Creative Class

Here’s the longer, unedited version of my column published in today’s The Daily Beast – It Wasn’t About the Economy, Stupid.

The conventional wisdom among pundits, pollsters, and political analysts is that the Republican victory in the midterms represents a referendum on – and a stunning of repudiation of – the Obama administration’s stewardship of the economy. “U.S. registered voters choose economic conditions by nearly a 2-to-1 margin over any of four other key election issues as the most important to their vote for Congress,” according to a Gallup organization analysis, a result that held “across all partisan groups.”

But the geographic patterns of Tuesday’s historic election results reveal a curious paradox. While the economy was clearly the voters’ number one concern, economic conditions alone cannot explain why they cast their ballots as they did. A Wall Street Journal analysis of House races found that Democrats held onto their seats in congressional districts that were feeling the recession the worst. “Of the 25 congressional districts hit hardest by the recession—measured by joblessness, poverty rates, and housing prices—16 are currently represented by Democrats. Fourteen of them won re-election despite the Republican tide.”

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With the midterm elections only two weeks away and the Democrats in jeopardy, the prevailing wisdom is that the election will be a referendum on the Obama administration’s stewardship of the economy. A large fraction of 2008 Obama voters now cite the economy and jobs as the key reason they will vote Republican this year, according to an October 17 AP poll. “The president must zero in on the economy if he wants to help himself and his party,” writes Eleanor Clift. The basic notion here, promulgated by pundits and political analysts, is that the current political environment turns on the vagaries of the economy. This amounts to a cyclical theory of American politics. And, in fact, several decades ago, the political scientist Douglas Hibbs advanced his seminal theory of the “political business cycle” which argues that economic movements have a sizable effect on American elections.

But another line of thinking suggests that American politics turns on deeper structural changes in economy and society. In the influential Red State, Blue State, Rich State, Poor State, Columbia University’s Andrew Gelman and his colleagues uncovered a paradox that both confirms and defies the conventional wisdom about American elections. While rich voters trend Republican, rich states trend Democratic, he found. The opposite holds as well. Though poor and minority voters overwhelmingly pull the lever for Democrats, poor states consistently end up in the Republican column. A second version of the structural approach comes from John Judis and Ruy Teixeira, who argue in The Emerging Democratic Majority that the rise of the post-industrial economy has tilted the playing field toward Democrats who gain advantage in wealthier urban “ideopolises” while holding onto the votes of the poor and minorities. A third perspective comes from Ronald Inglehart of the University of Michigan, whose detailed World Values Surveys identify a shift in political culture from the more traditional, religious, and materialist orientations of the industrial age to post-materialist values of self-expression, openness to diversity, secularism, and broad public goods like concern for the environment.

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Check out my new piece in The New Republic:

Speaking at a health care reform rally in Raleigh, North Carolina, in July 2009, President Obama declared that the worst of the recession was over. “We have stopped the free-fall. The market is up and the financial system is no longer on the verge of collapse,” he said proudly.

A year or so later, with midterm elections looming and an electorate that is as fearful and angry as any in memory, the stock market has risen, but even a breath of bad news can send it tumbling. As dismal as housing prices continue to be, they have yet to hit bottom in some places. Unemployment remains frozen at an overall level of nine-plus percent, and job creation has been anemic. If the crisis belonged to George W. Bush, the recovery has been Obama’s—and it has been a fragile and tentative one at best. Along with billions of dollars in stimulus payments, the president has spent down most of his political capital. So what is his next step?

Read the full article here.

Market forces are already causing a significant reset in America’s housing system – and a lot quicker than most people imagine.

Earlier this week, I argued that America’s penchant for homeownership distorted the economy, and that it makes good economic sense to tilt the balance of homeownership back from its high point of 70 percent to roughly 55 or 60 percent – about the level found in the most innovative, affluent, and highly skilled regions. The Urban Land Institute projections (PDF) already predict the homeownership level will fall back to 62-64 percent as a result of the downturn, tighter credit conditions, and demographic shifts.

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The new administration’s urban policy is here (h/t Aleem Kanji).

My first reaction is to be nice and say we should all give them time to get their act together.

But right now, there’s very little new thinking or strategy here, and even less evidence that anyone has a grasp of role location plays in the economy and of the powerful geographic forces that are reshaping the global and U.S. economies. It’s essentially a retread of Clinton-era urban policy, with the Bush-era homeland security add-on, plus some more emphasis on green and neighborhoods.

I sure hope they don’t start pouring stimulus money into this smorgasbord approach…

Your thoughts…

Barack Obama won the election by winning cities, according to this analysis by Nate Silver. (h/t: Alison Kemper). While others have pointed to this trend, Silver does a nice job of putting it all together. Plus the graphics are great.

If Bill Clinton was the first black president, then Barack Obama might be the first urban one. He is the only American president in recent history to seem unembarrassed about claiming a personal residence in a major American city. Instead, presidents have tended to hail from homes called ranches or groves or manors or plantations, in places called Kennebunkport or Santa Barbara or Oyster Bay or Northampton …

In 1992, when Bill Clinton won his first term, 35 percent of American voters were identified as rural according to that year’s national exit polls, and 24 percent as urban. This year, however, the percentage of rural voters has dropped to 21 percent, while that of urban voters has climbed to 30. The suburbs, meanwhile, have been booming: 41 percent of America’s electorate in 1992, they represent 49 percent now).

In other words, if you are going to pit big cities against small towns, it is probably a mistake to end up on the rural side of the ledger. Last year, Obama accumulated a margin of victory of approximately 10.5 million votes in urban areas, far bettering John Kerry’s 3.6 million. Obama improved his performance not only among black and Latino voters but also among urban whites, with whom he performed 9 points better than Kerry. Obama also won each of the seventeen most densely populated states, a list that includes such nontraditional battlegrounds as Virginia, North Carolina, and Indiana. (One hidden advantage of urban areas: They’re easier to canvass to get the vote out.)  …

With the votes that he banked in the cities, Obama did not really need to prevail in the suburbs. But he did anyway — as every winning presidential candidate has done since 1980 — bettering McCain by 2 points there …  It may also be that suburban voters are starting to look — and behave — more like their urban brethren. According to a poll by the National Center for Suburban Studies, 20 percent of suburban voters are nonwhite — not much behind the national average of 27 percent — and 44 percent live in a racially mixed neighborhood (versus a national average of 46 percent). Suburban voters are just as likely to be concerned about the economy as other voters are and just as likely to know someone who has lost a job. Moreover, many suburbanites who do not live in cities may nevertheless be thoroughly familiar with them; according to the Census Bureau, at least eight to nine million persons commute into urban areas each day  …

Republicans trail Democrats among essentially every fast-growing demographic except the elderly — the youth vote, the Latino vote; they never had the black vote. It is long past time that they hone their pitch to urban voters, and find their shining city upon a hill.

Ryan Avent, one of my favorite and one of the very best urban bloggers around, digs into Obama’s urban policy team. As a preface to his longer article which appears in Grist, Avent writes on his blog: “My thinking on the selections has evolved somewhat. Initially, I was fairly disappointed, but I’m more sanguine now.” Money quote: “The urban picks are probably just a bit more explicitly pragmatic and shouldn’t be read as a betrayal by the president.”

The best member of team city, as judged by urbanists and other progressives, is likely to be Shaun Donovan, tapped by Obama as secretary of Housing and Urban Development …A Clinton-era veteran of the agency, he’s familiar with the federal bureaucracy and managed to be effective despite institutional hurdles. More recently, he has demonstrated his knowledge of best practices in affordable housing as a capable head of New York City’s Department of Housing Preservation and Development  … Yet it’s unclear whether Donovan appreciates the scope of the housing challenge facing the nation.

From a visionary perspective, Obama’s Transportation pick is widely seen as the most baffling … Obama used the pick to name his promised Republican cabinet member (Defense secretary holdover Robert Gates excepted). Ray LaHood, a retiring downstate Illinois representative, will be handed the reins of the department at perhaps the most crucial juncture for transportation investment since the Eisenhower years …

Less remarked upon by urbanists but perhaps more disappointing, on the face of things, is Obama’s choice for head of the new Office of Urban Policy… And so the choice of Bronx Borough president Adolfo Carrion was also somewhat underwhelming. Carrion is at least nominally qualified. He’s a trained urban planner and a veteran of the New York political scene. He helped engineer redevelopment of underused portions of the Bronx … Carrion did take a courageous stand in favor of Mayor Michael Bloomberg’s congestion pricing plan … There is little in Carrion’s resume to indicate that the Bronx lifer can explain the necessity of a difficult transition to increased density to residents and leaders of the nation’s great suburban expanses.

The whole piece, here, is required reading for anyone interested in American urbanism and the future of urban and regional policy.

Two conservative intellectuals have recently raised questions about the value of college for most students. While they come from different starting points, they make the same basic point. I find the sources mildly interesting but I think the basic concept is long overdue. Just as high school needs to be reinvented, so does the undergraduate college model.

Charles Murray from the American Enterprise Institute had a piece in the New York Times about a week ago, which is summarized in these first paragraphs.

Barack Obama has two attractive ideas for improving post-secondary education – expanding the use of community colleges and tuition tax credits – but he needs to hitch them to a broader platform. As president, Mr. Obama should use his bully pulpit to undermine the bachelor’s degree as a job qualification. Here’s a suggested battle cry, to be repeated in every speech on the subject: “It’s what you can do that should count when you apply for a job, not where you learned to do it.”

The residential college leading to a bachelor’s degree at the end of four years works fine for the children of parents who have plenty of money. It works fine for top students from all backgrounds who are drawn toward academics. But most 18-year-olds are not from families with plenty of money, not top students, and not drawn toward academics. They want to learn how to get a satisfying job that also pays well. That almost always means education beyond high school, but it need not mean four years on a campus, nor cost a small fortune. It need not mean getting a bachelor’s degree.

Then yesterday George F. Will had a rambling column in the Washington Post about civil rights court cases that included this nugget:

…many employers, fearing endless litigation about multiple uncertainties, threw up their hands and, to avoid legal liability, threw out intelligence and aptitude tests for potential employees. Instead, they began requiring college degrees as indices of applicants’ satisfactory intelligence and diligence.

This is, of course, just one reason college attendance increased from 5.8 million in 1970 to 17.5 million in 2005. But it probably had a, well, disparate impact by making employment more difficult for minorities. O’Keefe and Vedder write:

“Qualified minorities who performed well on an intelligence or aptitude test and would have been offered a job directly 30 or 40 years ago are now compelled to attend a college or university for four years and incur significant costs. For some young people from poorer families, those costs are out of reach.”

Indeed, by turning college degrees into indispensable credentials for many of society’s better jobs, this series of events increased demand for degrees and, O’Keefe and Vedder say, contributed to “an environment of aggressive tuition increases.” Furthermore they reasonably wonder whether this supposed civil rights victory, which erected barriers between high school graduates and high-paying jobs, has exacerbated the widening income disparities between high school and college graduates.

Maybe this rings true to me because it matches my own experience. I never liked school with its emphasis on memorization, and was bored to tears as a college freshman when I dropped out. By the time I went back years later and got a BA, I was able to test out of about two years worth of courses. By then I had started a couple of small businesses, edited and published two newspapers, been a broadcast engineer, managed a radio station, done a lot of political activism, and had many other jobs. None of these required me to have a college degree at the time.

However, I don’t accept Murray’s thesis that this is primarily Obama’s responsibility – everyone under the sun is trying to pile more work on his desk. Instead it should be the basis of a public conversation involving universities, think tanks, unions, and other interested parties.

What do others think?

Rich has already written about how 1930s New Deal stimuli projects will not help this country prepare for the 21^st century global economy. Bloomberg has an incredibly insightful article on the Obama stimulus package. In effect, all the funds that will be appropriated for infrastructure will go for fixing old roads and building new ones to open new open spaces to crackpot development. Whatever one believes about global warming, this is certainly environmentally irresponsible and a step in the wrong direction. Moreover, it will cost cities, which, as Rich, Ed Glaeser, and many others have shown, have subsidized suburban development in the past. Now, U.S. “leaders” want to give us another dollop of past solutions. Optimistically applying old solutions (like ever greater indebtedness) for a debt and insolvency crisis is definitionally “crackpot.”

Can Obama translate his vague promises of change into a real change of direction for this country? To those that responded to my posting about taxation decisions, thanks.

I hope you all have great holidays. Rest, have fun, and prepare to put your thinking caps on because next year will be the most important for the global economy since 1933. We need to be there with alternative solutions and open the space for debate. Otherwise, the economists with old failed theories, some of whom claim to understand the Great Depression, will continue to provide crackpot solutions… to be discussed in the next posting.

How many of you are startled and even a bit frightened at the lack of attention the rapidly worsening global warming crisis is receiving in the U.S. in particular? Yes, there is vague talk from the incoming U.S. President about global warming, but, in fact, the U.S. government is trying everything in its power to boost consumption and raise housing prices in an effort to reignite the housing bubble. Obama is talking about massive infrastructure programs and yet, when you examine the plans, it is largely about building highways with some money for energy conservation in government building retrofits. All of this will be done on a wave of deficit spending that is likely to pauperize the remaining U.S. middle class.

Highway building and energy conservation measures will fail to rein in global warming because hydrocarbon energy is too inexpensive in the U.S. Odd isn’t it, only six months ago, because of the price increases, the U.S. was treating energy conservation as a serious topic. Miles driven were dropping, people were demanding better mass transit, and the move back to the city was being celebrated. The price mechanism was addressing the global warming problem, though it did affect the poor disproportionately. Today, with gasoline prices down, miles driven are increasing, and once again traffic jams and the behemoth SUVs are back.

There is an obvious measure that can address our fiscal deficit and global warming – raise gas taxes, say $0.50 immediately, then after three months another $0.25, and again another $0.25 in another three months (the more one increases, the stronger the signal to consumers is). The phasing in of the increases would provide warnings to auto buyers to choose more fuel-efficient vehicles. This would be a serious response to global warming and the fiscal deficit, but there are no voices demanding such an obvious policy.

You don’t need to be a member of the Creative Class to see how disconnected from reality the policy discussions in Washington, D.C. are. No discussions of raising taxes to address an enormous and spiraling deficit. No discussions of serious policies to discourage the consumption of fossil fuels. The U.S. is today operating on what I term “crackpot optimism,” which I will discuss further in future posts.