Chicago's dire warning for Houston
Judge Glock has a very sobering piece in the City Journal on "How Debt Ate Chicago - Mounting liabilities are the greatest threat to the city’s survival." Chicago is a few decades ahead of Houston on the urban maturity curve, but it's critical that Houston act now to make sure we don't end up on the same path to stagnation (which is almost impossible to stop once momentum builds). Some key points to indicate just how screwed they are, some of which I think you'll recognize as starting to happen in Houston as well:
- Chicago faces a severe police shortage, with over half of high-priority 911 calls going unanswered due to a lack of available officers.
- The city's financial woes stem from a massive debt burden, reaching $43,000 per taxpayer, the second-worst in the nation, further compounded by Illinois's own high debt load.
- Chicago's tax burden is among the highest in the nation, with combined city and state taxes exceeding 12% of a median family income, placing a heavy strain on both residents and businesses.
- Chicago's economic fundamentals are weakening, with downtown office vacancies reaching record highs and companies relocating due to high taxes, leading to a shrinking population and a decline in median household income.
- Newly elected Mayor Brandon Johnson, a former Chicago Teachers Union member, has pledged to increase spending on progressive initiatives, including a "Green New Deal" and expanded social programs, despite the city's dire financial situation.
- Johnson's plan to raise revenue through taxes on the "ultra-rich" and a "mansion tax" has faced resistance and has been deemed impractical or politically unfeasible.
- Chicago's financial woes are exacerbated by a high percentage of its budget being dedicated to fixed costs like pensions and bond interest, leaving little room for flexibility.
- Chicago's pension debt is particularly concerning, reaching $34 billion, with assets covering only 25% of obligations, placing a significant burden on the city's finances.
- The city's complex governance structure, with overlapping agencies and bodies like the school district, park district, and county, further complicates the debt situation and adds to the financial burden on taxpayers.
- Chicago has a history of using debt to finance political projects and social causes, leveraging its financial distress to push for progressive agendas, leading to concerns about the long-term sustainability of its financial strategy.
Concluding:
"Chicago has been bailed out by miracles before, but its current problems are structural and seem to have no clear solution. That doesn’t mean that the city will necessarily suffer Detroit’s fate and find itself in bankruptcy. The dangers of insolvency are real, but, just as with the exploding federal debt, too much focus has been put on the possibility of a single disaster and too little on the more obvious cost: deepening decline. Chicago could keep paying off its bondholders and retirees by bleeding public services, hiking taxes, and driving out still more residents, but it would become a shell of its former self. A debt-ridden Chicago wouldn’t be the first, or last, great American city to become a byword for lost possibilities."
Labels: corruption, governance, government transparency, pensions, public debt
Mayor Whitmire's HPD opportunity, Chicago's debt warning for Houston, Strong Towns takedown, 15-min city economics don't work, and more
Backlog of smaller items this week:
"The economics of the 15-minute city don’t really work...
What hasn’t been said is that the economics of 15-minute city planning go against foundational principles of how urban markets function....
Employment markets are even less localized. The very raison d’etre of cities is as a vehicle for labor pooling and sharing — this cannot happen effectively at the neighborhood scale. Setting up an expectation where people live within 15 minutes of their place of work will at best result in bad matches between workers and jobs, and at worst no matches."
- Bill King: Over 90% Of U.S. Population Growth Last Year Occurred Outside Of Largest Cities
- Arpit Gupta's "Contra Strong Towns" critique focuses on challenging the Strong Towns movement's assertion that suburban growth operates as a "Ponzi scheme." Gupta argues that the evidence does not support the claim that suburban development is inherently financially unsustainable. He emphasizes the need for rigorous accounting and empirical data to substantiate such arguments, which he finds lacking in Strong Towns' narrative. Hat tip to Zoabe.
- Antiplanner: "But today’s density policies depress fertility rates and the anti-immigration movement make it more difficult to compensate for those policies. Fortunately, some are getting the message that “maybe we should rethink” YIMBYism."
- Twitter: "There's a growing consensus on YIMBY Twitter that we need to build a lot of new high density housing in the biggest cities. Maybe we should rethink that idea." Or go with the Houston free-market model: allow lots of high-density housing in the core for those that want it (typically non-families) as well as plenty of low-density suburban housing for those that prefer that (typically families). Best of both worlds.
Labels: crime reduction, economic strategy, growth, market urbanism, pensions, public debt, public safety, sprawl, YIMBY
How to Fix American Capitalism
One of the common mistakes I make with this blog happens when I come across a really good, important, long article that I want to discuss more in-depth than my usual bullet points, because I usually set it aside to get back to later when I have more time, and sometimes later ends up being a year and a half, as is the case this week (apologies). It's a City Journal piece by Ed Glaeser titled "How to Fix American Capitalism - End insider privileges by renewing the freedoms to build, to work, to sell, and to learn." His opening:
"February 2019 Harris poll found that roughly half of younger Americans would “prefer living in a socialist country.” Millennials may not fully grasp the consequences of the government owning the means of production, but they certainly don’t like how American capitalism is working for them. They have a point. Over the past 40 years, insiders have increasingly captured the American economy—from homeowners opposed to new housing construction near them to incumbent firms that benefit from the overregulation of employment to interest groups that have transformed the federal government into the equivalent of a pension system with a nuclear arsenal. The young are usually outsiders; the bill for the insiders’ triumph has been laid in their laps. ...
What many young people today don’t realize is that socialism is a machine for empowering insiders. Few insiders have ever been rewarded more assiduously than the nomenklatura of the Soviet Union. Few governments have been as gray—in every sense of the word—as the Brezhnev regime. A vast expansion of the American government, as imagined by today’s Democratic Socialists, would create its own privileged elite.
From its inception, by contrast, capitalism was designed for outsiders. Its original apostles, such as Adam Smith, argued that entrepreneurs needed freedom from the royal regulations that limited trade and the formation of new enterprises. When the government controls decisions to work or to start a business, political pull becomes a prerequisite for success. The whole point of economic freedom is that all people—not just the connected—can use their talents to help themselves and, potentially, to change the world.
These days, capitalism’s advocates often focus more on defending the status quo than on promoting outsider opportunity. If capitalism is to win over the young, that must change—and a new freedom agenda can help make that happen. In January 1941, Franklin Roosevelt announced his four freedoms (of speech and worship, from want and fear) that helped frame his objectives for World War II, which the nation would enter before the end of that year. Our contemporary outsiders would benefit from a renewal of four key freedoms: to build, to work, to sell, and to learn. The young need fewer land-use restrictions that make it tough to provide affordable housing in productive areas. They need fewer employment rules that limit their ability to find work, as well as fewer business regulations that suppress entrepreneurial energies. And—even before these other important things—they need new educational options that liberate them from underperforming educational monopolies.
In 1981, the social scientist Mancur Olson published his magisterial The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities... His thesis: nations lost dynamism when insiders managed to stack the rules against disruptive outsiders."
His classic example is how well Germany and Japan have done since their society went through a complete reset after WW2, while Great Britain has been much more stagnant. Glaeser then proceeds to focus on onerous land-use regulation wielded by NIMBYs, often with the cover story of environmentalism or historical preservation:
"As Olson suggested, collective action takes time and skill, and better-educated suburbs have proved particularly effective at blocking development. To succeed, though, antidevelopment groups need rallying cries that go beyond self-interest, and green causes have frequently provided them....
Because areas like lower Manhattan and Berkeley have enjoyed enormous economic growth, limiting construction there means that fewer people can benefit from that growth. In the past, Americans could move to booming places because it was easy, for instance, to put up cheap balloon-frame houses on the frontier or erect tenements on the Lower East Side of Manhattan. Today, starter homes in Silicon Valley go for more than $1 million, while townhouses in Greenwich Village, a neighborhood that preservationists fought to keep pristine, now routinely sell for $5 million and up."
Next, he gets into how onerous local licensing laws restrict small business and entrepreneurship.
"One of the most egregious ways that government favors insiders is occupational licensing, typically presented as a way to protect consumers. Economists Morris Kleiner and Alan Krueger documented that, in the late 1950s, less than 5 percent of American workers needed some form of occupational license. Licensing in fields with a real public-health impact—pharmacy, say—may protect some consumers, but it’s hard to see why the person selling you flowers or your eyeglass frames needs certification.
Licensing can deter someone from starting a new job or experimenting with new occupations. If you think that you might like to be a florist, you could just try it out, in a free environment. If floristry requires a long process of certification, though, you’re more likely to stick with your current job. Occupational licensing also makes it harder to move across states to seek work, since licensing requirements vary."
His next biggie is employee unions, especially public ones, as well as public entitlements that resist reform:
"Private-sector unions have weakened, but public-sector unions remain strong—and they protect older and established insiders....
Twenty-four percent of the national budget now goes toward Social Security, and another 8 percent funds benefits for retired public workers, including veterans. Another 15 percent is spent on Medicare. Altogether, spending on the elderly now makes up 47 percent of the federal budget.
Some form of old-age pension system is a matter of basic decency, and no one wants to see the elderly on the streets without decent health care. But the political might of older voters—who live disproportionately in the crucial swing state of Florida—has been strikingly effective at blocking sensible reforms that could reduce the cost of the system for younger voters. When Social Security began in 1935, American life expectancy was 61, and only 7.8 million Americans were over 65. Today, life expectancy is 79, and 49.2 million Americans are over 65. Raising the retirement age would obviously make retirement benefits more financially sustainable. Yet older voters’ power has made such a change almost impossible....
Younger Americans see the massive flow of public spending toward the old, and they understand the difficulties facing reform. They thus find themselves attracted to politicians, like Bernie Sanders, who promise more spending on them. Visions of Medicare for All seem far more plausible to young voters than proposals to cut benefits already enjoyed by the elderly. But America needs policies that will empower the young, not make them a new generation on the dole."
And the final biggie at the foundation of it all and my personal reform passion, education:
"Insiders’ power to block change has been a steady feature of the education-reform wars over the last 20 years. "
And finally, his solutions:
"An effective alternative to the status quo and social democracy must, I believe, focus on empowering outsiders... To build a political agenda around the four freedoms of learning, working, selling, and building, four specific policies would provide a good start.
Start with the right to learn, which precedes the other freedoms. Insider control over traditional K–12 education is, at present, too strong to achieve any radical reform within existing schools. Charter schools sadly remain a niche product, so pushing for their expansion—and for greater school-choice options more broadly—is necessary. Another alternative that could open up new education opportunities would be vocational training that bypasses the school system entirely. Washington could pay for programs inculcating marketable skills—from plumbing to computer programming. These programs could be competitively sourced, meaning that labor unions and community colleges and for-profit entrepreneurs could compete to offer them. But providers would get paid only if students learned real skills. Access to vocational vouchers could go not only to teenagers but also to displaced workers, or to anyone without a solid job.
Second, we should establish a stronger right to work. All employment regulations should undergo rigorous cost-benefit analysis and have automatic sunset provisions. The Social Security system should also be made friendlier to the young. The payroll taxes that fund Social Security could be eliminated for those under 30 and phased in later in life. Younger workers and their employers would initially pay nothing into the system. That shift would eliminate a large tax-related barrier to hiring the young and make it more financially attractive for young people to work. That reform would reduce revenues, true; but raising the age of retirement could offset the lost funds.
Third, Americans need greater freedom to sell and to launch new businesses, especially of the non-digital kind. The Internet’s platforms may make it easy to sell goods these days, but services and experiences are provided live and thus are often highly regulated. The next generation’s entrepreneurs should be able to create abundant opportunities outside of eBay—above all, in poorer areas. The path to liberating physical entrepreneurialism is clearer in cities, since more customers are clustered together for creative local service providers. But starting a business should be easier everywhere.
The need to ease business regulations is particularly acute as America attempts to recover from the economic dislocation caused by Covid-19...
As with employment regulations, a top-to-bottom review of business regulations, subjecting them to ruthless cost-benefit analysis, would be welcome, but that could take years. A speedier approach might be to experiment with entrepreneurship districts. They could combine one-stop permitting with shared maker spaces and targeted training programs. The permitter could be made accountable for the speed of the process.
Fourth, we need more freedom to build. Since the Clinton administration, I have regularly interacted with officials at the Department of Housing and Urban Development, and they’ve always wanted to reduce the local barriers to building that push up prices. Their wishes have had almost no influence, largely because land-use decisions at the local level are not easy to control from Washington—and the notion that HUD would preside over local building permits is a little scary, anyway. State legislatures are the natural intermediate institutions that can push localities to build more. In many cases already, state governments have reduced the power of local land-use controls. The best federal approach in this area would be to deploy financial incentives to encourage state legislatures to do the right thing. Federal transportation spending is partially meant to build the infrastructure needed by new construction. If a state isn’t allowing any construction in high-demand areas, shouldn’t the federal government reduce its infrastructure support? Use money to nudge states—and let states nudge communities.
Today, capitalism seems unattractive to the young because it is stacked against them. America’s current outsiders will have far better lives in a free system, however, than in any new socialism, which would invariably privilege connected apparatchiks (among the other failings it would bring). The cause of freedom will need to present itself as a radical break with the status quo to win the hearts and minds of a new generation.
Even with these extensive excerpts, I'm not really doing the piece justice - I really recommend taking the time to read the whole thing. I can't think of a more important agenda for America.
Labels: affordability, corruption, development, economic strategy, economy, education, entrepreneurship, environment, governance, government transparency, home affordability, land-use regulation, pensions, perspectives
Fixing Houston's branding, hail-mary save for CA HSR, cautionary Chicago, learning from OKC, and more
A random thought before getting to this week's items: you know what
might save
the California high-speed rail white elephant recently dramatically downsized by the governor?
Uber drone rides from the SF and LA metros to the new Merced and Bakersfield endpoints, respectively (ideally extended to be a bit closer, maybe Pleasanton and Palmdale). I know it sounds a little crazy, but they might be closer to reality than you think, and the total price and travel time could be very competitive with airports if neither your origin nor destination are near airports. Doesn't mean this thing hasn't been a gigantic waste of taxpayer money, but this solution might scrape together some value out of the boondoggle...
Moving on to this week's items:
- Let's take a moment to be very, very thankful we're not the fiscal wreck of Chicago, and make a commitment that we never want to let Houston fall into the same hole. Some would argue we've already started down the same slippery slope :-(
"Chicagoans are suffocating under unfunded debt liabilities from every level of government totaling $130 billion."
That's $48k of unfunded debt per person in the city, or almost $200k per household of four!! How many families would buy a house in Chicago knowing it came with an extra $200k debt attached to it?!
"It’s curious that while every company tries its hardest to convince you of how much different and better it is than every other company in its industry, every city tries its hardest to convince you it’s exactly the same as every other city that’s conventionally considered cool.
Look at any piece of city marketing material, from promo videos to airline magazine ad inserts. It’s amazing how so many of them rely on the same basic ingredients: hipster coffee shops, microbreweries, bike lanes, creative-class members, startups, intimations of a fashion scene, farm-to-table restaurants, new downtown streetcars, etc.
These are all good things, mind you: things cities should be happy to have. Some of them may even be modern necessities. But you can’t help but notice how few unique things about these cities manage to come through. A video from the Greater Houston Partnership, for example, shows outdoor art, bicyclists, a live music performance, and a light-rail train going by—but nothing about oil or energy. Except for some references to the space program, little else about the incredible uniqueness of Houston comes through.
...
Atlanta and Houston are major cities with strong identities. They are much more than a collection of generic urban elements. Why cities with great identities and heritages of their own so seldom lead with them is something of a mystery."
The solution? Here's my suggestion.
Finally,
Oklahoma City has a really innovative model for public funding of civic amenities that Houston should strongly consider.
"There is reason to take pause at such public works programs, and the general idea of attracting outside capital through industrial policy. It can lead to misappropriated resources, which in other cities have, in fact, included convention centers and streetcars. But there’s something reassuring about the way Oklahoma City does MAPS. The projects, for whatever one may think of them, are at least chosen and funded by residents themselves. And they are delivered low-cost and debt-free, providing more bang for the buck."
Labels: affordability, governance, growth, high-speed rail, home affordability, identity, pensions, quality of place
Super Bowl! more MaX lanes, paying for infrastructure, affordability ranking, pension fix, autonomous vehicles vs. rail, Texas Urbanism, and more
Lots of items for Super Bowl week in Houston!
And some non-Super Bowl items:
“To improve transit in the region, auditors called for increasing the number of HOV lanes in the Houston area.”
"If President Trump wants to seriously improve American infrastructure spending, he should champion a new federalism for transportation, in which infrastructure is funded by states, localities and especially the users themselves. Too often, public debates devolve into a simplistic argument of "more" infrastructure versus "less." In many ways, America's infrastructure is woefully deficient, but we have also wasted billions on bridges to nowhere and highways in the middle of nowhere. The right question is how to get better infrastructure.The best decisions are made when decision-makers bear the costs and reap the benefits."
Hear, hear!
"Houston owes its police, fire, and city workers about $7.8 billion, and it doesn’t exactly have the cash on hand. Their hard-fought solution could serve as a model for the rest of Texas, and the nation."
Finally, "
Self-driving cars could spell revolution for Houston--or not" (hat tip to Julia). I do think they help make the argument that Houston could get rid of parking minimums (
like Buffalo recently did) and let the market naturally reduce parking over time as autonomous vehicles ramp up.
In addition, the City's Public Works department may not have too much to consider, but METRO certainly does with their new long-range plan. If we’re about to make point-to-point vehicle transportation far cheaper, safer, and more convenient, then what’s the impact on transit? I for one would argue that further rail investments will get nowhere near the ridership they expect and are likely to be horrible investments. This month's Surface Transportation Innovations newsletter from Reason concurs:
How Will Autonomous Vehicles Affect Public Transportation?
"A final point for transportation planners and transit managers to consider is the impact of these technologies on long-range planning for infrastructure. Here is the most relevant paragraph:
"Numerous communities across the country are planning for or evaluating major capital fixed-guideway public transit investments whose success may be impacted by the presence of alternative mobility options. The criticality of reflecting on these issues relates to both the magnitude of the cost of these commitments and the fact that these assets are very long-lived. These fixed-guideway commitments may well have extensive economic life remaining at points in time when new travel options compete with them, potentially cannibalizing their markets and rendering the investments less productive than envisioned in the planning stages."
Labels: autonomous vehicles, home affordability, infrastructure, MaX Lanes, Metro, opportunity urbanism, pensions, rankings, sports
Fix our pensions like AZ, passing Chicago for #3? avoiding over-regulation, MaX Lanes, and more
I want to open this week by getting a little contrary with
this call for more planning, control, and zoning in Houston to prevent future flooding problems. While I'm sure there's more we can do to make sure new developments retain their runoff, I get a little tired of the call for more controls and regulations every time an averse event happens. This is how stultifying bureaucracies get built, and once built they're almost impossible to remove. Repeat after me: "
planning does not lead to utopia" (if it did, please point to such a city for me).
If strong centralized planning led to thriving communities without disasters, then the USSR would have won the Cold War and Chernobyl would never have happened. (
mic drop)
Moving on to this week's items:
"What would happen if your city, in the name of progress, started giving poorer residents vouchers for landline telephones rather than smartphones? Or if, rather than stocking public libraries with computers, so that people could write emails, your city installed fax machines? You would consider these unnecessary expenditures on outdated technologies. Yet when it comes to public transit, many cities splurge on modes designed for a different time and place—namely light rail.
...
Instead these officials, often backed by federal grants, are throwing money into a century-old transportation concept that is unfit for most U.S. cities. This is a lazy approach, and insofar as it perpetuates the congestion crisis, it undermines the urbanist cause, by making dense living less convenient. It’s time for transportation planners to emphasize the future over the past."
"And Houston, which lacks a formal zoning code, has become a city that, contrary to its reputation, features numerous skyscraper clusters and whole neighborhoods dominated by new townhomes.
These trends point out a glaring contradiction in modern urbanist thinking. The people who claim they like density—such as planners, architects, environmentalists, and self-described progressives—also tend to prefer government centralization for cities. And they tend to oppose, as a broader principle, ideas that are market-oriented, anti-regulatory, capitalist, and pro-growth. But they seem not to have pondered how any of these variegated ideas actually work in practice within cities. Centralization has led to a stifling regulatory climate—most notably zoning—that prevents cities from adding new buildings and people, a point demonstrated by the New York Times. A hands-off approach, meanwhile, is what has proven to liberalize cities for this human influx, making them dense and dynamic."
Labels: affordability, census, corruption, governance, growth, home affordability, land-use regulation, MaX Lanes, mobility strategies, pensions, planning, rail, rankings, sprawl, zoning
