and lack of individual economic opportunity all giving way to national economic turbulence and US economic instability. 

My study of history raises question of the ability of government via social engineering to regulate and incent human behavior for successful implementation of a federal land use policy directing where people live and work.

For government sponsored “place making” to be successful – individual choice, not governmental regulation and incentives will need to prevail.

Reading Conkin’s book will give the reader much to think about – the government’s role to influence individual choice in determining where and how we live.

For the most part, I’m a skeptic.  While I fully support urban revitalization much which, by necessity, must be completed by government action,  I have serious questions about social engineering policies to regulate and incent behavior that reduces individual choice.

SOUTHWESTERN MICHIGAN COMPETITIVE ADVANTAGE – INDIANA GROWS MANUFACTURING JOBS

April 14, 2012

Southwestern Michigan (SWM) economic development strategy may need to be revisited based on latest Wall Street Journal findings about where Midwest manufacturing jobs are being created.

While SWM lost over 16,000 manufacturing jobs since 1980 and has had little success in repopulating them recently, maybe it’s time to rethink SWM’s past approach to economic development and begin emphasizing partnerships within a larger multi-state regional economy.

The Upjohn Institute’s regional labor economist George Erickcek recently made a convincing statement that SWM is not a single regional economy focusing on Benton Harbor/St. Joseph as the metropolitan city center.

In his March 19, 2012 presentation before the Stronger Economies Tomorrow (SET) local economic development strategy group, he clearly outlined his feeling that SWM’s economy is pulled outward toward the stronger economies of Kalamazoo, Elkhart, South Bend and LaPorte/Michigan City. 

He presented census data showing that a large portion of the employed population travel outside their home county for jobs. 

His claim is substantiated by 2010 employment data reported by the US Census Bureau.  Today, more than 50% of SWM’s employed residents travel outside their county to work – 38% in Berrien, 80% in Cass and 66% in Van Buren.  It’s easy to comprehend that a sizable portion may be commuting to Indiana as their place of employment.

He further noted only the Twin Cities of Benton Harbor & St. Joseph functions as a unified self-contained economic unit. He further opines that the strength of the Twin Cities area economy may be insufficient to override the “outward pull” of these stronger surrounding economies.

This challenges current governmental economic development thinking shaped on the premise that economic development in Michigan should be guided by state policies and intrastate geography.

It’s an obvious fact that residents needing jobs and their geographic labor market don’t respect state policy or boundaries – people will gravitate to their job “of choice” regardless of whether it’s in the county they live, another Michigan local or the State of Indiana.

Based on a new understanding of where people work, the question arises – What should Southwestern Michigan’s economic development and job creation strategy be?

The notion of aligning economic development strategy with Indiana may not be as far-fetched as one may believe, especially for the Benton Harbor/St. Joseph Twin Cities Area and southern Berrien and Cass county communities.

According to the Wall Street Journal article, “Over the past decade Indiana’s performance has been better than other Rust Belt States.  Its manufacturing employment is down 20% compared with drops of 26% in Illinois, 29% in Ohio and 35% in Michigan, per Moody’s Analytics.”

“Indiana’s efforts to attract manufacturing jobs are encouraging so far.  The number of Indianans employed in manufacturing at the end of 2011 was up 7.6% from two years before to 472,500 compared to 3% nationally after plunging during the recession.”

Indiana, as the Wall Street article states, has been more “recession proof” than Michigan and seems to be better positioned for manufacturing economic recovery, especially automotive related employment which historically benefited Southwestern Michigan communities bordering Indiana.

Corroborating this claim is data from the Using US Census that reports the number of jobs by employer showing that between 2000 and 2009 Michigan lost 18% of its manufacturing employers and 43% of their manufacturing jobs compared to Indiana’s loss of 9% of their manufacturing employers and 31% of their manufacturing jobs.

Maybe it’s time for the Southwestern Michigan political and business leadership to “take stock of economic realities” and recognize that for Berrien and Cass counties to achieve an economic sustainable future it’s time to rethink how we wish to grow – what we need to do.   A 30-year history of status quo and distrustful separatist local government mentality cannot remain the predictor for a growing future economy attractive to new residents and job creators.

Here are my thoughts of actions which should be considered –

1.  Grow the Twin Cities area economic dominance by increasing household growth.

2.  Conceptualize a new economic region somewhat larger than now established – one that overlaps state borders.

3. Consider an economic development strategy based on a new economic vision based on connection with regional centers of population.

4. Reformulate local and county government growth policies and incentives that stimulate population and household growth.

5. Consider how to improve transportation access – the journey-to-work trip – to job centers located in regional population centers.

6. Establish a goal of creating a world class small metro city center that can serve as a population and job attractor in the new global economy.

7.  Educate Southwest Michigan’s population with trends that facilitate growth – such as migration, diversity and tolerance.

8.  Make education and post high school learning an inbred family vision and goal for all youth.

9. Identify and train leaders with common understandings and bonds – mitigating political isolationism and status quo biases.

10. Form a multi-geography business driven economic development organization, with leadership connectivity to leaders in the larger regional economy.

It’s takes bold action to break away from tradition and move into uncharted territory which fosters new roles and relationship demands upon community leaders.

As the political pundits voice during every election season………If not now …when……if not us…then who!

New Deal Planning; The National Resources Planning Board

April 5, 2012

For every community planner and economic developer, the history of the 1920’s and 30’s hold special meaning. 

It’s the Hoover and FDR presidential era that provides the “birth right” of government regulation of private property land use and governmental aid to assist private business investment in new job creation.

As a student of this period of history and an avid follower of current political and economic conditions, comparison of history with today supports the claim that “history repeats itself”.

Planning and economic development was born out of necessity – the remedy of economic depression and the depilating financial impact upon a vast majority of the American population.

Marion Clawsen in his book New Deal Planning; The National Resources Planning Board documents the history of FDR’s attempt to introduce national cooperative planning to reshape the role of government’s effort to reinvigorate the depression economy.

Through several iterations of national planning organizations FDR’s goals of creating an institution within the federal government that would plan and program public works investments; stimulate city, county and regional planning; coordinate all federal planning activities with state and local planning efforts plus conduct various forms of research was rebuffed and eventually terminated by  direct congressional action.

While the difficult economic times paved the way for imaginative and innovative ideas that would better coordinate new and existing programs to stimulate the economy, this experimentation, the Hoover Employment Stabilization Act of 1931 and the formation of the FDR’s Nation al Planning  Board in 1933; work which continued under different names and authorities till 1939, never achieved the stated FDR goal of achieving a long-ranged plan “laying out a 25-50 year program for national development”.

What the reader will take from reading Clawson’s book is the dependence today upon similar “depression era” programs by federal and state government to remedy today’s economic recession.

Additionally, for those followers of federal government bureaucracy, it will easy to identify the legacy of the depression era government planning and research activities now embodied, but scattered, among various federal agencies.

Two messages from reading this book – First, government new deal planning remains, abet scattered, uncoordinated, unrecognized and largely ineffective within our current federal government.  Second, faced with national economic difficulties the federal government response is to fall back to strategies and program, much of which originated in the FDR era, many which history has questioned their overall long-term effectiveness.